tv Bloomberg Markets European Close Bloomberg August 30, 2016 11:00am-12:01pm EDT
p.m. in hong kong. i am vonnie quinn. mark: you are watching the european close on bloomberg targets. -- market. we are going to take you from washington to dublin and cover stories from germany and france in the next hour. here is what we are watching today. we will talk with margrethe decisionabout her ordering apple to pay a record $14.5 billion, plus more in taxes in ireland. the largest penalty yet on corporate tax avoidance. apple and ireland are vowing to fight the ruling. we will get the response from and why he said the commission left him with no choice but to appeal the decision.
and in an interview with sally she says incoming economic data will determine the path of interest rate increases. we will get fishers take on when the fed might move. mark: 30 minutes away from the tuesday close. column.your equity more than upsetting the declines from yesterday, which did not include the u.k. that was enclosed for holiday. ending the month higher. still a day of trade to go. we have not had two months of gains since may. looking at the individual movers. deutsche bastad, unlikely to increase the stake. boerse.che the indian cap that change the
law to allow foreign companies to own as much as 15% of equity exchanges. shares are up by a quarter today. combining the asset management business pioneer with a taste of your verizon. options forering the future pioneer, including an ipo as part of the wider capital plan. shares are up by 2.3%. sell the agreed to operation in the gulf of mexico for half $1 billion. it comes the equivalent of 25,000 barrels per day. shell is the biggest oil producer in the gulf. and it has been canceling projects, reducing cash out to deal with the plunge and the oil market to deal with the $54 billion purchase. shell shares are up by .5%.
90 minutes into the trading day in the u.s. going to the trading desk with abigail doolittle. forwe are looking at losses u.s. stocks today. the three major averages trading lower. s&p 500 and nasdaq. taking a look at the chart, something interesting emerges, the idea that we are basically doing a round-trip of yesterday's gains. right now it appears we're going to end tuesday for even on the , early in the week of course. as for what is dragging, hershey's shares are down inrply, the worst days september 2002 on the news that elez, abandoning a takeover offer. another loser on the day, new morning -- newmont m
mining. this is a minor, so being hit by this fall. apple the big story, trading lower on the news the company may be paying $14.5 billion in back taxes to the eu after thatnd it gets tax breaks the european commission is saying unfair to the iphone maker. we have the bloomberg dollar index trading sharply higher, up half a percent. this is pressuring oil. oil was hire earlier, sliding territory, down more than 1% at this point. mark: thank you very much. getting back to the top .orporate story ordering apple to pay $14.5 billion in taxes and ireland. joining us is margrethe vestager . thank you for joining us this afternoon. >> thank you. it is a pleasure to be with you mark:. mark:apple says we are in --
appealing the ruling. this believe that european commission is stretching rules by using them to enforce the eu tax law? >> not at all. taxation is a member of state aid. no member states can give out selective benefits to a company. .t is a long-standing case this goes back to the 1950's. so in that respect, there is no novelty here. this is the work that we are supposed to do. --k: there is disappointing disappointment from both parties, as well as the u.s. treasury. the treasury is disappointing the commission is acting
unilaterally and departing from the progress we have made together to combat tax avoidance. why did you feel the need to act b hasterally when the oec made so much progress over the past three years? >> that is a very important point, the progress. also, the european union, new legislation has been imposed. implemented.ng that is all good and fine because it makes the global taxation much fairer in the future. specifically -- is specific that we have a long-standing probation of member states handing out benefits or advantages to specific companies. thanis the case here more a case here of taxation. these benefits can come in all
forms. they can come in the form of benefit.d or a tax that is the case here, much more than the case of interfering in the very good work done by the oecb. vonnie: apple has been tax headquartered in ireland since 1991. why did it take the european tax commission until 2014 to begin a probe? question. a very good i think the answer lies in the lack of transparency. hearingsas before started in different parliaments very difficult to get the information needed to have concerns about the arrangement. of course is a very good demonstration of the fact that we need much more transparency when it comes to corporate
taxation of such. on that point, whose responsibility was it to report where apple was reporting sales and who should be reporting taxes? >> where apple is reporting sales is not an issue for on's -- for us when we do state aid control. how apple organize themselves when it comes to the corporation is not an issue for state aid control. what we have been looking into weactually the arrangement have seen. we have seen sales international and operations europe to see if the profits recorded in ireland are being taxed is in accordance with state aid rules. what we have found is they are not. the way it is worked is to allow apple to pay as little as
00.005% in some years. illegal?hat makes that >> well, the tax rate in ireland is 12.5%. most companies, national or multinational for that matter pay the corporate tax rate in ireland. they have to look at some companies that only pay a tiny fraction that they themselves have to pay. that is obviously not a level playing field. mark: are there any other companies that have such ?avorable tax regime tax policy or treatment in ireland? >> we have more open tax cases but they are not in ireland.
we have in luxembourg mcdonald's, and earlier on, we belgiumon a scheme in with a number of european multinationals. this was decided on starbucks. irish cases.t it is the same thing we are looking at, these companies get a selective advantage not open for other companies. how will this ruling damage it u.s. and eu relationship? >> it will not damage the eu relationship with the u.s.. to a very large degree we share a number of values in these areas. you find there is a very strong common value-based when it comes to a more fair global taxation. some would say this is
not fair because you are looking at retroactive collection, you missed your chance and did not look into this before now. so why force collection now? would look at this with change in legislation but looking backward. that is not the case here. it is, as i think very often happens, that you can look back .or a number of years that is also what we do in other
state aid cases, because for a lot of reasons business is backward looking when we have a concern of a legal state aid being paid out. this is a case not of penalties but unpaid taxes being paid looking back 10 years. mark: a final question, to what extent will today's ruling damage investment from outside aid being paid out. this is a case not of penalties but unpaid taxes being paid looking back 10 years. mark: a final question, to what extent will today's ruling damage investment from outside multinationals damage drop creation in the euro area and >> most probably it will not. there are so many substantial reasons piling up to do business in europe. very clever people, high level of education, high-level research and development. 500 million potential customers. europe is open for business if you want to do business, but maybe not so open if you come here for tax avoidance. thank: margrethe vestager you for your time. i want to go to a headline, the french economy minister is resigning from government. coming up, how will ireland respond to the european commission order? we will speak to ireland's finance minister, on the applen decision.
mark: live from london, i am mark barton counting you down to the european close. we are 16 minutes away. vonnie: i am vonnie quinn. getting back now to the apple tax ruling after it was ordered by the european commission to pay or $10.5 billion in rears taxes and a crackdown. apple and the irish government bowing to fight the decision. to fight the decision. n are joined now by michael oonan. is apple the decision?
putting pressure to fight the decision on their behalf? divers government will make a decision tomorrow to repeal. we are repealing it because we do not accept the irish authorities did anything improper, incorrect, or a, and we want to stand by the decision in may this when they gave opinions to apple about how activities in ireland will be traded for tax purposes. secondly, we think the incompetence under european protection matters. inthink the competition europe is trying to get through the back door to influence tax matters and to portray them as a state aid issue. we believe if they succeed they will widen it and will try to have a controlling interest over tax matters in the european country.
the oecd has said compilation tax to follow economic activity. in other words, the economic activity occurs, this process is where the tax should be collected. i have an apple iphone, and in the back and the says designed n california, manufactured in china. activity is not in ireland, and yet, the commission thinks the irish authority should be responsible for collecting taxes. vonnie: nonetheless, almost all by twosales recorded companies, two very large companies were attributed to a head office, and one company 5000's of 1% in tax to the irish government. why would you allow that, and if you did not think it was illegal, why would apple paid -- change the tax structure and get rid of the ruling you go >>
apple has between 5000 and 6000 people employed in court. they have substantial act -- economic activity there. they pay taxes on the profits generated by the activity in ireland. how they manage profits internationally is a matter for apple. due to be taxed under irish law was taxed under irish law. vonnie: what do you mean when you say under irish law? >> this is applicable to the activities in ireland, and they are paid that. we cannot tax people in ireland for activities in california. the ipad and iphone are apple's most successful product and both generated in the united states. the activity that gave rise to the product was made in the united states.
that is not a matter for the irish authorities. a graphic that shows half the r&d money came directly through the headquarters in ireland. you see that all profits were recorded in ireland, and half of those left ireland and went to california for research and development. >> yes, but we do not manage how their affairs. we tax on economic activity that multinational companies carry out in ireland. if there are arrangements made beyond irish law and beyond the competence of the irish tax ishority and an argument being made that international apple does not pay enough corporation tax, then it is a matter for other jurisdictions. the commissioner in her statement today has acknowledged that because she said some of the tax she is attributing to ireland may be contributed to other countries.
she also says if apple wants to an alternative arrangement with the u.s. authorities in terms of transferring profits to research and development cost, then they should do that. so by her own press statement she admits liability may not be in ireland at all but maybe elsewhere. more than 700 u.s. companies have units in ireland. will this damage investment, jobs? what is your message to u.s. companies doing business in ireland today? >> first of all, when the european commission was researching the apple case they looked at almost 100 companies. most of the significant american investments in ireland were looked at.
the commission came to the conclusion that the only possible case is to prosecute against apple. there is no contagion effect to other countries. what i am saying is we do not think the decision is value -- valid and will appeal the decision, and we are saying we thatstand by the companies invest in ireland and apply the tax regime that is applicable under irish law, and we will stand by them and have assurances for many of them that they will continue to invest in ireland and create jobs in ireland. mark: many people may be aghast today, and some of them that do not know the details. shensei maybe one of them. that is a lot of money. because as minister for finance i have a responsibility
for advising the government on these matters. foreign direct investment and the creation of high-level jobs is fundamental to our economic policy. and we stand by our economic policies and will protect our economic policies. he will not get into a situation of short-term game for long-term damage to the economy. -- we will not. the 12.5 percent corporate tax rate is a wonderful tax rate in europe. let me ask you, if you appeal lose, isn't that a win-win situation as you will have stood up for apple and your arrangement with apple, and at
the same time, you will then receive $14.5 billion in flow into the coffers, which we know would be a huge boom to help fund the health service or plenty of the old currently on property level? >> first of all, under european lose, isn'tn situation rule, the tax will be collected immediately. we will put it in an escrow account, and will be managed by the national treasury management agency, which manages these affairs and the national debt in ireland. secondly, the european commission wearing a different hat and another part of their jurisdiction say that this cannot be spent for day to day spending. so if we lose the appeal, it spent forsent -- health services or day today spending, but it can be revealed reduce theto national that. there is a possibility some could be used for investment and capital project. the appeal process will take several years. i have no doubt this will be a matter for one of my successors. thank you for joining us.
mark: you are watching the european close. i am mark barton with vonnie quinn. five minutes away from the end of the tooth a session. rebound from yesterday's losses. more gains in london because of declining mining shares falling as the dollar rises. have a quick peek at the currency board. the euro is down for the seventh day in eight days against the dollar. that is giving a boost to exporters. that is why euro area stocks are gaining. this is bloomberg. ♪
two industry groups are rising. a bit of a turnaround from yesterday. resourcesgoods, basic declining today. let's get to why. to overweightaded from equal weight. barclays has built a strategic originalfrom product perspective the last decade. it says it is well considered. they pride -- press target is up 21%. up 44 euros today. 89% have a buy. 7% have a hold. creditout noon in --noon credit? it -- according.
we have shares of many credit up by 2.1% today. a big piece of u.k. economic data, u.k. unsecured lending rose by one .2 billion pounds in july. -- 1.2 billion pounds in july. well below the 1.6 billion pound averaged over the last six months. spending splurge. running as an annual growth rate of more than 10%. also today, we had mortgage approval slumping to an 18 month low in july. banks a mutually owned lenders signing off on just over 60,000 loans. the fewest since january last year. mortgage demand has weekend since the tax hike on investment properties took effect in april. a piece of data that task out on
the recent evidence that brexit isn't impacting u.k. economy as much as maybe many had dissipated. vonnie, what are you looking at? getting a are statement from apple. the cfo had been speaking earlier, but this actually was not for broadcast. now the company has put out an actual statement saying -- the commission's case is not about how much apple pays in taxes, it is about which government collects the money. it will have a profound and harmful effect on investment and job creation in europe. continuing the statement -- apple follows the law and pays all of the taxes we oh wherever we operate. we will appeal and are confident the decisions will be overturned. the statement from apple. let's get to abigail doolittle.
>> first, a quick look at the u.s. equity averages were you see all three trading somewhat lower here on the morning. this could have something to do with dollar strength after consumer confidence measured this morning did come in better than expected, boosting the dollar, weighing on oil wraps dragging on stocks. we have lots of stocks in the world of m&a. i believethese shares are halted. yes, it shows they are halted. before being halted, both of nicely on the possible merger between these two fertilizer companies as they are battling falling prices plus the decline in spending a farmers. earlier this morning, it was not a combo could be announced as early as next week. with the stoxx halted, perhaps we will have more news today. turning to a deal undone -- in fact, one that never took place. hershey's and mondelez. is backing out or
pulling away from a $23 billion takeover bid after two talks of takeover talks were unsuccessful stop. mondelez trading higher. ritchie brothers, and auction company of industrial equipment. the stock a sharply higher, soaring up 17%. on pace for its best day ever. the highest since 1998. they are buying iron plant for $740 million. cerro brian says it makes sense it is a high profile offered in the businesses are very complement terry. -- consol energy. vonnie: more from the newsroom. courtney: british prime minister theresa may will let parliament have a say on starting the formal profits for leaving the european union. the spokesman for mays says the timetable will be announced in
the coming months. the prime minister says she will of trigger the exit process the treaty before the end of the year. a close political ally of germany's chancellor angela merkel says if the u.k. once the advantages of the european union single market, it will have to help pay into the eu's budget. jeurgen.nts from norway is a non-eu member that contribute to the bloc's finances in return for market access. prime minister trust in an eight-month political impasse today. he is asking parliament to back him for a second term. he wants to put together the first government since spain's traditional two-party system broke down. -- heds the majority needs the majority tomorrow. the u.s. is urging turkish tooks and kurdish forces
with her fighting in northern syria. the pentagon says those battles for the effort to defeat atomic state but turkey's government is going to present with a recent military operation. until both kurdish forces and islamic state no longer pose a threat to stop a hurricane watch is in effect for the big island of hawaii as hurricane madeline closes in. forecasters say the storm should be near or over the big island by tomorrow. it is a category 4 hurricane with maximum sustained winds near 130 miles per hour. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. thank you. between september and the u.s. elections in november, emerging-market bond issues are poised to the market with tens of billions of dollars in new deals, setting the stage for one of the busiest periods since 2013. joining us now, emerging-market editor. thank you for joining us. why is this a perfect
opportunity for emerging market if they were to try to raise the money? >> this is probably the final bout of opportunity for global dealsors to grab higher and for investors to borrow at historically lower rates. december, the and world as we know is going to change. it is not going to exist. it will be a completely different world. there's a rush from both sides to make the most out of this opportunity. mark: who are they and how much are they going to raise? >> you have borrowers from all over the world, basically, in emerging markets. easty, it will be middle this time. after the big drops in oil prices, they are seeing some fiscal imbalances and they would like to fix that. saudi arabia and kuwait, between
them they will raise about $20 billion. there are other borrowers. russia, they are being hit by sanctions, even of the sanctions did not pertain to all copies, it pertains to some companies. but all russian companies have been hit to some degree because of the perception of russia the last couple of years. they are all coming back now. there's more optimism in russia. there is a lot of optimism all around. ande is a sense of urgency they want to make the most out of this opportunity. vonnie: is there plenty of demand? where will it mainly come from? >> absolutely. in fact, it is demand-driven. if you look at the cash flow into emerging markets, they are quite heavy. almost, received record $19 billion. the first half of this month,
about $5 billion. that is the kind of money that to being into this market absorbed. you do not have enough paper. lack ofbanks -- general supply. there is a lot of demand come up which is actually attracting borrowers and make them think, hey, there's so much money and, you know, if i need money this year or next year, this is probably a good opportunity for me to raise the money. itnie go is it possible could be short-term money? is any danger we might see flows in and out in a bit of instability volatility? >> yes. that danger is always there. that risk is always there. now borrowers need money and investors want to invest the money. they want to grab high-yield assets. there is a 10 week window in which to do that. things could go wrong from now on.
already, you have yield spreads that have narrowed to levels that are making investors asked if it is worth it. fore risks are there, but people who need money and people who are investing that money, you know, there's a lot of optimism. they think rings are going to get worse after november -- thanks are going to get worse after november. mark: this is a lovely chart. nine times the g-7 levels. the white line is the emerging markets in dollars and the blue light is the g-7 developed bond index. the ratio is the bottom line. we have yields local bonds at record lows, dollar bonds at multiyear lows. is this a? how generous with after price these bonds with spreads coming in? >> absolutely.
the spreads are already narrow. the one line that probably is not showing up there is the risk of investors. at what point investors will say, hey, this is not good enough for me, right? that line is a moving line. it varies from investor to investor. the borrowers have to be very careful not to keep the yields two tight, the same time, trying to maximize the gains they can make. that is going to be a balancing act, actually. we will have to wait and see. we will have you here to talk about the elections as it unfolds. bloomberg emerging markets editor. 4:41 in london. coming up -- breaking news, first. vonnie: confirmation of talks of a merger. it is confirmed. the companies are in talks.
the. i'm going to start off today with one of the biggest stories in the stock market right now. looking at basically the purported death of the safety trade. it is a dramatic tribal -- title, but this has been a big sector of the year. winners going into the first half of 2016, they are starting to slow down. they are losing a little bit when you look at investors putting money into more cyclical groups like tech. even of the s&p has been flat the past couple of weeks, these sectors have broken down. the bottom panel, you are these and some of the low bottle full -- volatile etf's. have annth, investors adding money until august. this month is the first time the yellowake down line, shares outstanding drop. looking at flows have been negative. a big negative float for the last couple of weeks. i think as people start to
reassess how far and how high valuations in some of these groups can go, that will be huge whether or not the slow down in that area can happen sort of in a healthy, orderly manner if you will, or jostled the rest of the market. vonnie, i have my judgment had on. beat that. vonnie: i am in the mercy seat. i don't know which one i would rather be in. mine is about jackson hole and japanese automakers. huge moves. shifting into high gear. you can see the japanese automakers as a group were down something like 33% to a low july 15. the end showed a lot of -- yen showed a lot of strength. huge amount of strength. as we roll along -- whatever you do in a car.
the bank of japan governor talks about massive stimulus. this helps the yen move up a figure or two. seen as a good sign for the japanese automakers. they have come back all the way, about 30% or so, since the jackson hole affect took effect. mark: where can we find this? v#3155. you can tell i have a lot of experience. i feel judging. >> it is a lot cooler than my topic. vonnie: this is true. mark: i love her chart. it is a progressive. you know what? goodnessiving enough to our friend oliver. i am going to give him today. >> this is like charity. mark: this is the story right
now in the u.s. stock market. oliver, he does come out with some great pieces. armageddon's anniversary for s&p 500 with -- also gauges show the list posture on stocks before jackson hole. vonnie: ok. mark: oliver deserves the trophy. chart as love your well. coming up, why the brexit vote is blowing up currency derivatives. whose fault is it? this is. >> ♪\ ♪
merge. the commendation could be announced as soon as next week. no final decision has in made. potash has a valuation of about 13.6 billion, agrium about 12 point 5 billion. shares of both are halted at the moment. european commission has ordered apple to pay more than $14 billion plus interest in a long-running tax case. the eu concluded ireland gave illegal tax benefits to apple that helped it pay substantially less than other businesses. we spoke with the european commissioner for competition. >> the case here is specific. we have a long-standing prohibition of member states handing out benefits or advantages to specific companies. this is the case here, more than texas station. --tax cession. mark: rejecting arguments that
apple is getting special treatments. >> apple has between 5000 and 6000 people employed here and have substantial economic activity and they pay full tax to the irish authorities on the profits generated by their activities in ireland. mark: in a statement, tim cook said the ruling will have a profound and harmful effect on investments and job creation in europe "apple follows the law and pays all of its taxes we go wherever we operate. we will appeal. we are confident the decision will be overturned." latest bloomberg business flash. vonnie: another domino, the brexit vote is having on the financial segment. blowing up chrissie derivatives sold to u.k. companies -- currency derivatives sold to u.k. companies. our guest has been writing about
this story. explain what you mean by blowing up these currency derivatives. >> the gist of the story is that is mrs. across the u.k. -- businesses across u.k. bought derivatives sold to them as a way to manage currency risks. importers/exporters want some sort of visibility. brexit has come along and moved the pound by 12%. one of the biggest news in years. it was quite unforeseen according to the complaints we have seen, causing some of these derivatives to blow up. they have trigger points. as long as currencies are moving within small bands, ok. when you hit a trigger, companies are forced to buy much more currency that they need of much worse rates. it is like scandals in the past, but just applied to brexit, i guess. mark: and who has benefited from
these products? the big banks have shied away, haven't they? it is the smaller brokers. what does that mean when it comes to regulation and oversight? >> you are right. banks are still involved to some extent, but they tend to focus on the larger end of the market. to medium-size businesses. a lot of brokers have stepped into the bridge. a lot of these are owned by equity firms. in attractive private equity spaces. the margins are so great. these firms are regulated. there may be not scrutinized the same as big banks until now. involved, buters the same allegations. quote from your book. company that entered into a contract, it was going to get a call, but settled. some say many caught responded.
it was up to the company that took out the contract to understand it. >> you are absolutely right. that is the age-old discussion that will have to be played out. you have the firms of saying, listen, i'm a poor, old, importer of widgets and i don't really understand the nuances of the derivatives market and you never should have sold me this product. i was wined and dined and fooled into buying this thing. together side says, listen, the paperwork is pretty extensive. we were very clear about the risks associated. if you did not want to play in this bond, you should not have entered these contracts in the first place. there are always two sides to every story. in that case, there were differing views and that was the result. vonnie: thank you ,liam. check out his story on bloomberg.com. mark: take a look at the european markets. is it only tuesday?
what a day we have had. two hours of incredible television, if you don't limey saying come today. stoxx 600 up. more decline in london. the principal reason was declines in mining companies, they fell as the dollar rose. expectations creeping up the fed inl raise interest rates september. that is the big question out there across the bow markets. have a look at currencies. decline for another day, boosting shares of exporters. sterling down against the dollar. the euro down against the pound. zero down against the dollar. "bloomberg market" continues. ♪
>> from new york, good afternoon. >> we are covering stories from washington and dublin to berlin at this hour. here is what we are watching. u.s. stocks retreating from near record highs after apple is forced to pay more than $15 billion. evidencewe have more about apple will stop the biggest drag on stocks is apple. european commission has amended the island recoup some of the taxes. >> now ireland saying it does not want that. we will hear from both sides, from eu regulator and the finance minister this hour.