tv Bloomberg Markets Bloomberg July 14, 2016 12:00pm-2:01pm EDT
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. especially over,
with the bank of england decision not to do anything with interest rates. news: and we have breaking with a potential deal. beyer raising its bid for monsanto. spurred the first deal as too low. there has been a lot of speculation about raising the bid and now it has. we will see if they come back and accept the deal. we saw a spike in the shares when these headlines came out. came back down to some extent although still 2.5% higher on the session. 120 twol far below dollars or $125. seeing a rally to record levels of the dow and s&p 500. the dow has been leading percentagewise. 2100 64 on the s&p 500, a new intraday record.
we have seen quite a streak for u.s. stocks. we saw a gain of five straight days where the s&p 500 has been climbing. as you can see, we are up 3% over that time. in today's session, jpmorgan helping matters. beating estimates for banking revenue. it has been pulling up other banks. wells fargo and citigroup will be out with the numbers tomorrow. other finances are also doing well. regional banks that are more consumer focused have been rising. here is the s&p financial index would be best performers today. citizens financial region it up. these companies will be reporting numbers next week. >> outside of stocks, what are we seeing? to the boe decision and the effect on the pound.
it was expected that they would cut rates. and when it did, we saw the pound spiking. this is the reaction even though it looks like the bank may still go ahead and cut rates. we are looking for more stimulus at the next meeting. the fact that it didn't today is helping. >> we will talk a little bit --e about the doe decision boe decision. shery: let's get to mark crumpton in the news run -- the newsroom. mark: donald trump will reveal the person yes chosen as his running mate tomorrow morning. he has been meeting with mike pence, newt gingrich, joe sessions and chris christie. supreme court justice ruth bader ginsburg says she regrets making "it will advise comments" about mr. trump.
she was unusually frank about mr. trump in a series of recent interviews, even calling him "a faker." the most expensive weapon system in history is nearly ready for combat this year if needed. the air force says the fighter is close to receiving the go-ahead. developed cracks with stress tests and have had problems with unstable software. john kerry will meet with vladimir putin in moscow. he will lay out a potential deal that could prevent an escalation of fighting in serious civil war. he is expected to offer to share information for targeting the islamic state and al qaeda affiliates. in return, russia would have to keep syrian forces from attacking rebel groups who have agreed to a cease-fire. itsa is not backing down in dispute over the south china sea. chinese passenger planes made
test flights in the struck the islands. an international tribunal ruled that china has no historic claim on the south china sea, a ruling that china rejected. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am mark crumpton. back to you in london. scarlet: we will be discussing jpmorgan earnings, julie gave us the highlights earlier. a big beach in profits and sales. the fixed income currency commodities in equities trading. ♪
>> you are watching bloomberg markets. i'm in london with shery ahn in new york. before we check in with oliver renick, i want to broaden the look at the financials. come in here as well. and you look at how european financial banks have performed since the crisis, come inside the bloomberg and the difference is stark. you see the s&p 500 index has moved higher even as it is often speak from last july. the stoxx 600 bank indexes off 46% since the end of the financial crisis. gap and it is getting wider. it is getting bigger and bigger because european banks have to contend with the issues over negative interest rate and what kind of burden that has on profitability. whereas u.s. banks have gone up a little bit further. we are seeing bank stocks
plummeting but now they are beginning their footing. still, afters are falling from the financial burden of interest income, let's turn to oliver renick who has a look at jpmorgan. jpmorgan is the leading stock in the dow today. they beat analyst estimates on earnings and in revenue. today, the numbers do not lie. jpmorgan reported a net income of $6.2 billion. income of theet six biggest banks would fall -- jpmorgan is looking a little bit better. so low interest rates are in part responsible for the dismal outlook. the reported revenue against the 10 year yields continues to move lower.
revenue for the second quarter did rise more than 2% from one year ago. the revenue gain was aided by more gains. almost $4 billion from fixed income trading. beating analyst estimates. the units of jpmorgan are firing on all cylinders. the revenue gains compared to a year ago, only asset management was the business lineup that didn't do better. the corporate bank rose more than 5% from a year earlier. going into the quarter there was a lot of attention from the followed of the british vote. and you may have seen jamie dimon campaigning for the u.k. going into the brexit vote. carriesbecause jpmorgan $8 billion in britain. you see just how important the u.k. is to revenue across all of the banks. jpmorganhese numbers,
executives think this will affect the gdp in the u.k. which will affect the economy that not the banks business. jpmorgan is a stock to watch. through the session today and going forward to see how brexit affects the company. shery: let's get more with laura keller who covers the banking sector. how long can the success of jpmorgan last? laura: who knows? [laughter] laura: this quarter was good. this was a good kickoff to the bank season here. most analysts are not revising upwards. not going into to that in 16 or 2017 yet. so it won't necessarily carry forward into the next quarter. a lot of people were saying that the second quarter numbers didn't matter even with the trading increases. what kind of outlook did jamie dimon and the management team
offer on today's conference call? janie didn't say much at all because he had a horse voice. i think i would have liked to see a little bit more in terms of what they thought coming up. a lot of times you see the bank talk but we didn't hear a ton of that. they did express optimism about the u.s. economy. they mentioned how loan growth .as been really great so turning back to trading, that was an incredible beat for the fixed income side. 35% up from the last few years. so we did have a great time there. well.u have jpmorgan as one of the executives said that actually talking about growth of 11% in trading, but we saw that much higher. the other banks -- too -- given thatnks some of them are positioned for higher rates, how does this
factor into lower rates being a positive for mortgage banks? how is this going to balance out in earnings? all banks are looking to the higher interest rates that they are not getting. but maybe one of the bright spots for that can be to have additional mortgages come online. jpmorgan did see that although some analysts to not see as much growth there as they would have liked to. with mortgages, people go and they revise. people would consider getting a mortgage because rates are so low. so banks will get some benefit there. >> the net interest margin coming in lower than what analysts had expected. 2.25%. on there any color offered how much more pressure or compression there would be on the net interest margins? steadythey're holding it but you can see the fall more. it was down five basis points
which is sort of a lot in a single quarter. so i think that given the interest rates here, you will see it go lower. calls what are conference going to focus on going forward? laura: we didn't get what he wanted on where brexit has taken us. they didn't give us this color. there were rumors about looking at different hedge funds. so there will still be analysts out there who are looking for the forward on what brexit will be like specific to the banking sector. and then unresolved questions about whether we will be able to have entities in london being able to trade with other parts of europe. and he counterparty clearing argument, no questions there. none of that has been resolved. as you look ahead to the rest of the big banks reporting, we have bank of america and goldman sachs and morgan stanley next week -- what will you be looking for in terms
of divergence from jpmorgan? laura: in terms of one of the things that we always look at is the trading revenue. and with jpmorgan, with analysts that looked before, they were not projected to do as badly. so i'm trying to see whether that will play out. whether morgan stanley will actually be worse. and one thing that is really interesting -- the investment banking overall, we looked at those results and it was quite interesting to see that they looked at the deal logic data. which analysts used to calculate where people go. jpmorgan had a 30% difference between what we would have projected from the deal logic data and what they actually did. so we may actually see a lot more upside than we could otherwise. and so many analysts think big
discounts from comments executive analysts gave earlier in june focuses on brexit. scarlet: good stuff. laura keller of bloomberg news. we have breaking news. donald trump will pick indiana governor mike pence as his running mate. his vice presidential running mate. we know that donald trump met with mike pence at his residence yesterday. again, roll call is announcing that donald trump will pick indiana governor mik pence for his vice president of canada. this is bloomberg. ♪
monsanto. here is a look at how monsanto shares are trading. they are moving higher, up 3.2%. a big bump up earlier. since then it has eased back down. let's get more from a hammond. bayer raisedhat its bid. what kind of offer are we looking for? ed: i think it was inevitable that they were goingo bump up their first offer that they made a while ago. monsanto said this is something we recognize that is a smart thing to do. the logic ford consolidation but they set the price is not sufficient. inevitable buts it is also small. so whether it is to get the monsanto board or shareholders
to put pressure on the company will remain to be seen. it doesn't at the moment look like enough. we know anything about the enterprise value of this bid? ed: at the moment it is a three dollar a share bump. it is an all-cash bid. the other thing here is that there is a lack of alternatives for monsanto. as far as we know, they are talking to the other big german company but that is about something different. that is more like an acid deal where they would take on some of the chemicals businesses but it is not a straight sell. so if you are an investor, you want to think that this might be the only one. scarlet: i wanted to bring that up. the talk that has been reside -- that has been revised with monsanto. does that happen regardless of whether this bayer deal goes
through? ed: i think it does. the executive of month-end and has been vocal about the fact that he wants to explore the possible options of the company. and we haveo, written about this previously, the possibility of joining with -- china. then theylls of apart could take a run again. they are trying to keep as many things as possible on the table. shery: ed hammond, thank you. the latest on bayer and monsanto deal. back to you, scarlet. reporting, we were the bank of england kept interest rates unchanged in a surprise move today. the central bank is opting for a cautious approach following the brexit boat.
toresa may is beginning shape her with a number of new appointments. here to talk about the nuances -- mark carney, two weeks ago, directly intervened and promised a rate cut this time this summer. i think he is taking a cautious approach. i think he may have indicated cut but rates will be in retrospect, maybe they have decided to see how it goes. we have seen that it has come back up a little bit. confidence isn't as low as people had feared. haslet: right, stability returned to the market. accused markc has carney of scaremongering before the vote. i think he has been
remarkably consistent. i think he was weary of getting dragged too much into the politics. he always said that it was a democratic decision to be made by the british people and he was never shy of saying that it could have significant consequences. outi think it is being worn , we are in the process of having a new government be assembled, and once it is put in place, i think a lot will depend on the policies it tries to brexit.ith regards to there are various different ways that could play out. scarlet: speaking of theresa may 's new cabinet, her goal was to slow things down to get political stability. what you think of her cabinet change? pawel: i think it is pretty balanced. on the remainures
and leave side of the argument, which is crucial to maintain the confidence of her party. though side can feel as they've been unduly punished because of the results. so that is the first welcome step. the key problem now is getting all of these people around the cabinet table to agree as to what brexit means. because i think you have people like philip hammond who are more cautious and others who are more in favor of seizing the opportunity of exit and pursuing a more pioneering path for britain. scarlet: having said all of that. , they areans brexit still trying to determine how to go about that. the main people involved in negotiating would be boris johnson? pawel: i think boris johnson
will not be that involved. the new ministry will be headed by david davis -- scarlet: but he will be the foreign secretary and have the relationship with the diplomatic partner? pawel: of course. termsl play a big role in of the optics of it but in terms of the negotiations, i think that will be handled by the brexit ministry. and to reason may a micromanager. perspective, that is not to be underestimated. in her defense, she would say that it helps her get things done. thehas said that she wants u.k. to have as much access to the eu. the eu says you cannot have one without the other. are these opening gambit's? pawel: i think the inevitable
trade-off will be the extent to which theresa may agrees to compromise on movement. it is notable that in her control"he said "more on immigration. ondon't have free movement the line that we have had up until now. thank you so much for your perspective. edpawel swidlicki. we will continue this conversation continuing. this is bloomberg. ♪
this is "bloomberg markets." let's get to the first word news with mark crumpton. met in london with his counterpart, philip hammond. secretary lew said he liked the negotiations on britain's exit to produce "a highly integrated relationship between the u.k. and eu." to choosey's choice boris johnson has raised eyebrows. he raised a successful campaign to get britain out of the eu. he once accused president obama of disliking britain's empirical legacy because of his "part kenyan ancestry." the new york times is calling hillary clinton a wounded candidate because of her e-mail
scandal. nominee isdemocratic now in a tie with the likely republican nominee, donald trump. each at 40%. last month, she enjoyed a six-point lead. two thirds of those polled say she is not honest. security officials say they are worried about the republican convention in cleveland and at the democratic convention in the following week. they are expressing unease. johnson: i am concerned about the prospect of demonstrations getting out of hand. i am concerned about the possibility for violence. have, within dhs, some 3000 personnel that will be dedicated to the security of the republican national convention and the democratic national convention each. says hecretary johnson
will inspect the cleveland site tomorrow and will travel to philadelphia next week. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am mark crumpton. back to you. shery: the brexit vote drove etf to new trading records. now that the new u.k. government is taking shape, what is next for that sector? let's ask the man known as the godfather of etf. reggie browne. it is great to have you here with us. as a market maker, you are in the front lines of everything that is going on. so what are you perceiving with what investors want with the brexit vote? we are seeing rotation out of european equities and commodities. and we are seeing a new trend into japanese equities given
what is happening in japan. so it is a flight out of europe into the u.s. and parts of asia. shery: is this a temporary flight or is it a trend that can be sustained? reggie: it feels like it is going to areas where there is less uncertainty. it will be like sustained in what we are seeing with some of our customers. are using the etf's? are they individual investors or hedge funds? we get a lot of data on fund flows in and out of etf's but we don't know who is using them. due to 50% of etf's are retail use. the other half is institutions. we are seeing a lot of use by global banks and global asset managers. so their views are really opinions withound what is happening in parts of the world.
a largely, we are seeing larger adoption of etf's with the large asset managers of the world and we're seeing you adopted etf spy asset managers. seeing micro low yields across the world and now we are seeing a surge in fixed income etf's. tens of billions of dollars flowing into those funds. is this something that is going to be sustained? reggie: 3% of all assets in the corporate bond market is in the etf format. we think there is a lot of runway for future adoption. it really is a market structure problem. there is no clarity what you're paying into the marketplace. etf,u look at a high-yield they trace three basis points wide in the marketplace. there is a lot of cheap
liquidity in the etf's. you put i like the way that. a lens of transparency in the fixed income world. in a risk onre etf or risk off scenario? reggie: both. risk on, a rotation to equities. risk off, rotation into fixed income, short duration. there is an etf for every perspective. we are seeing the regulatory environment continue to change for the etf market. what are the biggest developments? reggie: around the world, it is customer first. we are seeing lawmakers in canada and the united states. where now there is fee disclosure and eds are being used in lieu of asset managers. in the united states, a fiduciary role. forcingawmakers are financial advisors to put
clients first and look for the best vehicle. and they are priced competitively over other vehicles. reggie browne, thank you so much. the cohead of etf's. -- we nown to burke turn to mark crumpton with breaking news. is reportingll that donald trump has selected indiana governor mike pence as his running mate. bloomberg news has not independently confirmed this information. the new york times and cbs news are also reporting that donald trump has chosen governor pence. he has scheduled an event tomorrow at 11:00 a.m. new york time, at which he is selected -- at which he is expected to announce his running mate. so again, roll call is announcing that donald trump has picked indiana governor mike pence. we will have more news on this developing story as soon as we get it. back to you. scarlet: thank you for that
scarlet: you are watching bloomberg. this is your global business report. scarlet: google faces new antitrust cases in europe. shery: volkswagen suffers a setback in its efforts to emerge from the 10-month-old emissions cheating scandal. california regulators reject the proposal for 85,000 vehicles. scarlet: canned will find
gulf find then winning formula again? regaining popularity. we start in london where former olivier blanchard is predicting tough times. some said it was the end of the world, the end of europe. days, we wouldng realize that this was mainly a u.k. problem. scarlet: he also said he doesn't see the eu making any major changes because of the british vote. shery: the european commission has launched a new antitrust attack against google. regulators say the research engine skews results in its own favor. it is also accused of restricting online advertising platforms.
google says it will examine the complaint and respond. suisse isredit changing the way it pays senior bankers in london. raised fixedk has pay while eliminating cash allowances. european regulators have promised to examine whether these are away to avoid rules capping bonuses at two times your fixed pay. regulators in california have rejected. in's plan to recall thousands of cars involved in the emissions testing scandal. they said the proposal was inadequate. regulators have signed off on a larger agreement covering 480,000 cars. $15ill cost them almost billion. oliver: it is time now for our bloomberg quick take. think golf.
the sport has been on the decline for the better part of a decade. the challenge of retaining new -- the game has been andicized for its elitism marginalization of female players but changes are underway. here's the situation. the number of golfers dropped from 29.8 million in 2002 to just 22 million in 2014. the decline has been more severe in japan. openings are at all-time lows. in rio de janeiro at the olympics may backfire after toward and spieth, rory mcilroy won't go after concerns over the zika virus. the sport came up in the 15th century. plenty of class had
time and money for the game. but that doesn't fit well with the hectic lives of the modern day. now, it is mostly retirees who have time to play. the average age jumped to 63 years old in 2014 from 48 in 2004. here is the argument. reformers point to other old-fashioned sports who turned their fashion i developing sport her, high energy versions. think cricket. things seem to be turning a corner in the u.s.. .eporting more new players the problem is retaining them. that has prompted calls for being morerses and beginner friendly. some officials do appear open to change. the european pga tour chief agreed to -- in a bid to attract young players. but don't expect leniency in the
scarlet: this is "bloomberg markets." forit has not made it easy businesses trying to grow in the u.k. but one company remains confident it will weather the storm. we speak now with -- who hotels in countries. he is bullish on the region and this morning on bloomberg go they spoke with how the brexit is impacting business. drivenhing that is pound
-- what we have seen for the past few months is likely less bond markets. we have seen the reverse, a lot of people taking advantage of the low pound currency and getting into london. so it is a mixed bag. i don't see anything good out of it. >> what about the fx market for you and how you run a business. do you hedge? >> i wish you could say yes, but i will say no. we do not hedge. we happen to be nice with different currencies. it is local costs against local revenues. so the only impact on currency -- andme and on the box on the folks at the end of the year. ,> revenue per available room how do you see that for the rest of the year given this backdrop.
rop? >> obviously not good. u.k. has been flattening out. news comingany good in terms of higher gross. which means there will be a correlated effect on the continent. we will see a low red bar of the french economy. said, germany is doing very well. wethe impact is there but can't measure it. don't ever predict the british. all of us have been saying they will remain and they did not. many predicted they would lower interest rates and they did not. those guys are actually making people wrong. >> what about in the united states? here in theresence united states, i understand growth is tapering off. are you concerned? >> yes. because the last seven years we have enjoyed a very good market.
it has been slowing. but a lot of people are talking about how cycles have to end because the last 40 years you had cycles -- i am actually saying that with the advent of new digital players, trip advisors of the world, the supply is so big that you will cycles lasting much longer than what you saw in the past because you have a lot more travelers and people assessing pricing choices. so the digital world will have an impact on the longevity of the cycle. it will last longer than people think. >> there is no upside for us to try to predict rates. we just have to ask you serious questions with 7 billion euros as you have the majority stake in the hotel and the story. what you want to do with that money? >> first, i don't have the money yet. the first thing to do is organize the company so that i have interested parties.
bigger in terms of market density. we are the largest hotels operating in the world. we dominate all the markets except china and the united states. do we need to get bigger in the u.s. -- i don't know. i am the small guy. it is too soon for me to disclose. months from today will be vastly different than the market today. it isn't common that you hear a company say they don't want to get bigger in the u.s. breaking news right now, we told you earlier that a donald trump spokesman says that donald trump has not yet made a vice presidential decision. paul metaphor says these election is in the near future. this comes after multiple reports this hour that he will pick mike pence as his running mate.
roll call cited a republican with direct knowledge of the matter saying that he will pick indiana governor mike pence. lubeck news has not confirmed these reports. we will keep you up-to-date with any news out of the truck campaign. shery: let's get a quick check on u.s. stocks. expanding all-time highs with the dow jones and s&p 500 gaining for a fifth consecutive session. we have financials leading the gains. jpmorgan profits beating estimates. the nasdaq reversing yesterday's losses. we have more on the tech movers. from abigail doolittle, live at the nasdaq, she has the latest. abigail: another day, another rally. it is the trend as of late. the nasdaq has been higher 10 out of the last 10 trading sessions on a rally that has taken the nasdaq positive on the year. pretty remarkable considering
back in february it was 1% away from an official bear market. a huge recovery. through this, what stands out most is the divergence between the record highs on the s&p and the dow and the nasdaq, 3.6% below its record high. unusual that the growth is .agging it tells us that the more defensive sectors are leading .his rally something that had happened at the end of bull market in the past so it suggests that maybe gains are going to be passed. another thing standing out is between the nasdaq and the buyer tech sector. if we take a look at the one-year chart with biotech in blue, it appears to be rolling over in the near term. the strong downtrend is in place. we see the nasdaq shooting higher. over the last year, they have been strongly correlated.
the last big divergence was in december and it led into a big selloff. nasdaqs hard to see the working out the new record highs unless it can get the biotech sector on board to break the market. shery: abigail doolittle, thank you so much. keeping on the tech seem. to ipoe a straight line success? so far, it is looking that way for "line." here now to give us more insight is alex barinka. alex, i am not surprised that this was such a success. i lived in japan for five years and i used it every single day. i still have it on. can this excitement be sustained? alex: that is the big question. japan and like taiwan, they are taught markets and it is very sticky. that is what we have seen the
investor interest momentum going into this listing. the big question is whether that can continue. there is some scarcity factor around it being one of the best one of the very few tech ipos this year. that there are questions around growth. roadshow andtheir ipo perspective that they expect growth to slow down. but now, they are focusing on making money off the users that they have. when it comes to u.s. investors, we have seen that they can be fickle when it comes to social platforms. greatly thisfs week. so that will be the continuing question. can they continue to expand in asia? and do they have opportunities in other markets, like the u.s., when they don't have the penetration that other mobile apps do in the market? why "line" we know
decided to issue in japan rather than korea? japanmy sources tell me because it is that market. is actually based in japan. and because the consumers they are really know the name, they actually pushed it to a lot of retail investors in that market. about two thirds of the shares are listed here in the u.s. where there are more institutional investors. but the choice to list in tokyo knowcause people in japan the business and potentially want to bet on it success. is so popular in asian countries. we just saw the pictures of the cute emoji's. i'm just wondering if that appeals to western buyers? alex: and that is the question i'm hearing the buy side was asking. throughbook services
this, play games, see other content. that is not the typical and 04 facebook messenger or for whatsapp or other things that are popular here. goingill be the big thing forward -- our u.s. investors ready to be locked into one mobile act as a one-stop shop? shery: i am really curious to see what happens from now on. thank you so much for joining us, alex barinka. scarlet: thank you. we are keeping an eye on the markets. u.s. markets are still up. half of 1%.p by we will have more coverage on the post brexit rally in the pound after this. this is bloomberg. ♪
headquarters in new york, i'm shery ahn scarlet:. and i'm scarlet fu. here's what we are watching this hour -- the pound surging after the surprise decision to keep interest rates unchanged. shery: a warmer -- a warning from former imf chief, saying tough times are ahead for the u.k. following the brexit vote. valve's tod valve crack down on underage betting that has cropped up around its games. let's head to the markets
desk where julie hyman has the latest. we are still at those all-time highs. julie: we are and we see more bullishness creeping into the market even though laszlo birinyi has says -- has said think there's not enough bearish sentiment out there. dow climbing and the s&p 500 up about .5%, trading at a record. we were looking at the fund flows into u.s. stocks generally. but i want to look out what is happening with etf. theooks at flows that track russell 500 and that act. we saw a surge of 11.5 ilion dollars, the largest we have seen in 10 months. it comes at the expense of on funds, more money going into stocks and buying into this
measure. at the same time, we are starting to see fed funds teachers pricing in a higher chance of a rate increase sooner rather and later. if you look at the bottom chart, this looks at the predictions for what could happen in december. a big drop and a comeback of sorts, about a 30% chance of a potential interest rate increase at the december meeting. we can look at what is happening in the bond market, so if you look at the 10 year and the dollar, selling in treasuries with a bump up in yield and the dollar on the flip side is going negative, rising against the pound after be of the in action. compared to the low on the 10 year yield -- what about
on the corporate side? we heard from jpmorgan and we will get more tomorrow. early and the prediction is numbers will fall again. jpmorgan's earnings did fall, just not as much as had been estimated. yum beating estimates and delta and csx joining the earnings beat club today. let's get to bloomberg 's first word news with mark crumpton in the newsroom. are conflicting reports about donald trump's election of a running mate. the "new york times" and cbs news reports that trump has selected mike pence but also reports that trump could change his mind and his campaign manager has had no selection has been made. he plans to emily announces selection on friday morning.
pens has emerged as the front runner over the coming weeks. the indianapolis star says pens has dropped his reelection bid. we will bring you more developments as soon as we get them. exit czar says the country will probably leave the european union by december of 2018. david davis says negotiations could begin around the end of this year. in minnesota, a black man fatally shot by a police officer last week is being remembered at a funeral service in st. paul. times shot multiple during a traffic stop after telling the officer who shot him that he was carrying a legal firearm. the aftermath of the incident was live streamed by his girlfriend. a new poll says 70% of americans believe u.s. race relations are bad.
that is on par with how people felt after the rodney king verdict 20 years ago. worse than at12% the same time last year. the survey was taken after the men inhootings of lack louisiana and minnesota and the ambush killings of five police officers in dallas, texas. dayal news 24 hours a powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. act to you. shery: the pound surged, touching its highest level in two weeks versus the dollar on news the bank of england has kept its interest rate steady. this has helped extend the rally from a 30 year low, though the currency is 10% lower since the nation opted for brexit. our next guest says fundamentals continue to point lower for the pound and recommends not just holding positions but increasing
sterling's store. it's rate to see you. let's get started with the pound. i was thinking the markets had already priced in -- the negatives that could happen for the u.k. economy following brexit, but you are thinking the pound has more to go lower? guest: if you think of the context of what is out there in terms of policy stimulus from the central bank, you are obviously going to get some unorthodox easing which is hard to determine if this point. also from a fundamental aspect, when you look at the u.k.'s current account structural deficit, a lot of that is financed by external portfolio close. the concern i have is not only is the u.k. economy looking at a contraction in terms of growth,
but over the long run, you could see capital leaving the u.k.. also external portfolio flows. how vulnerable is the u.k.? guest: i would emphasize that this is a process and not a you are eventful top it's not going to happen overnight and knees capital decisions are going to need to take their time and determine what sort of business planning and what have you to determine what capacity they will be withdrawing. my concern is you are looking at improvement in risk sentiment as almost an equivalent of a dead cat ounce. has said if analyst you look at the trade weighted pound, it has been dropping with the actual pound self and its and effective easing of policy.
did that factor into the decision or is it the fact that theresa may could move toward more flexibility? guest: it's important to have that element in terms of policy support, but for monetary policy in terms of the currency, i think the bank of england is looking at whether to ease financial positions and carney has been on the record discussing the current account deficit situation can improve based off the weakness in the exchange rate. i think that's a critical component with policy near the limits that the current cycle. could that mean euro-dollar parity? we have not seen that 2002. risk. it is a nontrivial i think it depends on the scope
of lyrical uncertainty to spillover beyond the borders of the u.k. and certainly, that's difficult for markets to calibrate two. i would suggest the notion that this is a process and not a's indoor event. with europe, we have a situation where we have a rough run them coming up in october and next year, you have a slew of elections with germany and france coming up at the turn of the year and that's going to be more of a concern at the turn of the year as opposed to something that is a concern in the immediate timeframe. there is some speculation out there that helicopter money could make an appearance in japan with ben bernanke meeting with japanese officials. does an actual form of helicopter money actually matter to investors or is this enough to keep the yen moving lower? guest: i think in the short-term, until we get to the
to lookting, my bias is at the top side in dollar yen. hugeou are building such a expectation that japanese policymakers will be delivering massive amounts of unique stimulus that we have not seen before and we are not sure how that is going to filter through into markets and i would be concerned that short of delivering that kind of chopper money, the markets might he disappointed. you could see dollar yen collapse, but for now, respect the top side, particularly given that we have seen over the last couple of months that you have seen yen long, say washout position needs to take place. more top side in the near term but my concern right which the extent to
expectations can be disappointed. thank you so much for joining us. the senior ethics strategist there. up, will brazil acting president be able to pull the south american company out of its worst recession in a century? if you are looking at credit default swaps, maybe. i have the chart, next. this is bloomberg. ♪
london. a rally in asian bonds is proving resilient despite the brexit though jolt. bonds in the region have drop to the lowest this year. take a look inside my bloomberg. asian bonde investors are expressing confidence that the turmoil may not have a lasting impact on the markets. the asian investment grade credit default swap. that has dropped to 125 basis points and you can see the blue line at 49, the lowest since 2010, showing asia-pacific debt is better regarded dan at any time isthan at any 2015. equity slumps and havens such as asian treasuries and gold rally.
a record in the week ending july 6, so a lot of movement of cash across the region. staying with credit default swaps and the emerging markets come it looks like investors are starting to see the brazilian government has less risky of a proposition than portugal, which is part of the developed world. take a look at this -- the white line is the five-year credit default swaps and that is priced to insure against a sovereign default and they have come way down for brazil. a portuguese shows credit event and has overtaken its former colony for the first time in 2014. we know the outlook has worsened on overall concern that europe is slowing down as well as the fact that european banks are in more trouble than those elsewhere because of negative s.terest rate
the interim government in brazil under the acting president seems to be headed in the right direction. , an ally became the new house speaker and that encourage people who thought the government could push through some unpopular reforms needed to get the fiscal situation in order. that is helped to push the above us but up and the brazilian riel strengthening as well. no wonder credit default swaps have continued to come down. it not only atee a two-week high but we he it as the best emerging market currency, the best performer out there. you know who is going to be happy? my little other because he lives in result right now. time now for the bloomberg
business flash come a look at the biggest business stories in the news right now. france is warning the 4 -- former european commission had not to take a job at goldman sachs. some consider it active he trailed to the eu. there's are free to accept roles 18 months after leaving but he is under fire despite taking the job 20 months after leaving his post. stillt: nigeria is africa's number one economy but south africa is gaining fast. south africa is number two after recently overtaking egypt. it narrowed the gap to 60 billion in 2015. the mercedes-benz style edition was rolled out at the british open this week.
it comes with a refrigerator, lou to come a speaker system and the car has a range of 50 miles at top speed of 90 miles an hour. scarlet: the california public employees retirement system has .apped marcy frost she most recently served as the executive director of the washington state department system. she starts her new job in october. oft is your business flash eight. still ahead, and uncertain market -- the key is to be invested. one investor is going to give us his take on why you should join the inflows. ♪
investors are pouring money into exchange traded indexes and doing it the fastest pace september. close total $11.5 billion. let's go to carol mann's -- carol massar and cory johnson standing by with jason brown. he says momentum etf's rank highly on his investment radar carol: this is the bloomberg advantage on bloomberg radio. we are talking with jason brown, chief investment officer at fun dax. we want to talk about how you pick some of your funds and some of the etf's you guys look at. does it feel like there is a fair amount of opportunity out there? guest: if there is one thing we have noticed is that this market is resilient. maybe we have gone away from the secular bear environment or you can think long-term about your investments, which is a great opportunity to not necessarily
worry about the news and things that are coming out. instead, to be able to think longer-term and follow the traditional investment process like asset allocation and rebalancing. when we look at etf's as a way to get exposure in an area, theyk at this moment where have $5 billion in assets and how that works the world of etf's. robo advisors are interesting because they are trying to promote the idea of low cost eds and charging a fee to do something relatively simple -- just take a static asset allocation and rebalance it every once in a while. i can see the appeal to some extent and i could say our process has always been to acknowledge market trends change
and we want to take advantage and i believe we can add some value over time. that's one area they don't grasp completely. maybe they have gotten bad advice in the past or feel like they are paying too much. ishink the one thing that interesting is there's a lot less criticism of what the investment results have been. carol: there are a lot more options for investors who want to do it more on their own. areou feel like you competing with new investor money from some of these options? .uest: possibly i would say not that different from somebody who would have gone to the firm in the past and bought a selection of raw-based etf's on their own and may be
rebalanced periodically because they decided an index team was the best way to approach and uncertain environment and they want to focus on fees. i think the robo advisor community does make things any simple to get things started and to not have to think about any element of it. if people think back and say what did i just get myself into, they don't have a clear picture of what to expect from a risk return perspective or what the long-term strategy has done for them and i think that's interesting and we will see how it lays out. a worldn you imagine where there are too many etf's? guest: i think we have then in that world for a while. 70ook at the universe of etf products that have come out and there are always interesting things like we have embraced the momentum of a quality etf and low volatility strategies that
have done well. but you really need these industries and etf that try to promote the idea that they are creating liquidity in areas of the market that had not been look at before, it does not make any sense. you have to be careful thinking all etf's are created equal. they are certainly not. talk about etf strategy. how do you pick and choose where you allocate any? three-stepollow a process. we make sure any etf has a reasonable track record, is reasonably diversified and trades well so we can buy it and sell it at a reasonable price. from there, we group our etf's based on downside record and rank them based on near-term performance and then we re-rank every month.
and we will replace it with something that is higher ranked. lows we are buying now is volatility funds, mid-caps and small caps coming up the ranks. carol: we are hearing a lot more people talking about the dividend strategy. thank you. back. carol massar on the growth of the etf industry. shery: still ahead, a former imf chief economist warns of tough times ahead for the u.k. as it works to leave the eu. this is bloomberg. ♪
i'm shery ahn. scarlet: and in london, i'm scarlet fu. mark crumpton is in the new york newsroom with first word news. mark: donald trump is closing in mikes running mate with hence. one source says they are prepared to announce him but a last-minute change of heart i trump is possible. a spokesperson says trump has not aid his decision yet and they are planning announcement tomorrow morning. star" reportslis that pence has dropped his bid for governor. a close political ally of chris christie has pled guilty to a oferal to -- federal charge soliciting a bribe. port authorityp from 2011 through 2014. officials say he threatened to withhold funding unless united airlines pervaded -- agreed to
provide service for him to get to his vacation home in south carolina. the money-losing flight was ended at three days after he resigned. the united ceo resigned after an investigation into that service. the republican convention gets oferway featuring a lineup politicians and celebrities. peter thiel could be the first openly gay speaker at a republican convention. some of the notable absences include presidents george h.w. bush and george w. bush and the nominees, most recent john mccain and mitt romney. the french president says the country's state of emergency will end on july 26. it has been in place since the terror attacks in january. he says military counselors will
be sent to iraq to help troops retake the islamic state stronghold in the north. "game of thrones was quoted has received the most nominations for the emmy awards receiving 23 nominations edging out "the ." hbo versus o.j. simpson was the top nominated network with 94. the emmys will he presented in los angeles. 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 in london. scarlet: theresa may took over as uk prime minister less than three weeks after the 10 -- after britain voted to leave the european union. the newly up pointed chancellor of the exchequer said had -- they vote to leave had a rattled
confidence. on bloomberg surveillance, tom keene and i spoke with olivier blanchard on the kind of impact the brexit will have on the u.k. short run,ink in the the u.k. is going to suffer. the option value of waiting for investment which might lead to a large drop in investments, which i think is going to be the main effect will be partly undone by depreciation, but not entirely. i continue to think the u.k. is going to go through some tough times, but at the same time, for the rest of the world, this was not a major event and i was by how risk had come off to an unusual degree. some thought it was the end of the world and the end of europe and conjecture over the
coming days and coming weeks, some of the smoke would go away and we would realize that this was mainly a u.k. problem, which it is. talking about the numbers you just gave, what strikes me as how well the u.k. stock market has done relative to the eu stock market. we continue to think the effect is much likely to be stronger on the u.k. than the eu. agreed that aking measured tone was in order. the newget that from chancellor of the exchequer? what was your prescription for the debate of austerity within the united kingdom? am not going to make any judgment or assessment about the politics. i don't know the new players
well enough to say anything. my senses in the current conditions, some fiscal expansion and loosening up policy are the same things to do. largell have a fairly increase in private demand. i don't see how this is going to be avoided. to that extent, fiscal consolidation should wait and i'm in favor of relaxing a bit what the initial plan was. say exit is a problem. what's the best way to strengthen and unify institutions as both sides try to negotiate this divorce? economicom a purely point of view, it's probably good in some ways. he goes to new york or to the constant. i terms of internal dynamics,
do not know. was ase is that there sense on friday that this was a beginning of movements and similar referendum elsewhere but i have a sense that what is going to happen to the u.k. is going to make people think twice. so that might he a good thing. if people really want more europe and try to use it to push, i'm not sure the electorate as a whole is eager to do it, so i don't see major political changes or changes of direction in brussels. scarlet: that was olivier blanchard this morning. we will have more for you coming up on monday because tom keene will sit down with christine lagarde. that begins at 1 p.m. in new york. shery: still ahead, it is our mistry stock of the day.
shery: this is bloomberg markets. i'm shery ahn in new york with scarlet fu in london. julie hyman has the big reveal on the mistry stock. here you have a hint again -- a loss for this highroller after it hit a lucky number year to date. despite the record high, it's at the bottom of the deck. something to do with gambling? julie: yes and the clue to the
name is in the first you words. it is a loss for this stock -- is?opposite of a loss . when -- a win wynn resorts. the stock has done very well year to date. it has a lucky number of 32% year to date but it is pulling back because one analyst cut the stock to neutral from overweight partly because of valuation and it had outperformed this year. to the annualast performance, is down by 4%. analysts pointing out it had this run-up earlier in the year because of enthusiasm over the when palace grand opening. palace grand opening.
you can see the other two have underperformed and this is something the analysts have highlighted. he also talked about the business in macau and this looks at the monthly change and it has been falling. but we 8.5% last month, are going to see table growth expand and room supply expand. he's mindful of what the implications could be. it has not turned around yet and he is lowering macau property level because of the lower mass volume. a will see if there is turnaround, but right now, it's one of the worst-performing stocks on the s&p 500. even as we see some records being set. been there and
it's an amazing facility. it has been troubled by a crackdown on corruption, so that has really put a crimp on revenue there. shery: thank you so much. that was julie with the mistry stock. here's the big question on wall street -- are treasuries on the brink of collapse are -- or are buy.a good by -- a good now is lisa abramowicz. why do u.s. investors care about what japan is doing way over there? lisa: japanese buyers are believed to be a huge source of demand. japanese investors poured a record amount of money for an bonds last week.
the same time u.s. treasuries were posting historic rallies where yields got to new record lows in the u.s. people are looking to u.s. to understand the international dynamic creating this backdrop for the incredible yield that we are seeing in the u.s. clearly timing was not on their side but where can they put money if they are looking to put it into sovereign debt market you are not going to go to europe. lisa: the largest insurer in japan made an interesting statement. they believe u.s. treasuries have room to rally more, but they do not the value for them elves because the cost to hedge against what you wish and in the dollar have increased so much that they are not actually earning income from those treasuries. which is sort of interesting
because it not as if they are bearish for the prospect of these bonds. that said, they see better opportunities because the cost of hedging is not so great compared to the yields you are getting onome of those instruments. we see an incredible rally in corporate debt this year with 12% return on u.s. high-yield bonds which is more than we have seen on the s&p 500. the fact that there is more room to run if these japanese investors come here is an interesting thing to think about. shery: this is what caught my attention yesterday because we see these big bond investors getting away from treasuries but then pimco is loading up on treasuries, extending their funds to the highest and eight months. what are investors trying to gauge here? lisa: when you started asking about why did people care about
what japan is doing, it is precisely this. u.s. treasury yields are not dependent on economic factors in the u.s. at this point. we are not looking at jobs data and what's going on in the u.s. quite as much as what is going on -- will we see another round of helicopter money coming out of there? what about the ecb or the bank of england? knows? they are expected to drop their interest rates to a record low level in the wake of exit. all of this is coming back to the u.s., pushing investors to invest in treasuries. even though the inflation rate seems to be picking up and wages seem to be picking up and jobless rate seem to be going down, people see yields going lower because of what is going on internationally. people have to understand that if they want to invest in
treasuries and it's a hard thing to get your hands around. fuld in the bond auction results and what it tells us about demand for sugar -- shorter term versus longer-term that. there is a limit to how much people will buy in the near term long-term, people do not expect inflation to pick up in a meaningful way. always great to talk to you and put everything into perspective. go to theommentary bloomberg. scarlet: devon energy has agreed to sell half of its stake to a canadian pension fund. they are better funded and able to focus on core assets after the sale. with this sale announced, where is devon energy with regard to
its development strategy? proceeds are $3.2 billion, and that will be put toward other capital projects that they would like to get involved in. devotes broken by scott and it was announced formally today that devon energy will be selling their 50% interest in the access pipeline in canada. board has closed out there divestment strategy and they have an hit along with other oil and gas and shale drillers by the plunge in prices. shery: tell us about some of the investmentlays these
plans are being offered right now. guest: they have been coming fast and furious. this is the third purchase and a first one for wolf midstream which was formed by the canada pension fund. it's their first big purchase, but we saw seven generations energy went ahead and sold alberto shale assets for $1.3 billion and that company has a huge interest, so involved there. another company agreed to buy oil-producing companies from penn west for about a billion dollars canadian. so this flurry of activity just in the last month or so. up, facing major
shery: this is bloomberg markets. i'm shery ahn in new york with scarlet fu in london. scarlet: time for the bloomberg business lash -- a lack of new models and global economic concerns are being blamed for limited plane orders. airbus and boeing racking up their lowest tally of aircraft orders and six years. they announced a commitment for jets worth $50 billion, only half the value they got at last
year's paris show. shery: the economic meltdown continues in zimbabwe, with the african nation missing their own deadline to repay creditors. the central bank governor has confirmed that they have not paid. they oh money to the imf, the $601 million to the african development bank. it may be the beginning of the end for skins gambling. videogame maker valve is walking away from the growing world of online gambling, a major component to its games. a crackdown on websites that use steam could cause a loss of 7.4 billion dollars in that's this year. us how this economy works. we are talking about skins, which are virtual items you get
playing the games. what is the gambling infrastructure? evan: a few years ago, valve started selling in game items called skins. you can think of them as colorful guns or knives players can use during the games and it did not take long for these two of crew -- to accrue real value. this year in 2016, 7 .4 billion dollars of skins are expected to be gambled. that gives you a size of the overall market place and all of this was happening on valve's software and for the first time, valve is speaking out and essentially shutting these websites down for top scarlet: what was the catalyst for valve to suddenly discourage gambling on its platform when it had allowed it were five years?
evan: i think a lot of people were starting to realize it was the shady underbelly of the e sports gambling world, especially when you consider a lot of the people use these websites are teenagers which does not play well publicly. -- there have been a view have been a few high profile problems, one of these websites admitting they had asked the results from some of their games to make it appear more enticing to potential users. the other being a few fairly prominent youtube stars who failed to disclose they were owners of one of these sites as they were pushing subscribers toward those sites. overall, it was a very shady world and valve is being renewed for violating gambling laws and i'm sure within the al business grown,re, the sport has
the game is popular, maybe we don't need this. have happened to the players who have amassed a load of skins that are worth real money and they games whose popularity was boosted because of this? evan: that's what everyone is trying to figure out. this game, counterstrike, they are saying it's entirely propped up by the fact that you can gamble with in game items and once it leaves the game, who knows how popular that game will be. tnt william morris and launched their mainstream e sports event, they chose counterstrike to be the game. a lot of people have invested a lot of money in counterstrike and the big question is what happens to the popularity of the game and, if you are one of these people who has accrued these skins as an investment opportunity, we were talking it -- talking about it as akin to beanie babies.
something that has a lot of value and in all the value you thought you had invested is gone. fascinatingis a world and i have friend to play these games and are getting real money out of it. thank you for wrapping this up for us. up in the next hour, former house majority leader eric cantor joins us for the latest on the presidential election as we await confirmation on reports that donald trump has selected indiana governor mike pence as his running mate. we will keep you posted. this is bloomberg. ♪
vonnie: from bloomberg world headquarters in new york, i'm vonnie quinn. and i'm david gora. star star to the u.s. earnings season sends stocks to fresh highs. volatility is low and confidence is up. jpmorgan beat estimates in its second-quarter report with firm growth in commercial real estate. david: an exclusive interview with house majority leader eric cantor, now vice-chairman of an investment bank, on what he thinks of donald trump's vice presidential picks in this election season. let's head to the markets desk, or julie hyman has the latest. julie: on this record-setting day, as the markets go higher and higher,