tv Bloomberg Markets European Close Bloomberg July 20, 2016 11:00am-12:01pm EDT
you are watching the european close on bloomberg markets. we are going to take you from cleveland to new york to london and cover stories out of frankfurt and is tumbled in the next hour. here's what we are watching. a week after taking office as uk prime minister, theresa may is set to meet angela merkel in berlin. why the german chancellor says there will be no negotiations with the u.k. until may triggers article 50. nejra: donald trump -- vonnie: donald trump officially becomes republican candidate for president. markets anticipating the
european central bank decision and news conference tomorrow. quantitative easing may look like a precise business but the underlying markets are anything but. have a look at where european equities are trading just 30 minutes before the european equity close. i have the big picture here, looking at germany plus dax upex and euro stocks 50 1.2%. france up 1.1%. looking at currencies, seeing a stronger sterling and the euro pretty much unchanged, though we were seeing it weaker against the dollar earlier. at how industry groups are performing on the stoxx 600. up 1% at the moment, heading for a four-week high.
technology stocks and carmakers are leading the gains today. sawa surprise given what we from sap earlier. still leading the gains at the moment, up 5.8%. it reported results that topped analyst estimates. they close more software deals despite the turmoil in europe. higher,en also heading up 5.5%. first half earnings exceeded market expectations, sending shares up the most in three months. car brand showing signs of recovering after the emissions cheating scandal. i want to look at the relative intogth index -- it moved overbought territory but is now within this range between overbought and oversold. we have been seeing anglo-american following today
after it cut its target for copper outlook. about 90 minutes into the session and it looks like stocks here have held on their early gains. little more solid with the dow up 43 points and the nasdaq up 1% in the face of declining oil prices. take a look at the bloomberg. we attack as the best performing group, helping to explain why tech is the best performer. energy has turned slightly higher. half ant a check on oil hour after the inventories report. it has turned higher as well. report. mixed crude inventories fell for the ninth straight week, on the flip side, there was an unexpected
build in gasoline inventories. so initially, there was some volatility after the numbers after people tried to figure out what it all meant, but now oil is going higher. have been watching the 100 day moving average for oil. looks at the inch or day changes and i put the moving average on here. the pertinent one is the bright green one, at one point oil went below it and now it looks like it is rising above it now that oil prices are higher. microsoft since that is fueling a lot of the gain we are seeing in tech today. after the company's earnings beat estimates. microsoft like many other legacy tech companies have been trying from its older businesses into higher growth businesses and the corporate doubled inorm has
the quarter, so that is helping microsoft shares. time to check in on the bloomberg first word news. courtney has more from the first word desk. cruz toss turnd in the spotlight at the republican national convention. the texas senator who donald trump called lying ted will speak tonight. maded trump's older son trump's nomination official speaking from the floor. >> to be able to throw donald trump over the top and the delegate town tonight with 89 delegates and another six or john kasich. congratulations, dad, we love you.
courtney: indiana governor mike pence will speak tonight. a teenage afghan immigrant who attacked train passengers with toax pledged allegiance islamic state. he was shot and killed by police. the u.s. is counting on wing commitments at a conference today to d-areas once held by islamic state. two dozen countries are taking part. the u.s. says it plans a substantial contribution. and the u.s. government has seizurea huge asset case involving a malaysian sovereign wealth fund. prosecutors are seeking more than a ilion dollars of real estate, art and proceeds from the wills of wall street movie. the center of several .nvestigations
nejra: tomorrow the european central bank will make its first scheduled monetary policy announcements and the brexit vote. most analysts are not expect to any new stimulus moves but they will listen closely to mario draghi's news conference. joining us is the wells fargo global research analyst. what is the most important thing you will be watching for? good afternoon, by the way. howt: we will be watching is the ecb has positioned itself following the brexit vote. we anticipate druggie to follow in the footsteps last weekend forcate the ecb is waiting more data to come out before making any moves. much more upside do
you see for european equities? we have seen some recovery since brexit. we have seen the stoxx 600 alternate between gains and losses. where do we go from here? we think there's a little more upside available. one of the headwinds to the rallies we have seen over the past couple of weeks is uncertainty around european banks. stocksinue to favor u.s. versus you -- versus european stocks. you dip into my bloomberg here, you can see how much the ecb buys from different countries. there is some speculation that might change and the ecb will tweak its rules in order to be able to do different things. thingsf you look at how are in germany, we have so much debt in negative territory it's
not even able to buy german debt. guest: that's right. if the ecb decides to continue its program, it is up against the wall with rates being so low. there are a couple of options. they could announce they are removing its deposit floor rule and enabling it to buy more expensive bonds. awayer option is to move from a gdp weighted scheme of asset purchases to be a market weight scheme of purchases which would enable it to buy bonds from countries like italy. would that improve the outlook and make you think more positively on europe? guest: it increased to liquidity outlook for sure but, if there ecb were to move to more of a market weight purchase program, i think that would introduce a little more political risk and uncertainty.
how do you favor or not favor european stocks versus the u.k.? we had a call earlier this week saying the ftse 100 down on the year 7%, yet they still favor the u.k. over europe. u.k. stocks at this time, there is more uncertainty and miss balance between german banks, italian banks. banks are going to be the main question around how do you play european stocks this year. we see more stability in the u.k. versus continental european stocks if we look at stocks in that context. bill ackman's pershing square quarterly conference call maintainckman plans to
his bet against shares of herbal life and will push regulators outside the u.s. to investigate the nutrition company according to a person familiar with the situation. ackman is expected to make a presentation on herbal life during the call. you can follow this story on your bloomberg. coming up, theresa may is scheduled to hold her first meeting as u.k.'s prime minister with german chancellor angela merkel. this is bloomberg. ♪
vonnie: time for the bloomberg is this flash, a look at some of the biggest business stories in the news right now. the prime minister of india is clearing the way for apple to open its first retail store in india. the move comes after tim cook visited india for the first time in may. them toes it will help be able to tap the fastest-growing smartphone market. news is said to be leaving his job. roger ailes is discussing possible exit terms with 21st century fox. ailes is a former republican political strategist who built fox into the most-watched cable news network in the u.s. that is your bloomberg business flash for this hour. one week after taking
office as uk prime minister, theresa may traveled to berlin for her first meeting with german chancellor angela merkel. joining us for the latest is bloomberg possibly ryan chilcote. big day for theresa may. ryan: she just had her first prime minister's questions where the prime minister gets grilled by the opposition party. but it looked like theresa may was doing a lot of the grilling when she was being cross-examined, at one point even evoking that sure, laying into the leader of the opposition. her way for her first meeting with angela merkel and we know brexit will be part of that. the germans have said they will not negotiate until they invoke article 50. we know they will have an informal discussion and from the prime ministers question, we know a little bit of the message theresa may will be sending.
prime minister may: brexit does mean brexit. but we need to do is ensure we listen to what people have said about the need for control on free movement and also negotiate the right deal and the best deal of trade and goods and services for the british people. ryan: i did not coin this phrase -- i'm going to call it bino brexit in name only. she saying we want to have our cake and year two. they are going to a if you want the same kind of access to the single market you had in the european union, when you are outside the european union, you have to agree to the same rule and agree to the freedom of movement, which for many people in this country is a nonstarter. it will be interesting if she achieves that. tell us more about what
kinds of signs of cooperation we might be and where the lines might be drawn. : angela merkel and theresa may have a lot in common. they're both women, both politicians, both tried and both pastors daughter. have a keen appreciation for the value of trade between their countries. it is big. germany is the u.k.'s biggest trading partner and germany is the u.k.'s fifth a gift trading partner. if you think about it, we have a that chart you can look at shows you right now in the month the u.k. has a trade deficit with germany. that we have data for, the trade deficit was about 2.5 billion pounds. the germans are exporting to
point 5 billion pounds more than the u.k. is ending to germany. the germans have an interest in selling all of those books wagons and mercedes into the u.k.. so while angela merkel wants to feel like she needs to stay tough and say you have to follow the rules, germany has an economic interest in the u.k. having good trade relations with the country. do the people who voted for brexit expect theresa may to come back with? ryan: a lot of people who voted for brexit -- brexit one control of migration and that's going to be difficult for the reasons i was just pointing out. they are going to expect to get some kind of concession on that where the u.k. can maintain access to the single market, but a lot of people don't really care about that. most importantly, that we see a big drop in the number of
migrants coming from the european union into this country. brexit in name only. ryan: you heard it here first. nejra: stay tuned for a joint news conference with theresa may and german chancellor angela merkel coming up at 12:30 p.m. new york time, 5:30 p.m. in london. don't miss it. we are about 10 minutes away from the european close. earnings, moving on including sap, which reported a profit the. we will hear from the ceo, next. this is bloomberg. ♪
their second quarter beat analyst estimates, largely based on the company closing more software deals. shares were up earlier today and the ceo spoke to guy johnson and caroline hyde. companysked how the avoided -- avoided the negative effects of the brexit vote. >> we saw double-digit growth in our software sales and operating income. very pleasing and sap is position like no other in our space. we look at the real-time information on the pipeline, we a very robust and ever-increasing pipeline for our technology. what is interesting about exit specifically, just like the greek debt crisis or the china growth issue, our software 10 to be very resilient and choppy
waters because business executives start thinking a lot about their customers, their channel strategy, their inventory levels and supply chains, their financials and real-time data to make smart decisions. architecture is right in the center of helping them solve those problems, which is why we tend to be resilient. i appreciate her comments on the resilience, but have companies that have big exposure to the u.k. have decided to down tool. they are resisting making big investment that this date. any businesses you were expecting to win that you haven't? what's happening in the story around the u.k. specifically. bill: i need to give you an update on e-cig -- on s.a.p.'s business in the u.k., which actually grew in the heart of this brexit issue. it actually grew in double digits in the cloud.
howere quite interested see the u.k. would react and how overall europe would react and europe was our fastest-growing region. as you know, the whole brexit some time toake evolve, but while it evolves, we are in lots of conversations that are new conversations with customers on how do they best align strategically in this digital economy to overcome the obstacles that could come their way from such a potential downdraft. and that helps us. i have not seen big, global multinationals say i change my business strategy because of her exit. we see some of the more nationalistic behavior in many world,nt market of the which is why i'm happy we are in to diversify our
portfolio and be relevant and all of those conversations. >> you are taking the business toward cloud computing. you saw a cloud corruption and support revenue up 40% from the previous quarter. can you guide us as to whether we will see this pace of growth going forward in the second half of the year? bill: we have 13 consecutive quarters. affectu back out any m&a of more than 30% growth in the cloud, what we have that is forue is a new architecture managing this all-important big data. -- reinvented the business suite for s.a.p. for end-to-end business with 3700 customers globally, 500 new in the quarter. platform by which we
cross sell all of our different cloud solutions. was ill mcdermott from waldorf germany, speaking earlier today. let's take a look at s&p shares five minutes away from the european close. and 1998their highest on a closing basis, one of the best performers on the stocks 600. let's take a look at the stocks 600, seeing gains of more than 1%. all headed higher. the euro pretty much unchanged but it did hit a three-week little earlier. german 10 year yields up one basis point. this is bloomberg. ♪
you are watching the european close. stocks finishing up the day in european trading. let's take you through all the market action. inhave seen some up and down european stocks over the past few sessions with the stoxx 600 oscillating between gains and losses. today, up more than 1% at the close. we will have a look and dig into those industry groups. carmakers stocks and have been leading the gains. thanks not far behind. most industry groups gaining. a lot of individual stocks to watch because a lot of optimism have been driven by earnings top we have seen vw shares rise today. after first-half earnings exceeded market expectations, sending the shares of the most in three months. car brand showing
signs of recovery from the emissions scandal. anglo american cutting its annual car -- annual copper target. the shares lower, down 4.4%. we are talking about the second-best performer on the ftse 100 index this year. miners in general have been performing well, but anglo is down. finally, s.a.p., we heard from the ceo just a little earlier. reporting results that topped estimates, putting a weak start to the year behind it and closed more software deals despite political turmoil in europe. we see the shares hit their highest level this year, the highest level since 1998 on a closing basis. vonnie: looking at the vix because we are below 12 today. have got in below 12 and's 2014. then again, you see a reversal
of the huge move we saw that brought it below 100. the lira is one to watch because we are approaching a -- an all-time high. it is really undervalued by about 40%. crude oil futures, we have to keep an eye on those. look at the broader u.s. markets. the nasdaqp 30% -- up more than 1%. let's go live to the nasdaq and talk to abigail doolittle. abigail: the nasdaq in full rally mode today, really outperforming the dow and s&p 500. this has to do with the overweighting to tack and we now
have the nasdaq within less than 3% of its record high. perhaps the index will use the recent consolidation to power higher. as for the big strength in technology, microsoft shares are up. the best day since october 2015. this is being driven by the companies tremendous fourth-quarter report. earnings by night percent, mainly due to strengthen the cloud and resurgent in the consumer pc business. the server business had dragged in the last quarter, so a lot of good stuff for microsoft. microsoft is still 5% away from it all time record high all the way back in 1999. maybe we will see a climb in the days and weeks ahead. 2.2%, of 11 days in a row, its longest winning streak
december of 2013. at its highest level november of 2007. real strength for legacy technology names. cisco is up egos of the strength in the cloud business. cisco provides a lot of equivalent for cloud servers. that suggests there report in august could prove to be strong as well. facebookt looks like is trading around a record today. could we close at a record? abigail: great question. we do have facebook hitting a record high. up two greatput quarters. some investors may be taking microsoft strength and putting it to work facebook. the company did announce over a billion people are using facebook messenger every month. that could be behind that
facebook record high. vonnie: abigail doolittle at the nasdaq. let's check in on the bloomberg first word news with courtney collins at our news desk. answered theresa may questions in parliament for the first time as primus are. she was asked whether the the 'snservative government long-term plan is dead. >> what i have said is we will not be targeting that at the end of this parliament. but he uses the language of austerity. he talks about austerity, i call it living within our means. courtney: may will travel to germany to talk to angela merkel. 12:30. watch that at the most expensive warship ever is not ready to go to war. the u.s. gerald ford may struggle according to a pentagon memo obtained by bloomberg news.
the aircraft carrier cost almost $13 billion. the ship was originally scheduled to be delivered two years ago. now the navy will not get it before november. more fallout after reports of widespread doping with russian athletes. no russian sports ministry officials will be committed to the olympics and with a will rule on whether any russian athletes can take heart in the game. in turkey, the president's meeting with top security officials for the first time since last week's attempted to -- attempted coup. turkey has fired, detained or stripped the credentials of around 50 people. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 companies -- 120 countries.
we have breaking news that turkey has been cut from -- to the be with a negative outlook. this news coming after moody's said earlier this week that the for ay was being reviewed possible downgrade to junk status. fast-moving here with the lira weakening 6% versus the dollar. we are joined by our bloomberg managing editor for the middle east and africa. on the the latest political developments. the latest is a turkish president has been meeting with his national security council and some top members of his cabinet. ended that meeting and they will make a recommendation that goes to the cabinet that is due to start meeting soon. , they will make an
announcement about what measures they are going to take. vonnie: what kind of announcement are people anticipating? guest: we are not certain. we have comments by some officials -- one of them saying one thing being considered as declaring a state of emergency. another official said there would be measures to make the prosecution easier of some of the people being accused of coup. part of the there are some serious measures on the table being discussed by the cabinet. if we get the most serious measures, what would this mean looking at the biggest picture overall in turkey? it depends on how they are implemented. as manye already purged
as 60,000 people either by firing or removing people from their position or arresting them. they might take these measures theher to reshape institutions in turkey. the desirerm part of to turn turkey into a presidential system and centralize more power in his hands, which he argues would create a more stable system for turkey. thank you very much for that update. to take a look at the market reaction to the political turmoil in turkey. i know we both have some charts to show, but let's head over to my bloomberg. the ishave here is simple one hundred index, the
benchmark. what this chart shows is stock history for turkey shows the index retreats when the moving averages cross. talking specifically about the 50 day and the 200 day moving averages. they are edging toward a cross here and what this means is we could see this index retreats as much as 18% in the next six months. the situation is deteriorating. if you look at the difference between how they are trading for do in, the turkey bond 2045 is climbing to a two-month high. you can dip into my bloomberg here and compare it to brazil and south africa and other politically difficult countries, you see a search there.
i want to take a look at the lira because a lot of the effects in this channel, the currency channel, if you look at the lira and its position relative to the u.s. dollar, we are close to an all-time record. we will see where we end up. moving to the ecb, mario draghi and the european central bank are gearing up to make their first policy decision since the breakfast -- since the brexit vote. -- joining us is just black who covers the central bank. thank you for joining us. looking ahead for tomorrow, there are some challenges here given some of the economics. the challenges are
primarily by measurement. in the aftermath of the brexit vote, the biggest problem is measuring just how big that impact is going to be on the euro area economy. the initial view is maybe half a percentage point over three years. that could be too optimistic or it could the contrary. question whatthe comes next? does the ecb need to ramp up stimulus? on balance, it's probably going to. howmuch is a question of much more slack there is in the european economy. we have been writing today about how difficult it is to measure that. about to refer to this great story you have written on the bloomberg and it talks about some of that. give us some details about what the confusion is. guest: it's a classic statement
central bankers that the output gap is something that you can't measure. the thing about the euro area economy is that it is 19 different economies, so you have lots of different things going on. waysave different inflation manifest itself, so there has been some recent the amount ofjust slack left in the economy could be 6%. bigger than times the current consensus. that means stimulus has got to be a lot more. ?oes the ecb believe that we are not sure. we're going to try to probe into those questions as we go forward. vonnie: will mario draghi tweak some of the bond buying? it's very early days.
should he wait and have more firepower? there is no indication yet that there is something coming tomorrow, but there is the capacity for the ecb to tweak terms and conditions of their bond buying more rate cuts should that be needed. should the judgment the by september that there's going to be a significant downside from brexit or other things. thank you. we did just hit a record low for the turkish lira. u.s. attorney general loretta lynch is holding a conference -- some headlines crossing the bloomberg -- the justice department saying money laundering edgley occurred from 2009 through 2015 and more than .3.5 billion was appropriated we will continue to monitor for headlines. coming up, it is battle of the charts.
vonnie: time for our global battle of the charts where we look at some of the most telling chart of the day and what they mean for investors. kicking things off -- and you know it's going to be colorful -- matt miller. matt: i have many colors on this chart. this is something a lot of people don't really understand or know about, which is the fact that the ecb has as big bond buying program. they can't buy anything by their under the deposit rate.
it turns out that's a lot of debt a can't by. , you havee in green to go out seven years before the ecb can buy any of those bonds. all of those yields that come earlier are below the deposit rate. it is especially troublesome for the ecb because they have to buy more german bonds than any other bonds since germany is such a big player. when they look at companies like ,taly, they can't buy as much although they are allowed to buy italian debt. 30% of thely by total issued debt. portugal, they bought everything they can. but they could decide to not work according to the capital key. matt: they could change their own rules. we will hear a lot about that
tomorrow. : i'm looking at changing political risk across the markets. it is three-month volatility of the turkish lira and then they volatility of the brazilian real. they moved a sickly in line with each other for a long time and then last year, as everyone started focusing on brazil, volatility really sword. that has been quieting down and you can see right now there has been a huge surge in turkish lira three-month volatility, so it's seems we are having a clear areme shift where people less concerned about brazil and getting more and more concerned about turkey. it in the respective volatility of the two currencies. i and/or it and i love
having both of you in the studio. matt, i'm going to make you the winner. just hit a record for the turkish lira. another tied today because we just did this last september. matt miller and joe weisenthal, thank you. coming up, donald trump named the republican nominee for president. but much of the focus was on hillary clinton. we are live with the latest. this is bloomberg. ♪
president. the former reality tv star reached the threshold of delegates with the cast his own children. we are joined by our senior reporter, mike bender in cleveland for a look at what tonight's focus will be and how long do we have to wait for that vocus to crystallize? it took a long time for them to get to the theme of the night last night. we're at the midpoint of the convention here and we see two tracks competing with each other for the attention of the american people. one track is donald trump, the one his campaign chairman says they want to focus on and present donald trump, make the campaign about him and not hillary clinton. they are hoping to show people a different side of mns why we see half a dozen trumps speaking in cleveland, but that message has then drown out. one by the plagiarism charges, but the other focus on hillary
clinton. yesterday, one of trump west surrogates, new jersey governor chris christie got the crowd it worked up and described himself as a friend of trump but bent his entire time literally prosecuting the political case against hillary clinton. that does jazz up the republican base. they were chanting in unison with christie, but it is not clear how that will get trump any new supporters. what happened to hash tagged never trump? has that been squashed? guest: that is in the history books. the reality has been that that's been a pretty weak movement from the start. theiroblem is what is option? they're asking people to oppose trump, but there was never a clear alternative for them. for a while, it was kind of
marco rubio, differing candidates in different states and it could just never coalesce. they had their final showdown in cleveland and like all the other times trying to oppose trump and his conservative movements, they did not get much traction and they came up short. mike bender in cleveland. thank you so much. let's take a look at where the european markets ended the day. they closed 25 minutes ago. the stocks 600 hitting a four-week high. up more thand dax 1%. in terms of stocks we are watching, tech stocks and carmakers led again. s.a.p. up 5.7% after reports that topped estimates. vw exceeding market expectations, sending it shares up the most in three months.
4.8% aftercan down it cut its annual target for copper output. check one a euro-dollar, pretty much unchanged, but it dropped to a three-week low ahead of the ecb tomorrow. vonnie: i do want to mention the there a one more time -- the weakest it has ever been. stay tuned to bloomberg for coverage of a joint news conference between theresa may and angela merkel coming up at 12:30 eastern. this is bloomberg. ♪
we know aetna has presented several divestitures plans to attract the antitrust concerns in the market for health plans according to the person we spoke with. the u.s. has said to be preparing to sue to block this deal. up 15% yearhad been today and the stock had come down on concern this deal would not go through. coming up 1% but you see a bigger jump i guess about 1%. they have come up about the day and have come back down. has been looking into this stock. like this may be an beginning or mid point of ongoing negotiation between these companies and the u.s. government. the other pair we are watching is anthem to