tv Bloomberg Markets Bloomberg July 5, 2016 10:00am-11:01am EDT
markets" on bloomberg television. we are going to take you from sydney to detroit and cover stories out of italy in the next hour. we have some breaking economic ada out of the u.s. -- data out of the u.s.. julie: these numbers were not expected to be great and indeed they are not, factory orders down 1% in may and durable goods falling 1.3%, both slightly worse than estimated. 1%,sportation down 3/10 of capital goods down for tenths of 1%. i just saw the number kick over for durable goods. is the final2.2% read on may durable goods, in line with what analysts and economists had been estimating.
these numbers are relatively weak but not too much worse than have been estimated, so we will keep looking at the data and bring you information and the reaction to it over the course of the session. we are seeing u.s. stocks make their lows this session. as this risk aversion comes back into the market today. i wanted to look at how the major averages have been doing since the close of the vote on the thursday before the u.k. vote, or before we learn the results. if you look at the s&p 500 on june 23, we are off about one and a quarter percent. we came within a much smaller margin at one point last friday but with the decline today we are a little bit further. to give you the idea of the glide path of what we have seen since that vote.
i also want to take a look on the groups on the move. the economically sensitive energy leading declines along with financial materials and consumer discretionary. utilities, telecom, and consumer staples. energy, we are seeing a pullback in oil prices and a resumption of the selling. crude oil down more than 3%, 47.34 per barrel. chevron down. bonds, -- to bonds, another record low on the 30 year, 2.16% down to basis points. a similar phenomenon in europe with record low yields as well. mark: and the u.k. and germany today and as you say, there is an aversion to risk.
every gauge on the stoxx 600 is trading lower. 1.7%,dex is down following a second day. last week it rose 3.2%, the best weekly gain since may. thes down since june 24, day we discovered the results of the brexit referendum. we are focusing on italian lender monte dei paschi. intocould inject capital the third-largest lender to increase capital amid the stress test. of theat the history high and the record was on may 18, 2007. since then, shares are down by 99.60%. love this chart. since the treaty came into force in november 1994, it
essentially gave birth to the modern union -- modern european union, the ftse 100 is the white line trailing the european stocks 15 which is the red line, and the benchmarks of norway and switzerland. in dollar terms, the ftse has risen 85%. by swiss market index is up 355%. in local currencies, the latter two have surged twice as much or more than the surrency -- then the ftse. aboutoes that tell you britain's plan to leave? let's get on to sterling, the bloomberg pound index measures sterling against its major peers has fallen to a record low. the pound falling to its lowest level against the dollar since september 1985, 31 year lows.
24, both measures down 24%. confidence plunging and pessimism doubling. this is the early pieces of data we are seeing post-referendum. investors are looking very closely. sterling, record lows on the pound. vonnie: it seems like it might be sinking in just a little bit. let's check in with taylor riggs. is the saudi arabia latest target in a wave of terrorist attacks. a suicide bomber killed himself near one of the holiest sites in the city of medina. two other bombings caused minimal damage. the death toll in iraq has gone up. at least 175 were killed and 200 wounded. islamic state has claimed responsibility.
the french government will use an emergency method to push a labor bill through the government. the socialist party is split on the measure. it would give businesses more flexibility in hiring and firing. president obama will hit the campaign train with hillary clinton for the first time today, joining the likely democratic nominee in charlotte, north carolina. he remains wildly popular among democrats. donald trump will also campaign in north carolina, a key battle ground state. hillary clinton's national lead over donald trump has narrowed. poll ofg to usa today's likely voters, she leads 46% to 40%. two months ago she had an 11 point lead. nasa's mission control celebrated as their spacecraft
entered jupiter's orbit. it will spend 20 months circling jupiter and the goal is to explore gravity and the magnetic field. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. riggs.lor this is bloomberg. vonnie: turning now to sterling's selloff, the pound fell to a 31 year low today surpassing those reached in the aftermath of the brexit vote. it briefly rallied as governor mark carney spoke in london, pledging to contain the fallout. >> the bank can be expected to take whatever action is needed to promote economic security and as a consequence, support the real economy. that means we can look ahead, not over our shoulders. vonnie: investors await more clarity outside britain's
separation from the european union. we have seen $350 billion in assets. he said do not panic last week but it does feel a little bit different today, the bank of england during even more and there is still a selloff. his reality finally settling in? jim: i think it is not unrealistic to think we are going to have some pull offs -- pullbacks on the way but i have been impressed with the limited reaction of the u.s. financial markets to this event. at only was the decline, worst the s&p fell 3% prior to the vote, but now the recovery. if you look at where things are today, stocks in the u.s. are basically a must unchanged prior to the vote. the dx why dollar index is up very little against developed currencies, and not on all
against emergency currencies -- emerging currencies. commodity prices have not pulled back much so i think it is crisis gold -- as crises go, this has not had a big reaction from the financial markets and that suggests that while this may be a severe political crisis , it might be a rather small economic and financial market crisis. vonnie: it is changing the nature of lows. the u.s. treasury hit a low. from that point of view is it affecting u.s. capital markets? jim: certainly, on the bond market i think is being affected by the negative yields going further negative throughout europe and japan like dragging down u.s. yields, but that sets up an interesting dynamic. we have had a very healthy rally in stocks since the january lows
and typically when you get a rally in stocks you get a backup in bond yields that act as a brake and eventually may cause the rally to stall. what we are getting is a continued rally in stocks with yields continuing to fall to fuel the rally. i think there is good odds until that dynamic reverses that stocks are more or to continue to move higher. mark: how long is it going to take for the s&p 500 to move over the top and break last may's record? when is it going to happen? jim: if i knew that i would be betting heavily. i do not know the day or the hour but my guess is we are going to move to new highs over the next few weeks or months, before the year is out. maybe the s&p will climb as high as 2200. there are four things i like
about where we are at. this rally since january has been very broad-based. --ally weighted indices value line, 1700, equal weight is up. athink that suggests that number of companies are experiencing earnings momentum again. those were narrow rallies we had after the august correction in 2015 with a brief correction in 2014. this one is broad-based. there is no yelled back up going on to pressure the stock market rally. if you look at the u.s. momentum index it has been heading straight north for the most part. we headed into this correction or event with rising economic momentum and we may get support for that on friday. , thee all the pessimism
fear that has been created by brexit when i think it is mainly a political and not economic event. i think we will continue to climb the wall of worry that has made this bull market great. indicated tothe gauge if this brexit event is spilling over to the economy is the dollar. according to the bloomberg dollar spot index it is down 6% from its january high. is there a level -- sterling against the dollar is at its lowest since 31 years -- is there a level where you start to get concerned? jim: the movement of the sterling has been big but if you look at a broader look at the u.s. dollar, look at the dxy against developed currencies. it is trading maybe 1% higher than it did on friday the 17th a week ahead of the vote.
you have got to remember the dollar went down quite a bit leading to the vote. a lot of what has happened to the dollar is just a reversal so the dollar is very little different over the last few weeks against diverting -- developing currencies. if you look at emerging markets, the dollar is down a little bit from the week prior to the vote. i do not think there has been much currency change and that is one of the reasons i do not think there will be a lot of economic fallout. if the dollar embarks on a major climb against most currencies than i would be more concerned about the economic fallout, but right now i understand the u.k. is suffering -- or not suffering that benefiting from a week currency. i think the globe overall, there has not been a big change in currency relationships. mark: jim paulsen, chief and that it -- investment strategist at wells capital management.
mark: live from london and new york, i am mark barton. .onnie: i am vonnie quinn let's head straight to julie hyman looking at some movers. based on apple because we have some analyst calls on apple and its suppliers. shares are pushing lower by more than 1% because it is so heavily has a negativeat effect on the s&p and the nasdaq.
quarterird and fourth earnings estimates were cut by citigroup. they are saying there is the potential of a lower demand because of exit-related uncertainty -- brexit related uncertainty. are hanging onto their old iphone for longer before getting newer ones. he does at the same time reiterate his buy rating of the stock. there is also a call on various suppliers of apple, coming from pacific crest. there is weaker than expected iphone seven production. they were both cut to sector weighed from overweight. both of those stocks are considerably lower this morning. pacific crest cut earnings estimates for a number of different apple suppliers like analog devices. those stocks are falling as well
this morning. adding on to that, digit times is saying that apple is pressuring suppliers to maintain its own growth margins. in many cases, some of these smaller suppliers are very reliant on apple to provide a large proportion of their revenue. c, we havek at spl pulled some nerve it -- numbers from that. mobile more than 50% and revenueets 62% of its just from apple. vonnie: julie, thank you. time for our bloomberg business flash. a drop ins warning prices for handling air cargo has reached landslide proportions. they say the problem is that
airlines are making a capacity deal out worse by adding more planes. landlords who buy large quantities of homes are now selling. blackstone group is getting rid of homes that have soared in value or are no longer fitting their business model. current tenants are being given the opportunity to buy. time, the olympics has an official insect repellent partner. the rear day janeiro games assigned to the rio de janeiro games assigned as a johnson. that is our latest bloomberg/. i wonder if it will change anyone's mind about heading down there. mark: the brazilian banking .risis back in the spotlight
what we saw in the last year, over the last six months starting with bailouts of smaller lenders. you see them facing consistent pressure. mark: and this would be the third bailout injections since the crisis? elisa: that is right. earlier in the year we saw some deposit outflows that were , but thatth talks enthusiasm quickly evaporated. brexit saw an acceleration of the selloff. decision tomade the go against the ecb and recapitalize the banks, and how bad with the fallout be? elisa: the talks are centered on how much leeway there is within european beta laws. see stateslly
providing funds to banks with other shareholders or creditors also sharing. what appears to be happening is that italy is trying to find a that butto get around use what is available within the roles to share that burden, and leave creditors and shareholders without further losses. vonnie: the exposure of individual countries to italian banks varies pretty widely but france has the largest exposure when you look at this chart that comes from bloomberg data and deutsche bank data. not so terrible for the united kingdom or the united states but when it comes to germany and france it is a lot worse. elisa: what we are actually seeing today as they are pointing to a flaw if the bailout goes ahead. they pointed to some bank valuation being so low,
unicredit, it is an opportunity to come in. these talks are coming to a for gains and not further losses. wrote ark gilbert wonderful piece yesterday, is brexit a lehman moment? he talked about the roles for europe to be dealing with this banking crisis if you can call it that, head on, not just in italy but in other nations. is there a sense the rules could be pushed aside and use brexit as an excuse? statesthe laws do allow to come in and effectively bailout their lenders. what will be key is whether this is that one time because clearly it sets a precedent for europe at a delicate time. market alone pointing to needing more flexibility. blackrock, they say europe
needs its top moment. us,: thank you for joining elisa martin newsy -- martin newsy -- martin newsy. vonnie: it is been a rocky month for tesla. what is next for them after they missed their second quarter forecast for global deliveries. let's just have a look at the major industries in the u.s. this is bloomberg. ♪
let's check in on the first word news with the latest from taylor. taylor: hungary pushing back against the european union and its refugee policy. they will vote on the plan to shoulder the burden when it comes to refugees. the prime minister has called the plan and abusive power. it is the first test for the five people who want to succeed british prime minister david cameron. more than 300 conservative members of parliament are voting today. the candidate who received the fewest votes will be dropped from the race. lawmakers say home secretary theresa may is favored. in australia, they are still counting the votes in an election that is yet to produce a clear winner. liberalturnbull's coalition is short of the seats needed for a majority government. so is the labor opposition. australia's election commission has just started to count more
than one million mail-in ballots. israeli prime minister benjamin netanyahu begins a four-nation tour of africa. he begins in uganda, where his brother died. he is trying to drum up business for israeli companies. travel to kenya, if you look you, and rwanda. global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries. this is bloomberg. thank you. let's get you caught up in all the market action today. we saw mainland china up by .6% on the shanghai composite index. the hang seng was down 1.4%. one story out of the asia cup, the reserve bank of australia keeping the country's cash rate on hold as expected, although
most economists were looking for a potential cut from the rba next month. paul allen has more. keeping the cash rate on was prudent at this time information -- inflation remains weak. the next inflation numbers are due out on july 27. that is why we have a majority of economists believing the reserve bank of australia will move to cut rates again in august. on the subject of data, before the rba decision, the trade deficit widened again to $1.7 billion, worse than expected. with a hung parliament after last weekend's election, meaningful economic reform will not be expected by whoever takes government, so the job of keeping the economy stimulated looks to fall continually to the rba. just under one hour left
in tuesday's trading session here in europe. take a look at how equities are faring. a second day of climbs for the stoxx 600. the ftse is up today. more declines in germany and france, 1.8%. take a look in the currency market. sterling continues to hit new record lows against the dollar. lowest since september 11, 1985. the euro, highest since october, 2013, against the dollar. sterling continues its plunge against the yen. it is down by 18%. now at its lowest level, the
pound, since december, 2012. take a look at the bond market. new record lows for the german 10-year, european 10-year. records in london and germany today. vonnie: records here as well. 10-year, 1.38%. earlier touched a low of 1.35%. there you can see the safety trade in the dollar yen. approaching its strongest in two and half years over concerns of political risk in the u.k. are spreading. fresh concerns about italy, too.
with that long and coming down, you are seeing more flattening, although not the type that we had seen. yuan.the offshore strategists say there is more risk now that it weakens in the near term. tesla motors missed its forecast of vehicle deliveries of what it called extreme production ramp. the carmaker delivered about 14,000, below the 17,000 estimate. for more, i want to bring in jamie butters from our detroit euro. bureau. ramp extreme production what you want? jamie: yes, but they needed it earlier. so much was done in the last half and tesla measures by
deliveries, how many gets to customers. the bigger established automakers sell them to dealers and they are sold as soon as they, the line. so there is a little bit of a rationale in that. they knew that that was how they did it when they sent the original goal, and they missed the goal. it take some time to get infrastructure to where you love must wants to be. -- elon musk wants to be. is that infrastructure being put into place, is it doable at all? jamie: there are different stages of it. the factory used to make as many as 450,000 cars a year when it .as a toyota/gm venture in terry, they can get there, but they have a lot of infrastructure to do their. they will be doing three different models, maybe two different assembly lines there. that will be a challenge.
and then if you are making all of your cars in one factory and then delivering to california, china, new york, it is challenging. mark: why are investors reacting more strongly to today's news of a deatheek's news of a customer, an accident in which the autopilot feature was being used? a pretty grisly accident, always disturbing when somebody dies, and maybe it was a little excess reliance on the technology by the driver in that case. it is still being investigated. tesla can point to the numbers and say this is a rare instance. but the making and selling of cars is an everyday thing. there plans to grow are so extreme, every setback makes it that much harder to catch up and
meet the promises you made to investors. mark: the other issue which could be seen hanging over the tock is this plan by musk combine with solar city. our analyst warming up to the idea -- are analysts warming up to the idea? jamie: they are skeptical. stock, theyat the basically we believe it will happen. bears arets and the skeptical about their ability to then todeal done, or execute it, without raising more money. both companies right now are still burning through a lot of cash. musk sayid elon anything that would give us home that eventually tesla would reap the benefits of all this talk? it is down but not exactly a plunge. not speak directly
to the sales come he did not hold a conference call or anything like that. but tesla is writing much his company, he is the ceo, and a project ever growing production and output. maybe by lowering the guidance, they have given themselves a chance to be for a change. -- beat for a change. he usually sets so ambitious goals, they sort of know that he will come up short. mark: jamie, thanks for joining us. changing from electric to oil according to the world's biggest oil trading house, prices will not rise that much further over the next year and have since rallying from january. vitol chief
executive with his ideas on a target. >> assuming demand continues to will, i, i think it think we will be maybe in the high 50's, early 60's. but i always give a traitor help alth warning. ofould see $60 at the end 2017. enough to cover the needs of germany, france, italy, and spain. nationalistsottish on the losing side of the 2014 referendum have gathered strength. will the world see the country break from the u.k.? this is bloomberg. ♪
mark: you are watching bloomberg. i'm mark barton. vonnie: this is your global business report. how much higher will oil prices climb? a top traitor says not to expect any steep rises or drops. dory" brings in $50 million in north america over the fourth of july weekend. vonnie: will scotland pursue its own political and economic path apart from the united kingdom?
the world's top oil traders say prices will not rise much further. s ceo ian taylor spoke to bloomberg. stock levels will come down as expected but i cannot see the market really roaring ahead, because we have so much oil. he says brent crude will rise to about $60 by the end of the year. it is not a great time to be a banker in london. bonus pools in the city's investment bank will be cut by at least 25%. the united kingdom decision to leave the eu has slowed down dealmaking. another round of job cuts is likely in september decline activity does not pick up. mark: the german auto industry is being investigated for a steel-buying cartel.
the regulators say there are indications that antitrust rules may have been violated. the company that brought you the twinkie is getting a new owner. hostess friends has agreed to sell a majority stake to an investment firm. hostess emerged from bankruptcy protection three years ago and has since been owned by apollo global management. d the box office, "finding ory" came in at number one for the third week in a row. e legend of tarzan" and "the bfg." time to provide some context and background on issues of interest. in a 2014 referendum on whether scotland should breakaway, the scott devoted to remain in the
united kingdom with england and wales by 55% to 45%. rather than settling the matter, the nationalists on the losing side gathered strength, and now may be poised for a second try after the u.k. voted to leave the european union. u.k. voted to split with the ,u by a margin of 52% to 48% though 62% of scottish voters in the june poll voted to remain in the block. the national campaign morphed into a movement that showed it can bring voters out in big numbers. here is the background. the scottish parliament was restored in 1999 with the u.k. relinquishing
oversight of education, transportation, and help. this forced the main political parties to promise scotland and accelerated land for more powers to help keep it in the union. scotland's politicians are using their unprecedented national influence to get more of what they want from the u.k. and are likely to use this brexit vote now to demand another ballot on independence. since scotland's economy would be underpinned by north sea oil, opponents say the pledge in crude oil prices proves that voters were right to decide that there is too much risk going at it alone. scotland needs to remain as part of a larger country that has a greater say. but that argument has been turned on its head by britain's decision to leave the eu. that is your global business report.
mark: this is bloomberg markets. i'm mark barton. vonnie: i'm vonnie quinn. we are focusing on investor tom barrick. he made his fortune in real collecting various items. now he is applying the lessons he learned as a dealmaker on wall street to a personal asset, his ranch in california. erik schatzker reports.
erik: here at happy canyon , it is easy to mistake tom barrick for your average vineyard. >> at every level, it is capable to grow these berries. each cluster is hand sculpted to make just the right umbrella area to nurture that particular bunch of the dairies as the season goes on, they become more right. in the quest is getting to that perfect sugar content of knowing when they will be harvested. erik: but he is anything but typical. he is a billionaire investor that made his money in real estate. he could've bought a trophy
property in napa or france. instead, he built a vineyard from scratch on this 1300 acre range near santa barbara. >> buying a great vineyard for me is the same as competing in an auction of a company and my young people coming backpropertd saying, we are so happy we just bought this company. we outbid more than stanley and goldman sachs. are you kidding me? that is how you make money, by paying the highest price on somebody else's auction? erik: lessons learned on wall street, applied here in california. a great year,e and you may get a little confidence and think you've found the tools, and then you can literally arrogant. the next year mother nature says let me teach you a lesson. erik: he started growing grapes about 20 years ago. how did you know what kind of wine you wanted to make? >> it is like all things, i knew i had no clue, but i knew what i
like td to drink. i did not have the taste level, so i surrounded myself with five or six people that had that level and said, you figure it out or us. erik: he knew who to call. they called in people who were associated with one of bordeaux's top wineries. >> this area has the same soil, sugarics, content at the end of the season. we have about 60 acres between the different varieties. nes that are ar wi blend of it all. 1.5 to two tons an acre. so not much. commercial winemakers would
produce six tons per acre because they would not be curating. they go for yield. again, it is like investing. you can buy 10,000 mobile homes, or one great apartment in brooklyn. a dealmaker since the 1980's, he finds parallels in business for almost everything he does at happy canyon. polo, another- passion. >> everything i do is about risk management, and the idea is avoiding disaster. the game itself became a place for me to practice risk. erik: during the polo season, he hosts three matches a week, and argentina,stly from regularly practice on his fields. wine, two expensive past times. he says he is not to bother that
the lottery does not make money. what is more important is having a project that his children can enjoy for decades to come. and he says vineyards have proven to be great investments. my family is interested and passionate and continues to leave it better than the year before, we have been successful. erik: what do you say to somebody who looks at this and , he, that guy, tom barrick is raising polo ponies, he is growing wine, but he is not doing it for a living, he's just a rich dilettante. >>, and live with me for a week. , youu can keep up with me can be here and think you are a rich dilettante. business is a physical sport. you better get up and compete. if not, somebody is going to run over your back. intending --ng
anything for granted, and i'm very thankful. you can read the full story and more about luxury on bloomberg pursuits. mark: coming up, the boe governor mark carney takes more step to reassure investors in a post-brexit world. european stocks are falling for a second consecutive day. 30 minutes away from the close. london, thes in weak pound boosting exporters. the stoxx 600 is down by 1.6%. this is bloomberg. ♪
live in new york and london for the next hour. we are covering stories in australia, france, and silicon valley. here is what we are watching today. the bank of england eases capital requirements. the bank pledges to do whatever is needed to shore up the financial stability. sinceoil has rallied hitting a 12 year low in january, but have prices hit a ceiling? ceoill hear from the vitol ian taylor. mark: and just glad you have a job, that is what financial firms plan to say to employees, as bonuses are expected to be cut 25%. we will discuss