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tv   Bloomberg Markets  Bloomberg  July 11, 2016 12:00pm-2:01pm EDT

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>> from bloomberg world headquarters in new york, good afternoon. >> we are covering stories from london to beijing and tokyo this hour. here is what we are watching. the latest twist in u.k. molitics, andrea leadso dropping out. the only question now is when. >> it is monday, so don't miss our deals report. how the fallout from the brexit vote and the u.s. presidential election could impact deal activity. >> shares of nintendo surging following the release of its new game, "pokemon go." >> we are halfway through the
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u.s. trading day so let's head back to new york where matt miller has been tracking the moves and a record high for the s&p. >> we were so close that it had to happen. too the close, we are going see a new record for the s&p for the first time in 286 days. this is the longest stretch we have gone in a bull market since 1961. was 2130.8.o beat not too difficult. the dow jones up 111 points. you've got the certainty of theresa may as a new prime minister after david cameron said she would start on wednesday. we have the japanese losing monetary policy further. we have've got the job on friday, all pushing up stocks. look at the airline stocks.
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here is the s&p. to show you the airline stock because a bunch of the asian airlines came in and ordered more single aisle jets. that is pushing up to sting boeing as well as all of the european airline manufacturers. american airlines rising as well as ualr. the utility stocks right now, they are coming back a little bit that we do see utility stocks still down about 3/10 of 1%. among the losers, you see utilities and telecom stock and i will finally show you gold here, which is actually coming up. we are still not at the record we saw last week but 1360, pretty strong for the precious metal. meantime, let's check in on
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the first word headlines with mark. mark: the favorite to be written's next prime minister says there is no going back on the european union vote. "brexit meansid brexit" and we are going to make a success of it. she will make no attempt to stay inside the european union. it may be a sign that bernie is about to endorse hillary clinton. sanders will campaign with the likely nominee tomorrow in new hampshire. last week he made his most pro-clinton comments to date. he said "we've got to defeat donald trump and elect clinton." the longshot attempt to stop mr. trump from becoming the presidential nominee is in the final days. antitrust forces want to allow delegates pledged to trump to vote any way they want on the first al it.
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-- first ballot. we are learning new details about the standoff between police and the suspect in the ambush style attacks on dallas officers. micah johnson taunted officers during negotiations, even singing. at one point he asked how many he had shot. johnson's parents say they are surprised and say he returned from an army deployment to afghanistan a changed man. five officers were killed during the attack. global news 24 hours a day powered by 2600 journalists and analysts in 120 countries. i am mark crumpton. >> returning now to u.k. politics. the british pound is rising. as britain moves a step closer to securing a successor to prime minister david cameron. leaving theresa may as the sole candidate.
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>> our country needs strong, proven leadership to steer us through this time of uncertainty. and then negotiate the best deal new roleeu and forge a for ourselves in the world because breaks it means brexit and we are going to make a success of it. >> that was theresa may, who will be the incoming prime minister. here with us is john brayer. leadsom said earlier that "i a short theresa may of four -- i assured theresa may of her full support." >> it is important to bear in mind it was a difficult weekend , so it is leadsom possible, but it is even more possible that the people around she wasn't up to the full
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glare of what it means to be prime minister. that is not to say i would rule are out because some people say she would play a role in the cabinet and some people say she might be a dark force to be -- a dark horse to be secretary. what do we know about what happens next? >> we are going to see the theater of british constitutional parliament. david cameron came out of downing street and said he would take his last questions in the house of commons on wednesday and then he would go to meet the queen. she will fly down to london tomorrow. >> that is holding it up? >> that plays into this. oneron will meet the queen wednesday, he will tender his resignation, and the queen will invite theresa may to buckingham palace so she can ask her to
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form a government. most influential female politicians in government over the past few years, what do we know about her economic policy? >> not that much. theresa may is obviously very well known on domestic and immigration policies but she did keep -- she has kept her counsel when it comes to economic matters. light.ek has shed some one of the most interesting things she said was essentially saying that she was going to abolish the fiscal rules that george had in place over the last six years. it is no longer her goal to remain in the surplus by 2020. the sameborne said thing so that raised some eyebrows that there was some coordination. this morning, she gave a speech
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in birmingham where she laid out corporate responsibility, how she will hold people to account. the pharmaceutical industry, which she regards as a strategic hand -- we are seeing her more and more about where she stands on the economy. >> we are waiting for her to speak again later this evening. it appears she is not going to have to go through the steps of making her case area does that differ less of a mandate? >> she is going to have a snap election. the parties have come out and that sheeople will say lacks the legitimacy of prime minister's -- or at least doesn't have the mandate to go to brussels. there will be no snap election. >> things change quickly in the u.k.. john freire of bloomberg news. still ahead, how political
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uncertainty could impact global dealmaking. allen klein, who has been involved in over a hundred billion dollars has joined us. next on bloomberg. ♪
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>> you are watching bloomberg markets live from london. i am scarlet joined by shery ahn from new york. time for the deals report. we zero in on the business insight and analysis from the big players behind the deals.
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how politics at home and abroad could impact this summer and fall. >> we are joined by jeff mccracken, our executive editor along with his special guest, alan klein. he is the busiest deal lawyer in america 2015 -- 2016. he has a $43 billion acquisition merger and aon total of a $15 -- $15 million purchase and a $26 billion microsoft linkedin deal. it is great to have you both here. it has been a busy year for you. is this an unusual 2016 where you have clients pulling off these massive deals or does it reflect a broader trend? of all, it reflects a
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tremendous amount of good luck and hard work. --elf and my colleagues these are long-standing clients in fields which the first half of the year have shown an uptick in activity. industrials are relatively stronger as part of the m&a market for the first six months. that is where these clients have been focused. >> we have seen a slowdown in the last couple of weeks. i've got to start with what is happening here. -- the. referendum actual divorce has not happened yet. we don't know exactly when it will. what is the impact on companies willingness to buy out companies? anbrexit has certainly been additional element of uncertainty that has come into play this year.
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i think the first couple of weeks after brexit, you saw the markets get very volatile. you've seen the strength in the dow, the strength in the ftse. that is a very good sign for people being able to agree on valuations and move forward on deals and i think things that have been in the pipeline are going to continue to be in the pipeline. it has remained remarkably stable. it is a good question. there is a lot of hard work that needs to take place in working through the details. i think a lot of the fallout remains uncertain. >> how does a presidential election impact m&a? you have been through this since the reagan administration, so seven or eight presidential elections. does it start a slowdown in june
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or july or does it accelerate when people try to get a deal done before the administration changes? >> i think historically, what you see is a real slowdown in october. in years where there is no presidential -- no incumbent, there is really a slowdown after labor day. into mid-november, people wait to see what will be the new administration and who is going to be running regulatory policy. this year is obviously, without question, the oddest we have seen in all of our professional lifetimes. wonder if coming out of the conventions that slowdown will be part of the natural august whole back and people are just going to be putting things on pause as we head into november. >> i want to bring up this chart on m&a sentiment.
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it shows that professionals in the m&a business, 62% said a donald trump presidency will have a negative impact on deals in the region. america, europe, the u.s., what are you hearing from clients when it comes to the potential candidate? think uncertainty is bad for the deal market. i think with a democratic administration, whether you view it positively or negatively you have a good sense of what that will mean in terms of everything from antitrust policy to monetary policy. >> is there a preference for clinton over trump? at the moment, what trump means is more uncertainty. is -- the devil you
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know versus the devil you don't know or a more affirmative view of it. around trump it just furthers the degree of uncertainty. it means ceos are not willing to take risks when they don't know what environments they are operating in. considerso have to that the polls have come under question as well as well as betting market -- vetting markets. our companies more or less scared of political risks? >> it becomes a real factor. a year ago it would not have been a material part of the conversation. ithink the polls getting terribly wrong on brexit lead to people waking up feeling very surprised. people don't like feeling surprised when they are thinking of spending billions of dollars. heightens the degree of uncertainty around the election because it means you
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cannot have the level of confidence in the polls you might have had. >> you brought up antitrust concerns. we've got a couple of health insurance deals out there that might get blocked. how does that change the conversation at the board level? issue that you don't even venture in or are you looking at solutions? questionis simply no that right now i would say the two threshold issues that anybody looks at, number one is valuation but the other is regulatory environment. circumstances, before people have agreed on evaluation , they will have the lawyers on both sides think through what the issues might be around regulatory matters.
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and will then need to be to investors? what level of risk is there? that oneed to evaluate deciding whether to follow through. >> what does it do to a termination fee? the allocation of regulatory risk is an important part of any negotiation and whether that is something that both sides should carry, that regulatory risk whether one side should bear that risk and have to pay a fee if they are not able to achieve regulatory approval? many transactions these days -- some people are pushing for a transaction and there is a significant regulatory risk. they may have to bear the burden by paying a fee.
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>> stay with me because we are going to be talking about changing how private equity deals get done. we will explore that question when our deals report continues. also later in the hour, jpmorgan and citigroup are among the banks kicking off earning season. we are taking stock of the good, the bad, and the ugly.
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>> this is bloomberg markets. live from new york, we are back with a deals report talking about the billionaire koch brothers who are help filling a give -- a big gap in private equity spending.
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lending has been hampered by tougher capital wire mitts since the financial crisis. -- capital requirements since the financial crisis. our executive editor and alan klein. now we have this adt with the largest leveraged buyout this year. what struck you as you are seeing this package comes through? >> i was working on the side for adt so we were on the south side. but it was a fascinating point hit thisecause as we past december, january, february, the high-yield markets were virtually shot. that is a traditional source for financing in this transaction. did in aapollo
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marketable job of pulling together close to 10-12,000,000,000 dollars. at a point in time where traditional markets were almost shut. frankly, traditional lenders have been very squeezed by the u.s. federal reserve. the federal reserve has really told the traditional banks that they don't want them landing into leveraged situations that have a 6-1 loan ratio. you see private equity firms having to go through nontraditional sources to create the capital stack that they need. withw does this compare deals you worked on three years ago or five years ago or 10 years ago where we saw these $20 billion lbos coming regularly. prior to the financial
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crisis, it would have been one likelihoodn all standing up for the commitment for most of the senior if not all the senior debt package. they would quickly have found code leads who would come in with them. the syndication process takes place but the amount of debt that was available on any given day for that package is much more limited and there is a much ,reater need for mezzanine debt which is very frequently coming from canadian pension funds, people like the koch brothers. at the senior debt level you see nonbanks providing those loans. >> i want to touch on another deal that you worked on, buying
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$443 million. how much business is china generating for you? also, those national security reviews by the u.s. -- how much is that hampering congress? we are still in the midst of the regulatory process. i want to stay away from that transaction but i -- if you look at deal volumes out of china, the outward bound acquisitions companies are for the first six months double for what they were the entire year. i think that tells you right -- there is a lot of acquisitions. >> thank you for joining us. ♪
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>> life, from bloomberg possible headquarters in new york, i'm shery ahn. >> and i'm scarlet fu. this is bloomberg markets. we've got christopher bailey
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speaking exclusively to -- to bloomberg. weaker pounda could help in certain ways. 1:00 p.m. eastern time, you don't want to miss it. let's start with the first word news this afternoon. mark crumpton is in the newsroom. mark: do you feel i guess u.k. will have a new prime minister by wednesday night. david cameron says he stepping down. >> wednesday i will attend the house of commons for prime minister's weston's and after that i expect to go to the palace. mark: the new prime minister will be home secretary theresa may. the way was cleared for her today when her rival withdrew from the conservative party leadership race. she will be the u.k.'s second
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female prime minister. margaret thatcher was the first. a campaign stop in indiana tomorrow fueling speculation that governor mike hence will be named the running mate for donald trump. his chances of being the vice presidential take according to the "washington times" are 95%. two other names have emerged, retired general stanley mcchrystal and retire old -- retired general michael flint. of theericans disapprove fbi's decisions not to pursue charges against hillary clinton. 66% say that she should have been charged for her handling of class of fight e-mails while secretary of state. won't% of people say it influence their vote in november. the end of an era, tim duncan of this spurs announced his retirement. he spent all 19 seasons with san antonio, leading the team to five championships. he appeared in 15 all-star games
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and is also a three-time nba finals and vp and was named to the all nba first 10 times. news, 24 hours per day, powered by 2600 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. thank you so much, mark. i'll, will be reporting results after the closing bell today. there's a great contrast the bull market the s&p 500 and making a new record high today with the persistent u.s. earnings record that's unlikely to end. if you look at it on the bloomberg terminal, which i have next to me, there are two panels here. the top the sales growth, appropriately enough, the bottom is profit growth. you can see the bars before the vertical line, these companies have been in an earnings recession sales drop with estimates for the second quarter
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, analysts looking for another drop in earnings. however the bright spot is sales as helped to recover by easy comparisons to the falling u.s. dollar and rising commodity prices. according to bank of america, the first order light -- likely marked a trough at less than expected because of slower global growth outlook, as well as a stronger u.s. dollar in the wake of all the other central banks in the world keeping a very accommodative policy. in particular they said the 50% for ator will see second straight year. more pain in those numbers. scarlet: more pain for -- shery: more pain for banks with these earnings next week. on that front either. you had one bright spot on sales.
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analysts downgrading the estimates. for these big banks. take a look at a chart that i have today. these are analyst who are cutting their full-year profit estimates for this year for all of these banks. earnings that dropped 16% for the full year on the y axis. you have that percentage change with morgan stanley expected to pull the most. faring relatively better compared to the rivals. we have for a long time had the possibility of longer low interest rates with analysts downgrading their forecast. i wanted to give you a picture of what the earnings season will start like. thursday, citigroup, wells fargo on friday as well as on monday. bank of america reporting quarterly earnings. it will be quite an interesting
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progresses how that during the rest of the week. scarlet? scarlet: we did hear from jeffries, not really showcasing something that they could get excited about when it comes to commodities and currency, but the interesting thing is that in the days after the break that vote that took so many by surprise, you had a lot of trading activity in the market. perhaps that led to a of a boom and better numbers for trading revenue in that division. whether that sustains itself, how long will that last? i think that most evil watching here are worried. shery: the consensus is that the bonus cuts are coming for just about everyone this year, scarlet. scarlet: yeah. the earnings recession continues for now. to the u.k., the royal air show, one of the biggest
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events for the aviation industry kicked off this morning under the cloud of exit -- brags it -- brexit. the transition of bowing to the triple seven at. x. in the u.k.een personae five years and we will continue to ramp up. we don't see plans changed -- plans changing. >> is there a contested currency story that we need to talk about? dennis: we don't see it changing the behavior of customers a lot. local currency fluctuations don't tend to drive our decisions on some light chain. that said, where we can drive affordability, we try to take advantage of it. >> let's talk about interest rates. does that offset the cheaper oil
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prices? running all of their planes a bit longer? dennis: i dig it helps and creates economic movement around the world while creating infrastructure, which i think is a key enabler for the aerospace is this. like now we have to figure out export import and the sale of now wees to iran -- >> have to figure out export import and the sale of airplanes to iran. a significant opportunity and we arm of article he the licensing opportunity right now area did i'm encouraged by the progress we have made we still have some work to do. >> policy must become an increasing part of what you do. you have been running the show for a year.
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you have already been in congress. what is your sense of the environment? have?ch visibility do you >> the politics and how it relates to our business continues to be complex. in many cases we have worked hand in hand with governments around the world and we have a partnership model that is important. even though last year it was passed by super majority for reauthorization by the house and senate in the u.s., today we to't have a full xm bank operate it. we need some near-term options on that. gethinking at david joyce at , talking about the panax, what are they telling you about the ability of that air in? >> first of all, the triple seven will be a great airplane for the market is and we are moving briskly through the development. we are in the meat of that development right now. if we need a stretched version of that, we can go there.
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it's very doable. it is an ongoing conversation with customers. they see the value proposition of the triple seven. we have the flexibility to create additional derivatives if we need that. bys will be driven customers. >> all of the diversity, you do the math on it and it is straightforward. you either sit down heavily or below the production rate, what's it going to be? dennis: the value proposition is still holding up in the market lace. -- marketplace. we are working hard to build a bridge to the triple seven x. we made solid progress this year, but we still have work to do. areais an important risk we are taking a look at but we feel we will be able to build that bridge and go down to seven per month in production rate during that transition time.
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scarlet: of course, that was the boeing ceo. breaking news from theresa may, the incoming it is prime minister. she repeats that brexit means brexit. she's been speaking to supporters outside parliament, saying that there is unique -- is a need to unite the country. she is set to become the prime minister as early as wednesday, once david cameron resigns. elizabeth the second will then invite her to form a new government. this is bloomberg. ♪
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mark: you are watching bird.
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>> this is your global business report. mark: getting a look at the britain farm air show, thanks to big orders from airlines and china and india. >> the japanese prime minister scored of big win in parliamentary election. mark: when it comes to credit card security, the u.s. is a few swipes behind europe to chip cards. how to erase the technology gap. vonnie: asian airlines inviting the biggest boost to boeing and airbus in the u.k.. they have signed a deal memo to purchase macs just -- max jets. familiar to people with the matter, the discount carrier air asia will order as many as 100 airbus planes.
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mark: the house has passed legislation preventing bowing from sampling plans to the iranian airline. there is concern that they could be used for military purposes. >> we have made progress here. it's a significant opportunity for us. we are methodically going to the licensing process right now. i'm encouraged by the licensing rye grass we've made. mark: saying that the iraqi sale complies with u.s. regulations. the conservative coalition and
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the u.k. now has a super majority in the country's upper house. the 126 in6 of contention. during the campaign they can take broad, bold measures to expand the japanese economy. shares of nintendo rose as much as 25% today in tokyo. the new pokemon go game has soared to the top of the smartphone app rankings. it lets them track down virtual characters in real locations. using their phones. scarlet: time for -- vonnie: time for our bloomberg quick take when it comes to debit and credit card security. october 1, 2015, the burden of liability for credit card fraud
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in the u.s. shifted. banks issuing a new card since that date without a chip or any retailer that hadn't switched to the new technology is now shouldering the cost. but the magnetic stripe on awayt cards is not going anytime soon. the conversion has a long way to go. it was estimated that by the end of 2015 only 36% of american credit cards and only 13% of debit cards would have the chip compared to 82% of cards in most of europe. here's the background. credit -- credit cards were cardboard when they were introduced in 1950. they moved to plastic in the 1960's. in the 70's magnetic stripes were added once the standard was set. in 1999, 3 networks, euro pay, mastercard, and visa established the standards for global use that included the option of chip technology. they caught on in europe with regulators pushing for the new
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technology. the payment industry in the u.s. relies far more on self-regulation than in europe. like a good thing when american companies were pioneering the credit card economy. but in the wake of well-publicized breaches, the president and lawmakers have standards national for requirements for notifying customers when breaches occur. fear of government regulation like that banks and merchants are speeding up the adoption of chip technology. they have become common in the u.s., but that could take years, and the battle with hackers is bound to continue. that is your global business report. for more stories, visit ♪
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scarlet: this is bloomberg markets. coming up, the outgoing burberry ceo will be speaking exclusively to francine lacqua. he said that brags it is not a decision that he wanted and that a weekend pound could help in certain ways. returning to steering the creative direction, stepping down a c eo. shery: the s&p 500 getting past such as the closing intraday high of 2135, trading 2142.
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the highest since may of 2015. the nasdaq headed for the highest close this year. to abigail doolittle, live from the nasdaq. what an incredible rally, abigail. abigail: we had the nasdaq reclaim 5000, that psychologically and orton level. i was talking to the producer in my year before going on, the nasdaq is 1/10 of 1% away from being even on the year. byay's rally is being driven tech names. facebook, amazon, and alpha that. ahead of tomorrow's prime day, last year was a huge success for the company. the company sold more units on that exclusive member of event than they did on the biggest
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black friday. some investors might be juiced ahead of that, but there is one part of the trade that they didn't mention before, netflix, down nearly 8/10 of 1%. when we look at a two-year chart we see something interesting. asmay be decoupling facebook, amazon, and google are trading higher, netflix is down your today. a bit of a bearish story, perhaps decoupling from this big internet trade. it's pretty notable. what is behind their weakness? the rest of the nasdaq is greatng? abigail: question. they put up some messy reports. they did die down today with errands saying they think that netflix to drop 40%. it's no longer a momentum name, the fizzle is gone. and if the stock is going to see fresh record highs it will require a new narrative from reed hastings.
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we will have to see what happens here. let's now turn to nintendo's newest game, pokemon go. it's sweeping the nation. this revolutionary smartphone app has soared to the top of download charts. nintendo plus stock has skyrocketed. joining us now is selina wang. were start with the basics people who have yet to download the app. how does this work? hasna: how viral the game gotten is insane. around new york you will see multitudes of people running around playing this game. you can think of it as fantasy google maps. you walk around, you try to find pokemon characters overlaid over the real world and you will try to catch them. earlier we were showing the adr for nintendo and how it's soaring today, up over 30%. in japan the shares rallied by the 25% limit.
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you have the knee-jerk reaction, but what does this really mean for the company down the road when the fever dies down? tough times been a for nintendo. they are seen as not being ill to keep up with the changes in their gaming industry is the console slows and people moved towards mobile gaming apps. but investors are seeing that this is just tip of the ip iceberg. the pokemon brand has such whole. if they can make more hits like this by capitalizing on their franchises, the potential is enormous. that is why we are seeing these insane skyrockets and talk rises. we are calling this just augmented reality, the combination of a game and also the real world. what does this mean for a trend in this new innovation? and also, for the rest of the gaming in this request and mark >> it is just basically overlaying digital images over the real world.
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this -- gaming industry? a simplet is technology. it's not the complicated headset that other companies are trying to do. but in a way it is a gateway for people to get familiar with what augmented reality and the potential for it is. i would not be surprised if you some more mobile developers using more location-based or more simple types of ar in their own games. i was going to ask about the company behind this. obviously, nintendo wins big from this. ,ut who are the names involved what is their linkage to sue -- silicon valley? selina: the actual developer of the game came from google. it used to be a google start up. he was part of google maps.
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a lot of the hard technology behind this game comes from then. the head of previous game that did almost the same thing, but they really needed nintendo and again to have this reach mass appeal beyond the nerdy hard court game community. we will have to download that act and try it in the studio. [laughter] almost afraid to introduce it to my kids who will be paying for virtual things left and right. coming up in the next hour, we will hear from the ceo of cutter airways. he is going to tell us how the brexit vote is affecting his company. ♪
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1 p.m. in new york, 6 p.m. in london. --come to "work markets." welcome to "work markets." --
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welcome to "bloomberg markets." ♪ shery: good afternoon, i'm shery ahn. scarlet: and i'm scarlet fu, in london. we are covering tories from new york to london, toronto and beyond. earnings season kicks off, the s&p 500 makes a new record high in today's session. the ftse 100 regaining its exit vote losses. vote losses. shery: do they have any reason to grow sharply? christopher bailey says that this was not the decision that he wanted and that the weaker pound could help in certain ways. let's head to the markets, where
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matt miller has the latest. we are still holding on to those record gains? matt: we are still seeing them in terms of closing records and intraday records. theme go here and show you s&p 500. right now you can see we are at 2142. the intraday record is 2100 34 and change. as long as we close it contains, we will see a record close with an intraday record as well. you have got optimism coming in through monetary policy and possibly even a big ¥20 trillion stimulus injection in japan with more certainty out of the u.k. and last we of course had the jobs number. you have a deal going on in the energy sector with energy prices and the underlying commodity not calling any further. 50% right now selling about
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of its pipeline business to southern, helping kinner morgan lead energy stocks. as a whole it is doing really well in today's energy market. the otherk at commodities gaining, metals led by copper, lead by nickel and other metals rising. that's a boost to freeport mac brand, up 65% now year to date, so doing very well. here in the u.s. and in the u.k. basic resource stocks have done very well over there, scarlet. scarlet: of course in recent days and weeks we had record highs for bonds with record whole -- record high yields as a result. how is it playing today? matt: doesn't like -- doesn't look like we will see that
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historical moment. you can see the selloff pushing the yield, but we are at those levels. it is just an unusual time to rally in theu price of bonds and stocks. the question is -- how long can it last? mattet: thank you so much, . let's check in on first word news this afternoon. mark crumpton has more from our newsroom. cameron will offer his resignation to the queen. the next prime minister will be the home secretary, theresa may. the way was clear for her today when her rival drew from the conservative already's leadership. >> the interests of our country are best served by the immediate appointment of a strong and well supported prime minister. i am therefore withdrawing from
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the leadership election. i wish to reiterate the very greatest success and i'm sure her of my full support. the family of one of five dallas police officers killed during an ambush last week is thanking the public for support. the relatives are asking people to keep all police officers in their prayers. thompson was an officer with the dallas area rapid transit authority. president obama is headed to dallas tomorrow to speak at an interfaith memorial service. the president is also asked acted to meet with the detective's families. house speaker paul ryan will reportedly address the republican national convention in cleveland, according to a report in politico. he is expected to address the need for conservatives to unite around a republican candidate.
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republicans in congress hoping to go to next week's convention following a burst of productivity, but disputes with democrats over defense, the zika virus, and guns have changed the narrative. republicans have accused democrats of being the party of dysfunction. democrats say that they -- republicans compromise in the senate and support partisan versions in the house. global news, 20 four hours per day, powered by more than 2600 journalists, analysts in more than 120 countries. back to you. shery: thank you. every day there is a twist or turn that sends markets up or down. friday it was the u.s. jobs report. today is the japanese promise of new stimulus with some sort of certainty in u.k. politics. through it all the global economy can seem to break out of a meandering path. joining us now is gamble -- daniel, discussing our focus on
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the drift, a. it's great to see you. so, how much longer will we be drifting? i thought that sounded great at the start. the global economy has responded to productions of doom, but it can't quite get traction. it's taking the knock but not able to advance. one of the principal problems is that there is no one dominic global growth driver, as there has been for every decade since 1945. it was japan.0's, in the 90's, it was the u.s.. the early part of the century was china. now we seem to have a series of microclimates and micro-stories, but no one driver they can just push it through. time we at the same seem to have a series of micro hitting thell,
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global economy without doing enough damage to take it down. like the last financial crisis. that's true, scarlet. we've had a series of glancing blows, if you want to put it that way. 3%dicting a global growth of , it's been in that range for a while. but if you break it down and look at the advanced economies, that's barely 2% as subject to downgrade as well. adopted the term drift. we are just sort of hanging in there without backward. remember at the start of the year there was a lot of apocalyptic area around the markets in china in particular that has not come to pass. but we are not surging ahead either. we are literally kind of drifting. you mentioned china's gdp numbers, how much will they be able to run it from there and? dan: first-quarter numbers surprised people in that there
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wasn't this apocalyptic meltdown. people speculated that is because of the and fiscal largess. but it did keep us within the target. that is probably what we will be discussing friday. not a breakout, but not a collapse either. full in i want you to but happening in the u.k. and how central banks are responding. we will have a new prime minister there by wednesday, but that's not miss sarah going to move the needle anyone way for the economy. in the back the bank of england is providing all the necessary support they need. dan: it feels like the person who has really been running the u.k. for the past two weeks is the bank of england governor. the majority of the economist are expecting a four point cut on thursday. notch o-matic, but consistent with his message since the vote.
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here, i will do what is necessary. don't panic, i've got your back. i will prevent the worst-case scenario and there's going to be a hit. a lot of people have called this an earnings recession. how much will this impact the economy going or word? given that if we are seeing profits falling, that could trigger lower wages and a succession of problems. scarlet: that's a great -- dan: that's a great question. what will be interesting to see the breakdown between domestic operations in company earnings and how much of a hit they are taking from overseas. all right, dan moss, thank you so much for joining us.
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"bloombergn markets," shares of the global luxury goods makers have dropped in the past year with a 3% increase in the s&p 500. next up we tell you about the decline in luxury. ♪
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we have a look at some of the biggest business stories in the news right now. goldman sachs trimming 55 or
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positions in new york, the fourth round of job cuts this year and pushes the total number of dismissals over 400. the cuts are scheduled to happen between the 31st and the 29th. about half of the people being let go are traders and sales personnel. a billion-dollar license has been filed against -- shery: a billion-dollar lawsuit has been filed against facebook. the suit says that the group used a -- a terrorist group used thecial network to share information. hamas is considered a terrorist organization. no comment from facebook. scarlet: a former girlfriend of sumner redstone will not she washer trial when evicted. a judge denied her request for a new trial. came back after
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just one day of trial. that is the bloomberg business flash. economic uncertainty stretching from china to europe, currency swings stripping the confidence of high income shoppers the u.s.. it doesn't bode well for luxury demand. that's as written today in a bloomberg cap fly column here in new york. when they started limiting and looking into corruption, starting just these measures to limit extravagant buying and so , you have focused a lot of the expectations on the u.s. and u.s. economic cover he. what is going on that is hurting luxury sales?
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>> now we are worried about europe after the right it -- after the brexit. all of that has come together for high spenders in the u.s.. now they are worried and pulling back on the pursestrings. how do we square that with the data that seems to show that the u.s. economy is doing just fine? retail sales have been doing ok. consumer spending seems to have been holding up for the most part. shelly: this isn't an issue of whether they have money, it is an issue of whether they have the confidence to spend. will they buy a new car? why the luxury apartment? if you look at a tiny little data point, new york city luxury apartments. they have been on the market 36% longer than last year. it's whether or not people are feeling comfortable enough to spend. shery: how much of a positive is
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it given a plunge in the pound? ironically good market right now, but it only contributes about 6% to these luxury brands. you know, shelly, one question i wanted to know here is -- japan is certainly another area of concern. even though the economy there has been holding up, you have the strong yen holding back a lot of the spending when it comes to going there too. that's also a problem. maybe you saw china pulling back , going tong or macau japan, but now that is starting to back. for the first time in a long time, chinese tourist growth is flat for the first time in a while. not spending, are if europeans are traveling, if americans aren't going abroad --
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you tend to spend more when you travel, regardless of how much money you have. not a complete about face, but there are worries. as you have less spending on luxury brands, you see a move to more affordable luxury brands. like michael kors or kate spade. how much of a boost is it to them? that's another thing economists are looking at. they benefit? in some cases, yes. the other thing that benefited them was a higher propensity of accessories. people are more willing to spend on a purse or a bag and they are necessarily on clothing. many of these apparel companies get hit and others are held up better. i can't resist asking
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from london, the weaker pound should make the u.k. a destination for luxury shopping? shelly: that is definitely helping. problem is that the u.k. represents only 6% of luxury brands sales. while it can help, it might not be enough. shery: thank you for joining us. you can catch all of the bloomberg gadfly columns at ga ds go on the bloomberg. luxury, every's outgoing ceo speaks exclusively to bloomberg. saying that brexit was not a decision that he wanted and that a weaker pound good health. this is bloomberg. ♪
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♪ shery: this is "bloomberg
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the s&p 500 has rebounded from the volatility costs this year to reach a record today. scarlet: at the same time, treasury yields are near record lows in some investors are wondering, as bonds and stocks are often thought of as a complement to each other with one being preferred over the other. here to make sense of it all, nick joins our radio colleagues. carol massar and co-rage johnson. -- curry -- cory johnson. now,you look at it right it's currently at a record high. the first since last may. sherry, we talked about the treasury bonds and how they had been climbing into the records as well. they are now pulling back a little bit so that yields are no longer at their record lows. the dow industrial is it 7/10 of 1%, 18,273. shery, i know that you were
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looking at the nasdaq earlier. definitely. it's headed to its highest close this year. we also have the s&p 500 just at an all-time high. surpassing the 2131 closing .ecord and the 2035 it's an incredible rally the we are seeing across the markets. we will continue to monitor that for you. there has been a change at the top of burberry. christopher bailey will now step down as ceo and assume the title of chief creative officer. go belly will be joining him at the helm of the company. he spoke of francine lacqua earlier today simply. francine christopher: i spoke to our board.
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quite a while ago about all of the opportunities, identifying all the ones we had ahead of us. and i wanted to impress the skills that we needed in order to execute on those. i certainly didn't start off the search looking for a ceo. but the more that i met her for people, when i first finally met with marco and started talking , it justartnership felt like i would love to get him into the company. it just moved from there. francine: are you really that you no longer have it? partnership it's a that we both have, collaborating very closely together. i don't see it as a relief. i have are very in my veins. and an evolution of my role of the company. an evolution for marco. i'm delighted that marco will be joining us. he is an extraordinary man with a wealth of experience that i
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think we need in our company. i'm just looking forward to working closely with him. francine: did you know him before? christopher: by reputation. francine: and the strategy changes as chief creative officer? mark: -- christopher: my new role will be over all creative design, marketing, communication aspects of the company. will be over commercial, finance operations. but we will work kind of hand in hand with shared responsibility for strategy and cultures in the company. as any partnership is and should be, it will be based on respect
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and working together collaboratively. francine: this is the great every experiment that everyone was looking at. is it possible to be ceo in chief creative officer? christopher: yes. i don't class it as an experiment, the way business does a dynamic way. i think that if you just look we were aago predominately licensed business. we have evolved very quickly over those 15, 16 years into a hole his and into retail and on the channel. i have done privileged to be leading that i have been privileged to be leading in this company. with or without the title.
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it wasn't a big decision for me. the strategy doesn't change? christopher: it doesn't change. i kind of formally started in january at the beginning of this year. he is naturally seeing what we have been doing and hearing -- we have been very public about those things. he is clearly supportive of what we are doing. a pragmatic and thoughtful bill -- view of the skills around pragmatism. the skills that we need to take into the organization. champion ofu are a the european union. have the last couple of weeks it has,gh? christopher:
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but it is what it is and i'm always a glass half full and we need to move on. it was done, the referendum was done in the right way. the decision was made. now we're on the right path to watch what it might mean. getting some clarity on the future. francine: a weaker pound helps? christopher: the pound helps in certain ways. we have always done it globally. any trading agreement is something that we will all -- , no matter what happens through the process. francine: this is the first time that people will be able to look and buy directly from the runway. mark: the september -- christopher: the september show
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is really a change in the way that we are thinking about the show. historically it has been pretty for theider event press, the media. all of our buyers. we have been doing intimate, private previews with our buyers and some of the press. and then in september it will be much more customer focused. i'm very excited. going back to our earlier conversation, change is good. it's interesting. theas has an insignia on lagging on his microphone. forward i have always been a big believer in moving forward. the next is about the changes moving forward on an active level.
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scarlet: that was the chief creative officer burberry, speaking with bloomberg's francine lacqua exclusively. it of kurt -- and of course comes on the heels of marco betty returning to creative direction. the stock jumped today, the highest in slate will. on to other headlines need to keep you up to date on. we will check in with mark hampton at the news desk. mark: it may be a sign that bernie sanders is about to endorse hillary clinton. he will campaign with the likely nominee tomorrow in new hampshire. last he made his host pro-clinton comments to date saying "we have got to do everything we can to defeat donald trump and elect clinton." , receivingr of texas
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burns on his hands and feet, involving an accident hot water. he may miss next republican convention due to his injuries. the united states is spending nearly 600 additional troops to iraq. carter secretary ashton made the announcement today. he says new forces will be used to help iraq retake basel -- mosul, which is controlled by the islamic state. in syria, a massive rebel offensive in aleppo, despite a cease-fire supposedly in effect. eight people are dead, dozens wounded after rebels launched rockets and shells, pounding the former commercial capital. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg, back to you
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in london. poseet: u.s. banks sent to second quarter results this thursday. jpmorgan kicking things off purely -- kicking things off. notices could be on the chopping block as a result. laura keller has been covering this story for us, and she joins us now. give us a sense of what we are looking for when it comes to these numbers for earnings starting thursday? thursday take off on with big bank earnings, and i think what most analysts have been expecting this for the rest of the year, we have some bad things, but it could be ok for this quarter. some drawdowns from the total net income, profit will probably be lower for a lot of these things. the could be some good spots, we could see a couple of things , and jpmorgan is a big member that trading area.
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we might see some thing from wells fargo, because they've had a lot of refinancing. things like that. analysts are going to be asking what she would be be looking at -- what should we be looking at? what we might see if we're not going to see in history rises and how can we actually see some growth here? scarlet: growth is always the one thing that remains out of reach for a lot of these banks. before the brexit vote, there was a lot of optimism from the banks. you heard the executives talk about a nice recovery in creating revenues and a nice rebound. areanalysts completely -- analysts completely dismissing this comment? laura: banks are saying we have to discount those. not even because of brexit, but because of the choppiness we have seen in june. some say absolutely not, there
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are others who say there are mixed results and there could be a couple of kinds of trading that got a boost. we had analysts who said equity trading could have risen a little bit. but there is some kind of caveat possible, where a lot of that trading could have been done on electronic platforms, which doesn't give the banks much in fees. as reporters, we just really have to see. we don't know what happens during the last five trading days of the quarter. scarlet: that's a good point during that incredible volumes and effects, but it depends on whether banks are positioned correctly for the moves that occurred. overall with the increase in volume, that should be good news for a lot of the banks. or is that still up for debate? laura: we don't know if the bank is offsides, meaning they had a lot of volume, but the way they
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were positioned wasn't good. we could see some good there. i think what we are really thinking about is on the back of last quarter, which was really terrible for a lot of trading, we were hoping that the second quarter was getting a nice elevated bump. it's more about the whole year story. what can we expect for three key when four q? scarlet: you had a nice story that just rates went from lower for longer to lower forever. you think about how the bank of england signaled they will look to ease monetary policy, economists say that could happen as early as thursday when the boe holds meeting. to what extent is this reflected in current burning investments? analysts havef been putting it back in, where we are not going to have a just rates rising across the u.s.. i think that there is still a little bit of work to be done to revise those estimates. in general, it is a pullback and analysts are doing that because
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they are saying we're not going to see these rate rises like we were hoping for. that's bad for certain companies like bank of america, because last year their executives said we positioned in such a way that when interest rates rise, which we expect they will, we need to get a boost. and now that hasn't happened, so they will suffer. scarlet: they will suffer, the lower for longer is good news, for homeowners that want to refinance or people who want to buy homes. you mentioned, it should be good for mortgage lending and wells fargo. laura: and other banks like citigroup, bank of america, they all have these mortgage practices, so they can be great for them. it is still probably a short-term thing and there are other effects, is not 100% good for the banks. we will have to see how that plays out. that could be one of the bright spots this quarter. scarlet: final question. this is the one at all of our customers care about. what does it mean my comes to the challenge
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becomes a probability must hurt when it comes to payouts. aren't going to make as much money and profits as we saw -- as we thought, there's not as much to distribute in terms of compensation. the only way, absent having a q, saying q or four we're not going to return as much money to investors. i don't know. it doesn't sound the gets when we looking good for the rest of this year. keller, bloomberg news reporter. a challenging second quarter after a challenging first quarter for big banks. coming up on "bloomberg markets," y thomson reuters is selling one of its division to private equity investors, and what it could mean for the future of the media company. this is bloomberg. ♪
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scarlet: this is "bloomberg markets." i'm scarlet fu in london. shares of thomson reuters are gaining today after the company announced it is divesting the intellectual property and science side of the business to private equity players in canada and hong kong. full disclosure, bloomberg is a competitor with thomson reuters incarnating -- in providing financial services and information. joining me is pamela ritchie, let's start off with who is buying this part of thomson reuters specifically? good to talk with you across the pond. one of the private equity players is on a, a large private equity company in canada. the other one is private equity
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asia out of hong kong. paying 2.5 5em are billion dollars for the side of thomson reuters business. this site of their business is intellectual property, and science. they provide information on seeingrk trends, you are trademarks being filed in china faster than any other place in the world, which is a new shift, about a year and half ago, the auto industry being powered for alternative powered vehicles back in 2012, they saw pete. with different types of consulting services they provide on top of this data. this is clearly what was of interest on the side of the business to these private equity companies, which are like every company around the world, looking for the steady income. scarlet: of course. do we know what thomson reuters? plans to do with the proceeds ? the company thomson reuters, ever since the financial crisis, has been losing market share.
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bloomberg is one of their main competitors. but because of that, it has been looking at different ways to consolidate their delivery. they're looking at saving money in certain areas and making sure they can put money back into the company to help it, then ultimately expand. at the moment, the company is a process of trying to reestablish its market shares. after losing a lot of them. scarlet: investors seem to like that deal, we see shares climbing and trading right now. what are you hearing? what kind of commentary have analysts provided? pamela: we are seeing on x shares higher, they do trades in canada. and also in the united states. we are seeing their shares up as well. look and analyst reports, scott chen saying he thinks that with a paid is a little bit rich, particularly for our next, multiples on the sealer higher than you normally see.
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however, from thomson reuters investor side of you, it has been responding very well. this is a piece of the business that requires very little capital to spend it. , 77% ofg to scott shen that unit revenue is recurring. this is a steady and printable income. ritchie, joining us from toronto. here in the u.k., a small town in england to getting bigger this week because the international air show in farnborough is underway at the moment. the ceoson spoke with of qatar airways. >> other than the foreign exchange appeal due to this brexit, we are not affected. we still have the passenger numbers and we still see passengers traveling in and out of europe. as a matter of fact, more and more people are not flying into
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u.k. because of the lower count. have a 50% in ig. wouldn't that be a golden opportunity to raise that stake? moment, we arehe 15.24, and we want to stay at that level. we are long-term investment, we are confident that this relationship between us and iag will keep on growing and we will keep on benefiting from each other's purchasing power. guy: you don't see this as an opportunity to raise the stake? mr. baker: we're not thinking about that at all. guy: is that brexit related? mr. baker: we are not worried about instability, we have full confidence in the british economy and the british government. things will rebound in business will be as usual. this is what i think will happen. guy: do you worry that this is a story that's going around the world that business instability is something we're going to have
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to get used to? mr. baker: i think political instability will stabilize. you have theresa may, the only candidate going to be in the run. i think she will be a very strong prime minister. and there will be level heads that will sit across the negotiating table in europe. i think things in the not-too-distant future will stabilize and everything will be back to business as normal. guy: let's talk more specifically about what you are doing with your business. let's talk about a320's. you ordered a lot of the new engine version of the aircraft, and pratt has had a few problems with those engines. you walked away from one of them, how many more of the 320's will be walk away from? mr. baker: as many as possible
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as long as they don't fix the problem. but have confidence in my friend, he has assured us that things will be sorted out before the year-end. we have accepted that, and we will wait and see what happens. guy: are you talking about -- talking to boeing? mr. baker: we talking to boeing very seriously. we hope we will be able to get the light at the end of the the 320 isar as concerned, before the end of the year. only will have to exercise plan b. guy: plan b is boeing. mr. baker: yes. guy: what about the 350? mr. baker: we've a second one it will be delivered this month, and we hope the remaining nine aircraft will be delivered before the end of the year. was akbar al
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baker. time now for the bloomberg business flash, a look at the biggest business stories in the news right now. cyber security company logarithm has hired morgan stanley and jpmorgan to help prepare its initial public offering. this is according to people with knowledge of the matter. the company's investors include siemens, active venture partners and piper jaffray. and i feel could happen as soon as next year. your suburban adjusted officials reportedly ignored recommendations from prosecutors to pursue criminal charges against hsbc over money laundering. this is according to the "wall street journal," which cited a report that alleged eric holder misled congress about the decision not to prosecute the bank. the doj reached a then record $1.9 billion settlement with the bank in 2012. at least one world leader is sold on the relative safety of teslas itself driving vehicles.
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german chancellor on the merkel, speaking at a campaign rally today said the most dangerous driver is a human being. on the merkel also said that tesla is a household name, and that once her countries automakers are highly competitive, they're lagging behind when it comes to electric vehicles. and that is the bloomberg business flash. coming up on "bloomberg markets," we are at the start of we get earnings season, the earnings report, with the s&p 500 in a new record high, will profits meet estimates and excitations? -- expectations? we get a preview next on bloomberg. ♪
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scarlet: this is "bloomberg markets," i'm scarlet fu in london. seasonlook at earnings getting underway this week. quarterly profits are estimated to fall once again. s&p 500 ofres of the the index at large climbing to all-time highs?
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michael regan joining me now. the s&p 500 making a climate since may. what are we expected to see in earnings? michael: it's expected to continue is reporting season. the calling for about a 5.7 drop in earnings. companies,ing energy it's looking like a 2.2% drop. declines expected in some of the major sectors like financial and technology. the bright spots -- health care, consumer discretionary, telecom and utilities. overall, this earnings recession is expected to last at least through this quarter. this earnings recession is fairly long, but not deep. it is shallow. as a result, you have stocks continue to levitate higher. give us some context in terms of
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this earnings recession and how it compares to previous recessions? mike: previous earnings recessions, that's the big distinction. this one as of yet doesn't appear to be dragging the full economy at large into a recession, which is one of the things that a lot of people are taking heed of. part of the reason to be optimistic about the market. bloomberg news had a great story about this today, talking about how long it has lasted. at six quarters, is one of the longest earnings recessions on record. 3 2009 financial crisis was longer. earnings have decreased about 18% since 2014, earnings per share on a gap basis are down to $86 a share down from $106. that is a lot. if you look at some of the other earnings recessions, the two
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prior to this, the financial crisis, bubble, both of which cause actual recessions -- the drop in earnings was about double what we have seen so far. much more steve and deep recession and profits. e and deep recession. scarlet: we had a chart of earlier that really highlights the valuation question. it is distorted by what happened in 2008, 2009. you have big spike in price price-earnings because prices came down so much and earnings had not reacted. valuationing pe moving higher. how does that compare to the stored valuations, and what does that say about the durability of this world market? mike: if you look at gap earnings, not adjusted earnings, but gap earnings. it's about 25 and change now, which is in the 90th percentile,
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as far as most extensive in history. stocks people bidding for record? you will get at bond yields and interest rates. the 10 year treasury yielding 1.4 and change percent, that is keeping corporate borrowing costs down. that's a good telling for stocks. it's also making the dividend yield attractive. the s&p paying 2.1% in dividends. are basically still chasing yield wherever they can. there's optimism that this is the worst of the earnings get back, that we will to double-digit percentage gains next year. obviously, it's difficult for a lot of people to stomach valuations this high. kind of a buy and hold your
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nose for a lot of people. scarlet: we were talking about the ea functions earning analysis on the bloomberg, and how sales are expected to rise in the second quarter. part of that has to do with easy comparisons and the fact that the u.s. dollar has weakened a little bit and oil prices have come back and recovered along with other commodity prices. ahead, forward, going this is the function, let's pull up what it looks like. i'm going to get rid of this, so you can see it in context. we are going to spread it out, and the top panel is the sales growth. the bottom panel is the bottom line profit growth. andcan see the divergence how sales growth is set to perhaps recovered. what are you hearing, michael regan, when the rest of the world is mired in this? mike: the ease of the dollar is
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certainly one of them. everyone's eyes are on oil prices. analyst estimates are optimistic going forward. traditionally, they come down a bit as we get closer to the reporting period. it will be interesting to see how far down they come in, going forward. if that double digits earning growth is a reality or just too optimistic at the moment. a lot of people, with the market at an all-time high, people are buying the optimistic approach. scarlet: for now. mike regan. much more coming up on "bloomberg markets." we switch from equity to debt with kathleen gaffney. this is bloomberg. ♪
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david: it is 2 a.m. in hong kong. >> welcome to "bloomberg markets."
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david: from bloomberg inquiries in new york i'm david gura. >> their worries whether gains are stable. david: we have an exclusive interview. gonie: in the game pokémon adds billions to nintendo's market value. move over, mario. howard: let's head --david: let's head to the market desk. talking aboutust a record close, we are talking about an intraday high. the s&p 500 at 2140, a new record up .5%. the dow jones at the highest level


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