tv Bloomberg Markets European Close Bloomberg August 29, 2016 11:00am-12:01pm EDT
trading day in europe. you are watching "the european close." we are going to take you from london to new york. here is what we are watching today. oil is falling today nearly $47 a barrel mark. producers need to agree on a deal to stabilize the market. and the biggest oil executives in the industry -- what are they saying about food markets in these volatile times? ofnie: then, shares herbalife rising today after carl icahn bought shares. will this lead to a heavyweight showdown? job,ighting to save her
the suspended brazilian president told senators today that the allegations against her have no merit and that history will judge the country if she is removed from office. we had to sao paulo. let's have a look at what european equities are trading at. there is no trading in london today. the volume on the stoxx 600 is at 70%. below the 30 day average. jim emco, global macro movers. that is what i want you to focus on. equities are falling today as investors digest comments from keep and officials in jackson hole. let's cut to the chase and talk about the big equity movers. -- shares rising by 3% today. winning a $2.5 billion contract to design and build 28 new high-speed trains to run along
amtrak corridor doors in the u.s. northeast between boston and washington. the trains can exceed speeds of 100 miles power and shares are up by 3% today. -- lower development costs for almost $3 billion. it has raised the estimated initial outlook by 16% after intensifying drilling and streamlining operations. it holds 3 billion barrels of crude is norway's biggest offshore project in decades and it represents a lifeline for the oil industry, which is suffering the biggest drop in a generation. i thought i would bring up gold. was falling for the seventh consecutive day but it is rising now.
but the seventh day fall was the longest losing stretch since may 30. onreached a two-year high and precious metal has fallen roughly 4%. -- most bullish with a year-end target of 1400. goldught we would look at to the perspective of 2016. the white line, gold is up as onhe be of tt-performing commodities this year. look at the ran core gold miner. up today. -- this year, a market return of 152%. analysts foresee a temper said downturn four. 90 minutes into the trading day.
to the markets desk over there where abigail doolittle has the latest. abigail co. a nice rally for the u.s. equity markets. the dow, at the s&p and the nasdaq are nicely higher. the dow up more than .5%. health care is dragging. it is all about the financials. this includes wells fargo, jpmorgan and the bank of america. this could be in anticipation after janet yellen speech that rates will move higher this year that the fed could move rates once and twice. come we have the committee out to say that large banks are not having capital issues. in fact they are managed to raise $1.3 trillion. as for another asset class on the move, we are looking at wheat. it deserves a look because we and a huge breakdown here
after jackson hole, it's sliced .hrough buying support and turning now to the energy complex, a tale of two stories. and intrading lower fact, at the lowest level since august 16 but when we take a look at the one week chart, here -- gas is trading higher on the heat on the coast while oil could be trading lower on the dollar strength. vonnie: dallas abigail doolittle. let's check in on the first word
news. >> taking a look at brazil. brazil suspended president has made an emotional appeal to keep her job. she urged senators to vote against her impeachment. she said it would amount to her death sentence and would put the democracy at risk. she is accused of financing government spending without congressional approval. in colombia a permanent cease-fire has taken effect. the largest rebel movement has lain down the arms but voters still have to approve the agreement which would give rebels political power. the fighting has killed an estimated 220,000 people. in brussels, reports of a bomb explosion turned out to be false. authorities say someone set fire to a crime lab in an attempt to destroy evidence. five suspects have been arrested.
rolling out an is comprehensive plan today to deal with mental illness. ensuring that americans would no longer separate mental health from physical health in terms of access of care and treatment. the agenda will include a focus on suicide prevention. thesands of drone pilots in u.s. are racing to get license. more than 3300 have signed up to take the test today. the federal aviation administration says that in any year, the number of drone operators may exceed private pilots. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. mark: let's get to oil markets. vladimir putin is asking the --ernment to let the giant by another stake. the deal would be worth $5
billion in cash. let's bring in ryan chilcote. ryan: it is a $57 billion company. is the what is amazing terms of the output. the world's largest publicly traded oil company. not as big as aramco but pretty big. thef they do buy government stake, it would add andher half alien barrels get close to 6 billion barrels a day in production of oil and gas. that is more than half of russia's outlook. more than half of saudi arabia's outlook. that is what makes them an even larger player in the market. shareholders likes it. shares went up on the back of the news. went up as well.
up by as much as 2%. putin has rejected this before so there is no guarantee it would go forward this time. the russian prime minister rejected it on his recommendation and vladimir putin rejected it. but the problem is that there are some people in the kremlin that are concerned about the government having too big of a hand in the economy. they already control more than half of the russian economy. company and if it gets bigger, it would make the government's role in the economy even larger. say, that isle probably not the direction we should move in. what i will say is if law thisft was able to buy stake and then sell the 20% stake they would like to sell to ,nvestors in their own company
a secondary offering, that could garner the government as much as $60 million. vladimir putin would like that. vonnie: the average price of a $45.60.s does russian need to sell the stake? ryan: you know, it could be helpful. russia can borrow money. isrow is cheap -- money cheap out there. but there are investors waiting to hear when russia is going to sell its stake. been promised these asset sales for many years in some cases. in 2014.tionalized at the government ever since has been promising to sell the investor stake in it. so i think it would really be useful from a pr perspective to sell that stake just to move on.
many investors would prefer them not. vonnie: what do the companies say about the price of oil in the future quarter? if you look into my bloomberg chart, you see that now we have investors switching sides. shorts are dropping off and longs are coming back into the market. it is going from one side to the other. oil will rise again. yes, they all think oil will rise. we know oil is likely to rise at some point. you know, what was interesting talking about how in 2-3 years you could see oil at $80-$90 a barrel. that is very bullish. he also said that in the short term, we will see a lot more
volatility. if you think about that, the price of oil and brent has moved between $40 and $50 over five months. it can't get out of that range and part of the reason is because inventories have come down a little bit but there is still a massive glut. we are way over historical averages. in addition to that, it is not a one-way decline in inventories. the glut seems to get a little smaller and then it types up again. mark: ryan chilcote, great to see you. vonnie: still to come, what kind of impact will -- have on the fund performance? this is bloomberg. ♪
mark: live from london, i am mark barton. we are 16 minutes away. vonnie: i am vonnie quinn. is there trouble ahead for norway's biggest sovereign wealth fund? the government is making its first withdrawal from the fund. forthat could spell trouble the effort to manage risk. joining us now for insight is jonah bergman. he is on the phone. see you. how could the government withdraw from the number region's sovereign wealth fund? is interesting that it is finally acknowledging it. it has been saying all year that it could handle the outpost find that the problem is that it is trying to branch out into new
assets and take on more risk to boost returns. which are being severely hampered by negative rates that .re spilling into the portfolio what it has done in the past is that it has taken inflows from the oil income that the government gets and used that to shift strategy. now, it doesn't have that anymore. it is forced to take a closer look at the portfolio to see where it can adjust and where it to move intoassets more space and into infrastructure. which it might do next year at some point. mark: is the government able to shrug off the with -- sovereign wealth fund, are they able to shrug off the withdrawal from -- it gets about
200 billion dollars in income payments and real estate funds. so it does have cash to take from. but the issue is when it wants to go into new assets. but when it needs to shift its portfolio, it will move more into real estate and into infrastructure, as i said. it needs to find ways to adjust its strategy as those inflows have halted. part of thealso problem is that the older bonds are maturing and if they will be reinvested, it is in debt with negative yields, which would not have been the case a few years ago. how much can the sovereign wealth fund change its own rules? can is government itself? well, that is one of the main sticking points. globally. broadly and
so a lot of the maturing bonds that are maturing now will need to be reinvested into negative yields. it is hit from both sides. it needs to keep up with the return target that the government has set at 4% while at the same time the government is taking out money and it is being forced to reinvest into bonds that don't pay. so going through major reviews now, and we will see them in early december and decisions will be taken in april of next year on the way forward for the fund and how it will structure its equies. vonnie: interestingly, it is trying to take down the share. what does that say about inflation in scandinavia? jonah: it is in the debate right how it wants to up its
structure to 70%. time, it hasme been tasked to up the real estate portfolio. so it is looking at the correlation between bonds and stocks. and now it is basically correlated. so it is a vastly different 2007, whenw to in thee measurements or indexes it set up, it is a vastly different scenario. when they were set up. it is really going to go through a rethink in how it was to set up the portfolio next year. it will be interesting to see. vonnie: jonas bergman, thank you. of the u.s.part economy got off to a solid start in the third quarter.
consumer spending rose for a fourth month in july. -- likely to lead to a rebound in expansion. chrysler has used samsung as a potential partner. the ceo spoke with them in rome following reports that samsung was interested. we have a very good relationship with samsung as a supplier and as a potential strategic partner. thati did say yesterday is an opportunity is an opportunity that has been looked at by a variety of people. we have no interest in just selling. i think it does have strategic value for us. vonnie: whatever it decides to do, it won't happen overnight. and that is your bloomberg business flash for this hour. mark: coming up, the bank of
vonnie: live from new york and london, i am vonnie quinn. mark: this is "the european close." vonnie: monetary policy has its limits. -- reacted in part to the bank of japan's governor corrode a weekend announcement saying the central bank won't hesitate to boost monetary stimulus if needed. speaking to anna edwards, -- said banks like the bank of japan create the potential inflationary flareup. >> when the rates have gone lower in japan, we saw that impacting banks because people
fret about bank earnings. and that happened in europe as well. i think negative rates, are at their limit in terms of policy measures, even though technicalnkers see no hard limit, they could go lower. to see they're anxious the discussion shift more to fiscal policy or other means rather than low rates. and certainly, that is what the market likes. you look at the response of financial stocks. >> what would you make of a -- would that be radical enough to make a difference to remove the dial?
>> well, it is hard to say that. anyone move is going to be enough, given the history of stimulus. the history has been erratic. much a it is not so binary decision. it is how much they do and whether they can create that kind of shock at this right in this cycle. everyone is hoping that they will give it another try because clearly, japan, despite reaffirming their inflation targets, has not been able to hit them. and that has pushed that country and central-bank into some kind that they will have to work their way out of. so they could announce a massive stimulus program both the and fiscal side. and they could end up reducing the inflation targets.
right now, it looks like they will use more stimulus. whether they do it now with the yen at these levels or they wait for the yen to strengthen more, that is an open question. chief: that was the ubs manager. i want to mention a couple of headlines. has pleaded not guilty to breaking fx markets, this in the first u.s. fx rigging case. check out what is happening to european equity markets. five minutes away from the close. no trading in london. there is a bank holiday. europe is open and alive. trading volumes well below the daily averages. the stoxx 600 rose last week and we have in on an alternation. the pattern has been up and down for five weeks. this is bloomberg. ♪
mark: i am mark barton with vonnie quinn. stocks are finishing up the monday trading session. let's take you to the market. we were down two thirds of 1%. it looks like the stoxx 600 finished down by 1/5 of 1%. percentagest my right because trading, volume is 70% lower than the 30 day average. it is a bank policy -- holiday today. stuck in a very narrow trading range since august and since july 12, a 3% trading range since recouping its losses on august 12. it has been trading lower. investors are thinking about what jackson hole meant for the direction, increases love this chart. it shows you the market capitalization of the french and
german stock market here at we love to tell you things that you may not know, the blue line is the french stock market. since bloomberg started tracking the data back in 2003, the french stock market has been bigger than the german stock market. in the last year, the stock market has risen by $64 billion in that has decreased the gap between france and germany in theation and now that valuation differential is a mere $15 billion, the gap is now the two .1stock market, trillion and the german stock market, 1.95 here you do the math. what a great chart. luxury companies today, the big news came from product. it is traded in hong kong. shares surged 12% in hong kong, the most in 12 years. the time luxury goods maker will return to growth and sales and
earnings next year held by cost-cutting and on mining expansion in asia. big players this year, the worst performer is down by 34%. falling today. economic data today, italian manufacturing confidence in august fell to the lowest level in one year. struggling with staggering economy, earthquake to deal with as well. consumer confidence also hauling. a big week for european data. the highlight is your -- european price inflation. what are you looking at? an interesting story about leaving the workforce. i was looking at the vix. h are many different the vix. it was higher in now lower again. nothing to write home about. it is holding on to the strength we saw pre-weekend. there might be a little profit-taking following weakness.
look at the 10 year yield. a real gain their. the 10 year yield not so much, 1.9 percent. points the front and has moved up. let's get a check of u.s. companies now. abigail doolittle has more now. abigail: something interesting going on for u.s. stock. the majors are all trading higher, a nice rally. of the 10sed rally sectors for the three indexes. all are trading higher except for health care at the nasa act. the reason behind this is the biotech sector down not just today but down more than 4% over the last five days. real weakness here. we are looking at it biotech giants. shares are lower in the sales for last week were down pretty , and we also have
sciences having the worst day in , talking aboutth .he hepatitis c drug, down 1% pricing could be one reason why. costs $94,500. that could be a little bit of a block there. finally, a stock that cannot catch a break. it was higher earlier today but now trading lower as investors are dumping the stock not wanting to have anything to do with a pr fiasco around pricing issues around the epipen. vonnie: thanks. courtney donohoe. courtney: italy will investigate whether fraud had anything to do with the number of people killed in last week passes earthquake.
authorities want to know if contractors broke building close .- codes the government wants to make sure organized crime does not get involved in the rebuilding effort. stain's acting prime minister closing on the number of votes needed to form a government. the party feels an agreement with the liberal party and that it's an 170 of the 176 votes he needs. the first round of voting takes place tomorrow. isncellor angela merkel trying to win back voters turned off by the influx of refugees. campaigning again today going one to two states holding elections next month. her ratings have slumped in recent months. the christian democratic block leads democrats. john kerry says the u.s. and bangladesh will closer together to fight terrorism. the week of recent attacks on bangladeshis and warner spirit it tax raise concerns that the
islamic state is spreading its network. lawmakers in massachusetts are studying whether they should timethis state to a new zone. the times during the winter, the sunsets in boston as earlier as -- as early as 4:00 p.m. that is causing massachusetts to lose to places like new york where the sunsets later turned global news 24 hours a day powered by more than 2600 journalists and analysts in more than 123 countries here this is bloomberg. brazil.t's get to entering the final phase. recess defended herself in front of congress for the first time today saying she did not commit any of the clients she was accused of and she will never quit or give up fighting. following her remarks, brazil's royale rose against the dollar amongst investor optimism.
i spoke with a lecturer in sociology in london who worked for 10 years as a journalist in brazil and got her take on the impeachment process. >> it is highly unlikely it will go through. unfortunately, this is a sad day or democracy in brazil because there is a sense that we are having an impeachment again since 1990 two with fernando carlow. this is also a process where the impeachment is being seen as highly controversial and white what isflawed because permitted for the impeachment is not exactly what he has an accused of. of tax been accused peddling, something many governors in brazil as well as former presidents have done as well. this is not just like a parliamentary democracy where you change a prime minister who is unpopular. it goes much deeper because what you have is a sharp shift from
the previous government, more centerleft, to a government pushing forward many policies that have not been voted by the people, including the proposal of freezing public spending for the next 20 years, which could ring brazil down to the level -- the level of afghanistan -- and have serious consequences for health. >> the polarization that happened during the impeachment process over the last nine or 10 byths could be emboldened some of these more austere measures, which a potential successor acting president is hoping to prevent. >> that is actually -- exactly right. critical soare very it is very much about sustaining and we need to take her out in 2018, or have heard
back and propose new elections. this is something world leaders have talked about. bernie sanders in the u.s. has mentioned this as well. what they seeing voted for two years ago is not what is put forward. would give he meant him legitimacy to fix the economy. maybe that is not the case? >> that is exactly right. there was support for financial markets in the beginning thinking perhaps the cuts of economic mismanagement, he would be someone who would unite the country. what we have seen is this has not happened. speaking to mark earlier. let's go to brazil. standing by with the latest, what is the likelihood at this point he will be impeached?
>> it is seen as highly likely. 52 votes for impeachment already declared here they need 50 or to impeach her and there are 10 or so senators that have not yet declared the vote. this is seen by markets as a done deal. >> to some markets, it is fine by them. you take a look at the bloomberg and we have had a bond rally in this though. you can see it is 3098. if you look at the areas, this is the yield. bonds rallied for many companies. >> that is right. the rally has an across assets. stocks are up 60% in dollar terms, the best in the world. currency also the best in the world. credit swaps down by a lot almost half of what they were. markets are hopeful they will bring policies that will help
get brazil out of the mess of a recession it is an. wageshe is cutting into of workers and already his coalition seems to be cracking. if he pushes through further austere policies, how likely is popularhe will remain with the population and markets? >> he is not very popular with the population. that is probably not his biggest concern. markets wants reforms. wants social security reform, tax reform and those are the priorities of people looking at the economy that want brazil to really get out of this recession. is important to remember how complicated brazil's's political system is. you need to deal with all of the parties in order to pass these measures. mark: if through seth is impeached? i asked my guest earlier area
does it give him credibility, tos it give him leverage really embark on the measures to turn around the economy? you still have a political polarization in the country. right. is that is the hope he cuts he does not have the immediate threat of , if you do not give me this, i will not vote for the each meant and your government will be over in a month. he will be able to be more forceful and sit down with parties and say this is what us toto be done for succeed here. the hope is negotiations will be easier but never easy. >> in terms of social safety nets, it sounds a lot you are if the impeachment goes ahead. government will be increasing the estimate for privatizations but also adjusting benefits for inflation only and on finding the benefits given to the elderly. is there any danger of social >> i thinkr mark
that is always a possibility us actually one brazil is always as divided as it is. not a popular politician and there are a lot of people that support ruth f and believe ago with her argument, that this is not something she should be impeached for and this is not a legitimate government. depending on how austere the numbers are, it is definitely a possibility. thanks. if you want to look at how investors are looking at this, there is a new function on the riskberg now, the barclays analytics index solutions page. you can see international debt, live trading, brazilian banks, sovereign debt in the u.s. and so forth. mark: it is battle of the charts. a couple of surprises today as i take on my buddy joe weisenthal with a look at the u.k. economics index.
vonnie: you can access these on the bloomberg by running the function featured at the bottom kickingscreen your things off as joe weisenthal. joe: thank you. first data. it seemed decent not that amazing here is a different way of looking at it. johnny looked at three ways of looking at it. the blue line is the change in real personal spending, up 3% year-over-year. if you look at the annualized change, close to 4%, that is
yellow line and the analyzed change, these are the noisy rates of change, that is also around or percent. ae general trend is really sharp upswing since earlier this year. there have been concerns about q3nding but it looks like will be really solid, a good time for the u.s. economy. you can see the chart on the bloomberg. >> that chart really puts things into perspective. thank you. mark, you are taking him on today. u.k. i am aching about the . we are on holiday but it does not meet inking about the u.k. economy. post-brexit, the big debate is to what extent has brexit affected the u.k. economy. you have to say that actually it has not affected the economy is much as some maybe have asked acted. we have a wonderful index on the
bloomberg, surprise index which measures the extent economic data is beating economist forecasts. this is the white line. since brexit, we have risen 2.73 from .45. we had consumer confidence rising the most in three years, we also had data on retail sales searching as well. the other piece of information i thought we would look at which gives us a sense of how bullish or bearish investors are, the month to the first u.k. -- recheck, i know many investors are expecting a rate cut. -- investorsy has think the next rate hike will happen. this again tells us how bullish investors were or bearish on the economy at the time of brexit rate on june 22, we are 31
months. we moved just after 217 months on july 29 and now we have come back to extend three months. it highlights the fact that the has been not as sad as many had anticipated. one thing worth taking to consideration is the fact that you economist we surveyed expect the economy to contract this quarter. it grew by 2.6% in the last quarter and the bank of england takes the economy will rise .8% next year, about one third of the previous estimate. things are not looking great on the work as front, but you have to say they are not as data as expected. collects 64 months to the first rate increase sounds like a long time to me. i love both of those charts and i think that is a brilliant it shows how brexit is impacting the economy. you will forgive me if this
holiday monday, i prefer a tie. you are both winners today. congratulations. mark: i will take the tie. >> good. another stunning twist in the herbalife saga as carl icahn loads up his portfolio with 2.3 million shares of the company. what is behind the move, that is next year this is bloomberg. ♪ -- next. this is bloomberg. ♪
vonnie: live from new york and london, i am vonnie quinn. mark: i am mark barton. for the bloomberg business flash, a look at some of the biggest business stories in the news right now. shares of product rose 12% today. the time luxury goods maker predicts a rebound next year. we demand in china, terrorist attacks in europe caused sales to slump in the first months of the year.
bmw is trying to put its flagship seven series back in the luxury car race. the automaker is coming out with a sporty tutor -- two-door version of the seven series according to people familiar with the plans. now out cells>> the series. next year, audi will come out with an updated version of its flagship. that is the latest flash. vonnie: finally, carl icahn raising the state in the battle bill ackman.e with shares of the supplements company rising today after our icon increased his stake. he bought an additional 2.3 million shares. joining us now is matt. intohe acquisition context. what does the extra share -- do the extra shares mean? stake toincreased his
21% who is still basically betting against the shares. this all caps off on friday here there was a report that carl icahn was going to sell his stake. he then came out publicly and said i was up first i jeffries about buying some of that state and he later said he was doing this just to help them get out of the stake. carl icahn responded and said no, i do believe in the company and he added 2.3 million shares on friday. >> the feud continues between the two. it is personal. i wanted to ask you about the outcome here at it seems like some of this has been resolved. ackman isnt, bill syndicated in his stance that he has not coaxed out all of his short position. >> right.
they were going to make herbalife going to a fact next year. he is saying when those things happen in the u.s. market, it will hurt his business and people will see more evidence that it is a pyramid scheme. no, i believe in the company and herbalife says the same thing. has as point, ackerman bet on shares. he is still sticking with it any thought getting carl icahn a boost. >> the best business decisions based on personal decisions? they had a big falling out three years ago and have gone back-and-forth a couple of times but recently they have had more encouraging words about one another. more friendly now and things have been patched up.
but this seems like they are back at each other's throats -- throats again. carl icahn questioning bill ackman's thinking on herbalife saying he is obsessed with this and being irrational on the investment. be moree there will fireworks down the line. there is still a question of what will happen to the business as the changes hit the business. >> we will watch this very closely as we have been. thanks. do not miss our interview with federal reserve vice chair stanley. tom keene will interview him. mark: take a look at the european markets end of the day. bank holiday here. stocks lower and investors digesting the jack and whole -- jackson hole event. ♪
matt: it is noon in new york. >> welcome bloomberg markets. matt: good afternoon. i am matt miller. we are covering stories from washington to zurich to houston in this hour. here is what we are watching. stocks are in the green to start sinceg and stocks halting june. gains adding to investor confidence in the u.s. economy. we see a flurry of health care deals to close out the deal -- close out the year? suzy will be here to talk about what is on the horizon. >> what does donald trump really believe when it comes to immigration po.