tv Bloomberg Markets European Close Bloomberg July 21, 2016 11:00am-12:01pm EDT
watching the european close on "bloomberg markets." ♪ >> we will take you from cleveland to paris and cover stories out of frankfurt and istanbul in the last hour is what we are watching. ecb president mario draghi signaling essential bark -- bank will consider --when it has a clear picture of the impact of the u.k. vote to leave the european union. the union pacific chairman us.ceo joins >> turkey imposing a three-month state of emergency in response
to the continuing coup attempts there. low.ira hitting a record let's start with a look through where european equities are trading. we are 30 minutes from the close. up here.e grr function overall the equity benchmark pretty much unchanged, up 1/10 of 1%. policy, so wecb haven't seen strong moves up or down. it is commodity producers leaving the game, followed by banks, up 9/10 of 1%. retailers down 6/10 of 1%. been focusing on the airlines. we've seen lufthansa and easyjet
fall today. lufthansa cut its 2016 profit forecast after terrorist attacks and economic uncertainty. it is a similar story for easyjet. it also has been impacted both by terrorism and brexit. these as close eye on we head to the close, also closely watching the euro and the yen. at 10999 on the euro-dollar, heading lower. the yen stronger today after we will from kuroda discuss later. what we are seeing is the theme that these 2 currencies have hit multiweek lows because of all the prospects are similar. of 1%.till down 1/1/0 umana shares have opened
back up after the company came out with an updated forecast and raised its forecast for the full year. you can see the shares when they were halted. they are now up by 4.5%. it says that is partially offset by continuing challenge in the company's individual medical business. humana says it claims to exit aca markets. it says it could extend past december 31 of 2016. we will be hearing from loretta lynch in just a little while after the doj decided to file suit to block that deal. then we got this news about humana and it's updated forecast
great as for aetna shares, we have been watching them as well. they also have been heading higher. in a statement this morning saying it's not certain it's deal is going to go through, whereas it seems humana and aetna are prepared for their deal to go thruogh. -- through. in this case it's not certain it is going to go through. both of those stocks are trading higher as well. aside from these health care headlines, what's going on with the major averages? not much. are littlef them changed because we have other corporate news on the earnings front. a lot earnings from general motors, qualcomm, ebay, intel. on a day like this it's more micro than macro driven. you.ank another company we are following this morning, union pacific, the
largest publicly traded railroad reported second-quarter earnings that beat analysts estimates. peaked just as oil and natural gas prices started taking a tumble. the rebound in some commodity prices helping to make up for a drop. joining us now is the ceo of union pacific railroad. more than 1/2 the value you carry is commodities. coal is already seen a 30% drop in prices year to date. is still facing some headwinds year-over-year, natural gas price continues to be a lower cost than many circumstances to generate electricity. natural gas prices are firming. we are seeing some sequential
strength in coal, also driven by weather. seeing exceptionally warm parts of the country and that is striving overall electricity consumption. >> it is the biggest on the west side of the country. >> we enjoy a great franchise. part of it is into the southern river basin. when coal is doing well, it is one of the most competitive coals in the market. have been the climbing. do you think we've hit a bottom? >> it's hard to call a bottom. in addition to coal, there are other headwinds that continue year-over-year. shale energy related activity in the united states continues to
be depressed. to strong dollar continues have a negative impact on u.s. exports. we are seeing some sequential improvement great we are seeing sequential improvement in grain shipments and industrial 's, andls and lpg construction materials. some part of that is normal seasonality but some part of that might indicate the markets are starting to show more strength. >> what are you doing to mitigate the weak demand environment? have you been improving the productivity of your network at all? >> i'm so glad you asked that question. we are doing excellent work when he comes to productivity. in an environment like we are in right now, where markets are against us to a certain degree, we focus on the things we can control. we focus on getting our
productivity up, increasing the reliability and maintaining an excellent customer service product and overall service experience. i'm very proud of the team, they've been doing excellent work in all cases. if you look at our overall headcount, we have that largely under control given volumes. expense in this quarter was down 12%. if you look at locomotives, we have 1700 locomotives. lowern the context of freight, we grew every train size with the exception of our intermodal products, which is a pretty exceptional result. >> you are attempting to get to 55% near-term. when do you anticipate getting to that mark? >> our guidance is 60% operating ratio. we've announced that we've got initiatives focused on trying to
get to a 55 operating ratio. the program is called grow to 55 and 0. there's an efficiency and productivity component there and ultimately it's come out here. >> there's a big connection railsn euro rails -- your and large rails in mexico. what would the impact be if a trump presidency were to happen? >> we don't make any comments during this presidential cycle. thate the only railroad serves all six rail gateways to and from mexico and mexico is a growing trade environment for us, even in the context of overall freight now. >> the union pacific ceo and chairman lance fritz, congratulations on your quarter. happening and washington, d.c. justice department officials are speaking about the decision to file an antitrust lawsuit to block the merger of anthem and
for president. ted cruz refuse to endorse him in his convention speech, setting off a round of boos. >> i adjust the convention because donald trump asked me to. and went donald -- when donald did, he didn't ask me to endorse. three days ago i talked on the phone with him and set i'm not going to endorse you. he'sney: trump says if elected president, he would review whether the nato country had fulfilled its obligations to the united states. investigations are assessing the search for the malaysian jetliner that has been missing for more than 2 years. of the designated search area in the indian ocean has been covered. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries.
i'm courtney collins. this is bloomberg. nejra? nejra: turning to the mornings ecb decision, mariota raw says he's ready to move in the -- mario draghi cities ready to to move.aid he' sready great to have you. no surprises from the meeting today, but what are you expecting now beyond today's meeting? awesomenk today was an kind of meeting, but september will be key. it brings into focus the end of the program in march 2017. it gives time to think about the changes are different parts available today once they come to september. there was a feeling that brexit, they push these things forward.
i've got a chart here on the bloomberg, if you take a look. it's showing the german government bond market liquidity index. what you can see here is this line. this is right around the time of brexit. basically, the higher the index, the bigger the divergence from bond yields from their values expected to rise from bloomberg's fair value model. i want to get onto the theme of the scarcity of bonds available to the ecb. what are the best options for the ecb to deal with this? it will amplify the impact of the monetary policy, moving from germany towards countries that need easing. it will also than help reducing
some of the scarcity. germany -- the fiscal profile is not producing enough supply for the ecb. that is the most powerful element. there are shifts such as changing the deposit rate itself to bring in some more german borns under the eligibility criteria. viewers want to look at what the key says, all they do is type in ecb go. germany is the largest. what will they decide to do? will they change the nature of corporate bond purchases? it would be a tricky move for the ecb at this stage. there is a potential conflict of interest. ecj ruling which came after the omt give them
enough cover to go towards that if they want to. at this stage, putting financial culprits in what would be a lot of attention -- >> you sent me a great chart of interest rate differentials. now, i want you to talk to me about bond yields. do you think the yields can go even lower, in this negative yielding environment, what are you looking for in your investing? >> the fundamental reality that we are onlyhat relying on capital gains to produce long-term returns. the cost of holding a bond is negative and that is what we see unprecedented. how low can interest rates go? there it brings in the question
whether you have cash in the economy or you don't have cash in the economy. that is why it can create a problem for a central bank. those are the questions we are starting to answer. and for us, what we are saying to our investors and clients is we need to think about safer implementation, focus on quality, focus on fundamentals. great to have you here in the studio. still ahead, the french president francois hollande. getesa may to get moving on into motion. ting brexit -- get moving brexit into motion. ♪
to explainon the uk why it hasn't started formal brexit. we understood it would be september, october, then december. justifications will have to be given. caroline,e from -- explained to us why the french are so angry at britain for not starting the process. merkel yesterday being quite patient. >> yeah, and we expect the french president to be much more pressing on angela merkel on brexit to happen. for the french president, it's a political and economic emergency. from a political point of view, he needs this brexit to be smooth and quick to counter the calling for brexit,
thefrench -- frexit, french exit from the eu. he even linked the brexit aying he would-- s only be able to lower french taxes next year if the brexit problem has been solved. >> what else will the two leaders be discussing beyond brexit? them toso expect mention this massive $24 billion a frenchroject that company is supposed to build in the u.k., and that has been delayed. expect in one week to
discuss the response to terrorism and how to evolve the amalgam between terrorism and immigration. france is home to the refugee camps where thousands of refugees have been trying to cross the channel to move to the u.k. illegally. u.k. is allowed to conduct checks on the french side. >> caroline connor -- caroline connan in paris. for perspective on investing in britain after the brexit vote, a chief investment strategist joins us. brexit talked about before on bloomberg radio. given that of elements we've seen over the past week, have you changed your view at all? >> not really.
the uncertainty which is just starting, the u.k. governments reluctance to trickle -- trigger article 50, and you can see the difference between german and french. the european union cannot force britain to trigger article 50. fact, it is helpful that both parties sit down and reassess the situation before they dive into it. obviously a swiss private bank, what are you doing with your clients money and what are you telling them to do? >> i think for us this is more than brexit. negative interest rates is a much bigger problem. it is that we will go for policy returns. in the most cases on the most secure manner. -- ofhas entrenched the
and energizer, that view because it is making central banks even more cautious about policies they are deploying at the moment. >> you are talking about how you navigate that negative rate environment. that in that sense you could be going for more high-yielding with the assets. would you agree with that? >> yes, because we are being forced to take more risk, we will do it on the basis of fundamentals. it sounds sensible, but if we look at the status quo, it's not like that. you are also talking about born replacements, where we have multi-asset type portfolios which mimic exposures. seconds. what is your call on sterling?
ahmed, you stay with us. look at where european markets are, we are five minutes from the close. stocks pretty much unchanged. little bit of a mixed picture there. we have seen fluctuations in european equities after the ecb decided to keep policy unchanged. the european closes minutes away. this is bloomberg. ♪
of sunny days, but you're watching the european close. i'm negra cehic with funny quinn. stocks finishing up the day in european trading. let's take you through all the market action today. it's not been one of those days where we've seen huge moves. it looks like we are finishing up the day pretty much unchanged on europe equity benchmark. we've seen a little bit of fluctuation, we opened higher, then we dipped down towards the beginning of the afternoon. let me take a look at some other asset classes. it's an unusual day. mario draghi speaking after the ecb decision. we take a look at what the euro has been doing. it did spike a little during mario draghi's press conference but it's come back down a bit since. germany's 10 year bond yield is really where we have seen quite a bit of action. we did see this go back into
positive territory earlier. the drop into negative carry -- territory for the first time ever in the aftermath of brexi., we are watching the tenure bond -- 10-year bond yield. in terms of where stocks are ending up, the grr function on the bloomberg. commodity producers leading the game, up 2%. you're seeing retailers down 7/1 0 of 1%. traveler leisure has not been performing too well and we have --n lufthansa and easyjet airlines have largely been affected by terrorist attacks and brexit as well. >> we are two hours into the u.s. session. the major averages we will get to in a second but the dollar-yen i want to show you
first. it is seeing a continued movement there. comments on helicopter money were made before ben bernanke visited. the lira topped at 308 yesterday. that state of emergency for 3 months has been declared. we are seeing the two year yield at 70 basis points straight it was only 78 basis points before the brexit. major averages, very little movement. the dow jones industrial average down. unchanged,pretty though i'm sure abigail
doolittle will have some stories for us. abigail: we do have yet another market for the nasdaq after a big rally yesterday, taking a breather, more in line with the market action we've seen prior to yesterday. this flat market today is a reflection of a tug-of-war between earnings winners and losers. before we get to a few of those stocks, yet another successful ipo has gone off at the nasdaq this morning. you makes this notable is can see shares are up 26.6%. stock price yesterday at $14, a week ipo. nonetheless a successful ipo. to one of the big tech losers, in fact the biggest drag on the nasdaq today. the biggest drag on the nasdaq. this is after the company
reported better-than-expected second-quarter results but as put by --there are lots of warning signs he says are quote, multiplying like bunny rabbits. he believes inte may have peakedl. qualcomm shares up 7.7% rate the biggest boost reversalsdaq, bit of a here. expectations going into the intel report relatively bullish. they did beat on the top and bottom line. on the bottom line, earnings by 20%. catch-up royalty payments in china along with the company taking share in china. turnaround hopes on qualcomm at the end of last year have been very high. this is one of the worst stocks in the nasdaq. now of 20%, 90 best in the nasdaq 100. thanks.
let's check in on the bloomberg first word news this morning. carbony: in london, kicks off his campaign to win real of the opposition labor party. corbin lost last month. he is promising a different, fairer, and kinder britain. >> what is holding people back above all, inequality, neglect, insecurity, prejudice, and discrimination. in our campaign i want to confront all five of these ills head-on. courtney: opponents say corbyn's ineffective campaign he says he likes the qualities to be prime minister. the brexit votes may push the british economy into its first recession since 2009. economists have an -- been slashing their estimates. the u.k. economy is likely to shrink 1/10 of 1% in the third and fourth quarters.
top prosecutor pistorius should have gotten a longer sentence for killing his girlfriend. erdogan is declared a three-month state of emergency that will allow him to expand a crackdown in the wake of that failed coup. the turkish government will be able to suspend rights an issue decrees -- and issue decrees. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm courtney collins. this is bloomberg. let's get the investor's perspective, still with us salman ahmed. have we seen the lows, weakness in lira, is it going to balance
a little bit now that we have some stabilization? >> if you can repeat the question -- >> weakness in the lira? s, weakness in the lira. what is the problem in turkey, the coup happened quickly and the revolution became swift. the reaction of the government, there have been widespread purges going on. that is what is unnerving the market. we've already seen s&p downgrade and the main problem going forward is moody's and fitch, who can potentially downgrade turkey from its investment grade. that's where the problem is. we are expecting lira to remain under pressure because turkey has a mixed profile. >> the political situation at least for the moment seems to have stabilized. does it mean there are assets there that might look attractive? salman: i think i would hold
onto that. giving the all clear on turkey at the moment. it is true the short-term stability is there, but the government's reaction has been aggressive and you can see as i mentioned, what has been worrying is the widespread purge happening. tourism is going to get hurt and external vulnerability will come through. that is why our view is we cannot give the all clear, even though the damage has happened quite a bit. >> we spoke to moody's earlier this week on this program and they talked about one of the reasonings behind that change in the outlook was that they were concerned about investors turkey money out because relies on these foreign inflows for its current account deficit. you on the other hand say you are listening to what the rating agencies are saying. it seems a bit circular. we have important why
to it at least in the short term, we have identified $7 billion to $8 billion that will move if the rating moves. are paying a little bit more attention than we should usually do. that is where the problem comes in. >> i want to turn your attention to the bank of japan. what do you make of what we heard today from kuroda? salman: the market overreacted to the helicopter comment. japan will have to do more easing in the form of monetary policy. japanese economy needs that. it is a coordination of fiscal policy that is needed. whether it happens in baby steps
remains to be seen. the economy needs more stimulus and help. mr. kuroda said that in his later comments. the comments about helicopter money and the idea that they were made back in june to the bbc when people assumed they meetingt the bernanke and japan. many saying he still feels the same way. tell us where lombard oda -- odier is positive. think our views, we are quite positive on emerging markets. we see value, there's differentiation. on currencies, i think japanese yen will come under
pressure because this is an overreaction and there will be more stimulus coming through. those are different views we have across-the-board, more and more central banks will remain easy and central banks are likely to remain low. >> which emerging markets? >> emerging markets, we are very positive on india and russia. onmoved to our top pick and the negative side we are still negative on brazil. we remain negative on turkey after these developments. >> it is certainly true that it seems like we are in a very risky environment at the moment great let's take a look at the bloomberg again, we're here we can see that world equities actually have been fairly resilient in the face of geopolitical events. do tell me, what does it take now for geopolitical risk to actually shock investors? geopolitical events
have been happening so frequently that we have lost instability to this news flow. going forward we should not underplay the importance of these events even though they appear localized. it can clearly become a much broader theme out of globalization, which is the key risk factor that all these things come together and there is a collective shift towards inward looking behavior. that is why we are looking at the u.s. very carefully. >> salman ahmed, thank you for being with us in the london studio admits the all-important ecb day. up, an airline cuts its profit forecast in the wake of the recent terror attacks. we are watching that and other airline stock for a closely. -- very closely. ♪
>> i'm vonnie quinn. this is the european close on bloomberg markets. i'm nejra cehic. we are about 15 minutes away since european stocks closed great lufthansa shares tumbling in german trading after the airline cut its 2016 profit forecast in the wake of the recent terror attacks in europe. the company calling for a profit decline instead of a gain. from frankfurt with more on this is bloomberg news reporter richard weiss, who covers the european airline for us. give us the take away from lufthansa first. lufthansa is the third big european airline to cut their profit forecast after a series
of events that do not bode well for carriers. had theew months ago we oil price declining, economic growth robust. airlines was record profits all over the globe. it seems that is so long ago now. it seems like peak profits are behind us. , the owner of british belines, profit growth would -- we had severe thunderstorms at some airports in europe. lufthansa also clearly named the terror threat as the reason for that forecast, mainly because people from overseas do not want to come to europe at this time. it's no wonder.
if you are thinking about your big summer break, do you think europe at the moment? probably not. people are reconsidering and that is what the large network communities are still in the balance. carriers see the same within europe. >> how can airline sort of mitigate all this now looking ahead? >> that's the big question. essentially you have two options once you have put your network in place. either you can low prices if demand falls or you can accept seatsrowing proportion of will remain empty on your aircraft. either way it's going to hurt you, so there is no easy way out. capacity discipline would be the answer but when you have your network schedule up and running,
is not that easy to take out planes and ground them. for the time being, probably the carriers have to live with this. underlying itsons is, to be honest, they put too much capacity in the market. fighting for market share at the expense of profit and those that were most aggressive have to pay the highest price now. >> are there any airlines that might benefit that are spending more on safety or perceived as being safer? at people from overseas, they are probably not going to differentiate between the carrier they are flying with if they feel their holiday destination is not safe. there is only so much the carrier can do. whatever safety rankings we have been looking at in the past, it's not that these are the airlines where nothing happens. lufthansa tried to sell one of
the best safety records in the industry. one of their planes came down and 150 is dead. to manipulate that kind of reputation is very hard. weiss,mbergs richard thank you for taking us through the airlines which have been falling today. it time for the bloomberg business flash, a look at some of the biggest business stories in the news right now. fell aty revenue easyjet. the british discount airline says volatility will have an impact on the key summer travel season. terrorist attacks in europe and north africa have deterred tourists and business executives from traveling. easyjet will also be impacted by the plunge in the pound after the u.k. voted to leave the european union. voteother sign the brexit is having an impact on the economy, in june retail sales had their biggest drop in six months. they fell 9/10 of 1%.
some responses were received the week after the eu referendum. watch reported its lowest first-half profit in seven years. earnings plunged more than 50%. hurt by falling demand in hong kong. the company makes omega watches. latest business flash. coming up, our ecb themed battle of the charts on a day the central bank keeps rates unchanged. i will be taking on julie hyman. ♪
bottom of your screen. kickingecb themed day, things off for us in new york is julie hyman. julie: this comes to me courtesy of our new chart producer. dan is fantastic. reallylation, by person, interesting way to cars this out. you have the bank of japan. their balance sheet assets by population, per capita essentially, you see it's the largest by far. then you had the federal reserve, then you happy ecb. -- you have the ecb. that puts it in a different perspective. reserve has been going sideways because it has been withstanding more pat here and cutting rates. japan has the smallest population of the three. it is spending the most per
person in order to try to stimulate its economy. >> that should be a late-night tv show question. how much do you think your central bank is spending for you? assets wise at least, anyway. whatever we got? >> my chart also comes courtesy of -- in bloomberg first word. expanding, the ecb its balance sheet. this white line shows you that growing balance sheet from the ecb. but the blue and purple lines marketre basically two inflation metrics. you have the five-year inflation swap near all-time lows straight you also have the euro, 2%, 10 year. it is basically the price you pay to protect yourself against inflation going above 2% in 10 years. this is also near all-time lows.
the ecb is implementing this qe, the stimulus. the market still isn't expecting that you have any real material impact on inflation. >> well as the number of your chart and who helped you again? >> those who want to have a look at julie's, what were your numbers. don't forget, you have those wonderful charts in our charts calendar and bloomberg. , and you could have a charts extravaganza all on your own. just bring some popcorn.
>> we are waiting for the white house to bring in the kansas city royals. president obama about to honor the royals for their victory in the world series. was their first championship since 1985, so you have to be happy for them. let's take a look at european markets and where they ended the day. that was just under 1/2 hour ago. . stoxx 600 pretty much unchanged. ftse 100 heading lower. there has been some fluctuation on ecb day. this has been the european close and this is bloomberg. ♪
scarlet: from bloomberg world headquarters in new york, good thursday afternoon. shery: here is what we are watching. scarlet: stocks fluctuating near all-time highs. corporate earnings have topped estimates, feeling optimism for further gain. the european bank keeps policy on hold. can we expect stimulus comes september? tonie: from vehicle sharing electric pickup trucks . is this what the original tesla founders wanted? we will find out from ian wright. scarlet: julie hyman has been tracking the moves