tv Bloomberg Markets European Close Bloomberg August 2, 2016 11:00am-12:01pm EDT
watching the european close on "bloomberg markets." ♪ mark: we will take you from washington to london and cover stories out of japan and germany in the next hour. here is what we are watching today. commerzbank shopping -- dropping the most in a month. we will look at what is dragging down the overall sector for a second day. shery: turbulence in japan's markets and for global investors after the government's this golf -- fiscal plan underwhelmed investors. bmw pledges to defend their league in the world's luxury car market after being topped by
mercedes-benz. they try to keep deals and margins up. cap a look at where european equities are trading. we are 30 minutes away from the tuesday close. these are your equities. they are in the red for the second consecutive day. we are seeing bonds decline, yields rise along with equities. commodities rising today. equities down, bonds down, commodities rising today. let's get to the earnings. second-quarter profit gain better than expected. grip on cost.ght determined to of course keep that position for the full year, highlighting the importance of new models such as
the revamped behemoth -- bmw five series. 11% lower. they are down 23% and 24%. let's get to intercontinental hotels. shares are up today. rising by 3%. earnings rising more than expected. the brazilian and u.s. market making up for slowdowns in other markets. they have been hit by travel uncertainty in the wake of various terrorist attacks in france and the attempted coup in turkey. they said first-half profit fell by 4% partly due to their french business. intercontinental hotels shares up 4% today. the world's biggest primary silver producer, precious metals
hit bottom. it raised, as i said, its full-year goal forecast. -- gold forecast. silver output forecast. it is the second best performer on the ftse 100 this year. that rally in silver, which is the best performer this year on the bloomberg commodity index. gold is the third best former. the rally continues, up 1.5%. we are 90 minutes into the trading day in the u.s. let's get to the markets desk. julie hyman has the latest. julie: we have losses accelerating in the u.s. u.s. stocks were down just slightly out of the gate. down for the major averages. this is on higher volumes than we have seen recently.
>> he harshly decides clinton and bernie sanders's endorsement of her. mr. trump: his people are angry at him. they should be. if he had just gone home and relaxed, he would have been a hero. he made a deal with the devil. she is the devil. >> clinton campaign with warren buffett. he slammed trump for not releasing his tax returns. he accused. top of misleading voters about his business record. the pentagon is about to approve work on a number of nuclear armed missiles. that is likely to rekindle the debate over whether the u.s. can't afford to monetize --
>> i think that skepticism is mainly on the monetary side. on the fiscal side, it did underwhelmed. this is actually the result of japanese strength in the fiscal position. if you look at their debt to gdp a ship, it has stabilized. there close to breakeven. they do not have much of a budget deficit. that is coming because they actually have a fairly robust economy especially if you look at gross the messick and come.
-- gross domestic income. things like the number one business survey there, firms want to keep employment. they want to keep investing. we have a banking sector that is very willing to lend. there is a lot to like about the underlying minutes of the japanese economy. i know sounds like i should be buying everything japanese at this point. the postponement of this consumption tax hike and this package are a sign that japan has more physical space. -- fiscal space. ink: central banks working conjunction with governments trying to boost their economies as some say central banks are running out of ammo? >> i think there is a de facto pact coming because governments
and people in financial sectors and people in the treasuries are working out that monetary policy will not fix all of these issues. they have to do a little bit more on the fiscal side. the worries some people had in the aftermath of the crisis that we will all have sovereign debt crises, that has gone by the by. we are running into the legacy of 25 years of policy building and institutional building in the aftermath of the fall of the berlin wall and the neoliberal focus we have had. separating monetary policy from fiscal policy, the whole point of making the central bank independent is preventing politicians from telling you what to do. if you think ordination is what you need, you have a problem. they should not be poor knitting. that is the whole point.
-- they should not be correlating -- coordinating. that is the whole point. you see it in japan and europe you are about to see it in the u.k. and the u.s. say theireard you debt to gdp ratio has been stabilizing and that is true. how is this not a problem that it is the highest? >> it is very high. everyone knows that. it is not a problem for the markets. shorting the japanese government bond market on presumption that some point markets will lose faith about this country's ability to pay back their debt. we see low interest rates because we have a central bank that is willing to buy an ever-increasing share of the outstanding stock of government debt. this understanding that the prospect of some kind of blowout in japanese yields is not going
to happen, therefore a ratio around 200% if you do not take into account how much the government are he owns is actually sustainable -- already owns, is actually sustainable. we are still disappointed about are they not doing much on that front. the dynamics are very different. the ratio has stabilized. the budget is closer to being in balance than people think it is. that is why they have space to do a package like they have done today and delay the consumption tax hike. shery: one of the points that you also may was that corporate profits were on an upward trend. that has been helped by a weaker yen. if you take a look at the bloomberg, you can see that the japanese yen is the second best-performing currency this year. how dangerous is this change? this is dangerous.
>> i do think there are better things happening in some people think. if they can get the yen to stabilize, they will keep things on track. great to talk to you. ahead on "bloomberg markets," the battle is on to be the world's number one luxury automaker. bmw and mercedes are looking for the top spot. this is bloomberg. ♪
♪ amk: live from london, i mark barton. we have 15 minutes away from the close. shery: yes we are. bloomberg world headquarters in new york, i am shery ahn. a look at some of the biggest business stories in the news. emerson electric on a killing spree right now. it will sell its network power division two platinum equity and other investors. the deal is valued at $4 billion. they agreed to sell their motor and generator business to the japanese corporation for $1.2 billion. their ceo said they wanted to focus on more profitable units. samsung is unveiling a new
smartphone. it has a 5.7 inch screen and enhanced stylus and iris scanner. they extended their smartphone lead over apple in the second quarter. that is your business flash for this hour. let's turn to the luxury car market. the battle is on to be the world's number one luxury carmaker. bmw is pledging to defend their top spot from mercedes. they rose almost 8%, beating estimates. increased total deliveries in the first half of the year. can bmw hold the top spot? i want to join -- bring in to join me elisabeth behrmann. bmw is now losing their league in the global electric car
sector in the first half of the year. they say they want to stay number one when it comes to sales this year. how can they achieve this? >> that is right. they said they want to stay the leader in 2016. what i guess is important to point out is that they said today that they want to do this at the group level, so that means bmw brand sales. last year that was about 340,000 attitude is sales numbers -- added to those sales numbers. their growth rate was about half of what mercedes had in the first half of the year. they don't really have any big models coming up for sale in the second half of the year. mark: how does it fare compared whens big to competitors it counts to operating -- comes
to operating profits? >> today they delivered above expectations in terms of the profit margins. unlike both audi and mercedes, which calculate one-time items reportedo recall, bmw figures that included. considering where they are in terms of their product cycle which is quite old in comparison to mercedes and audi, they did very well. elisabeth behrmann -- garnett mark. -- go ahead mark. mark: it seems to be reaping the benefit of electric car. and 87% rise of electric car sales in the first half. what does that mean for the company in the future? ago was the years
first major carmaker to carve out electric cars as a special focus for them. they came out with the i3 and i 8. the sales of those cars, especially the i3 have been disappointing to the company. what can be said now is that there is a degree of hope that they are reaching the tipping point for electric car sales. cities are readying -- mercedes are readying their own family of electric cars. audi is doing the same thing. all that should be seen in the context of tesla and all the accolades they have been receiving. shery: elisabeth behrmann, thank you so much for joining us from munich. happening right now in the east
room of the white house, you are looking at president obama holding a joint conference with the premise her of singapore. obama saying singapore is the anchor for the u.s. in the region and that trade fears are legitimate and that prosperity must be shared. obama saying that the answer is not to back away from trade in the global economy. you can watch it live on bloomberg.com or on your bloomberg. this is bloomberg. ♪
of the currency, most of our currency is dollar linked. we report in dollars about half of our corporate earnings. -- we don't really look at it in the short term like that. in a business like ours, it is a long-term business. this year as in others we have continued to invest heavily in innovation and our digital up over aur mobile is year ago. we signed new hotels into our china brand and opened our fourth hotel in the u.s. it is genuinely a long-term game. we look ahead. short-term currency movements or issues in one country we just have to deal with. >> did the weakness in the pound make a number of businesses in the u.k. -- does this make you more likely to be acquired?
>> i don't think either really. we are delighted to have just announced a hotel in paris and amsterdam. we're focused on growing our brand. as a public company, someone can always come along and by our shares. our business is doing well. we focus on doing what we do wrinkly. >> you are very diverse. around 60% of your business comes from the u.s. on friday we saw lackluster gdp figures, growth was only half the number that economists expected. what do you see in the u.s. market at the moment? richard: if you look at our numbers, we were slightly ahead in q2 versus q1. that is slightly about the
timing of easter. we see steady growth. closelyness is most correlated to gdp, so gdp growth benefits us. for us in a market that is growing even a few percent gdp, given that we are growing supply activee have 15% of the pipeline in our brand, as you can see good solid growth in our u.s. numbers. we remain positive about it. solomonst was richard there. we are literally four minutes away from the close. stocks are trading lower for the second day. this is bloomberg. ♪ hoy s'oi gho, esak
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cling today. the main gauge falling by 1%, that has not happened since july the 12th. when i say that, what i mean is a move of 1% to the upside or downside. lower, ledtry group by banks. they had lost a third of their value in 2016. just one bank's rising listed on the stoxx 600 today, monte paschi. this is the bank whose capital would be wiped out during the most stressful scenarios. 1.5% -- .5%iley higher. full-year profit
target, forecasting a drop in earnings, adding pressure on the chief executive to lower costs further. lionel laurent will speak more about european banks and moment. german retailer, shares slumping the most in four years today. 9% lower. the reported third-quarter profit that missed analyst estimates, hurt by currency swings as the company prepares to split into two next summer. i want to bring up u.k. construction. construction shrinking the most since the financial crisis, citing brexit uncertainty. 45.9 from 46ped to in june. that is the lowest since june 2009. housing, commercial, and civil engineering reporting below 50
readings, indicating contractions. shery: president obama is speaking at the white house in a -- a bilateral press conference with the premise her of singapore. recognizeobama: i that they all profoundly disagree with myself or hillary clinton on tax policy or on certain elements of foreign but there have been republican presidents with him i disagreed with, but i did not have a doubt that they could function as president. i think i was right and mitt romney and john mccain were wrong on certain policy issues, but i never thought that they could not do the job.
had they want, i would have been disappointed, but i would have said to all americans that this is our president, and i know they will abide by certain norms , willles and common sense haveve basic decency, will enough knowledge about economic policy and foreign policy and our constitutional traditions and rule of law that our government will work. then we will compete for years from now to try to win an election. that is not the situation here, and that is not just my opinion. that is the opinion of many prominent republicans. there has to come a point at which you say enough.
that thenative is entire party of the republican party effectively endorses and that are the positions being articulated by mr. trump. speech last week, i don't think that actually represents the views of a lot of republicans out there. , you know,t to libya i have sat on -- said on several occasions that there could have been a massacre in libya. we did so as part of an international coalition and .n.er you and mandate -- u mandate. all of us were not attentive to what had to happen the day after
to ensure there were strong assureres in place to basic security and peace inside of libya. the good news is that we now have -- shery: you can watch the president live. he is talking about donald trump in is carrying out his rally virginia. donald trump has come under fire for his comments regarding the khan family. we will be following his comments. on can watch is full remarks the bloomberg. let's take a look at the broader u.s. markets. it is a down day with the s&p 500 seeing its first back-to-back losses in more than a month. the dow jones also down for eight consecutive days. the nasdaq was a different
story, the index up in the last five sessions, but reversing course today. markets ins moving midtown manhattan. >> great commentary there. as for those five days higher for the nasdaq, today with the for itsown on taste worst drop since the end of june, it really seems as though investors have been jolted out of complacency. as for all of the stocks you talked about, the one that stands out to me is the doubt they down seven days -- dow being down seven days in a row. here is a somewhat longer term, one year and a half. aqua, the nasdaq in orange. this is a record intraday high. this is something the nasdaq has yet to revisit.
we see in orange it is still below the yellow line. highow's recent record just recently touched on that line. we see the doubt coming down strongly. if the correlation holds, it may a new high for the nasdaq is elusive. inry: we are seeing weakness big tech names. what else is dropping? >> usually you see -- think of the nasdaq with biotech, but new dropping one lines the news that the company missed forecasts. downcosts, this stock is more than 30% year-to-date. some wonder if it is bottoming and if they should buy it. i have not seen any analysts so
far defending norwegian cruise line. mark: thank you. let's get the latest on european banks. the group continues to come under pressure. commerzbank dropping. both reported their latest earnings due to credit plunging. lionel laurent joins us now. commerzbank down 9%. monte paschi down 6%. knew capital would take a hit. today we just see the scale of the earnings problem. there is a profit problem. at the same time, the bank is trying to set aside money for a dividend. weak.tlook is just very we are still seeing rising loan losses from shipping, the outlook from negative rates. i don't think anyone is buying
this bank until can properly show how it gets costs and profits back on track. mark: look at monte paschi, yesterday they were up 10%. is there real doubt about the execution of this plan which was announced after the stress tests results on friday? stock: this is a penny of 0.1 at evaluation times book value. it is not a surprise to see it jumping around. of 0.1 it has to raise 5 billion euros of equity. the execution risk is huge. it is not surprised. you can see it spreading to the rest of the italian banks. they are worried about the whole system. there is no relief, just a lot of uncertainty. shery: what will it take for italian banks to emerge from
somecrisis and get to investors reassured about their prospects? lionel: the big problem with italian banks is this that of nonperforming loans -- stack stack of nonperforming loans on their books. the italian government has tried to come up with all these measures from state guarantees, those have not been convincing either. we now have the latest plan which looks incredibly risky which is selling them off at a discount. deal,we have some kind of we are still going to see this kind of uncertainty. it will take months to put this plan into action. the uncertainty is not going away soon. shery: let's talk about what brexit has done for banks in europe.
greatly iscted them the common wisdom, but that is not the case for hsbc or standard chartered. again, it is difficult to talk about the impact just because we still don't know what the impact is. at least astill be year of negotiation to understand whether banks will have access to the european single market or not. we have seen potential impacts. i would say it is still quite general inanks in terms of market risk. if you have to sell assets in this environment, there is a lot of uncertainty out there. it seems like hsbc and standard chartered have a lot of exposure to asia. mark: a year ago, look at this chart. it is wonderful. it shows all the big u.k.
lenders. they are in the plus column. the other lenders are in the negative column. last year it was worry and fear about hsbc and standard chartered's exposure to asia. how the world flips on its head. lionel: last year it was all about, you know, the horror of the emerging market. that has flipped around. that is a common theme. shery: how will asia be able to sustain banks going forward, not just what has happened so far, but moving forward, will asia still be able to provide that support? lionel: that is a good question. standard chartered did a lot of work last year in trying to address this exposure. i think it is getting credit because it has done a lot of the work. hsbc is very exposed to hong
kong. the housing market their looks problematic. hsbc is trying to pay back dividends even when earnings, under pressure. it is not out of the woods. shery: thank you for joining us. lionel laurent, our bloomberg gaslight columnist. with a saointerview paulo bank executive. that is right here on bloomberg television. coming up in battle of the charts, i face off against julie hyman. today it is u.s. treasury versus japanese debt. this is bloomberg. ♪
♪ global battle the of the charts. let's take a look at some of the most telling charts of the day. you can access all of these charts on the bloomberg by running the function on the bottom of your screen. shery ahn kicking it off. shery: the tables have turned. the member that i gave you a couple of wins there. today i am taking a look at japanese government bonds. about $45 billion in extra spending from the government today. that is a fraction of the headline number announced last week. is the ball back in the bank of japan's court? last week the boj underwhelmed the markets. boj ist is that the running out of places to buy. they already own one third of
japanese government bonds outstanding. this is causing problems for some investors who are complaining that the central bank has killed off market liquidity. it is plunging their in the markets. where is the boj going to go next? they are buying up etf's. they are keeping negative interest rates. it is a big issue for the bank of japan and the abe government. you can see my chart. beat that. mark: what more can i say? beat that. julie: i am looking at the government bond market here in the united states. not just liquidity, but volatility as well. we have been talking about this with regards to stocks. this is the merrill lynch treasury volatility index that
looks at volatility in the treasury market, it is a move index. it is declining. assete seeing high cross volatility if you went back earlier this year or at the end of last summer. we are seeing a collapse in that volatility across asset to some degree. it is at the lowest since 2014. it is not just investors in japan who have something to complain about in terms of bond market investors. here in the u.s. as well, volatility at very low levels. mark: where can we find your chart? gauge always gets my pulse racing. shery: noo! mark: however. shery: i like that however. mark: i think debutantes should
always when, otherwise they will never come back. we need shery ahn to come back and battle. shery needs a victory. this is all about confidence building. shery: i promise i will come back with better charts. mark: coming up next, what is the big topic of conversation these days when the rich and famous gather for a cocktail party in the hamptons? we will have the answer. a quick check of what is happening to wti crude. it is down below 40 dollars per barrel. that is the biggest fall since yesterday. wti fell into a bear market yesterday. this is bloomberg. ♪
♪ shery: president obama speaking right now in the white house with the singapore prime minister. he just made comments about donald trump, calling him unfit to be president and unprepared to do the job. he says that donald trump does not have a set knowledge on critical issues and says that proves he is unfit to be president. staying with politics, the hamptons in new york is the place where the rich and famous go to get away from it all. in this election year, there is no getting away from the names clinton and trump. henry goldman is just back from the hamptons. what was your assignment? henry: the assignment was to talk to people, but people who are permanent residents there
and temporary residence who have homes there, they tend to be wealthy, and the people who serve them, who catch their lobsters and fix their roofs. those people and the temporary people have a different view of the world and a different view of this presidential campaign. shery: what exactly are those views? henry: it is impossible to , but inze completely the people who are very wealthy and own homes ,nd our temporary residents they tend to be supportive of hillary clinton and worry about income inequality. the permanent residents tend to support donald trump.
they want to shake things up. they are willing to risk a candidate that they don't really know what he will do, but they just feel that the country is in the wrong direction, and they want to shake things up no matter what. mark: what does this tell us about how the candidates are relating to the voters? henry: it is an interesting question. it appears from these conversations, and i have talked captains,cs, boat roofers, plumbing supply people. they tend to identify with donald trump. they respect the fact that he is wealthy. they see hillary clinton almost in the same light as they see these summer people who live in the big homes and rent the homes
, who they work for. some of this residual resentment over the traffic jams and the crowds at the movie theaters, all of the ways in which their quality of life may be affected poorly, hillary gets some of the residual blame for that. mark: i liked the part where you talked about merchandise sales. what can we learn about candidates popularity from merchandise sales in the hamptons? henry: i'm not sure we can learn very much. we can learn that these shopkeepers are very smart. they seldom at three dollars a piece. -- sell them at three dollars at these. people at the monogram shop who , theylling these cups
swear by these as a barometer of presidential elections going way back to jimmy carter. it remains to be seen. right now, hillary is ahead in the cup race. needed aever we leading indicator, that is it. henry goldman, bloomberg politics reporter. where european markets finished in tuesday's session. stocks declining for a second consecutive day. the stoxx 600 down by 1.63%. aig interview. journalists and analysts in more than 120 countries. this is bloomberg. ♪
>> good tuesday afternoon. i'm scarlet fu. >> i'm angie lau. here's what we are watching. the dow is on track for its longest losing streak in nearly a year and crude oil falls the lowest since april in new york. scarlet: in japan growth remains far behind. angie: america's fight against zika takes another turn after the cdc's warning. dr. anthony from fauci. scarlet: