tv Bloomberg Markets European Close Bloomberg July 6, 2016 11:00am-12:01pm EDT
day, you are watching the european close on bloomberg markets. ♪ mark: we are alive new york and london at this hour. a truly global show. here is what we are watching today. post brexit fears back in the market today. on deals continue to rally. the pounds sinking to a 31 year low. couldn't time banks trigger a full on financial crisis in europe? mark: and the football superstar, down to 21 months. all of this to pay millions in fines for tax fraud by the spanish court. will actually serve out the
sentence. let's head to the markets desk julie hyman has the latest. off thee are bouncing lows. the nasdaq is actually turning higher now by .2%. we are seeing a bounce back here this morning. take a look at the map to see what is driving it. consumer discretionary as the two groups in the green, the nasdaq has a decent waiting in health care and biotech. we are seeing more of a lift their than the other major averages are telecom stocks continue to fall along with energy materials. more of a balanced picture now than earlier. take a look at the s&p 500 over the past few days here at the eighth following of going today. yesterday, several attempts were made that were not quite successful.
today is more of a bounce then we saw any point during the day yesterday. finders areere among them, the worst performance worthy refiner's. watching aerospace and defense stocks in the wake of president obama's commentary about a slower drawdown of troops in afghanistan. it is still declining and bouncing off the lows along with the rest of the market. george-mailing with ferguson, who covers these companies. he says it might mean marginally different spending but it will not mean material for these companies necessarily. here is a percentage of revenues from the u.s. government. boeing has the smallest percentage, the highest is 83%. then you have general dynamics also on the list and heavily dependent on the u.s. government.
finally, back to the 10 year ,fter reaching the record low we are seeing a comeback unchanged at 1.37%. a little change in direction in bonds. mark: down for a third consecutive day here. netherlands down by 2.2% and germany is 2% lower. substantial declines in currencies against the dollar. sterling 1% down, the lowest level since the middle of 1985 against the dollar. you are seeing the 10 year yields rising today, those are credit default swaps and we are seeing the decline across the commodities spectrum as well. i want to tell you about individual stories.
post brexit, an investment vehicle with industrial assets in the u k it is a transaction value of $2.8 billion, including debt and shareholders of nor tech will receive $86 per share in cash under the return of the reverse takeover. percent.p i-44 giant,the supermarket hsbc, removed it from its top list of european stocks. is owned by walmart, and may be about to fundamentally reposition on price, bringing down sector profit. scherzer 8% lower, since september of 2014. news developing in the last half
hour. henderson's as many two after liquidity pressures. management, 3.9 billion pounds three other real estate funds frozen 9 billion pounds of asets after brexit sparked flurry of redemptions. usdon values could plunge much as 20% within three years of the country leaving the eu. managers, on the ftse 350, falling as much as the 26%.of june from 12 to that is sizable. vonnie: absolutely. thanks for that. in.s check courtney has more from the newsroom. courtney: president obama will slowdown the current troop withdrawal from afghanistan.
he maybe enough about a half-hour ago at the white house. ofsident obama: instead going down to 5500 troops by the end of this year, the united states will maintain approximately 84 hundred troops in afghanistan into next year through the end of my administration. >> president obama said the security situation in afghanistan remains precarious and says the taliban is still a threat and afghan forces are not as strong as they should be. on capitol hill, angry house republicans have called the fbi director to testify. director,to know why did not recommend charges to hillary clinton over her handling of e-mails. house speaker paul ryan says the decision to defies explanation. a report says the u.k. chose to take part in the invasion before options had been his austin. it criticizes intelligence services in the military.
on thegest impact may be reputation of former british prime minister tony blair who was responsible for britain's involvement. w --uth africa, the double-amputee olympian had begun serving a six-year prison sentence, can -- accused of murdering his girlfriend years ago. prosecutors asked for a 15 year sentence in the lawyer argued he was only guilty of being irrational when he fired four bullets through bathroom door, killing. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. mark: thank you. as julie was just telling us, hovering around the low yields, france, germany, australia, and
japan, hitting new lows today. dollar, itsinst the lowest since 1985. joining us is the managing partner and cio. thank you for joining us today. that we will start with is the news from henderson global investors, 3.9 billion fund, to. property pay struggle to meet redemptions in the layer of brexit. it is something the bank of england is looking at. is this something that could spiral akin to the event in 2008 when we saw a big slump in commercial property in the u.k.? >> i do not excel. while these funds represent the property market, which is substantial, the vast bulk -- which asksh
themselves- and failed to reflect what the underlying investment value can do. what we have got is a relatively specific problems which has been well telegraphed on the bank radar for some time. it's special artist as part of our activity in global reach, we continuously said, look at the you getarket, diversification to almost 50% now for prime buildings and you don't give a liquidity problem. you want to get out, i think it is just on the road to a
restructured dominating property flows from here. concerned are you about contagion or other via will like ats, also backed by liquid assets. >> i think it is an issue. if we look at the crisis up until now, primarily we have seen asset market are well behaved. we have seen volatility hardly up in the mid-20's for the ftse and the s&p of hundred. we see the pound containing a lot of the pressure for the economy. i do not think out of brexit becomes a particular issue. you have not seen any blowout spreads. the world passes best-performing bond market in the last month. we have seen u.k. fall to an all-time low of 2.27%. out of exit, i do not see a
particular issue. vonnie: could it be that the commercial real estate market in this particular small niche market does begin to spook investors? >> it is possible. a lot of longer-term money and pension money, a lot of the losses have already been realized. ist you actually are getting 10, 15, 20%. a% of the pound, with still client base that will be in the buildings for 20 times to come. this setting off a major trigger. mark: on the matter of the following pound, this very simple chart, it is beautiful in
its simplicity. fared.s how the ftse the ftse 250 is down by 10%. post or exity lows. is the falling pound such a boon to the stocks we have seen rally since the brexit vote? >> i think it is a modest boon. -- this5% of dividends is a truly global, quite well exposed to pharmaceuticals and quite well exposed to where we have seen price recovery. the ftse 250 is more tied to services flows in the u.k., construction, and direct investment. for the pound to get an interesting possible low is a
roundabout 20. at those sorts of levels with borrowing costs, the 250 turnaround is quite attractive. thank you for joining us today. managing partner and chief investment officer. 18 minutes left of the european at recession today. as if you knew to be told, this is being led by italian lenders way down by about 300 billion dollars. could he spark a systemic crisis? we will hear from the chairman, lorenzo. ♪
york, i am vonnie quinn. mark: i am mark barton. this is the close on bloomberg markets. governmentsitaly save the banks question mark discussing ways to shore up its lenders after a selloff in the wake of the brexit vote. earlier, lorenzo, chairman, joined bloomberg's on the move from the paris euro place financial forum. european solution. i think what has not happened so hadis so far, we have national solutions. we need a european solution to the central expectations that drive this contagion in the banking system. the banks had a couple of problems. andis nonperforming loans the other, many banks are not profitable. you just do not solve the problem because capital is not
sufficient overtime to generate good returns. you need restructuring of the banking of them. it becomes more profitable and attracts capital and this requires political determination. ,t means also restructuring less jobs, cost-cutting, and this is the hard part that has not really been addressed. we know the german banking system, you look at the stock basis, they are going down. too many banks in germany. capital is not profitable to that sector. >> the political angle you were talking about, the political the way the bad loans are dealt with, is there the loan dealing with
story dealing with legislation that would allow for a quicker registration? i'm wondering if we are getting the sequence wrong in the way we are tackling the problem. >> the government has implemented tools to speed up recovery. it is not clear, but there has been movement there. they now need to deal with a andk of nonperforming loans incorporate the losses and whatever those losses are, they must be recognized. the next step is how to make the banks viable and avoid them being zombie banks just because they are not able to be sufficiently profitable, generate new loans. refrain that we need to leave in october.
issues andelicate you have to reduce employment, these are not politically very easy things to do. joining us now for more is the bloomberg managing editor for european finance. is there really a fear that the italian thanking crisis can come systemic and spread across europe? >> we are clearly seeing a distress where the european bank are pushing substantially lower today. that was the deaths -- death of the sovereign crisis. other measures of distress are not as acute. i think we are in a situation where there is a lot of frailty in the system.
that not inconceivable that could spark a deepening of that crisis. mark: check out the chart. of capitalortion reserve. highlighted the issue. above 100, a warning that banks need a solution quickly and bottom or top of the chart, where are we? are we near interjection? how are talks going between italy and the european union? being discussed, how quickly a decision might be reached. andwhat of a hard deadline a result at the end of july. any sort of resolution discussed , i think the month is really
one way or another. some highlighted very well the secret -- sequence of events, hurting profitability, and you need to draw on capital. be thinking about what happens next, avery organization to make these viable. vonnie: it is obviously the nonperforming loans as well. is there more where that came from? my chest efficient banks but the shadow banking system and so forth? >> what is concerning is it has been a slow buildup. , theyructure of these could find themselves in similar situations in the future. andessing the cost-cutting making the system more viable.
the market conditions with the level of interest rates where the market are very thin, they will remain with us from time to time. not short butd they were down 30% in two days. thank you for joining us. york,11:21 in new literally nine minutes away from the close. sterling continuing to drop trading right now. you can see the price just below 1:30. currencies -- this is bloomberg. thanks. later today and bloomberg tv and radio, bill gross and his latest investment outlook. he is urging central bankers to take lessons in credit on the economy from the board game of
live from london and from new york, i am vonnie quinn. mark: i am mark barton. this is the european close on bloomberg television. vonnie: time now for the bloomberg business flash, a look at some of the biggest business stories in the news right now. expanding the fast as in seven months. the nonmanufacturing index measures everything from retail to construction. the u.s. economy picking up speed before the vote to leave the eu. much credit goes to consumer spending. apple is losing ground. 11 ins made up less than may. 12% last year.
the chinese company is now a 17% market share. is your business flash for the hour. tok: take a look as we head the close. five minutes left in the session. 600 down,e europe falling for the third consecutive day. check out the currency of the bond board. the currency markets, sterling, falling below 1:30. just after midnight. to the lows, we have not seen since june of 1985. since june 24, sterling has fallen 14% since -- against the dollar. since september of 1992, this is bloomberg. you are watching the european close. ♪
industry group on the stoxx 600 down, fallen for a third consecutive day, the longest losing stretch since june the 14th before the u.k. referendum, down 8% since june 24 when the referendum became apparent, the big move in the currency arctic, sterling falling to new lows against the dollar. 13%, the biggest nine-day drop since june 24th, september 1992. 27, the lowestis since january. risk remained to the downside, the next capitalist for a selloff could be next thursday, expect 25 basis points in august. now, 1.2910, the record low, mid
1985, 1.05. what would it take to get sterling to falling to its record? money continues to move into the haven that is the global fixed income market, almost $10 trillion of securities in the bloomberg global bond index, yields less than zero, up $9 trillion one week ago. movement in the u.k., french, and german 10 year bond markets, lower, little change but all three hit record lows earlier, spanish and italian 10 year yields are a little bit down, not record lows. gold, this is the area of the market that benefited from haven flow since this day, since june 24, incredible movement, silver up 15%, 60% and gold by 8%.
the big two gainer on the ftse 100 since june 24, silver and gold producer up 61%, rand gold, up by 50%. what more can you say, quite incredible, the moves in precious metals since the day the brexit result materialized. u.s. dollar in terms, gold up 29% year to date. ,he dollar index, i am watching extremes, the dollar index elevated, the euro as been wavering in that index thanks to the euro which is trading below one -- 101.11. 17, back underneath that but an elevated vix. mark, it wasthe 80
79 basis points between the spread between the two-year yield and the 10 year yield, now close to 81 but a phenomenal spread with the 10 year yield of 1.37%. the dow now down a 10th of a percent. the s&p unchanged. nasdaq, up one third of 1%. let's go to abigail doolittle. >> a little bit of a turnaround for the nasdaq, it was down around the open now trading modestly higher. outperforming the dow and s&p 500. biotech is helping. airlinesng is american stock, down sharply in a downgrade at credit suisse to underperform from outperform, a few factors including disappointing third-quarter revenue growth possibilities and
a high 2017 earnings number putting pressure on the stock and the company to perform, she thinks american airlines could be hit with currency effects and post brexit stresses. she does like spirit airlines but on this download, all of the airlines at the nasdaq trading lower. also hurting the nasdaq are the shares of netflix, down 3.2%, on a downgrade at jefferies, citing the possibility of flat domestic subscriber growth. his rating to an underperform. the downgrade yesterday, laura martin citing the possibility of -- oppenheimer saying they think the recent price i could hurt domestic subscriber growth. netflixanalysts on ahead of the company's second-quarter report on july 18. chart, take us to your does this have anything about what we will see? >> it tells us lots of
uncertainty, we see a range of uncertainty, up and down between buyers and sellers. what could be ahead, it will matter how this range breaks, up or down, a big move the cup -- bearish uptrend, it suggests sellers are gaining control and the could be downside ahead for the shares of netflix. vonnie: thank you. let's check in on the bloomberg first word news from new york. >> in australia, the prime minister's coalition has taken a slight lead over -- over the opposition labor party, not clear whether he will win enough seats to form a government. both are still being counted. -- votes are still being counted your native holds its first meeting on friday since the u.k. voted to you leave the european union, a chance for the military alliance to show unity in the face of a more aggressive russia, nato plan to announce troop deployments to reassure members in eastern europe that it is committed to defend them.
analysts say the moves will be too little to deter a potential russian assault. the president of argentina says the brexit may be an opportunity for south america. bloomberg and says that trade talks are going forward between the eu and marcos are, the south american block. because theunity european union can expand its capabilities, a region in which -- we are all sons of europeans. natural, we should work together. >> he has been pushing for a trade deal with the eu since he took office last december. france has sent love letters to 4000 british business executives , the letters from the paris regional government outline the advantages of doing business in the french capital. it makes the case for moving operations and jobs.
the letters were mailed a day after the u.k. voted to leave the european union. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, i am courtney collins, this is bloomberg. mark: could it be the dollar's time to shine, top currency forecast think so. chaossays thanks to the caused by myrexis, the demand for greenbacks could begin busters. smith, us now is simon we will get to the dollar side of the equation, the chart behind me is very clear, 129.17, how low do we go -- can we go? >> we are going lower. pretty much oversold. that will prove the case for cable. losses have continued because you come in in the
morning and see cable lose out. i think people were hedging the youit risk on coming and see decent selling of cable during -- -- the u.k. is a wash with uncertainty. inclination is to sell and not reinvest. there, threw it out saying what does it take to push sterling to 105, the low from -- is it inconceivable that the town could fall that far? >> not inconceivable if you look at the charts. in 2008, we saw a big move. magnitude is not inconceivable by any means. what would it take -- at least
to easing's from the bank of england. plus, continued uncertainty on the exact cause and timing of the uk's exit from the eu. it carries on beyond september, mid-october, i could see that down through 110 and eventually 105. vonnie: how quickly will we see an impact on the british pound through the import and export tunnel? >> it will take some time. it takes time to feed through. initially ating two months to three months. what is more interesting and what will drive things initially is for the bank of england, not the messages because we do not we can getrd data
our hands on, what will drive it initially, what impact will we see it in some of the share prices? that is still speculation. the view from the bank of england will be key in shaping the decision because they do not want to base it on speculation, they want evidence. vonnie: will the direction of the pound or maybe the pace of depend on whol it becomes the next conservative party leader? >> it will to the degree in as much as the extent to which they push forward on the plans for the u.k. to exit the european delay -- orday which they delay. then we are in a complex situation. impact toe, it will the extent which it pushes forward that decision, brings
uncertainty or whether we see a continued, where the u.k. is having one position it wants to take things slowly but the eu saying we are not talking until you trigger this decision formally. mark: the haven currency of choice, is it time for the dollar, which is what we moststed, coming from the accurate forecaster, is it time for the dollar to take that mental post-brexit weather haven or for other reason? >> for the first cap of the air haven,e yen was the safe i do not necessarily think the second half will be given for the dollar. yen -- still the every policy they have done through 81, the
markets kick sand in their face. on the dollar side, two drivers come interest rates, the safety element as well. we have not seen as much of that recently and that will be hard to come through at a time when the momentum in the u.s. economy -- we do and the risk not see further rate hike this year and also a potential fed rate cut being priced in 2017. mark: do we get more clarity from the fed minutes? >> i think it will be limited. when you see the way things have changed, the timing of the 10%,ng, a 50% chance, now things have changed. it more depends on the labor market and the extent to which the previous month was an
york is danny berger. >> looking at a trend that started last august with all of the oversee woes and continued on since brexit, since the banking issues we are having in italy. a study out of credit squeeze trading strategy group, the bottom line is looking at smd swings overnight. -- s&p swings overnight, this half year that line has been slowly ticking up as we have had overseas concerns in the middle of the night, jolting stocks. at the top, our small-cap russell 2000 index which historically swings more overnight, a less liquid market. some trading on that will be -- make it swing more. these two lines have been converging and according to credit suisse, this is the closest that these have ever swung together. it is showing how overnight the volatility from europe is jolting u.s. stocks.
.ou can look at this vonnie: talking about this morning, everything we looked at was at the extreme. a good illustration of that. mark? mark: a lot has been said about european banks since brexit and even before. the banking today crisis in the league could spread to the rest of europe. i looked at the stoxx 600 bank index since june 24, thanks to the worst-performing industry group on the stoxx 600, with a decline of 21% this year, banks at the bottom with a drop of 35% . in the last year, a plunger 43%, this chart shows the market capitalization of the stoxx 600 banks index, this is a gauge of 48 lenders. 2007, the stoxx 600
banks index have a market evaluation of 1.89% -- 1.8 9 trillion euros, today the market value of the stoxx 600 bank index is 804 billion euros, that means one trillion euros of value have been wiped away in nine years, in percentage terms that is 78%. in the last year, half a trillion euros of value has been wiped off the european banking industry since the high in 2007. monte dei paschi down. rbs down 97%, credit suisse down 90%, deutsche bank down 88%, ubs down 83%. half-full way if you look at things, the market cap up 350 billion euros on march the ninth 2009, above those levels but one trillion euros of value has disappeared in nine
years. i am not sure that is glass half full, that is looking like a little tiny drop in the glass. one line that puts shivers up your spine, mark, you are the winner. please look at those charts and send in your comments. we love reading them. coming up on bloomberg markets, the european close. --k: focusing on what about one of the big sports stars, leno messy, sentenced to prison after he was found guilty of tax fraud, unlikely he will spend any time in jail, why, this is bloomberg. ♪
york, i'm vonnie quinn. mark: i am mark barton, this is the european close. time for thblmberg business flash, the biggest business stories in the news. tradersn, berkeley convicted will be sentenced this week, three of the men were found guilty of conspiring to manipulate libel, the other pleaded guilty, a former ubs trader was the first man convicted of rigging libel is serving an 11 year prison sentence. the company that makes citroen and persia those has come clean, the real fuel mileage will not match what is on the sticker and not close, 14 models use an average order for percent more fuel in real life then they claimed. the group is trying to bolster consumer trust in the wake of the volkswagen scandal.
berlusconi is close to selling his football club. the former italian prime minister says he is agreed to a deal with a chinese group, he says the condition of the sale is the buyers invest at least $440 billion in the club, ac milan has struggled, has not won any titles in five years. bloomberge latest business flash. was sentenced to 21 months in prison after a barcelona court found him guilty of tax fraud, he is unlikely to serve any time in prison. here to talk about his next -- why won't he spent any time in prison? >> basically because of the spanish law, people who have a sentence of under two years are unlikely to do prison time, up
to the judge to decide whether they have to go, rarely does it happen, a few cases but very rare. vonnie: the back story is that it tax avoidance by him and his father, is this common in spain? or unusual examples given how much he earns? >> the back story is that for seven years they evaded taxes come his father managed his finances, they admitted that, messi said he had nothing to do with the contracts. there has been other cases but mostly foreign players have had problems with this issue. the tax agency usually goes after foreign players, the other theory is that some foreign players may not be accustomed to paying taxes in the same way they do in spain. mark: i got a sense from your
story that messi does not know what is going on. is that accurate? he focuses on the pitch and leaves the rest to his father or his advisors? >> most of the tax division came with his contracts with sponsors. they built a scheme with offshore companies that they used to evade taxes. this problem was from taxes from 2007 2 2009. he claims that he had nothing to , hadth it, he had no idea nothing to do with the paperwork so that argument, he has pushed it and everybody seems to accept it accept the court, they say that does not justify the situation. they say because you do not know the law does not mean you do not have to follow the law. paid --ppy fines been
have the fines been paid? >> he paid everything, back taxes, everything asked of him. him: thank you for joining -- thank you for joining us. messi is retired from international football. three days of declines after four days of gains, look at that, the stocks europe 600 still a percent below where it was when it finished the trading session on june 23, the big story today, look at the currency, sterling has moved below 130, its lowest level that is it for, the european close, bloomberg markets continues, this is bloomberg. ♪
mark: we will take it -- we will take it from washington and london to los angeles, here is what we're watching. >> we will hear from the economist who had the second-highest yield forecast for this year to find out what he is going for now. matt: the u.s. economy is like monopoly according to bill gross , he tells the fed chair she needs to take a lesson in credit in the classic board game which creates bankruptcies. apple, losingw to ground in its biggest overseas market, dropping to fifth place in chinese sales. ♪ matt: