tv Bloomberg Markets European Close Bloomberg August 9, 2016 11:00am-12:01pm EDT
trading day in europe and you are watching the european close on the bloomberg market. >> from washington to london, we cover stories in brazil and italy. bondack of england's new buying program already showing signs -- signs of distortion. at the same time, spain's 10 year bond deal declined to a record low. >> the day after his speech in detroit, bloomberg takes a look at how donald trump's vision stacks up. plus, how the strategy compared to hillary clinton's.
the uk's largest manager of pension assets posted short of estimates. we hear from the ceo. >> and let's have a look at where european equities are trading right now. we are just under 30 minutes to the close. i will like to start on gmm. 2.196%.the dax up we are in a bull market territory for germany's equity benchmark. in many parts of europe, the euro stronger up 2/10 of a percent against the dollar. sterling on its longest losing streak since may. look at that 30 year, down seven basic points on the 10 year gilt yield.
that falls to a record low as has the 10 year gilt yield fallen to a fresh record low. this is one of the stocks we have been keeping on, legal and general. first quarter profits fell short of estimates. the shares have dropped the most in more than a month. on legal and.2% general shares, one of the worst performance is on the stock hundred today. -- stoxx 600 today. euro-dollar has dropped to its lowest level in two years. this is interesting because what traders are thinking is this is going to stay range bound ahead of janet yellen's speech at jackson hall on august 26. we have seen this drop. the euro falling slightly against the dollar. , we are stoxx 600
seeing green across the board. industrials and i.t. stocks leading the game. it is very much an update at the moment in europe. too. is an update here records for the s&p and nasdaq. hitting a closing record today, the dow not quite there. even though the daily movements are higher, these continue to be small and they continue to happen even as profit growth continues to be negative. this is the latest report card on the early earnings season and we have sales growth. this is the current quarter. sales growth is projected. both of these are negative.
we have had five straight quarters of declining sales and earnings. now suchestimates are that they are projecting a sixth straight quarter of declining growth. does that mean the s&p is going down? no, it means new records. we are watching media stocks today. saw though the companies some declining ad sales, digital ad sales were strong. sales beat estimates. charter communications also coming in ahead at 6.6%. disney is reporting we are going to be hearing shares just above a quarter of percent. the best performer in the s&p 500 is and no pharmaceuticals. pharmaceuticals. the company's estimates sales rising 25%.
leant maintaining its earnings guidance as this past quarter missed estimates. it is going to sell assets that could be worth as much as $8 billion and it could ask lenders to loosen restrictions on its debt load. not all is sunny. we are looking at cruise line operators because norwegian cruise lines cut its profits. they are seeing lower demands and the weaker british pound the effect of that pulling down the other cruise lines. vonnie: let's check in now with first word news this morning. courtney has more from our newsroom. look at hillary clinton, she has agreed to take part in all three presidential debates. there wasn't must -- much question she would show up.
tocomes in response complaints from donald trump who says the dates are unsuitable. two debates are scheduled on pro football game nights. is stilllines struggling to come back from that computer failure that grounded flights for several hours. it is reducing the morning schedule, which means 300 flights were being cancer -- canceled. the airline is waving change fees and differentials for passengers whose flights were delayed or canceled. turkey's president or to one -- posters to restore constitutional order in the wake of the failed coup attempt. --r the syrian border scottish ministers will appeal it court ruling on offshore wind farms. ruled the scottish
government failed to properly assess how the wind farms would affect migratory seabirds. the wind farms will cost $13 million to build. the senate is debating whether to put the suspended president on trial. she is expected to lose today's vote which requires a triple majority. global news, 24 hours a day powered by 2600 journalists and analysts in more than 120 countries. i am courtney donohoe. to theturning back markets, global stocks are rising. the nasdaq hitting a new high and germany's dax on course for a bull market. the bank of england resumes debt purchases to combat the fallout from the brexit vote. joining us with a look at what is driving the action is neil mackinnon, global macro
strategist. i want to start with what is happening. year yields, 10 dropped below 1%, the 10 year dropped to record lows today. is this all about central-bank action? >> partially. we have comments from in mccafferty on the managing policy committee. we're suggesting there might be conflict. there was always the possibility of that. so that is one reason why we saw this move today. in markets, they
asked the up today and that is because in the italian for thetion, constitutional referendum, the key issue with that is the ecb might the for any quantitative used in bond purchases. nejra: i want to take you to the bloomberg chart that i got up startingh is actually to show the distortions already in the u.k. gilt market. what we are seeing here is three yieldedts have actually less than their two-year counterparts. and their first yield curve inversion in almost eight years. --are seeing these states distortions start to come in. is it going to be affected? >> i think ambassadors have been asking themselves that question
for all the qe programs. euros, or japan or the there is a big debate about that. qe isl bank's say yes, hard to bring down effects that will encourage people to go out and spend, but what it has done in terms of the real economy seems to be quite limited. you could argue we haven't done these things. but there is a debate about that. that is a key issue. thes all clear that more of same is actually going to resolve the situation. i wonder if it is even necessary actually. a number of commentators made the point that qe could become the problem rather than the solution. some central banks, the bank of japan have negative interest rates and is not clear-cut if that is the direct
way to go. when you see the impact it has had on the share prices of euro banks and japanese banks. nejra: talk is about the curves worldwide and particularly benchmarks which we have begun to see move. how is that going to ripple through the rest of the tragedy -- treasury? point and a good certainly, the pressure that we a functions really of impending money market reforms that come into play. the 14th of october and the effect of these reforms is to increase your costs. this is regardless of what is referred to -- what you may want to do. u.s. jobsd two strong reports that put the possibility of fed rate hikes. the presidential election back they know why it
is happening. it is a technical issue but on top of that more recent week, we have had the markets replacing -- repricing. what the fed might do in the months ahead. want to take people to my chart of the british pound versus the u.s. dollar. we've broken through that $1.30 mark. what is the next move? >> i think the decline in the exchange rate -- and it has come along way -- and after the brexit referendum, we have seen depreciation. i don't know if that is a good thing. it is a shock absorber for all the uncertainties around the brexit vote. technical analysts tell me that perhaps we could see further downsides in the exchange rate.
u.s.depends as much on the dollar and one of the key things ofthe moment is the softness the u.s. dollar might allow the feds to go ahead and raise interest rates. we don't have a strong dollar and that certainly gives the defense some leeway -- gives the fed some relay -- leeway. concerned,terling is it is a good thing for the economy that the pound has gone down. rate will gonge somewhere, not the whole way, but some way in resolving that. you backwant to bring to equity markets, 15 minutes away from the close, dax heading for bull market territory. up 20% from a february low.
have beenarkets resilient despite all the shock factors we have seen this year. >> i think that ultimately, despite all the uncertainties we have had, whether it was china or brexit, is that investors know that central banks will be the ultimate banks. even though they seem to be running out of money with negative rates, i think ultimately, investors at central banks will provide the liquidity that keeps it going up. nejra: neil mackinnon at the tv capital. still ahead is a week of dueling economic speeches as donald trump and hillary clinton layout their visions. which will benefit business the most. we are 15 minutes away from the european close. ♪
> live from london, i am nejra cehic. counting down to the european close, we are 15 minutes away. vonnie: i am vonnie quinn. turning now to u.s. politics, we are continuing to break down donald trump's economic vision for the nation. the republican nominee wants to cut tax rates on businesses and individuals and is also calling to/regulation. you can not start a small business under the tremendous regulatory burden that you have today in our country. i'm going to end it. i am going to cut regulations
massively. hillary, of course, outlines hers thursday. joining us with how donald trumps plan measures up is economics reporter tina. trump gives us a lot of what we have had before from paul ryan, for example or mitt romney elements as well. he is saying he is going to make three tax brackets and simplify income taxes. that sounds reasonable. tell us why we shouldn't like this. >> i'm not sure if i could tell you why you shouldn't like it but we didn't get a ton of detail on that tax plan yesterday. yesterdayok away from is there are a lot of question marks about exactly how those three simplified tax brackets are going to work. what are the thresholds, where they going to effect? and also how are we going to pay
for it? you have to cut spending somewhere. so i think that is the main overarching thing that people are going to be looking for going forward. a tax, 10% orbout more on $2 trillion in companies overseas. is that doable? and if it is, why hasn't it been done already? >> it is an interesting question that we are going to be grappling with going forward. is the details of how donald trump proposes actually doing it. what is particularly interesting about the repatriation tax is this is standing across the aisle. hillary clinton is talking about ways to make companies have to pay for that. particularly when they actually do a corporate inversion.
think, is going to be with us throughout the entire campaign and it is one place we could see action when whoever is elected take the presidency. vonnie: you mentioned clinton there. where did you see the biggest similarities and differences to clinton's plan? >> one of the big similarities was the inversions and front and clinton have said they would like to renegotiate the terms of nafta. we come ton differences, it really boils down to regulation. the biggest defense in regulation comes in environmental and energy policies. trump is saying we need to repeal the regulations and bring back coal. that is a major divide between the candidates. plan: but what did trump
would actually be good for the economy? >> that is a question mark. one thing that we know from economics is a tax cut can be stimulative if it comes for the middle class who have a higher propensity to spend from their income. at the same time, when you cut taxes you have to cut spending somewhere and that could hurt the economy. that could be constricting. at the same time, we need to think about if we don't cut those spendings and increase the deficit, that could push up interest rates so there are all these interworking parks -- parts for these taxes. we will need a more detailed explanation of where the tax cuts will come from. quick reaction on the idea that donald trump wants to repeal dodd-frank even though it is mostly all in effect whereas
hillary obviously doesn't? >> that is going to be something that we will continue to hear about. you go about repealing dodd-frank is something trump will have to discuss at length as the debates go on. for hillary clinton she is going to have to answer why we want to reinforce it, strengthen it. i am certain that is something they are going to focus on. vonnie: thanks for joining us. chairshead, dollar yen -- shares are rising. this is bloomberg. ♪
vonnie quinn. time for bloomberg business flash. valeant pharmaceuticals surprised investors after revealing its forecast for the entire year. they will have to raise sales and profits in the second half of the year if it is going to meet the target. valeant's second-quarter earnings cut drug prices. worldwide --er rounds that will pay above monsters monday. monster went public when it was an advertising agency known as tmp worldwide. lines on lowere demand for vacations from the u.s. to europe.
norwegian also cited the weaker british pound. there is also concern of the zika virus spreading in latin america and the caribbean. flash.t is your business nejra: still ahead, the european close. how markets are trading. let's take a look at stocks. up 1%,ot the stoxx 600 the dax heading for a bull market. let's switch up the board because big story in bond markets today. the 10 year and 30 year yields have hit fresh record lows. at can see the 10 year gilts 1%. this is bloomberg. ♪ ?c+sv
let's take you through all of the market action and boy has it been a day. every industry group in the green. we were seeing a majority of them in the green, but all in the green at the close. carmakers leading the gains, same for chemicals and tech stocks. producers for to much unchanged, but still edging into the green. one of the big stories in equity markets has been the dax index because we have seen this enter a bull market, rising more than 20% from a february love. -- february low. one of the companies that has been pulling this benchmark has been unit greece -- munich reese.
second-quarter profit beat analyst expectations as gains from currency and investments cushion higher claims from natural disasters. seeing these shares up on the day, up 5.6% rising on that profit beat. i want to show you a chart relating to the bond market support, looking at u.k. guilt. i wanted to show you spain because we saw spain's 10 year yield fall to a record low, dropping below 1% for the first time, ever. this shows you that the yield difference between spain's two-year and 30 year government bonds has narrowed to the least since april 2015. that is a sign of the ecb's asset purchase program boosting demand. that we are seeing through a lot of the bond markets.
vonnie: i'm taking a look at dollar yen and it has broken options are2 and expiring today and also --tinuing ideas that negative yields in japan, also taking a look at crude oil which continues its gain. yield again, elevated, 72 basis points and when you think we are looking at the spread, just remember that the spread between the italian two-year and the u.s. two-year is a lot whiter, so that will give you some idea of expectations for a federal reserve interest rate hike. the wider averages, the dow jones industrial average up a quarter of a percent. not a record, that it is a record for the s&p 500, 2186.
the nasdaq is up 4/10 of a percent. record and more from the nasdaq, we go to abigail doolittle. abigail: the index hitting an entire -- an all-time intraday high, just below those levels right now. the question around this new high for the nasdaq could be, are there more records to come? something we have seen with the s&p, new records over and over. the index quickly retreated and dropped 18%, so this will certainly be an interesting macro story to watch. as for today, we do have the index higher. let's take a look at the big winners. front, we ares looking at microchip and charter communications. microchip be estimates on the first -- fiscal first-quarter.
charter put up a nice second quarter as well, eating sales estimates. it looks like the strength for charter is coming from their internet subscribers. internet business is up 12%, year over year for $3.1 billion in revenue. vonnie: other winners -- are there other winners today, given that it is breaking records? : dish network is up -- she2% after mccoury's sees about 20% of side for the shares of dish network. she also believes there is merger potential and she also mentioned verizon and at&t. as for sky works, the stock is upgraded. the rating was taken to an outperform and he thinks the
company's guidance for the rest of the year, a well-known apple supplier, looks ok as long as they can take more chip share from apple around the upcoming iphone seven. so much interest going on around the upgrade cycle for apple, another big story to keep an eye on in the weeks ahead. vonnie: let's check in on the first word news desk. courtney donohoe has more. according to the international organization for migration, 263,000 refugees and other migrants across the mediterranean. a year ago, there were 355,000. route, almost ridiculous -- almost 3200 so far. alternativeigration for germany party has warned of an explosion. >> we have to close the borders
and we have to put anyone in border control because if we are looking to the sheer numbers. last year, we had 1.5 million immigrants. something is going on in germany, which cannot be good for the country. we don't know who is here, we don't know which influences some people have and i think we are sitting on a time bomb. courtney: a recent full shows that two thirds of germans approve of how chancellor merkel is handling the refugee crisis. british from minister theresa faces a daunting list of demands from the european union when it comes to -- my comes time to negotiate brexit. the demands could run counter to what may hopes to achieve with brexit. china is warning the u.k. that relations between the two hang
on the inkling -- the complete nuclear power plant. in today's financial times, china's ambassador in london said the cancellation of the power plant could affect trade with written's second-largest trading partner outside of europe. the british government said it will decide next month whether to build the plant. day.l news 24 hours a legal and general's first top profits -- earnings as insurance and investment units declined. shares of the uk's largest manager of pension assets fell. they actually closed down five and a half percent today and -- concerns about britain's brexit vote could shrink the value of the insurance industry's $2.6 trillion worth of investment.
earlier today, the ceo responded to concerns over brexit, his property fund and how the global economy can impact business. >> there are lots of different things going on. people finding difficult to interpret. any given day, they can be interpreted positively or negatively for us. i don't think they are true, but because there is a lot of noise, we seem to excessively respond to any particular type of noise because we are such a bellwether for the economy. we look after it hundred 40 pounds -- 840 billion pounds of money. a staggering amount of extra money. you would not think so from the results, but the consequence of that, anything that moves, whether it is property or bond has an impact on our business. a sense about the capital strength of the business, the solvency.
behind that and where are you looking in terms of the performance going over? ratio went down, and we paid almost 600 million pounds of dividend. that is the principal reason the ratio went down. the capital service is 5.3 million. surpluses.uge if you are holding that amount of surplus capital, that would be a significant -- a really significant -- >> let's talk a little bit about risk within the portfolio. saw derisk on a number of areas. given the uncertainty that you see at the moment, you are looking to derisk some of the things you are investing in. >> since the brexit, we have invested an extra 5 million --
500 million pounds in the britain economy alone. we believe the u.k. is a great place to invest and if we don't invest, other people will. we still think that is true and whether that is the great cities or businesses, we are in recently looking at venture capital because there is some fantastic technology being developed in the u.k., and they are all short of money. it is not getting into the real economy, hence the frustration among the world. >> you say the u.k. is a good place to be investing, what about the property class? do you feel that we need to rethink the way in which property funds a restructured? -- in which property funds are restructured? >> property funds should be more
attractive because interest rates have fallen, equity yields have fallen. yields, one would think would track in the same direction. the question of how should property funds be structured is a good one and i think we will have a dialogue with various people going forward because it is clear that retail investors at times of great uncertainty want more liquidity than actually available in the funds and we saw that during recent times. we were fortunate that was one of the scenarios we thought might happen, so we had long liquidity and we do not close our funds. >> i'm fascinated by the process because others had to go through some extraordinary loops to kind of minutes that. what did you see that others did not that enables you to do not have to -- the fund at any point? >> in a highly uncertain
environment, retail property funds may find themselves with a lot of redemption, so we held a lot of liquidity. we had about 20% of the fund in the good assets to buffer ourselves in case there was any rush for the door and that is what we saw. others maybe had less liquid assets and as a consequence, closed their funds. -- and youhe things and i have been chatting about about yourget wrong business is the assumption that low rates are bad. >> it is a commonly held misconception and i have tried to convince people that does not happen. rates are down to .25%. our share price has gone from 50 nds. -- 50p to 2 pou further, theto cut
the bloomberg. kicking things off is julie hyman. is at 2534 inart the chart library. this is all about what treasury investors have been attempting to do in the net it, they have been chasing the rally and many of them have not been doing so successfully. here is where we have seen the 10 year yield. here is been the median waited forecast. this gives more weight to the more recent forecast for the 10 year treasury yield. this has been consistently above the actual yield. visually -- treasury analysts have underestimated the demand for u.s. treasuries. this is the first time that the yield has gone above the forecast for the treasury yields, so we have seen the yield go down and now it has bounced, but the question is, and all of these treasury forecasters cut their forecast by too much?
we have seen a 25 basis point bounce in that yield since the record low back on july 6. we have seen this appetite for u.s. treasuries as we have seen negative yielding, sovereign bonds around the globe and u.s. treasuries have looked to track by comparison, we have seen investors push out their expectations for when the fed might raise rates. that has also meant yields are low. at the same time now, we could be seeing a reversal. we had some beneficial saying maybe the treasury market is underestimating the odd for a federal reserve rate increase. whether this now is a more permanent change, but this is notable since the first time it happened this year. nejra: where can we see your jarden -- your chart? i was looking at the
difference between some different yields in your up and what it might mean for japanese investors on a currency headspace because you don't just buy these in yen, you also swap yen into euros or u.s. dollars and the endless was dropping below 102 for the first time in a while. it turns out and you might be surprised, that italy's 10 year yield actually offers by far, the best value in europe and not just in europe, but 24 times the return of the u.s. treasury at the moment. this is italy, here are some other european countries and the u.s. 10 year yield is the one in purple. you can see by japanese investors might be looking to italy of all places for some currency hedged yields. nejra: where can we see your chart? vonnie: 2602. nejra: it is such a hard one that youonnie, i love
picked up on this theme that we were talking about yesterday, foreign buyers getting a negative return on u.s. treasuries when you take into account all of the hedging, but julie's chart really highlights how difficult it is to call the treasury market. i'm going to call it a tie. shout out to hillary clark as well. i had a, the european close 450%, a private equity firm wants to unload the world's premier motor racing sport. ♪
time now for the bloomberg business flash, a look at some of the biggest business stories in the news. british bookmaker william hill has rejected a takeover bid. william hill says the offer undervalued the company. the deal would've included and all share merger of aaa's and rank. british regulators want to cap seas -- the competition and markets authority is recommending a limit on overdraft charges and a grace. -- a grace period for customers to avoid them. that's the latest bloomberg business flash. vonnie: formula one racing has proven to be a lucrative investment. a private equity firm acquired a majority stake in the racing. a decade later, it has made the
from about $4.5 billion. they're looking to exit the investment and goldman sachs is on board. the price tag could reach $10 billion. for more on this story, we are joined by private equity reporter kyle porter. we don't have a $10 billion check on the table, but it looks like that is what it is valued at. kyle: that is certainly the intelligence. we are expecting a deal by september. vonnie: what will they do to make formula one such a coveted sport? it has tried to expand. it almost came to jersey but did not come to jersey, so why now all of a sudden is to mark kyle: it has been 10 years and private equity generally only hold investments for half of that.
-- doese: how much control bernie eccleston still have? he controls everything from the commercial rights agreements to how many passes you can give to your sponsors. who could replace him, potentially at any point? how: you will not find another bernie. in 78 in its current incarnation and if and when he steps down or they carry him out in a box, the general consensus is that it would take three people to replace him, someone strong technically, someone strong emotionally and someone to manage it all. vonnie: -- this huge violation and a garage sport, almost.
who -- for the next people who buy this ruin the sport? you were talking about media companies looking for program content that might buy this. that does not seem like a good direction. kyle: there is a lot of information formula one throws out the people around the sports a is not producing. you could look into what the driver is doing, what sort of performance they are doing. if you can show that in real-time, you can make it but or engaging and that is what everyone across the board has said ernie has been a little slow on. it does not do much in mobile or social media. nejra: the timeframe we are looking at, a matter of weeks. kyle: this thing could flip. there was talk about a sale last year.
vonnie: private equity reporter kyle porter, thank you so much. we saw european equity markets close just 25 minutes ago. the dax closing in a bull market, up 22% from its february low. the stoxx 600 closed up 9/10 of a percent, put closed higher as well. currenciesa look at and bonds because we have had some big moves in the bond market. 10 year yield fell to a record low along with a 38 year yield. the spanish government bond yield at 1%. ♪
>> from bloomberg world headquarters, good morning. oliver: we will be covering stories from rock -- rio de janeiro to los angeles and washington, here's what we're watching. sufferingconomy is from the same old problem, sluggish productivity. we will talk about monetary policy makers. scarlet: u.s. stocks edging higher, putting the s&p 500 on track or another new record. corporate earnings are lifting health care and tech shares. oliver: a big one we are watching after the bill is disney. all profits be crimped by lackluster shanghai opening? while eisner -- bob eisner will join bloomberg tv later.