tv Bloomberg Markets European Close Bloomberg August 24, 2016 11:00am-12:01pm EDT
close on bloomberg market. ♪ mark: we will take you from washington to london. here is what we are watching today. shares of glencore are falling off for the company posted its lowest profit this decade. can we really sure the investors with his pledge plus $500 million? >> a powerful earthquake hit central italy in the middle of the night. the death toll continues to rise. denmark's biggest pension fund says it is growing increasingly worried about how the markets will react across asset classes. one of the many side effects of
excessive monetary stimulus. mark: have a look at how european equities are trading. until the end of the session. you know the global macro movers, rising for the third consecutive day. currencies, bonds, credit default swaps, and commodities. that is what this chart is all about. i love this chart. this is the stocks index, a measure of volatility right now, posting its lowest volatility average since march of 2015. the little purple, horizontal line, is the monthly average going back to march of 2015. are seeing we volatility right now at its
lowest level since march of 2015. august 12, it fell to its lowest level in a year on june 16. it rose to the highest since august. a great chart, great company. we rarely speak about this company. 12.6% today up as much as , the biggest rise since 1992. the highest share price ever. the company basically said it will seek shareholder approval to the products unit 22 different companies. --will facilitate growth biggest gain on the stoxx 600 today. a seasonallysing adjusted .4% in the second quarter. , the top trade was the main driver. domestic demand, private, and
government spending. 82 2016. 19 minutes into the trading day in the united states. let's get over to the markets desk. ramy has the latest. right over here in new york, we see a minor selloff but a broad selloff. all of the s&p financial sectors are in the red. telecoms and materials are the laggards. today. material store the s&p 500 and the nasdaq pulling away from the record highs. the nasdaq is 50 to 53. off about 10 points of record high from there.
2487. to show you areow you this because we in a time of not only low volume but low trading ranges. the last move was 32 days ago. we are at .22% right there. the dog days of summer in august and we are waiting on the sidelines until jackson hole happens this friday. let's look at more commodities. off 2.8%. i was telling you about crude oil, rising 2.5 million from the , the biggest jump in 16 weeks. let's take a look at metals.
this is all about the dollar, strengthening for the fourth time in four days. it is an oversupply in terms of copper haired 200 and $10 and a little bit of change. david: thank you. let's check in this morning. nina has the latest. >> about 27 miles from the town. in the collapsed building. turkey launched the biggest operations can islamic state to syria. u.s.are being assisted by operation forces. air force is to pound islamic state positions. the offense is also aimed at
syrian -- north korea successfully launched a missile from a semi-off the east coast. kim jong-il and's military conducted the test while engaged in annual wargames. south korea says it is from 700 miles toward japan. a new report says many donors to the clinton ambition met with hillary clinton while she was secretary of state. people outsideof government who met with people during that time gave money to the foundation. the report was called a distorted the trail. dayal news 24 hours a powered by more than 2600 journalists and analysts in more than 100 and 20 countries. this is bloomberg. mark: thank you. glencore is one of the big
stories today. our guest is a portfolio manager at union investment, which holds glencore bonds on -- among us $295 billion in assets. from the bondholders perspective, today was good news, glencore widened its debt to $16.5y $500 million billion by the end of 2016. progress on good its debt cutting plan? >> you are right. it is a nice credit story. you have a management that is very committed to its targets. onmade important progress the program. you see it coming down. very important on the market hitting their target, 1.2 billion euros in the first half of the year. are confident the credit
profile of glencore is continuing to improve. leverage is stable. they have adjusted net levels because of the lower commodity prices. i think now they are more stable. targeting two times the leverage by the end of the year. so it looks like leveraging now will pick up. mark: a couple of analysts were doubting glencore's ability. is notuld say the crisis yet over but we came along way. we came to more than 100 by the beginning of the year. consequently, executing -- you
stillt quite over but you have a high sensitivity to commodity prices. if they managed to be more -- they would be more resilient going lowered. >> i wonder when you look at peers here and how they have handled the route in the last four or five years, how do you compare the strategy to what we have seen in glencore? >> they have been quite aggressive historically. i think the investor community made it quite clear they do not want the country to be highly leveraged. modelve a complex as this if you look at treating especially. most also different to mining companies.
the end of last year, discussing the commodity cycle. the management learned a lesson so investors do not want leverage. they are executing on this. david: this company has put a lot on the auction block and has traded its business because that is where the money seems to have been over the last couple of years. do you think the company will stick with that strategy and it will continue to invest as heavily in the trading business? >> i think i will speak to this hybrid business model. you have what you could also trade on your trading platform. synergies that make sense. i think i would stick to that strategy. idea ofve us an investment potential. when you look at glencore from a bond perspective, we know that shares have rebounded 180% since
january. how can we as investors take advantage of investing in bonds? what is the best way of exposing ourselves to glencore? >> i think the level, they came down a long way. and euro, you can have a spread of $250 or more. i mean, the story is they want to do you leverage. i think the plan, as long as commodity prices are more or less stable. i think they are attractive at the moment. equity to have a performance, you would need rising commodity prices. i think it is more interesting at the moment. , portfolio you, max manager at union investments joining us from fine for it. chairman of bloomberg
johannesburg just a few minutes ago. the market reaction has been extended today. the rand is falling against four major currencies. up byjohannesburg just a few mis ago. 1.3%. he is perceived in the marketplace as a safe care of hands when it comes to the economy. david: we will continue to follow this. time now for a look at some of the biggest business stories in the news now. the housing data, sales fell.usly on -- sales were down 3.2% with an annual rate of 5.4 million homes. this is the first time they declined in five months. inventory is still tight and it would take five months to sell out the current supply of houses. bank of scotland has told about 3000 of its clients that times running out.
they are global transaction service customers outside of the u.k. and ireland. rbs acquired the business is in a takeover and multinational companies were forced to find new banks. that is your update. now to u.s. politics. donald trump has been the center .- a shift of his strategy the economic plan is more an evolution in the. in a described this conversation earlier today on bloomberg surveillance. he is cutting taxes for everybody and importantly, the key part of this is business tax cuts. the economy is crying out for more business investment. why are they not crying out for more? is it because tax rates are too
high? regulation pressure? to that solutions problem. a lot of this has to do with the expansion. what washington has been doing and getting rich is controlling the business climate. that has got to be wound down. >> what kind of the -- of advice do you get -- give to donald trump? does he flip-flopped all the time? ?an we trust him are you sure you can trust him not to flip off or change strategy? >> yes. flip-flop is not the right way to look at it. he said at the beginning that he is flexible. that is how you do business deals. you go in and modify the position. wallyou cannot modify a across mexico. come on. this is outside of what you are doing and economics.
francine is looking at a local -- a wall in london and saying, do i want to vote for this guy? >> but think about the vote in the u.k.. people have wanted to change immigration policy and the government would not do it. tom: so you're pointing at the global influx. bring up the chart. 4.0% unemployment, one president obama came in. david, i am sorry. take ahe president victory lap on job formation and is that not what being president is about? >> absolutely not. the petition -- participation rate is low. the people lucky enough to be in the system showing up -- >> bring this up again. said he willhas generate a 4% economy.
i believe that is 4% real gdp. how? that by having more business investment and more people working. that is all it takes. it has been done over and over again. and 8% growth rate in the reagan administration and the 7% growth rate in the bush administration. tom: jump in here quickly. 14% real gdp economy? there we go. dominic weighing in with a lengthy discussion here. ask, do you think there will be more business investment under a trump administration? >> david, that is my question to you. has donald trump spoken to any international investors outside of america that would support his presidency and actually do trade deals? >> wait. he is a big international investor himself. he is talking to a lot of
international investors. we discussing whether a tax rate cut will cost more business investment. we know absolutely that it does. every single time. that is what he is proposing. hillary clinton is saying she will raise taxes. all the data shows it and that is in the productivity weakness that we have in seeing. mark: economic advisor david there. right. coming up, could be putting more pressure on the stock market as the boe cut rates to stimulate the economy. gap contribute to a pension . we will explain why next. this is bloomberg. ♪
on bloomberg markets. 10 minutes to the end of the wednesday trading session. let's stick with the markets. ftse 100 up more than roughly 8% since the brexit vote, a rising get could put pressure on u.k. stocks as companies face the prospect of penalizing shareholders in order to pay retirees. joining us now is the bloomberg equities reporter alexander who joins us today. thank you for joining us. deficits, why are they in the focus right now? >> the issue has been resurfacing in recent weeks just because the main problem is falling bond yields. it makes it harder for companies with huge pension deficits to fund future liability because there is less return on investments. that is really putting a strain on all of these companies. pension --0, large pension deficits, those are a significant portion of the
market cap. case, we cane already see the share prices are suffering. mark: you are a company with a big pension deficit. is it shareholders who will get hit hard? >> that is the big concern. i have been speaking with strategists and fund managers. a few wait as could be addressed, i will talk about the company specifically here. it is really cut dividends, cut a little bit here or there, or go and say you have to take a cut in your benefits, which is obviously controversial and that would kind of be the least favorite option. isting capex in dividends the only way. you mentioned tesco and you see her overtime i'm going back to that referendum vote. you mentioned they are not talking about cutting benefits. do you expect that is going to
come into the conversation here? will that lead to that going into the conversation? >> as i said, the ubs strategist i spoke to kind of signal to as lower down the line. it is not what immediately comes to mind, especially because it is very difficult to do that. it is hard to go to members and tell them that what you promised is not going to really be delivered to them. it is really not something that is talked about right now. capex and divends wilbe the first options. enough, thatt would be an option. mark: give us an idea quick the of the sectors most at risk. >> sure. risk arers most at where they are the largest
portion of market cap and that is currently the case with industrials, telecoms, utilities, and financials. specific names, bloomberg intelligence has done research about this. ubs has done research about this. first group, and the ones i mentioned, bt tesco, those are the deficits where exceeds 10% of the market -- market share. >> a great story. alexander, european equities reporter. what is the time? we are literally four minutes away from the end of the went they session. check out what is happening to equities. this is bloomberg. ♪
hey how's it going, hotcakes? hotcakes. this place has hotcakes. so why aren't they selling like hotcakes? with comcast business internet and wifi pro, they could be. just add a customized message to your wifi pro splash page and you'll reach your customers where their eyes are already - on their devices. order up. it's more than just wifi, it can help grow your business.
biggest run, best run since august. investors twiddling their sons ahead of janet yellen. banks leading the advance. isaac resources declining. let's get the basic resources. glencore is the story of the day. profit down 66%. you know why you lower raw material prices. coal, in a rebound in zinc. that will help earnings going forward. check out how some of these big miners have fared since generate 2020 saying to a 12.5% year low.
quite astonishing. the world's biggest ad company, shares earlier up, biggest gain since 2011, rising to a record. first, off it -- profit up by 15%. it was supported by stronger ad buying in europe. tournament in all advance of the referendum. .he pounce on the pound two months since we learned about brexit, it was the 24th of june, we learned about brexit. gilt up 2.5%. that is big. up.ftse 100 the footie 100 is down by 4%.
the biggest gain in currency against sterling is done again. the pound is down by 15.7%. .ince brexit david: i'm watching oil after the eia report they came out a little while ago. oil plunging 3%. byde oil inventories rose 2.5 million barrels. we have gas stop wireless -- stockpiles rising. dropping into an intraday low. nigeria is moving towards someone little stability. they plan to introduce more barrels and the market as well. of course, the specter of the opec meeting. a lot of red on this now arrange. the dow is down .2%.
the s&p 500 is down also about 2.5%. and the nasdaq, down one points .1%.nt -- down abigail: we are looking at a relatively an eventful day of trading so far on the nasdaq. yesterday'sng from new intraday all-time high of 6 we have some big movers to talk about. . starbucks shares are up right now. the biggest boost from a point spent -- point standpoint on the nasdaq. andrew charles says he believes sales in the americas are back on track. this is after a trip to starbucks headquarters. this has been what has been .olding the stock back shares are actually down about 4% on the year. but he's sees a reseller nation
for the rebound to be slow. and when you take a look at a five-your chart, david, this call is supported. we see a beer for a trend and areas of congestion in the past where it we have one happening currently that may suggest that we are going to see another move up for starbucks, perhaps on the recovery in sales in americas. david: we've seen this narrow range. we have seen the ups and downs. what has been a notable drag year? abigail: shares of garmin are down. the fitness segment for garmin is going to slow noticeably. there is another flag comics. she thinks it will float in for 2017. she feels the fitness segment the growth could be just 7% come as compared to 29% growth in the second quarter of 2016. so she has cut her rating to a sell rating.
stock though is worth noting, up 39% on the year. she now sees modest downside of the shares to $46 per share. david: we are sending a messenger down with a nasdaq flyswatter. [laughter] nina: we are -- there are are -- there are reports of an explosion and gun fair at the american university in kabul, afghanistan. there are few other details we will be following the story as it develops. . l.a. 73 people have been killed in a powerful earthquake in central italy. and the death toll is likely to rise. the magnitude 6.0 quake destroyed small mountain towns. rescue crews are looking for victims or survivors who may be trapped in the rubble. the quake was centered 27 miles from the town of rieti.
vice president biden news trying rebuild relations in turkey. >> the united states of america not have any foreknowledge of what the fell you on the 15th. the united states of america, the people of the united states of america, the poor what nina: turkey has demanded that the u.s. extradite the cleric. and the world's largest aircraft had a rough landing on its second test flight in the u.k. didn'tained damage, but
give any details. none of the crew was heard. airship,ender is part part helicopter, and part airplane. it is more than 300 feet long. mark: september, big month for monetary policy. we are expecting important to decisions from the bank of japan, ecb, and the u.s.. jackson hole, wyoming, janet yellen gives a highly anticipated speech. says, for there to be a september rate hike in the u.s., janet yellen would have to be very, very hawkish. is september live and how hawkish the she really have to be to make it a reality?
mark: i think september is not going to see a rate hike. the odds is 10% to 15% probability of a hike. and the title of the speech signals she is going to be looking probably more in the longer term and locations of dealing with monetary policy in a world of low growth and low productivity. that said, the risks are clearly tilted that she tries to raise expectations. with only a 10% probability of a rate hike, you don't need that much of a hawkish signal for her to lift a rate hike expectations. this chart looks interesting. it shows how narrow a range the 10-yield has traded. i think the basis points are the lowest in a decade. the market is struggling on a key theme. we had bill dudley come out with more hawkish comments are let people think that the july minutes would be more hawkish.
they weren't very there isn't a clear thing that people are looking for that is wide volatility is coming down. whatis also important is is happening outside the u.s., where you have central banks from the u.k. to japan they're forcing yields down by buying assets. -- the u.k. to japan who are buying assets that are forcing yields down. the very front end is more about pricing what is happening with the fed. importantly, we have seen rising costs or rising libor versus t-bills as the u.s. moves to a new framework for money market funds. i think there is a difference there. there are different games that drive different parts of the bond market. into: are you putting more those holdings? myles: yes.
we are in a world of positive growth. we think the fed will be gradually raising rates. slow infed will be raising rates because of what we discussed, low inflation and low activity. in that world, investors will be looking for higher yield. external thatts is the sensible place to be. you have to be discriminatory. we've seen a situation in south africa today. we have a lot of political risks there. you have to be focused on the valuations you are buyingwe've y it is syncretic risks your working on -- risk you are working on. more recently, we have increased our exposure to emerging market currencies, again, being very discriminatory about what we are looking at and what we are buying. david: are you worried aboutdavid: quantity of debt? i do think there is enough supply to go around? myles: i think the emerging
market world is such that, if you start to see scarcity issues, you will more likely see a supply response. , s&p put mexico on negative watch just yesterday. so i think you have some credit issues. but emerging markets, the economies any foreign capital. i don't think you have a scarcity issue that drive these yields down. i think the supply-side will be able to respond to that. mark: i was getting wistful earlier, myles. gilt, look at that, 10.5%. would you have expected that? myles: the biggest surprises the performance of the equity markets. mark: especially the smaller. byes: gilts have been pushed , obviously, growth expectations have come down. and then implemented quantitative easing.
but the performance particularly of the ftse 250 suggests that investors are more concerned about growth at the same time by more u.k. assets, suggesting the lower yield is forcing people to look for higher-yielding alternatives. mark: we had a bit of data in recent days. last week especially, it was better than expected. myles: yes, the retail sales. mark: are things not as gloomy as many led us to believe? myles: it is way too early. myles:my expectation is the data i most focused on is the investment data. will't think the consumer stop spending because of the brexit vote. i think it will be in investment numbers and in higher numbers that you see the immediate reaction. but the investment numbers is where it is easy to defer an investment decision, weight three months, six months for more clarity. mark: are you cable is ok to buy or not? we are ok on u.k. bonds.
they are not the biggest risk in our profile. but i think the u.k. will ease policy and will try to support the economy, both fiscal and monetary policy. it is in tivoli good place to be when you look at the global opportunities. mark: thanks for joining us. david: we will have full coverage of the jackson hole economics symposium that starts tomorrow. the breakdown of janet yellen's much-anticipated speech on friday. don't miss some of the biggest voices on bloomberg on friday, including fed presidents james bullard and dennis lockhart. judging had on him it is battle of the charge. how narrow is it? this is bloomberg. the ott is next. ♪
mark: time now for our global battle of the chargemark:. we take a look at some of the more telling charge of the day and what they mean for you, the investor. you can access these charts on the bloomberg by running the button featured on the bottom of your screen. denny: if you remember, quants were in in the first half of the year. you had guys like paul to jones hiring them. but things are starting to turn around for them and fundamental managers are starting to outperform. my chart shows you how and why. so this white line we have right here is an index from hedge fund research that tracks them. half ofsee in the first the year, they were doing pretty
well. fundamental managers on the bottom here are outperforming by 34%. so definitely under. but look what happens as we start to head throughout the rest of this year. .hey start to the verge on top-tier, fundamental managers artfully doing better than quants at this point. so why, you might ask. mv blackttom, we have rocks etf. these are all inflows. but by the end, look at how outposts start piling up. this is 300 million worth of outflows since the start of this month and that is the biggest amount of outflows that this etf has seen, fully taking on quants , which loaded up on these lowball shares, which are starting to lose steam now. #btv 005.art is at
mark: beat that, david. david: i'm still looking my wounds from last time. i'm looking here at some of the volatility. add to the sleepiness we have seen in the sessions and the range that the s&p 500 has been trading in. looking back at 32 sessions since we saw a plus or minus move of 1%. mark yesterday joked about the slowness of august. there is a lot of waiting had to see what happens at jackson hole. janet yellen may make some remarks that are a tad more hawkish. i loveour chart, david. beautiful in its simplicity. i like danny's, two, how the
property bonds and reduced its exposure last week. china said that new home prices. rose and furious these last month than the month before. big spenders among tourists to the u.k. last month, it was visitors from qatar that spent the most. they were followed by tourists from the uae, saudi arabia, russia and china. international tax rate shopping rose 7% in july. that is the latest bloomberg business flash. david: denmark's biggest pension fund is worried about some of the unprecedented correlations we have been seeing in markets. and bonds are moving up in tandem, making it harder to diversify. what happens when they stop moving together?
let me ask how this fund is responding to this, how it is retooling its investment strategy. peter: hi, guys. it is the biggest fund in market -- in denmark. they basically need to prepare about half the population for retirement. so they are very cautious. they are looking at all kinds of different strategies, looking at investments. they basically changed the whole way they look at the investment just in the last year, breaking down into different factors instead of asset classes. this is something that really worries them all through the heart. david: just put into some context, how big a deal is this for them? how much of a retooling is this fund having to do? . peter: in terms of relocating funds, basically, they put some different lines splitting to
perform a oh into different categories. is not that they have been moving. substantial amounts of money you between bonds and liquid assets. it's just that they are looking at it in a completely different way. what they are wait about here, and about central banks, basically, predictability, transparency. they need to be able to foresee. where assets are moving. a massive hedging program because they are so protectingbout purchasing powers of the 50% of danes that have no their pension savings than what they have at atp. idea,does atp have any any thoughts on when this sort of crisis era correlation of assets might reverse, peter? what they told us when we went to see them was basically that they've been pushing
forward their inflation just. substantial hedging on inflation. it's nowhere to be seen, inflation. purchasing power, keep betting that inflation will come back. but they push that way into the future. being just a couple of years alan they were looking at it a few years back. now it's between six and 15 years into the future that they have the biggest bets. is,as the ceo told us, this whenever central banks reverse their lax monetary policy, nobody has been there before. nobody knows how it will play out. they are hoping that it will play well. we did see the fed have liftoff back in december without any crashes following. but who knows. , that really the fear
nobody knows. mark: how will markets react when crisis air correlations across all asset classes start to revert, peter, thanks for bringing that to us. where european markets ended the wednesday session. three days of gains. best winning streak since august. jackson hole. janet yellen, fed chair, will speak on friday. ahead of that, stocks rose. here in the u.k., the corporate story was glencore sliding first half profits. you're watching bloomberg markets. this is bloomberg. ♪
some bloomberg world headquarters in new york, good afternoon. matt: we are covering stories from los angeles to washington to sydney. here is what we're watching. stocks circling in a holding pattern as investors await friday's speech from janet yellen for clues on when to expect higher borrowing costs. shows thatgovernment oil stockpiles dropped for the month. matt: political risk is haunting emerging markets with investors selling assets in south africa, turkey and south korea. halfwayscarlet: through the trading day. ramy inocencio has the latest. ramy: we have been flat for most of the day.