tv Bloomberg Markets European Close Bloomberg July 14, 2016 11:00am-12:01pm EDT
european close on bloomberg markets. we are in new york and london for the next hour, covering the middle east and the campaign trail in the u.s. as well. sterling rallying after the bank of england decision. the central bank keeping rates at a record low, possibly weighing stimulus for august to keep the economy going post brexit vote. vonnie: and kicking off earnings theon to a beat thanks to global market rallies. mark: it's the first full day with theresa may as prime minister. we will discuss who is in and who is out. vonnie: 90 minutes into the
trading day in the u.s. julie hyman has been keeping an eye on the action. s&pe: the records on the and dow, the dow actually the winter percentagewise. the s&p gaining a little more than .5%. look at the bloomberg because this will show you the other ways that it is manifesting itself through the various sectors. a pretty broad-based rally. cyclical groups are back and forth. some of the more defensive groups are at the bottom of the list. some of what we are seeing is earnings driven. jpmorgan coming out with second-quarter profits beating estimates. it saw earnings at its corporate and investment bank rising by
6.5%. rising.e stocks these companies do not report until august 3. elsewhere earnings wise, we have yum! brands coming out ahead of as comparable sales in the u.s. are trailing to some degree. the company has raised its forecast for earnings and delta also coming out ahead of estimates. cutting volume as rail has been declining. you just heard from the ceo of line. they just had their initial public offering and shares are rising 30% the first day of trading after raising a little more than a ilion dollars. the largest tech offering of the year thus far. for risk is still
here in europe. as you can see from our function, global macro movers, there is a taste for it still. we have gains in austria, germany and the euro stocks 50. the sterling gaining against the dollar. the swiss franc is up and we have gains in bond yields in norway, switzerland, austria, germany and france. withnto has revived talks basf about a possible after they rejected the $62 billion offer. is to combine agricultural chemical businesses. various exploring transactions. dow and dupont progressing with
their merger. of 3.7%. --.k. recruiting company shares rising, after it raised its full-year operating guidance saying public-sector recruiting remains challenging. private sector sentiment weekend with shares up 6.5%. up 3%.sh lender propped trading incomes for sweden's against currency deal with the vote,l from the brexit lifting trading and shares lifting today, up by 1.6%. check in with bloomberg first word news and courtney collins in our newsroom.
courtney: the new york times calls hillary clinton a wounded candidate because of the e-mail scandal. according to a new poll, clinton has fallen into a tie with donald trump. each is at 40%. last month, clinton had a six point lead. saythirds of those polled clinton is not honest or trustworthy. trump is expected to announce his running mate tomorrow morning. the presumptive presidential candidate and his team have been meeting with mike pence. he has also met with new jersey governor chris christie. the imf chief critics tough times for the u.k., saying the brexit vote will lead to short-term suffering but only in britain. >> some thought it was the end of the world or the end of europe. the conjunction over the coming days and coming weeks, some of
the smoke would go away and we would realize this is mainly a u.k. problem. courtney: he says he does not see that you making any changes because of the british vote. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. get back to the surprise decision from the bank of england -- sterling spiking after voting to leave the benchmark at .5%. boe tot guest urged the leave study. the chief economist from deutsche bank joins us now. 56% of you friends said the boe would cut today. why did you want the boe to wait? guest: they did not have the
data. the data we are seeing at the moment is three brexit. we have had a retail survey there and it has shown some weakening post brexit that it is not enough to condition a decision to buy corporate lawns or whatever it was that we might still do at the august meeting. we need to wait until this dig amount of data comes out. mark: it said that he was a man before he wasct head of the canadian central bank which led many to believe he would do the same and be preemptive. fowler --ny blanche danny blanchflower earlier. what's the risk to being
preemptive? think it would have done any serious damage, but the next meeting is the fourth of august and that's when they evaluate the forecast for growth and inflation. they can think about what to do against that backdrop which makes more sense. it's only three weeks and there's plenty of time. vonnie: you could say mark carney is acting on his own and pins the vote to the pound. bank ofi think the england never like to try to steer sterling. had the bank of england cut interest rates by more than the market expected, it might have put downward pressure on the pound.
even at 133, we don't need to worry about the pound being strong. will be very supportive of the economy as will higher auity prices, as will compression and corporate bond spreads. admittedly, they are only an offset, they are not good enough to substitute. vonnie: you were saying one of the reasons we did not get a cut is simply because the data did not come out to show we needed a cut. however, the forecast changed the minute it came in from gdp growth. fallenconsensus has indeed. now .1%.
i don't think it is going to be that weak but there is risk on the downside that would -- we could see something as we guess forecast. around and you have to accept the fact that growth is going to be weaker and inflation might be higher and not simply due to the currency. look at what is happening to business investment. we will find out toward the end of this month when the cbi releases their quarterly survey. weaker, you get weaker supply and of supply is weaker, you might not get a big increase on the negative side which puts downward pressure on inflation. they did discuss what measures could help the economy but stop short of detailing what those measures could be.
let's go through the options and what is likely than not likely in august starting with interest rates. george: i don't think they are going to want to cut interest rates into negative tort that -- negative territory. that compression is bank -- that compresses bank margins. one way the bank could regain those margins is to raise borrowing rates which would be counterproductive to what the bank of england was tending to do in the first place. if they don't want to go to negative, it means they can only go to 40 basis points. overnight rates are lower than the official bank rates and as we start to do quantitative easing, i would be surprised if that falls further below the bank rate. interest rates are something they can do but there is a limit to how far they can go. if you start to buy bonds, the interest on the 10 year gilts are very low.
usefuleally going to be to get those interest rates lower or maybe they already reflect the likelihood of more quantitative easing. ,hen we have corporate bonds ecb style easing. hadthen again, we have corporate bond spreads which makes it less likely. on bloomberg markets and the european close, theresa may is make guesses -- is wasting no time forming a government. we will take you to westminster and break down who's in and who's out. this is bloomberg. ♪
vonnie: live from london and new york, i'm vonnie quinn. mark: and i'm mark barton. let's get to the big story. prime minister theresa may wasting no time appointing a new government. ago she camehours in. czar will formally signal that it is leaving the block and boris johnson is now foreign secretary. thank you for joining us. i'm trying to figure out what has surprised me the most. it is very much a cabinet in theresa may's mold. what surprised you most? boris johnson or osborne not
even in the cabinet, what are your top three shockers? guest: those will do. doris johnson was and continues to be the big surprise. that's a really interesting choice. wouldn't have been surprised if she had given him nothing. his leadership campaign blew up on the launch pad in one thing she could have done it that to eers, she couldit have said you guys had your shot , i'm going to fix it. but she said well done, you one, you fixed it. so david davis, before the the exitm was arguing from the eu and is going to prove us right. would be quitet
easy to do trade deals around the world and he's going to get to do that. boris johnson was the figurehead of brexit and the foreign secretary, it is a diminished job because the big foreign job is brexit and now that is being done by someone else. secretary is a job that sounds like a huge job but is slightly less not so big. and he will have his hands did in the blood of exit. mark: tell us about box office phil. it was in your story. he said he would do whatever it takes to stabilize the economy.
is he the right man? it was a joke at the bbc because he was not terribly interesting and now he's chancellor of the exchequer. his job may well be to be quite boring. to someone that he was a chancellor in alistair darling's mold. and she replied that alice got quite interesting at the end. it is hard to stay dull and that job. there a chance that even david davis who thinks he's going to have multiple deals before the u.k. even exits that he won't be able to sign on the dotted line? we are in completely uncharted territory here. i don't know what david davis
inks he's going to be able to do and he may be quite confident of them, but he is entering negotiations with the eu. he seems to be trying to separate off different countries rather than negotiating with brussels. might well be sensible because you need these people to come in and vote for the deal. you may find him touring european capitals and saying you want to do a deal on this and maybe he will do it. the key point is if it fails, the people who supported brexit will not be able to say this failed because you believed in it. she can say i gave you your top people and put them in charge. mark: thank you for joining us and filling us in on all the latest goings-on in westminster. vonnie: time for a look at the
biggest stories in the news. , clients shifted money from stocks, lowered fees and fixed incomes. larry fink cut 3% of the workforce, the biggest round of job cuts ever. three u.s. senators are trying to elevate local battles with airbnb to the federal level and are asking to investigate other home rental websites. some of the companies are full-time landlords who rent out the residences year-round. judge has awarded $91 million in the dispute of fees and charged by mastercard. the judge said mastercard charges restricted competition. in a the first ruling
vonnie: live from london and new york, i'm vonnie quinn. mark: this is the european close on bloomberg markets. monsanto is said to have revived theirabout basf combining aggro chemical businesses. latest twist as the world's biggest suppliers of pesticides and seeds try to consolidate. the industry that keeps on giving. every time we think it is
quieting down, something else happens. monsanto said they were open to talks but it has gone suspiciously quiet. then we hear that bsf has revived talks and say that they have various options. one of the options, and i think that's what they are looking into now is doing a deal with basf. hearing is that monsanto's board is split over the merit. the advantages that puts monsanto in the driver seat. buy the business by issuing new shares and adding some cash on top of that. the flipside is they might not want to sell to buyer but justifying that to the shareholders is a difficult task because they offered a 30% premium and the basf deal would
require them to issue new shares and dilute shareholders. i think they are thinking this is part of the strategy to ratchet up the pressure on them. i think they are in the buyer seat and have made an attractive offer. maybe it's part of the strategy just to scare them and i don't know how seriously they are taking it. regulatory and political obstacles, ok or not? guest: they have requested an extension of their deadline that needs to rule whether the chinese buyer can buy them because they have big exposure to the u.s. is there something going on behind the scenes that has caused this delay? they say they are sticking to the deal and want to get it done
. i think people are getting slightly nervous. mark: this story keeps on giving. thank you for telling us about this latest dance. take a look at where the european markets are headed. we're five minutes away from the thursday close. stocks rising for the fifth day in six. down.se is literally four minutes away from the close. the macro event of the day -- or shall we call it the nonevent? the bank of england deciding to sit on its hands and do nothing ahead of august. many forecasting that there would be a rate cut today. stocks are rising. this is bloomberg. ♪
get ready for the rio olympic games by switching to xfinity x1. show me gymnastics. x1 lets you search by sport, watch nbc's highlights and catch every live event on your tv with nbc sports live extra. i'm getting ready. are you? x1 will change the way you experience nbcuniversal's coverage of the rio olympic games. call or go online today to switch to x1. mark: live from london and new york, you are watching the european close. i mark barton. stocks finishing up today in european trading.
this is the stoxx 600 with all of its industry groups rising for the fifth day in six after falling yesterday. we were up as much as 1.2% and finishing up right .9%. close of% below the the day of the u.k. referendum. check out sterling, rising for the fourth day in five after rising yesterday. still 11% below the june 23 close. something quite spectacular happened today for that was just around mid day london time when the bank of england decided to do absolutely nothing, sit on its hands, keep interest rates unchanged at a record low of 5% sterling. it has retrace some of those gains over the five days. of 80% put a probability
that the bank of england would cut rates today. we spoke to economists and 56% say there would be a cut today. george dudley said there would not be a cut today. wait until august, wait until mark carney has a press conference and wait until the bank of england has more hard data. an interesting house -- interesting housing survey today -- it's national house price measure declined to 16 in june from 19 in may. that indicates overall prices are still rising, but it's the 2015, level since january a measure of london house prices fell to its lowest level since the height of the financial crisis. brexit sending shockwaves across the market. in light of the bank of england's nonaction, i thought
it was appropriate to see how homebuilders might have fared. little movement as it happens. further policy loosening is in the cards for august. five in thee big u.k.. they sunk after the referendum. they have come back and declined as a group between 19 to 29%. you are looking at the fear index. theie: i'm looking at barometers of stress showing more calm than just a few days ago. the fx volatility gauge and that's down to levels seen last month and then you have the yen, also showing an increase in terms of the u.s. dollar side of things. it ain't for the u.s. dollar versus a weakening yen.
nevertheless, some relief for the bank of japan. 84 basis points -- we were looking at just 75 basis points last week. that's a good nine points up widening their at that level. the 30 year yield, to a quarter percent. let's take a look at the broader u.s. markets. a nice gain of 150 points. the nasdaq up .6%. let's get more from the nasdaq headquarters with abigail doolittle. abigail: after taking a breather, we have the nasdaq higher, hitting six-month highs, so strength being driven by lots of the well-known mega cap names like amazon and microsoft. some strength in tech and one subsector doing well are chip stocks. apple suppliers including corvo,
broadcom, all nicely higher and it appears this is on a bullish report from taiwan. they raised the third quarter deal. some believe this has to do with the fact the company has started theuild chipsets for upcoming iphone seven. it's the biggest boost for the nasdaq. more immediately, we are looking at apple's june quarter report about two weeks away. not beene have thinking about apple too much in recent days. what is the chart saying? abigail: we have not turned too much. it's just we are about to see a big move, only 10% up or down for top we see 20% geek to trough after the march quarter
report. a bit of a disappointment and since then, apple has been can just doing in this area, telling buyers and sellers they do not know. it turns out to be bearish, if sales disappoint or guidance disappoint, you could see apple drop below that range, perhaps toward $80 a share. vonnie: let's check in now on the first word news. we are getting some news now from courtney collins. new brexitritain's czar says britain will probably leave the union by december 2018. negotiationsays could begin around the end of this year. the ceo of europe's largest hotel operator is skeptical his
company will see any long-term benefits from brexit. >> what we have seen for the lesscouple of months is outbound market so british citizens are likely to be struggling less. seen a lot of people taking advantage of the lower pound currency and getting into london. it's a mixed bag and i don't see anything good out of it. this month,rlier they completed the purchase of the swiss hotel brand. mostbrennan says saudi's modernize a traditional society that has been exploited by islamic extremists and called saudi's the closest u.s. ally in the fight against terrorism. in japan, shares of hunting companies rose after reports indicated the emperor wants to abdicate. japan uses an imperial calendar
and this year is highside 28. if there is a new emperor, there will be a new calendar and many official and commercial documents will have to be reprinted. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. vonnie: jpmorgan kick off earnings season today with second-quarter profits falling 1.4%, but it was better than estimated. the bank reported an increase in fixed income trading revenue. jamie dimon spoke on the conference call about the challenges opposed by the outcome of the brexit vote. >> we had hoped they were very sensible. it makes sense for the eu and britain to anchor the process and make it sensible. whatever changes they make to
give businesses time to adjust to the new reality which we don't know what it is. vonnie: let's bring in our banking and wall street reporter for bloomberg news. what was the main topic of interest? iny are always interested banks as far the health of the economy and jpmorgan is this beacon for that industry. but brexit would have been a huge topic. guest: if there is one simple takeaway, that is it. amorgan has every business bank could have, asset management, the retail side, the big trading side, so they did pretty well. what weould have been are looking for -- going forward, how is it going to be? talkingd jamie dimon there but he did not say very much and neither does his cfo.
there takeaway on that is interesting -- you want to look at the political effects and how the u.s. economy is faring in their view is a much the u.s. consumer is fine, the u.s. economy will not have any problems but in terms of trading and how we can think about markets, they did not have a lot of color about exit. vonnie: that's because they do not know yet. is positive on jpmorgan and says in terms of expenses, has caught mostly what it can. where are the analysts looking for tailwinds moving forward? laura: some analysts we have talked to have said our estimates are down for the year. we are not seeing a lot of places where we can see more growth because we have the elections which could be bad for either the retail side or the trading side, though people are
saying maybe we will have a hit of a surprise with everything being so much better than the analysts verdict it. , bank of america and goldman sachs next week. can we take anything away from jpmorgan's figure and translated into the other three or four? i think that's what we were hoping to do. some increased growth there, but they are not necessarily the bellwether for everyone in mortgage. we have wells fargo reporting and they are a very large mortgage lender, so people will be looking there and if we can stipulate anything from jpmorgan, perhaps it is that. see loan provisions go higher and that is a concern at wells fargo for four jpmorgan, it was -- for jpmorgan, it was
not any increase in the loans means they have to increase some of the losses that might be coming out of that. as goldman, morgan stanley, bank of america, we probably look a little more to the trading aspect. they did mention fx trading and rates were really strong and bank of america and citigroup toh have a lot of exposure those kinds of trading, so perhaps we will see a surprise from both of those banks. citigroup is a very large trader of equities and jpmorgan did white well there. this is going to be the fourth straight quarter of declining net incomes for the big six or the big banks over there. when are we going to get a plus figure in front of the net income? what is the consensus? laura: i don't know if there is a 10.
if you look at 2016 and 2017 estimates, we don't have a lot of good positives. that's partly because of this interest rate environment where we are not getting the upside we had been hoping for from the fed. on the trading side, it just has not been a good trend of things. and are lending out loans they are not able to get the return on them the a would like. in that sense, maybe the only place you see growth come from his and expense cutting scenario which is where we were a few quarters ago. thank you. laura geller giving us her take on today's results. vonnie going up against all of her rhetoric. can't wait. this is bloomberg.
mark: time for our global battle of the chart. we look at the most telling chart today and what a mean for you, the investor. you can access these charts on the bloomberg running the features on the bottom of your screen. news thrown today -- it's my new seats that you can't games ofit is very thrones -- i've got my judging thrown on. vonnie: you are enjoying this way too much. oliver: let me remind you that
kings do not often last long on their thrones on that show. i'm looking at a big transition in the market. this is looking at flows into etf and we are looking at two different groups. y andws flows into sp etf's, those are all stocks. russell 2000, s&p and nasdaq, the white line shows flows into the aggregated on etf's and minimum volatility which tracks low volume two stocks. x months, year to date, those latter two were eating the market and you saw these big jumps in the white line with people trying to get safer access. this represents a huge shift. that line is the biggest jump from flows into stock etf's since august of last summer, which is when the market was rebounding.
this was a big jump and the reversal shows the sentiment there. that is really interesting because when our guests yesterday was saying when we showed him a similar chart looking at one flows which were negative on equities, her money was moving from active to passive funds. so that is really interesting. love that chart. vonnie, do your best. vonnie: thank you, mark for the conviction there. now that the winner has presented, i will present my chart. this is perhaps why the bank of england did not need to do anything today for one analyst said there was not eight out and clearly that is a big reason the bank of england did nothing. financial conditions have eased in the wake of the brexit vote and there's a lot of pent-up pressure and we've seen the
british pound versus the dollar, the euro versus the dollar and you can see the lines dropping here, this huge plunge, but still not overvalued or undervalued. he says the pound is about right right now. reason for its no to be lower and it may not even the beneficial were it to be lower for three lines showing why financial conditions have eased in the u.k.. mark: where can you find that chart and mark -- find that chart? i'm sitting on my throne and i have debated thoughtfully and deeply because i just want to see the shock on her face -- vonnie is the winner. oliver: i didn't realize i was battling vonnie. i'm used to battling mark. all that hostility, i apologize. mark: i love that chart and if
you had done it on friday, you would have cleared up. you chose the wrong day. vonnie played into my boe prejudice. does strange things to you. mark: coming up, donald trump is pulling out his vice presidential pick tomorrow just in time for the start of the republican presidential convention. we will have the latest from cleveland. this is bloomberg. ♪
about a possible combination of their agrochemical business according to people familiar with the matter. they have come back and up your bid, one hundred $25 a share in cash. the plot thickens when you look at the agrochemical industry. continue --ill be we will continue to follow this headlines as they come out. donald trump says he will announce his choice for vice president tomorrow. speculation is that indiana governor mike pence could be the contender. newt gingrich and chris christie also said to be on the short list. and new news on potential republican the convention. let's go to mark halperin. what do we know at this point about the speakers? mark: they put out a list that has some familiar politicians and some would say minor
celebrities. some of the rhetoric said we would see very a miss athletes and celebrities, entertainers, of the levelix entertainers and athletes and some politicians. i think the reality is any convention featuring donald trump is going to star donald trump. vonnie: you can see on your screen some of the other speakers. might get aity we leak today? mark: sometimes these campaigns put this out on purpose and you need -- you need to start doing the legit sticks of the event. it is scheduled for tomorrow in new york, either new york city or a new york suburb. i suspect word will leak out that i think people would be surprised if it was anyone not on that final list. the latest poll -- we have
some live pictures of hillary clinton show trump and clinton that can that. to do with the private e-mail server scandal? is it a surprise that trump has narrowed the gap? the controversy over e-mails and harsh words from the f geithner wrecked or certainly i don't think helped her numbers. trump has had a mixed run during this same time, so national polls and key state goals are settling down. as long as neither candidate is close to or near 50% of the vote, there's still a lot of dissatisfaction with both candidates. i think you may well see some shifting and we are at a critical time which will affect the polls with an absence of running mates and two big national conventions. let's talk about the money
possibleike hence record is being scrutinized heavily. how does it bear up under scrutiny? mark: he has been a moderately successful governor. he was able to build on the predecessor, mitch daniels, and was a very successful governor. if you look at this date economy and infrastructure, he has done fine. he's doing better than some of the surrounding states. he has had some controversy, particularly over gay and lesbian rights and hurt his standing in the date and one thing striking about his consideration is that he's up for reelection and he is not a shoe and more reelection. usually you would only pick some a popular in their own state and mike pence would probably have an easier time getting elected vice president than he would his own governor. 4/5 of evangelicals
support trump. are they definitely trump voters? it mentioned that they were almost reluctant trump voters and it's only that they don't want hillary there. you see that on both sides. voting against the other candidate rather than actually casting a ballot for who they are voting for. a check on u.s. markets as we approach noon. , just off itsup high intraday. the s&p 500 up more than .5% and then asked to act up more than half a percent. stay tuned. you are watching bloomberg markets. ♪
scarlet: from bloomberg world headquarters, welcome. frome covering stories london, tokyo and beyond. here is what we are watching. .hanging of the guard putting together the team that will oversee britain's exit from the eu. >> jpmorgan kicks off learning season as the global bond market rallies. >> and the biggest tech ipo of the year. shares of "line" surging. we hear from the company's cfo. we are halfway through the u.s. trading day. we need to head over to the markets desk where julie hyman has the latest. a lot to