tv Bloomberg Markets European Close Bloomberg August 3, 2016 11:00am-12:01pm EDT
you are watching the european close on bloomberg television. ♪ mark: we are going to take you from washington to new york and tell the stories out of italy and the u.k. in the next hour. there's what we are watching today. european banks rebounding in today's session but breaking down the earnings from everyone including hsbc and k-fed. hearing from the top executives. matt: real reporting the worst profits since 2004 as the price for metals rose at the second-biggest mining company. ceo talks' new strategy. and pmi drops in july ahead of the super thursday for the bank
of england. how they are finalizing plans to stave off brexit related slowdown and what tools it has at its disposal. look at the way european equities are trading. we are 30 minutes away from the close. gmf go. i could ease, currencies, sovereign, the color is red today. although the stoxx 600 is little changed, down for a third day. longest losing streak in over a month. let's go to the earnings. rio tinto reporting the worst profit since 2004. surprised -- depressed prices for aluminum and copper. fell 47% in the six months through june. that didn't match estimates, dividend falling 58% to $.48 a share. a new policy that time pays for
earnings. i like this chart. on january 20 we had the bloomberg commodity index. it was at the lowest since 2003. i sharpened all of the big miners of the world. -- anglost the american up 200 at 70%, rio tinto gaining a mere 58%. let's go to it, shares earlier as much as down 15%. first our profits falling 34%. this is based on estimate funds plunging, p are withdrawing 5.6 billion francs permits business. -- from its business. services pmi falling to the lowest level in seven years with the bank of england meeting tomorrow. 47.4 that is the worst since
march 2009. perfect symmetry. that was the last month and the bank of england cut rates to a record low. you have banking news on -- breaking news on goldman sachs. matt: $5.3 million over leaked documents from the fed. petrod is st. joseph jim who was an acting manager and before that worked of the fdic somehow became the federal reserve supervisory document and use them to solicit business for goldman sachs. ban,will pursue a banking permanent, against him, but they are asking goldman sachs, and goldman sachs has agreed to pay $36.3 million as well as beefing up its security policies to prevent another lapse.
90 minutes to go -- it has been 90 minutes, i'm sorry. it has been 90 minutes since the opening bell. let's go to the market desk. julie: but sick a look at stocks right now. we had the services report. it was in line with estimates. oil inventory. we are not see much change with stocks. the dow is breaking a recent losing streak, but we have had day after day of muted movement in the s&p 500. look at the bloomberg care and see this chart. the daily move in the s&p 500 in percentage terms. last time we had a move of 1% at the close of trading was all the way back july 8. it has been 18 sessions since we have had that substantial of a move. that was the last jobs report.
this is just report coming out on friday, we are bringing those numbers to you. can see theif we breakout from the lack of activity in the s&p 500. we are seeing individual stock activity. aig was earnings that beat estimates, announcing a stock buyback authorization, shares up 7%. continental exchange is pursuing a five for one stock buy back. time warner as well with numbers that beat estimates. failed by 10% of hulu. -- they will buy 10% of hulu. dropber initially we saw a after we saw this on is interested build -- this unexpected bills. there was a large drawdown and gasoline, so that is mitigating or offsetting the affect of the
overall build. we are still seeing oil hang onto gains of nearly 1% right now. it did drop 5% in the past two trading sessions. julie: it is a bear market. matt: i want to go to court collins. she has first word news on the news desk. reporter: there was a dramatic escape in dubai when this jet landed. it erupted in flames after sliding down the runway on its belly. emergency chutes were deployed and all people escaped unharmed. it is the worst accident ever for emirates, the biggest carrier of international traffic. the runway was shut down for several hours before reopening. armed police are being deployed in london as an effort to reassure people worried about terrorism. former british time -- prime minister david cameron announced funding for 1000 extra armed police. the begin patrolling today. donald trump is doubling down on his criticism of the parents of
an american soldier killed in action. he is ignoring advisors and party leaders who want him to move on from the feud. he told a tv station he has no regrets about his clash with the family. senior republican officials are considering their options if trump honestly late drops out of the race. most of the rate carry the u.s. openinging the ceremony. michael phelps was selected in a vote by members of the u.s. olympic team. he has 22 medals overall in four previous olympics. tourl news 24 hours a day by more than 2600 journalists and analysts and more than 120 countries. -- in more than 120 countries. mark: let's go back to that u.k. rate decision, sterling up against the dollar what is being called super thursday.
52 economists predicting a rate hike. and new data confirming what many of them are worried about since the brexit vote. we have had u.k. services pmi plunging to a seven-year low in july. that is soaking fears that growth is set to slow. let's bring in kevin boettcher, chief investment officer at brooks mcdonald international which oversees $40 billion. you had a very interesting note, because you said what if all the stimulus, reform, monetary, the reform sterling, what does it mean over the long-term? is the u.k. outperforming? kevin: it is possible based on historic precedent, but it must be some way into the distance. a the short-term, the bank is difficult job to do. they need to acknowledge the
downside of the economy and the short-term. they have to restore some level of confidence while not being too pessimistic and sort of downplaying the economic input. there are still down 2.5 years of negotiations ahead. that is on the weaker side, the evidence not the week. they have difficult balancing act. we do expect them to hold the some back as well. mark: it is quite popular when it comes to the u.k., seeing change in demand for the big banks. the trend over many years would be be underway u.k. this is a lovely chart. it tells you everything you need to know about the ftse 100 and the ftse 250. the ftse 100 is up by 5%. it was positive a few days ago. have we seen the gains when it
comes to domestic stocks? kevin: for now, possibly. it is easy to understand why it is up. dollar earners, national nature and the devaluation of sterling. i think the ftse and the export sector are likely to benefit from the weakness of sterling and further monetary easing. we think there is a physical easing -- fiscal easing. some domestic sectors and companies including the small cap will benefit from that. for us, and is about picking the right stocks, not out and out versus midcap type of argument. ultimately, if the authorities get his right and they have all the instruments available to them, monetary policy and fiscal policy and the devaluation of sterling, that should provide long-term stimulus to the
economy despite headwinds shifting down where most sectors benefit.r small, that is sort of out in the distance. we need to get rid of this uncertainty and policymakers need to do the right thing. matt: fanuc would say the federal reserve is equally worried about markets as about the underlying economy in the united states. you have the same cynicism prevailing in the u.k.? is the bank of england likely to watch the markets as closely as in unemployment and gdp growth, etc.? kevin: i think it will. any increase in equity risk and agreement will increase in volatility for the market, is a former monetary tightening in itself. it leads to a lack of confidence by investors. that can feed down into socioeconomic activity, which goes into weaker consumption, investment and so on.
it is a barometer of confidence in the economy, and the policymakers actions. so i think central banks are correct in taking market into account. it should not be the dominating factor. it should not be the lead factor , but it is a consideration. at the time when global economic picture is so fragile and political risks are elevated. do you feel confident putting your money to work in the u.k. and european markets, given you expect monetary easing coming from the federal banks to support your investment? butn: in the u.k. yes respectively. we expect most divine duration has already occurred. -- we expect most devaluation has already occurred. there could be fiscal and monetary easing into course. you could have assets outside the sterling in some other
currencies. so the u.k., i think we will focus on those stocks or those areas we think we will benefit from the fiscal together with the market impact on sterling. europe is a top position. it is by no means -- rethink the european economy is rolling over. the risks are elevated not just in terms of italy, the banking sector and referendum but elections next year. valuations are not that attractive. europe is one of the places where they are disappointed on earnings in the most recent seasons. we are cautious on the european outlook. matt: thank you so much for joining us. chief investment officer at philips mcdonald's international. , aad on bloomberg markets big earning day for european markets. we will talk with carlo mussina. ♪
♪ barton, continue down to the european close. matt: from the bloomberg world headquarters in midtown, manhattan, i am matt miller. it is a big earnings day for european banks. we have an exclusive interview with carlo sao paulo mussina. here he is with francine on bloomberg surveillance. carlo: the point of italian banking system is some specific cases. there were two banks. the change them to buying, and they are the threshold of capital.
these have been sold through the usage of [indiscernible] and it [indiscernible] the big problem of the italian banking system. in my opinion it has also sold [indiscernible] we have to wait for the recovery of the real estate market in italy. this includes 20% transaction, prices increasing. we are waiting for the price to recover. i don't see significant problem. there is the emotional point of market. every time i speak to you and ask if you will buy this, you tell me know. would you be interested given the latest comings of buying it if you got rid of the bad loans. ? carlo: there is no rational to this.
plan in a clear train for the shareholders. andover get 50% of capital is on invested. leftve such an amount we with no possibility to create value for shareholders. francine: if you were heading targets yesterday. would you increase dividends? carlo: this year, no. we want to increase significantly compared with last year. probably it will be the best dividend yield in the banking sector. this year we want use the extra toting related to this improve profitability for 2017. i want to give room to have better cost in 2017 and delivered.
yesterdayw an urgency across all european banks. most people in american finance are baffled by the lack of synergy and mergers of italian and other national banks in europe. wind we begin -- when do we begin to see a moderate mergers discussion among european banks? carlo: it is clear to work on synergies between european banks, you have to talk about the possibility to reduce cost between the different banks that are in different countries. it is difficult to have synergies between banks of different countries. otherwise you have the story of increasing revenues. it is hard to say you can increase revenues for italy or france or germany. of european banks,
it can happen only in light of recent. profit banking, but not between big players. tom: are there too many banks in europe? are there too many banks in italy? carlo: yes absolutely. there could be conservation. in the countries you could exploit synergies. so if you want to make a merger, you have to create value for shareholders. synergies are cost synergies. it is possible to exploit them. ofhink we will see a lot consideration in countries, in italy, but also other countries. intesa senior manager. we will have part of our interview with the chief
♪ matt: live from new york and london, i am matt miller. mark: i am mark barton. you are watching the european close on bloomberg markets. we are seven minutes away. we are watching rio tinto shares falling. the minor reported its worst profits since 2004. depressed prices for iron ore, aluminum and copper are to blame. we have the chief executive john jacques, jock -- this was a disaster. jean-sebastien: china has been down.
all assumptions for planning purposes, you are to assume market conditions would be challenging in the possible future. we want to be the master of destiny, which means we will work hard in terms of tier one safety,nd to drive up productivity to the next level. whatever market environment we have, assets will be free cash flow positive. and we want to balance the sheet , critical in this environment. we have a project we are currently assisting early days, when we progress and come back to the markets on this one. mark: talk about china more specifically. they are trying to consolidate capacity. i want to understand what that meant for you. you have a billion-dollar trade with that country.
with their consolidated steel capacity, what did that mean for iron ore going to the country? jean-sebastien: that is the real question here. chinad a lot of time in to meet with customers, partners suspect --irman of two trying to understand what he is doing. they want to restructure the mining industry and remove low performing assets. the question i have from comments earlier when we look at china is the speed and execution of the plan. we know china's employment is important. that triggers some questions by that speed of conservation of the steel industry or the mining industry. we watched a carefully. -- we will watch it carefully. market, freed of
clash flow -- cash flow positive. mark: speaking with the ceo earlier. 4:25 in london. check out where the markets are trading. literally five minutes away from the close, stocks have been down up, down. they are down again by 0.012%. credit agricole, ing with a few. xx up.e lower, sto all away from the close of bloomberg television. ♪ e
will close higher. we are up 0.12%. we were down for a consecutive day, that hasn't happened since july 8. look at the lagging industry groups, banks up 2%. still down roughly 30% for the year. let's talk about hsbc, biggest ride since april. -- stride since april. they will buy back to .5 million dollars of stocks by the end of the year. they will keep the dividend at current levels also for the foreseeable future. standard chartered rising as much as 11%. the biggest drive since 2010. upgrading cost increase up 10%. investigators give the bank credit for progress as revenue hit lowest since 2008. it will make a return on equity's target last year. he missed estimates. great chart showing how the
lenders have fared since the day after the u.k. referendum. fromig disparity, those hsbc and standard chartered have risen 11.6% -- 11% and 6% respectively. they lost office of their value since brexit, a mere six we go -- a mere six weeks ago. second quarter profits that beat estimates, cupping a strong string of results from the french lenders. that is left them exposed to the french lenders, because they are focusing on consumer bending -- vending. they are not exposed to the vulnerable swings we have seen the likely credit suisse and deutsche bank are exposed to. societe generale up. credit agricole said second-quarter profits rose 26%
gaining. a little change on the day. and eurozone consumer confidence it pmi. -- composite pmi. unexpectedly accelerated to the highest in six months, sigourney -- signaling to manufacturers concern. the big one is the boe tomorrow. across dataooking check assets here. crude oil really being the main focus when i came in this morning. it had fallen below $40 a barrel. it is an official bear market. 5% down the last two trading sessions. you can see here 2.2% the gain. since july, level 1364. it is interesting to look at treasury as investors began to
sell it off. here you see usd and why are usd-myrx, the malaysian ringgit. screenlook at that wprs i have in the terminal, the green arrow for the ringgit means it is getting weaker against the dollar. i have something that shows expanded emerging market currency against the dollar. you can see at the bottom the ringgit is doing the worst, but the turkish lira doing poorly as well. emerging markets are having a tough time in currency terms against the dollar and equities as well. mark: let's go back to stocks, posting second-quarter profit that beat estimates after the earnings report, shares of the company jumping 5% in paris. little changed. that is the two day chart. ban -- highlighted.
>> it is now in a very solid of they, increased 35% contribution to the third quarter. in france, despite the difficult environment with negative interest rates, the return of this is still 15%, which is a good deliberate supply. global banking and social activity, the markets like the first quarter have been very much unstable. again -- gain. so technically benefiting from the difficulties of some of your german counterparts. speak about the
difficulties of my counterparts. i have speaking about strategy. some banks have freedom of market, which offer to other bankers to gain market. >> your group is that a .1% in the second quarter. -- 8.1% in the second quarter. yearer your target of this -- this target is going to be enriched? >> our target of 10% has been fixed 2.5 years ago. in the environment we have today, it is completely different from the first environment. clearly today we have in a normalized environment, [indiscernible] condition isthe that of interest rates, growth -- but also the burden of taxes. so if i meant to increase cost reduction plan [indiscernible]
you have to have that in mind. it is not always the same. the mobile structure could develop in a normalized environment. severancef executive cabnne.n -- severin stocks down 30% compared to the 8% drop of the overall stock 600 index. we got earnings from hsbc standard and shafts. even they've they reported top numbers, shares of both banks storing. -- soaring. there is a glimmer of hope. we have michael moore. should we lump them together? they are emerging markets. they were easy to lumber together when times are tough. is it fair doing so on the common purposes? seems fair because
they had such similar stories. they had profits down 40% from a year earlier. they both had a tough environment, pushed out there profit forecast over the couple of years. so you know you had some common theme talking about the tough environment. but yet the stocks for both did quite well. i think it somewhat speaks to the low bar but is being set for the banks are now. mark: the standard chartered missed, but banks are going to look over that because they had operating cost decreasing. there was other negatives as well. they missed the are a target. -- the re target. when investors overlook disappointing earnings and chew on the positive?
are the shares down? michael: that is a big part of it. standard chartered, you are starting from a stock that is trading at bulk. it will not take a lot to engineer support. i think investors are looking for these little markets of progress, if you will. , you arechartered starting to see that. you had this big kind of kitchen sink quarter of last month for there was a lot of in pearman's, they broke down assets. you are starting to see it be a little more normalized now. more, a you had stronger impetus from the buyback. you had something specific there for them, not just this buyback that talking about future buyback being similar magnitude, perhaps even next year. stephen: we saw the finance theytor ian mckay said
want to do further buyback. they will return substantial capital, or they have been allowed to, by the u.s. regulator. but why do buyback is that of raising dividend? they had a progressive dividend policy and have had setbacks from that. michael: i think the buyback offers more flexibility. they will do buybacks when there is some sort of specific reason to, some event that causes them to. this quarter they failed. next year if they can get that done, it will be based on capital being freed up from the u.s. unit. those are one-off type events. and the dividend, speaking to our discussion of low bars, the dividend went from progressive policy to maintaining. even that was better than a lot of analysts had expected. they expected a cut in the
annual dividend. even status quo is good news right now. sorry matt, you go. stephen: the bank has basically -- matt: the bank has basically canceled the return on equity, surpassing that next year. even though they are able to give money back to shareholders, does it look bad for the future of the business? are they in a sustained downturn? michael: they talk a lot about the growing uncertainties they are seeing, not just in their home market because of brexit, but any emerging markets. it is not great profitability. at the level these banks are trading, if you are able to provide some income, all the analysts pointed between the dividend and the buyback, hsbc has got 8% capital turn yield.
you are getting significant income from that stock, even if the outlook keeps getting worse. mark: we had the from son follow as well. -- intesa sound polo. -- sanpaulo. the to sort out there bad loan problems from the earnings we have been seeing. michael: it seems like investors are looking at the capital ratios. you had tests last week, that put it on everyone's mind. that has a fairly high capital ratio that you need to be a little bit more rougher. have a bigger buffer. intesa executive talking about consolidation needs to happen, but not from us. [speaking simultaneously] mark: shareholders are all that
matter, no. michael: you are hearing that across europe, consolidation should happen, but not us. we are working on our own problems and plans areas everyone is inwardly focused, and that is why you are not seeing much. mark: the earnings season continues. bloomberg's michael moore. we have decision day for the bank of england, widely expected to cut rates for the first time since 2009. willie do more? ♪
tomorrow, widely expected to cut rates. it has other tools available including qe, corporate bond buying, refocusing the inflation target. joining us to discuss possibilities is the uk's economy reporter. this is a sledgehammer. ,re they going to bring it out and if not, why not? >> a number of facts go into the complicated decision tomorrow. my to read policy has a number -- monetary policy has a number of limits. it is not if they will loosen policy but by how much and in what form. there is a range of ledgers they are debating. cut interest rates, do more qe, funding for lending. they could bring inflation back to target. that could give us more guidance about policy. they will probably be another operation they could do as well. a combination of
interactions between them. we don't know what is going to look like. stephen: when your -- matt: when you are up against this, they may not have the tools appropriate. the thing do, can it have impact on a bank that wants to move all of its employees out because they don't see pass porting coming through? scott: in terms of individual decisions, no. but overall demand, the bank of england can still we'll tools out -- wheel tools out. they can cut interest rates bound. -- down. and we are still uncertain what is the real effective lower bound of that interest rate. in terms of qe, already very low. furtherbrought down any
quantitative easing, that could back pension funds and engine -- pension deficits. they would have to put more money in those. mark: there is an argument to be made that they should keep the powder dry, do something. they will have a real hard day until the middle of the month. keep the powder dry until september or november at the next quarterly inflation report. scott: there are a number of reasons we could see them hold off, not do anything or hold back on the session. data aboutsufficient shouldact of brexit, and be, with all guns blazing. -- should we come out with all guns blazing. there was a drop in the pound. that will cause presentation problems.
the forecast goes above target. and they could keep the powder dry until the economy is something. and the fiscal policy as uncertainty. the new chancellor of exchequer said he was going to reset. how can they decide more what to do? mark: so many questions. tomorrow is about the meeting and the quarterly inflation report on super thursday. it was eight to one last month. the divide might be important within the npc. scott: the regulations you have seen in the favor of actually doing something. christine fowlkes has made it clear, she said she was to keep calm and carry on. mark: that was martin's view as well. scott: july 22.
losingious people were confidence and becoming pessimistic about the outlook. he said he is now going to join the group voted for more stimulus. in terms of easing, i think it is more uncertain about what may be there. there are questions about what qe can achieve. is already quite low. there was no certainty -- mark: they did by corporate bonds last time. bonds lastorate time. with market to do liquidity and market functioning. another looking at putting credit back into the economy. mark: scott hamilton, he has got a busy day tomorrow as do we. we have live coverage and analysis as the bank of england a.m.,on beginning at 7:00
12:00 in london, 7:00 p.m. in london -- hong kong. managere trump campaign latest financing numbers, saying it raised $80 million in july. tom keene joins us with donald trump's national finance chairman. tom: this is wonderful. what a big number for mr. trump. all of the credit has to go to stephen linn energy. he joined the trump campaign. museumat the parish art in south hampton. wonderful to have you with us. my favorite painting at the "monopoly",useum is 1964. a bunch of kids playing monopoly, as we all did. are you raising money from boardwalk and park place, or from mediterranean, oriental on the cheap side? steven: i would like to say
both. i'm upstairs, there is a small studio i am coming from. tom: where are raising that $80 million? boardwalk or the others? steven: they could not be more excited about the money. million up to $80 million. this is the second month we are doing it versus the clintons were doing it 80 years. it goes to show you how much support there is for donald million the ground, $64 of the $80 million was in small dollar contributions. we have several unique computers. that goes to show what we have been saying all along, ground support for donald trump. a lot of them are traditional republicans, some of them are new, and i am sure bernie sanders supporters have come over as well. tom: newly dictate the change in
style? it does not cost you if you shift to a more traditional campaign strategy. steven: not at all. we will raise whatever we need to compete. donald has contributed a significant amount of money. he contributed another $2 million matching program, bringing perturbations to $56 to $56 -- contributions million. we focus on the ground the benefit of him and the party. this is not a traditional campaign given by media. he has 20 million social media followers, like owning a newspaper. and he is happy to use it and be on tv. you recommend to mr. trump off of the washington post article today on richard nixon that they clear up the distractions? one of them is releasing the tax returns so he can raise more money. that is called transparency. we have morenk
transparency if you look at the fundraising numbers -- we have released tons of details and where they are, the fact that there are $70 million in cash in the bank. has released a balance sheets people understand his income. all understand what he is contributing. the american public understand donald trump's finances. you see from the fundraising numbers they are happy to support him. the press want to talk about the tax returns. if the american people thought it was relevant, they would decide. this is not changing one way or another. tom: how are you selling him to billionaires? of coats have received a lot press on this. what is this formula to bring in the billionaires? steven: i don't have to sell him, he sells himself. my job is to connect with all
the people that want to support him. that is what we do. there is a lot of support out there. there are some traditional people who are not on board, but there are a lot more people who are on board. there have been a few, with very large support and a lot of other people. carl icahn, tom barrow, is useless to people who aren't willing to not only contribute but our economic advisers. toare not only willing contribute but are economic advisers. donald trump will have a plan to build this country back, focus on the economy, lower business taxes, create jobs, create growth. tom: you know the definition of wall street whether it is global or new york or wherever wall street is in 2016, does this candidate need to connect with
wall street, or can you go it alone? steven: people talk about wall street. i would say it does not exist. what does his financial services firms. terms.inancial services they are now banks. banks and financial institutions, people in the private equity supporting donald trump. a lot of finance people that understand his view of the economy. they are contributing and helping. we are thrilled with that. historicalportion of wall street that wants to support clinton, that is there got a tip. -- their prerogative. she raise a lot of money from special interest groups. this campaign is focused on people that want to rebuild the economy. tom: 20 seconds. what is your goal for august? weven: we are not focused,
will continue to grow numbers. we could not be happier with the cash in the banks. she is outspending us, so whatever the differential she is raising, we have got more cash than we need. we will continue raising money. we are not publicly putting out calls. people were shocked when i saw 50 last month, they were shocked when they saw $80 million. we will do as much as we can. museumeaking from an art , you are coming from the land of jackson pollock. nice to see you. matt: great interview. it is in for the european close. we had a mixed close over in europe with the stse
alix: from bloomberg world headquarters, good afternoon. we are covering stories from san francisco to beijing. here's what we are watching. highsude rising to it day . it entered a bear market, struggling for direction has volatility. scarlet: tesla has missed on vehicle deliveries. now they need sources to take over. we will look at the cash burn angie:. lower commodity prices are eroding at the second-biggest mining company. we are talking about rio tinto. from the ceosghts interview.