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tv   Bloomberg Markets  Bloomberg  July 5, 2016 12:00pm-2:01pm EDT

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>> from bloomberg world headquarters in new york, i am shery ahn. >> i am matt miller. here is what we are watching. the fbi is recommending no charges be filed against hillary despite carelessness in the handling of classified information. what is next for the democratic presidential hopeful? bond deals falling. the fallout from the brexit vote continues. the pound trading at its weakest level against the euro since 2013. sabmiller investors toasting the plummeting pound. this live in the currency is creating a $3 billion windfall as the company continues its takeover of ab inbev. matt: we're halfway into the trading day. let's go to julie hyman.
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julie: i selloff after the weekly gain or the biggest of the year thus far. great to see you. already said my hellos off air, but we can say our on air hellos. welcome back to the united states of america where stocks are selling off. on's look at what is going with the major averages. we are near the lows of the session. the nasdaq has been leading the decline. i was checking volume, 5% below the 20-day average in the s&p 500 coming off of the holiday weekend. you will see that there were a couple of small attempts made at a recovery, but then it legs downward, bumping along the low. groupshe cyclical leading the decline, energy is the worst performer.
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if you look at the bloomberg, energy shares are leading declines down more than 2%. stocks, tobacco stocks, for example, are doing better. pepsi is helping to mitigate the losses as people rotate into what they see as more economically resistant. we see the buying of treasuries. that means record low yields. the 10-year yield going down to the lowest ever. matching some of the record lows we have seen in the bond market. shery: what about the biggest damages? julie: oil and energy stocks are poorly. as we see more of that risk off sentiment coming back into the market. oil is down 4.5%, $46.80 a barrel. matt: thank you. bloomberg to the
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first word news, taylor with more from the newsroom. taylor: the director of the fbi says they will not recommend charges against clinton or her aides over violations of e-mail protocols that occurred during her tenure as secretary of state. james comey criticized the likely presidential nominee. not findgh we did clear evidence that secretary clinton or her colleagues intended to violate laws regarding classified information, there is evidence they were extremely careless in their handling of highly sensitive classified information. mey said it was the bureau's judgment that no reasonable prosecutor would bring a case against mrs. clinton. saudi arabia has been rocked by three terrorist attacks in one day. blew himself up near the prophets mosque.
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there were also suicide attacks near a shiite mosque and one close to the u.s. consulate. doubleh africa, and amputee of olympian oscar prisonus may return to tomorrow. a judge will hand down the sentence for murdering his girlfriend three years ago. prosecutors want the story is to get at least a three-year sentence. in chicago, thousands of police flooded the streets and her gang members into custody over the july 4 weekend. eliminate figures show that 4 people were fatally shot and 60 were injured by gunfire. last year's total was seven dead and 48 injured. news, 24 hours a day, powered by journalists and analysts, this is bloomberg markets. filedno charges will be
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against hillary clinton over her use of a private e-mail server as secretary of state. james comey said that clinton and her aides were careless with the e-mails. our managing co-editor joins us from the duke energy center for the performing arts in raleigh, north carolina where there will be a donald trump event later today. mark, how do you think trump will react? he did not get with his camp would have liked. dark: he has reacted on twitter saying that the system is corrupt. not addressing one of the problems for republicans that the system is personified in the decision by james comey, who is respected by republicans. other places are now criticizing directly for engaging in a verbal indictment of hillary clinton, not a legal indictment. to suggests plan is
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hillary clinton did something wrong and should have been indicted given the evidence laid out by comey. was critical talking about the sloppiness in the handling of the e-mails. how do you defend against that. should you or or should you just move past? her: the things he charged with rhetorically, not legally, go beyond some of the things expected. there is almost nothing people thought about her conduct and how it was irresponsible and against the rules, perhaps against the law, that he did not lay out today. what is baffling to some critics comey decision is that did not say she did not do all of these things that were expected, she did something less . he alleged something more than what we knew about her conduct. yet he reached the conclusion that was something that would
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not constitute under past standards and indictments. republicans will face this choice. in the end, because of comey's standing, they will likely say she showed bad judgment. it might be something that she did not get indicted for, but she showed bad judgment. they do have comey's words to back them up. matt: how will this affect her campaign? mark: she had an event in washington and chose not to address it. she is coming to north carolina tonight. " with all due respect" will be from north carolina. john will be in charlotte where president obama and hillary clinton will be flying down together. there's speculation that comey time to his announcement to clear the deck between the mail
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that is comey's boss, the guy who gave him his job, at least, and mrs. clinton. the next time reporters are able to question her, this will come up. although the headline is that she will not be indicted, the fbi is not recommending that, there is plenty to chew over regarding her conduct. matt: how does the chain of command work? the president is his ultimate loss, but isn't justice in charge of the if ei directly? a 10 the fbi director has year term to bridge across administrations. they have a fair amount of independence. president obama is the one that comey in this position, and his widely respected. general,he attorney to, saying shets
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would accept the recommendation of the fbi -- relating her off the hook for having to overrule a recommendation that they seek charges against hillary clinton. shery: thank you for talking to us. that was bloomberg politics managing editor mark halperin. is at 5:00 ont bloomberg television. coming up, the mystery stock. writing lower after some analysts. steered to a halt. this is bloomberg. ♪
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matt: i am matt miller with .hery ahn breaking news on the british pound. it has fallen another leg lower
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with the 130 handle. you can see on my computer -- i noted earlier that he u.s. visitor to london and now buy an hermes tie for less than $170. shery: british people going abroad, it will hurt them immensely. it is falling against the u.s. dollar and the euro. it is at the weakest level since 2013. it is weaker than just after the referendum. matt: it has been an amazing drop. the ftse is up since the referendum 3.5%. if you bought the day before the vote, you would be in the money if you bought in pounds. if you bought in dollars, you are down 9%. let's go to the markets desk. julie hyman has the reveal on our mystery stock. today's pick is writing lower after some analysts saw added pork in a recent runoff.
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a helmet might be needed as shares skid to a halt. you guessed it. i thought it had to be something with motorcycles and thought about polaris. i thought, how does pork play into it? julie: we started talking about hog."-davidson, or " that is the spike that you see here. this bike on friday was because of takeover speculation. it did not aim to have any specific catalyst. it is not the first time it has come up for harley-davidson. it is something investors have speculated on over the past year or so, causing a 20% spike. it was downgraded to neutral. the analyst pierre said there was unconfirmed rumors that kkr would be interested in buying the company. that shares were above the fundamental price target.
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here are the dips in the shares today that does not wipe out, obviously, the advance from friday, but is trimming it. polaris had a similar move. seemed to spike and is also coming down a little bit today. matt: indian motorcycles and victory motorcycles, the maker of. also, really cool for and three wheeled vehicles. julie: there's speculation about the outdoor vehicle industry in general. there was an rv deal with thor industries buying a company based in asia. with julie, thank you. frexit back to coverage. regulators in britain meeting with asset managers. it comes as asset suspense trading and 4 billion dollars
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real estate funds. another run by of the vote was frozen because of a lack of liquidity. are the dominoes of brexit starting to fall? simon kennedy overseas the coverage from london. simon, thank you for joining us. is this because, if you watch equities it has not looked that bad since the brexit vote. you are in the black if you are an investor. other asset classes are seeing real weakness? simon: you see it in the pound the most. the lowest in more than three decades. the dominoes are not falling, but they are starting to shutter. matt: what about real estate? it is like a canary in a coal mine. after the vote i was on the traders were and telling me about projects investors were pulling out of over concern that would not be
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as much need for office space. simon: you have a market that many thought was frothy in london before the vote, and now people are reevaluating the market for commercial property. you wonder if companies will invest, the companies that are here, will they stay here? all of that in a frothy market. you are seeing the panic button hit in some areas. shery: our people expecting a sawp a 40% like we in the financial crisis of 2007-2008? property?financial it is too soon to tell. construction dates are unnerving son, but the canary in the mine, the housing market will be worried. mark carney spoke to them today that the economy will be in for a tough time. shery: what are regulators discussing? what do we know about this meeting? simon: a meeting of fund
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managers and the like. they will be talking over the horizon. mark carney, the bank of england, the financial policy about rubble today on the road to protect the economy and the financial industry in changing ratios and the like. they will be peering through the fog. then the monetary policy front, perhaps in august, when the bank of england meets. matt: i was in london covering brexit and spent time at the angle see arms in south can. nes. will i ever be able to afford a flat? simon: savior dollars and see how much the pound goes matt: down. so expensive. i could not find a flat in south cannes or chelsea.
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tokyo it is hong kong and as well. property prices are booming. matt: i guess berlin is the place to be. we will stay with brexit. we will go back into europe. shery: let's look at european banks. they have been among the hardest hit in the wake of the referendum. i want to bring and michael moore who covers banks for bloomberg. he is live in london. michael, we are seeing that italy is considering injecting fresh capital. what are we expecting? it is a singular move or are we expecting a domino effect? michael: it seems to be a singular move, but it could be precedent setting. there is a lot in the air with that wereil in rules introduced this year, and whether italy can work around
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those, or has to have those changed. there've indicated that they want to work within the rules that were set up to avoid the in the laste we saw financial crisis. there are ways in doing that. you have the stress test this month, and if the capital test,alls in that stress there are ways to inject capital into the banks. the question is if bondholders will have to take losses. shery: look at the charts. there are reports that stock prices are moving more than 70% this year. everything that is happening, what does it mean for other banks in italy? which ones and by how much would be the key question? michael: that is the big question. that is the one that bondholders are certainly taking a look at. you have seen similar moves in bonds, not as steep as the
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shares. certainly, if italy were to set up some kind of bailout fund, you would assume that it would be for more than one bank. investors looking across the region. european ranks have been hit hard by brexit. aong the fears, certainly slower eu economy. the politicians sort this out. i will bring it back to germany. i thought no bank could have a lower ratio than deutsche bank. the bank of monte paschi is in white. you can see that deutsche bank is in green. they are trading at less than 1/10 of their book value. they have been bailed out three times i the government. why doesn't the government take this bank and nationalize it?
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michael: i think there are political reasons. certainly, it is at extreme distress levels. among all of the banks -- deutsche bank you mentioned is trading below the price-to-book ratio than it was in the 2008 crisis. a number of italian banks are below that. we are seeing unprecedented levels. that is why you are seeing so much chatter about potentially the state stepping in. shery: michael, great to talk to you. michael moore joining us from london. matt: still ahead, grappling with the brexit all-out. where opportunities exist amid this volatility. this is bloomberg. ♪
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matt: this is "bloomberg markets." i am matt miller. .hery: i am shery ahn
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the fallout from brexit, the british pound drops to 130 for the first time since 1985. they managed to briefly rally as mark carney spoke in london, where he said he would do what is needed to contain the brexit fallout. >> the bank can be expected to take whatever action needed to promote monetary and financial a consequence,as support the real economy. these efforts will mean we can look ahead, not over our shoulders. shery: our next guest says investors may want to remain cautious. a portfolio manager at tcw joins me from los angeles. what is shaping your outlook? valuations, political risk? >> first, thank you for having me on. it is a combination of all of the things that you mentioned. first, the signal we are getting
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from the credit market. equity managers, the warning signs from the credit market. they are unambiguous saying this is a late stage signature. the things you mentioned, lu elation, s&p trading at 17 or 18 pounds forward multiples, near cause fors is concern. and the geopolitical landscape we have been witnessing has been uninspiring to say the least. that is causing us to proceed with caution. there any asset classes -- i think property would be interesting to purchase with the devalued pound -- equities have risen from the grexit vote. bonds have skyrocketed. are there asset classes were you think that you have good vision, or are they all difficult to see? , the ones with
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exposure to the u.k. and more broadly to the european union -- the outlook is somewhat clouded. the result of that vote, you can probably anticipate that will embolden many euro-skeptic parties in other countries, like rants and italy. we will proceed with caution with companies that have exposure to those geographies. all until the and uncertainty will cause opportunity. more companies with domestic u.s. influence, they stand to benefit. matt: thank you. iman brivanlou from tcw. this is bloomberg. ♪
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live from bloomberg world hecklers new york, i'm shery ahn. matt: and i'm matt miller. this is "bloomberg markets." julie: there is a report that
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says that comcast is going to include netflix on its x1 platform. aset-top box that gives you menu of different apps or different ways you can get your content. shares spiking on this. they had earlier been falling stock was downgraded following the u.k. vote. now seeing this reversal. recode saying this is a very big deal for netflix. they already have deals with smaller cable operators in the u.s. and also has deals with apple, roku and chrome cast, google's product. this is the biggest network it has signed with come especially in the u.s. we will be speaking with that stockt who downgraded the
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in the 2:00 p.m. hour. the x one is the set-top box you get if you are a comcast customer. devicedon't have another like an apple or amazon fire stick -- julie: whatever you have come if you are getting your content through comcast, this box in particular -- a lot of the boxes will give you a menu of apps. now, netflix later this year will be included on this x one comcast box. matt: taylor riggs has the first word news. taylor: the fbi has recommended that no charges be filed against hillary clinton over her use of ivan e-mail servers -- private e-mail servers. clinton and her aides were
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careless with e-mails, but he said there was no intentional misconduct. donald trump took to twitter today to react to that decision. general david betray us was in trouble for far less patreus was in trouble for far less. inquirymentary concluded there were multiple intelligence failures. overlapping agencies should be replaced with a unified structure. , mission control celebrated as the solar powered spacecraft entered jupiter's orbit. needed fivececraft years to make the trip. it will spend five months circling jupiter.
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global news 24 hours a day, powered by 2600 journalists and analysts and more than 120 countries. i'm taylor riggs. this is bloomberg. is takingbrexit vote a toll on the uk's largest asset managers. aviva investors was frozen today due to extraordinary market circumstances. this after standard life froze its u.k. property fund. -- joined the bloomberg team earlier today to discuss. about a loanholds to value of about 30%. maximuml have the amount they can borrow. you can meet redemptions by bar wing money and just paying people out of leverage. the remainder investors and up ends in and and that unhappy situation in a courtroom. -- have a $.30 of capital
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the skies are leveraged to do one. which may be far more leverage than the intended to have. -- these guys are leveraged 2-1. leveraged far more than the intended to have.
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+++ jon: what does it mean for commercial real estate? can it become real even if it is noise, become a real signal? >> absolutely can. one of the factors that drive this, the notion of a price is the level at which people will buy something when neither the buyer or the seller must act. when they go to put up their , youst problem -- property know it is a distressed seller. it gets marked down and the next property gets marked down and you will have others having to do that. what things are going to start lending more against this pool? the almost hysteria, what boris johnson called the hysteria, adeath lot of this is driven by domestic investors pulling out. david: this is certainly a brexit story. also a hedge fund story. hardly a day goes by that we don't hear about some hedge fund that has to cut its fees or close up shop.
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what does this tell us about the overall hedge fund industry? where are we in terms of money going in and coming out of hedge funds? >> the first quarter was the first time we saw money flowing back into it for a while. almost more than the level of performance with the level of volatility in correlation -- every dip and every dive seems to be followed almost precisely with the hedge fund story. equity long shorts have correlated very highly. one of the great myths that it is going to die is that you can buy individual assets that are so specific and wonderful that they are uncorrelated. what the activists contend for it i don't need to hedge because what i'm buying is so different from the rest of the market, but when it is macro-based, you see this wholesale selling.
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the overall market decline will and your absence of a true traditional hedge will be an expensive mistake. matt: the absence of a true , when-- isn't it the case you have compensation linked two and 20 come it drives you to have some high yields? -- compensation like two and 20, it drives you to have some high yields? getting really high yields is to buy illiquid assets and leverage them up. long-term capital's largest was somewhere just north or around a basis points to around an eighth of a point -- all the rest was leveraged.
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an illiquid asset and leveraging the heck out of it is not alpha. if you are getting two and 20 on outlook am i don't think anyone would mind paying for manager skill. junk bond orying a mutual fund that closed or this particular real estate fund which is a stable investment trust with high levels of liquidity but massive level of -- combineismatch leverage with illiquidity and you have a poisonous cocktail. it is just a matter of time. coming up, following the historic brexit vote, could scotland be the next to join the rest of the eu? ♪
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mark: you are watching bloomberg. vonnie: how much higher will oil climb? fighting dorie's wins to success for a third week in a million in north america over the fourth of july weekend. scotlandinn: could leave the united kingdom? one of the top oil traders says prices will not rise much further. >> yes, levels will come down.
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but no, i cannot see the market really roaring ahead because we've got some much oil. vonnie: he says brent crude will rise to $60 a barrel by next year. the price has been hovering around $50 a barrel for the last month. executors and recruiters predict investment pools will be -- anothercould round of job cuts is likely in september if client activity does not pick up. mark: the german auto industry theeing investigated -- regulators say there are indications that antitrust rules may have been violated. brought you the twinkie has a new owner.
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hostess and merged from bankruptcy protection three years ago. since then, it's been owned by apollo global management and investor dean metropolis. finding dori is now number one for the third week in a row. it beat warner bros. "legend of " and steven spielberg's new children's movie "the bfg." in a 2014 referendum on whether scotland should break away from europe, they voted to remain in the kingdom. rather than settling the matter, the nationalists gathered
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strength and may be poised for a second try after the u.k. voted u.k.ave the european union as a whole devoted to split with the eu by a margin of 52% to 48%. voters favored remaining in the eu . the nationalist campaign to show into a movement it could bring out voters in record numbers. here is the background. the scottish parliament in edinburgh was destroyed in 1999 -- the momentum of the campaign forced the uk's main political party to promise scotland and accelerated plan to keep it in the union.
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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 to demand another ballot on independence. since scotland's economy would ,e underpinned by oil independence say the plunge in -- scotlandices needs to remain part of a larger country that has a greater say in the world, they say. but, that argument has been turned on its head now by britain's decision to leave the eu. scotland should pursue its own distinct economic and political and apart from the u.k. remain within the four decade-old union with the rest of europe. visitre stories, ♪
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shery: this is "bloomberg
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markets." i'm shery ahn. matt: i matt miller. a gorgeous shot from the roof of our building. shery: time for the bloomberg business flash. blackberry will no longer manufactured the block very classic -- blackberry classic. introduced the classic after joining the company in 2013. the move is another step towards eliminating the bb10 operating system. matt: mcdonald's has won a case in the european court that could prevent another company from using any combination of the mc" to sell food or drinks.
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the court found the use of ma ccoffee would take unfair mcdonald'sf walmar trademarks. making arlines are capacity glut worse by adding the average price per kilogram has fallen 20%. a quick check on u.s. stocks right now. we are down across the board, along with most global indexes, with the exception of the ftse which show some gains. the dow and s&p and the nasdaq all down by a little less than 1%. the nasdaq is the biggest loser. why don't we see with going on there? abigail doolittle takes a look at the tech movers today.
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abigail: we do have the nasdaq down sharply and down more than both the dow and the s&p 500, down 1% at this time. one stock that had been dragging on the nasdaq but is now trying to help the index, netflix, the big turnaround, the big turnaround commissioners have been down more than 2% earlier. now higher on the recent news out of recode saying netflix is being allowed on the comcast x1 platform. says it is a very cool deal for netflix and comcast. netflix will get access to comcast's 22.4 million video subscribers and comcast gets to offer its customers easy access to the popular services via the x1 platform. looking at a turnaround for netflix. as far as what is dragging on the next of they come apple is the biggest drag overall. there is a demand pause come a
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slowdown in demand for the ahead ofphone model the iphone seven model due out this fall. the brexit uncertainty could be adding to that. the bull bear debate on apple continues on with this bearish call out of citi. shery: anything new on the apple chart? abigail: because of the netflix breaking news, we added that. we want to talk about tesla. shares are down 3.3%. the company preannounced the sunday that they expect second-quarter deliveries coming in below the target of 17,000 vehicle units. they cut the full-year target to below 80,000 vehicles.
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the previous range of between 80000 and 90,000. a lot of bearish speculation around this company. many investors may see this as a sign the company is not making the leaps toward a global auto manufacturer. they may have issues on the manufacturing side. matt: i do not have a developed opinion because there are always changes to this story. musk is always throwing something out there. it doesn't matter what you think of the product. the company is an enigma. that's why we love to follow it . britain's decision to leave the
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eu has shaken up a number of deals. one example is sab miller which is taken does being taken over in a be in bath -- -- one example is sab miller, which is being taken over by a be ib inbev. there is a catch to this. in one sense,gain but you have to hold onto those shares. >> it's interesting. the way the deal was structured, 40% of the shareholder base which includes all three a -- altria are entitled to a partial share alternative to avoid capital gains tax. inbevis really based on ab
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stock. plunge,ound has taken a -- a $.17nefiting premium above the cash offer. what are they saying about this? there's a clause that would limit the impact of case rates. >> so far, they've declined to comment on the story we reported. we've been tracking this story for a while. then, we haven't seen any developments from their part . they will have some smart people on the case given the fact that 59% willshareholders, a 17%
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matt: where is most of sab miller's beer made? this is interesting. asset divestiture as we've seen on the part of sab bev, some of itn s most prolific brands are being sold off to saudi's. now must sell its eastern european business. shery: is there a threat to the deal in terms of fairness here? >> it's the conversation that's being had. there is still a $3 billion
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in the event the deal does not go through. that is a large amount of money .o pay i would suspect there may be a threat to the deal structure. the investors will be seeking to aet with the board or get more thorough offer than they are getting at the moment. afternooning up this on "bloomberg markets," we are talking about netflix. shares are surging. ♪
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matt: it is 1:00 p.m. in new york and 1:00 a.m. in hong kong. shery: welcome to "bloomberg markets."
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good afternoon. i'm shery ahn. matt: and i matt miller. the bank of england's mark carney uses words like uncertainty, which are not much comfort to markets. the pound had a 31 year low. we will have the latest. shery: the banking sector hit hard i brexit. -- by brexit. tom barrick adds wine and polo to his portfolio. more about his unique pursuit. julie hyman has the latest look at the bonds and the british pound. julie: $1.30 for british pound. a 31 year low.
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matt is happy because he can buy his ties for cheaper in london. what seems to be the catalyst for the latest move downward is a third asset manager in u.k. suspending redemptions -- real estate fund, to be specific. the pound hitting its lows of the session 30 minutes or so ago. along with the u.k. currency heading lower, we do have bond yields in the u.k. also heading lower. we have seen a collapse in these yields, moving down 60 basis points. , butar move in the u.s. the magnitude is much smaller. , yes, year in the u.s. the chart look similar, but the
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movement is a little over half that, down 38 basis points. still a remarkable move. the buying we are seeing in treasuries of the inverse of that would be the selling and stocks. averages hovering around the lows of the session for much of the day with the nasdaq leading declines. the nasdaq has been leading on the up and down site over the past couple of weeks. groups leading declines, energy, materials, financials, some rotation into more defensive groups like consumer staples and utilities. the story has been the playbook over the last couple of weeks. -- someally led selloff of these defenses had been doing better. let's talk about apple for a moment.
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we've been talking about this stock all day. we have a number of suppliers being affected. it comes back to iphone 7 demand. there was a report in the nation newspaper that some of the suppliers are under pressure from apple to keep its gross margins lower. thank you very much. we begin with the continued reverberation -- we begin the 1:00 hour. we will continue talking about the brexit. the pound tumbled to a 31 year low. they 130 handle on the pound after mark carney offered little comfort. mark: the u.k. has entered a
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period of uncertainty. the efforts of the bank of england will not be able to immediately offset the market and economic volatility that can be expected. commentsh more on the and how they are being interpreted, let's get to scott hamilton. exciting time for a journalist to be covering this central bank and these markets. seems prepared to almost pull out a mario draghi sized bazooka in order to shoulder up british banks and the british economy. scott: today was the latest installment -- we have another chapter to come because now, focus will turn to the monetary .olicy committee
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today was the financial policy committee. they are watching the risks closely. they have started to materialize or crystallize and they decided which the capital buffer will allow banks to free up money to lend to the economy. matt: what is the countercyclical capital buffer? set out a. banks capital stack last year and eight countercyclical capital buffer. they vary depending on the credit cycle. in good times when risks may be increasing, the buildup that times like now when we seem to be facing a downturn, they reduce the buffer which allows banks to extend the lending. policythe monetary
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meeting coming up next week. what do we expect? thursdayrney said on it is probable that could loosen policy over the summer months. mark carney said we should take those two meetings as a package. economists believe we will get some combination of interest rate cuts and qualitative easing. because interest rates are so low in the u.k. , there isn't much room for them to lower the interest rate further. we could see quantitative easing being used. what is the environment like right now with sentiment across businesses in the u.k. right now because we had business confidence becoming more pessimistic there?
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scott: we have little hard data because it's only been 12 days since the vote. we have very anecdotal evidence or single snapshots into smaller subgroups. we've had a consumer and a business survey done since the referendum and both point to falling sentiment. it is yet to be seen how this will play out in the hard data. matt: thank you for joining us. we turn now to a report in the u.s. shery: the dimming prospect of a fed rate hike and this is helping to spur high demand for treasuries. yields on the 10 year are falling to all-time lows. the government that has gained nearly 6% so far this year.
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from lisainsight abramowicz. yields,these record low some strategists are still thinking they might increase. we cycle and you've had this pretty progressively. for a bunch of years, strategists have been saying watch out commingled yields are going to rise, you have to go into unconstrained bond funds and benchmark yields went down and they went down and even this year, a lot of strategists were saying now, they are really going to rise, the fed will start increasing benchmark rates and they've fallen to all-time record lows. what could make them rise at this point and why exactly are they going down so low? isn't brexit come is it because people are thinking the fed will not hike again and told desk will not hike again until 2018?
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what exactly is the trigger? it's all these things. where is the good news here? matt: i heard a guest on surveillance this morning say the reason interest rates don't rises because interest rates don't work. it's just not working. central-bank policy is not working, so people flood into these safety assets. lisa: the rate that banks are trying to lend to each other, you've gotten $10 trillion of debt with negative yields come it is shocking and it defies investing logic. given where 10 year yields are 10japan and germany, u.s. year at 1.3% look pretty great. we've heard anecdotal evidence that the buying is coming from japanese investors, from overseas.
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it is hard to understand what is behind this. will it cause a meaningful increase in yields from here in the near term? shery: predictions believing the 30 year yield could rise this year even as the yield keeps falling. one of them is goldman sachs. they say investors are just reacting to the votes to leave the eu. not awritten is systemically important country given the exit from the european union. we will get over it. it is not that big a deal. not take logic does into account is that it is not just brexit, it is italy, for example, which is about to have its own referendum. it is the u.s. where we heard earlier from the fbi director, look, we are not going to indict
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hillary clinton. this will all create turmoil, uncertainty. central banks are running out of ammunition. you have the swedish central-bank coming out, people speculating that they will not be able to move away from their low rate policies as quickly as they thought. b.n.p. paribas saying political risk in the european union is at the highest since 1911. a reminder, you can read all the on the bloomberg, of course. world,n a post brexit bankers braced for bonuses to shrink by as much as 30%. we will have details. ♪
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market volatility for the rest of the year. what are the risks that lie ahead? matt: the wharton school says a flight to quality amid the brexit shot before the brexit shocked because nothing has happened yet other than the vote. this is bloomberg. ♪
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matt: you are watching "bloomberg markets." let's get to one of the most read stories on the bloomberg today. london investment bank bonus
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tools are set to be cut by at least a quarter and some bankers won't even be that lucky. if for the round of job cuts in london is likely in september if client activity does not pick up. this according to multiple banking executives. joining us from london is stephen loris. not good news, but at least they get to keep their jobs, i guess. most of them. stephen: indeed. bankers london will be lucky just to have a job in this industry is the most pessimistic predictions come true. a lot of them are expecting their bonuses to be cut in half or go down to zero. , you got ae story quote from hsbc chairman doug saying the work profit and lower revenues mean compensation will be lower.
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ftse come atthe the forecast for profit and revenue we have on the bloomberg terminal, i see the actually rose after the brexit vote. are you actually hearing from profits and banks' revenues will take a hit this quarter or this year because of brexit? stephen: it depends on where you work in the world. in asia, they will not see quite as much of an impact from the brexit vote. this is focused on the prospects of london's investment bankers. londonple who work in where trading is predicted to be down, the economy will grow slower. makes less money, there will be less money to pay the staff. they were already amidst
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a dramatic reorganization. how is brexit going to affect that? stephen: if we take hsbc as next apple, again, their ceo said they may have to move to 1000 investment bankers -- a fairly large exodus. barclays may consider moving some to dublin, which will likelye -- which will remain in the eu. they will have to look at not only the structure of their bank , but where they will put their people in the region. i'm looking to see what investment bankers have been up to and i just pulled up a chart here for western european deal volume in yellow and deal count in red.
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they have been on a decent trend coming into 2016. they have come down in the last quarter. do we expect deal activity in london or the u.k. to really drop? stephen: we are seeing a lot of deals held up as people wait to see what relationship britain will have with the eu going forward. if you are looking for a silver lining, you can argue that everything in britain just got a lucky breast the pound fell against the dollar. got lucky as the pound fell against the dollar. ♪
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shery: this is "bloomberg markets." matt: the s&p 500 is off nearly 1% in the day's session.
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eric is the senior portfolio bank and hehe u.s. is with colleagues in radio, cory johnson and carol massar. carroll: we welcome everybody to bloomberg radio. they have $133 billion in assets under management. how has this changed what you are doing back home? eric: it has tempered expectations as far as growth is concerned. what we have seen is a significant decline in interest rate expectations. that? you surprised by eric: yes and no.
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we are surprised that it has .een so material that is a bit surprising that you are seeing a push clearly deep into 2017. perspective, it certainly changed the complexion of any near-term action on the part of the federal reserve. we are still holding out that we are likely to continue to see progress made, particularly in the labor data. that brings us to the importance of friday's figures dispelling may. which may be indicative of a long-term trend. cory: we had the verizon strike that impacted the main numbers. -- may numbers. the figures we get this week may help us understand what's going on in the labor markets right now. eric: it is hard to extrapolate one data point. all of a sudden, multiple data
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points paint a different story. you cannot connect one dot , but you can connect to. -- connect two. carol: companies are making decisions, doing deals, moving on. does that temper some of the impact of brexit? error: it does, but it leaves us in this almost purgatory. we got an outcome as far as the vote, we just did not get resolution, there is still we arecant uncertainty faced to deal with in terms of brexit, but also just looking at monetary policy, looking at the level of interest rates and the slope of the yield curve and the implications there. are we surprised that m&a is still taking place? no, especially when you look at
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levels of financing. we are interested in getting some color as we move into second quarter earnings season. what's important for us is not only reported numbers, but much more importantly will be the level of confidence, conviction that management teams have met the playing their capital. have at deploying their capital. things are different now, rhe expectations we had fo gdp coming out of the u.k., the rate of tightening -- eric: we are advocating for broadly diversified portfolios come including exposure to fixed income and equities. -- thee do have a buy developed team is important.
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is important. we have a modest overweight in europe and japan. we are overweight in the u.s. we still have exposure to emerging markets. when you look at emerging markets or the s&p 500, on a year to day basis, it tells you really conflicting stories for all the concerns about the implications of slowing global growth, we are seeing emerging markets doing well. , you are seeing a return of energy. if i'm a client and i come in, where will you put the new money right now? eric: it is appropriate to be broadly diversified. we are buyers across the asset spectrum. a preference now would be to have that highest -- bias towards equities and we think there are compelling
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opportunities. -- defensive's are more richly valued. the more cyclical side we would be inclined to take. shery: thank you so much. that was carol and cory right there. we have much more coming up. this is bloomberg. ♪
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>> from bloomberg world headquarters in new york, i'm matt miller. courtney collins has more
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from the newsroom. >> presidential nominee donald trump is expected to enact his running mate next week according to cnn. iowa senator joni ernst and and mike pence are among those reportedly on the list. he said he would announce his vice presidential pick at the republican national convention which begins in about two weeks. makes her first campaign appearance with the man who defeated her eight years ago. clinton will campaign in charlotte, north carolina, with president obama. he will be a frequent campaigner as the election draws near. in the u.k., the conservative party takes the next step toward selecting the country's next prime minister. all party members in parliament will vote on one of five contenders to succeed david cameron.
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a new poll has andrea let's trim in the lead. and in germany, chancellor uncle a merkel says the european union must be open to the balkan nations. a sign that she is not giving up on a diplomatic push to stabilize the region. global news powered by 2600 journalists and analysts in more than 120 countries. shery: thank you, courtney. a growing pool of negative yields and boosting the appeal at the securities university of pennsylvania, they told the bloomberg team of what he makes of the bond market versus the rest of the domestic economy. what we see is a flight to quality after the brexit shock.
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people are going for sovereign debt of the strongest countries. risk aversion is very high. they say take me to the safest asset. the sovereign debt of japan. the u.k. yields going down, the pound dropped 10%. you did do well in u.k. bonds if you are a non-sterling investor. the demand for high-quality liquidity has been the story of the last two or three years. >> when you're writing the textbooks, you have to teach them about what is happening in the market. when the biggest buyer is and sensitive,ed what do you teach your students right now. what do you tell them?
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>> for 42 years, i said you can have negative yields because the lender can put the money in his pocket or her pocket and get zero. why would you lend a negative? suddenly you can put $10,000 in your pocket but $1 billion is hard to put in your pocket. if you want high-quality and you say i want security of an simple, you're willing to pay the government's 10, 20, 30 basis points for several billion dollars. in the case of switzerland, that is unique because the swiss franc is the strongest currency in the world. but i don't think we are in that for the united states at all. the only question is when will the fed hike? i don't think we are in for a drop unless we have a recession and i don't see that at all on the horizon.
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upside but10% to 12% with the s&p right around record high and so expensive. almost 20 times a price-to-earnings ratio and you have the 10 year yield at record lows. what gives first? >> first of all, when you say 20, that is the 2015 earnings. and 2015 earnings were crushed as a result of what happened in the energy sector. negative earnings for the s&p 500.
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when it is north of two percent, the dividend yield is 3.5% to 4%, and emerging markets have a good dividend yield. my thesis is that people will be for income stocks that the bond market as we can see. the investors will go to. >> how much of that is topline growth? >> a lot of it is a bounce back from the energy sectors.
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it really moves negative in 2015. and now we have oil stabilized between 45 and 50 which will bring positive earnings back. the dollar was a hit of about 5% of earnings in 2015. this year, it will be more moderate. those reverberations so to speak. we take a look at public opinion polls in europe and they move more positive after the brexit vote. ,e look at the spanish election that was positive for the ruling
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party which was protein you. the brexit will not start a domino effect. i think it will be britain's problem. strongery actually be after the brexit. shery: and we have breaking news. theresa may has won that first round of voting. liam fox's been eliminated. he received the fewest votes, dropping out of the race when the results were announced today. we are learning that theresa may
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has lectured the first round of voting there. matt: and with a large majority. on your terminal, if you want to check it out. liam foxx got 16. not even close, really. boris johnson cannot bbc and said he supported andrea because she's the best all around. andcomes in second place theyas a pro-brexiteer as call them there. in the remain campaign was in the lead by a long shot but she was always a eurosceptic in the past. on thursday, there will be another vote. the person with the least votes will drop out. it would be stephen crabb.
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it then every tuesday and thursday to have another vote until there are only two members left. then the whole country will vote. >> the candidates have been campaigning on key points about how to trigger article 50 on the treaty on how to exit the european union. we will be hearing much more from the candidates coming up ahead. of bloombergour markets, the global fallout continues. a look at what is done to an eu candidate. it this is bloomberg. ♪ matt: plus, a real estate investor adds a vineyard to his portfolio. why not? he plays polo, too. shery: and we will get more details about comcast letting
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netflix into their platform. all that coming up and more. this is bloomberg. ♪
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shery: this is bloomberg markets. matt: oil on track for the biggest drop in five months, trading below $47 a barrel. the commissioner chief appears to be bowing to pressure from germany. officials before and , jamie sturgeon.
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this is fascinating because i imagine most canadians stand with the european union. >> they say this was anticipated and doesn't put this in a progressive 21st century trade agreement. he is very optimistic. the reality appears to be the eu has listened to governments and has decided to put the sweeping trade deals to a vote across the block. veto in spite-- a of what officials want. shery: what is the move in
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canada among the electorate? is it mirroring what is happening in the eu and in the u.s.? >> none of the parties did. in the province of ontario, they made it free for low incomeers. they keep things from boiling over.
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it is fairly european as well. >> the question about the allegiance to the eu and any north american government. doing the impetus of this is the economic believe. far?: what has she said so
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>> indications are moving through the eu. coming out against free trade. there is a protectionist sentiment spreading around europe, here in the u.s. as well. >> is not just voters.
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they started to push her away from that free-trade stance. it look at some of the biggest business stories in the news right now. is it a sign that u.s. companies are being more cautious? falling by the most in three months. it is weighing on american factories. from the british vote to leave the european union. car maker itstric second-quarter forecast for global deliveries. tesla also lowered its forecast. if theed questions about company can reach a goal of 500,000 deliveries by 2018. and they will submit if your round of bids tomorrow according
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to that, expecting to take place around july 18. and a groupverizon led by quicken loans founder dan gilbert. and that's the bloomberg business flash. here onquick break bloomberg markets. when we come back, we will tour the billionaire tom barrick's been yard -- vineyard in california. ♪
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matt: this is bloomberg markets. fortune in real estate amassing assets including neverland ranch, hotels and the implying lessons he learned to his ranch in california.
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it is easy to mistake tom barrick for a typical winemaker. wine itself is capable at every level of growing these kinds of barry's. each cluster is hand sculpted to make the right umbrella area. more ready toen be harvested. >> he is anything but typical. a billionaire investor that made his money and really eight. bought a trophy property.
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>> buying a great vineyard is the same as competing against goldman sachs and morgan stanley that's great, what did you do? you may have a great year. >> he started about 20 years ago. >> headed you decide what kind you wanted to make? >> like all things, i knew that i had no clue.
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>> they previously owned one of the top wineries. soil, temperature, sugar content. it will produce five or six.
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>> they find parallels in business for almost everything he does and happy canyon. like polo. another passion. >> everything is risk management. itself, they regularly practice on the two fields. polo and wine are too expensive pastimes. says he's not too upset if it does not make money but it's important to have a
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project's children can share for decades to come. plus, vineyards have proven to be great investments. if my family is interested and passionate and continues to be better than the year before, we are successful. >> would you say to somebody that looks with this -- that looks at this. this guy is growing wine but he's not doing it for a living. what do you say to that person? live with me for a week. if you can keep up with me doing what i do, it you can think you are a rich dilettante. you have to get out there and compete because somebody with cleats on will run right over your back. i'm not taking anything for granted. i am very thankful. tomy: erik schatzker with
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barrack. you can read more about luxury at bloomberg pursuits. in lifest things including watches, travel, and dining. matt: coming up in the next hour, netflix on a wild ride today. company was downgraded, then rallying back this afternoon after announcing a partnership with comcast. from buytock to hold and get her take on the latest news. ♪
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shery: it is 2 p.m. in new york. welcome to bloomberg markets.
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♪ >> from bloomberg world arequarters in new york, we taking you from los angeles to london to san francisco. here is what we are watching. from ian taylor. the biggest oil trader. >> major political news from both sides of the atlantic. of voting foround the prime minister. the fbi director is not recommending any charges over her use of a private e-mail server. vonnie: is it time to sell netflix? explaining the downgrade today of the stock because shares are up on the verge of a new collaboration.


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