tv Bloomberg Markets European Close Bloomberg September 1, 2016 11:00am-12:01pm EDT
close on "bloomberg markets." we are going to take you from san francisco to washington, and stories out of london and moscow. it is what we are watching. u.k. factories reached a 10 month high in august as a weaker pound boosted income. -- r the sendingthe fed treasuries to their worst month since june 2015. we will talk to the head of rates research on which trades russia'soring and vladimir putin is taking a gamble.
how he is aiming to turn the easternmost nuclear garrison into a center of commerce and casinos. should china be concerned? mark: have a look at where european equities are trading right now, under 30 minutes to the go -- to the close. macro movers were lower on the stoxx 600, no help by the isi manufacturing number which showed a contraction in the industry growth in the united states. earlier we reached the highest basis on the stoxx 600 since may. we went away all of our post-brexit losses. get sterling after the isn manufacturing number, up 1.2% against the dollar. sovereign bond yields are rising and commodities as well.
costs, going to cut roughly 400 million euros .hrough his -- 2020 they are trying to battle is two big brands that have been suffering but as the cfo told us, absolut is turning around. up by three quarters of 1%. remy cointreau announced talks withrm a joint venture their dutch competitor over the fruit liquor. shares were up that slowly drifted lower throughout the day . the u.k. manufacturing data was not the only piece of data out of the european area because we had eurozone manufacturing data showing the pmi number came down
to 51.7 from 52, highlighting that activity has been hindered by the brexit vote. that is the big piece of economic data out of the eurozone. 90 minutes left in the trading day in the united states, let's get over to the market. abigail: decent declines in the u.s. equity markets, all trading lower. the dow and s&p 500 are each down more than half of the percent. this sterling has accelerated after a surprise manufacturing isn came in below the estimates, certainly below july's print of 52.6, and more importantly, in contraction territory. is on pace for its biggest decline since june.
we have the bloomberg dollar index higher in now lower for the first time in four days since janet yellen's speech in jackson hole, suggesting investors think there is less of a chance the fed will be raising rates anytime soon because she said policy will be dependent on data. taking a look at oil and the energy stocks, oil is tumbling, down four days in a row, down 8%. we have a few of the majors lower, exxon and chevron. if we look at the 10 year yield that is where we are seeing the impact of the manufacturing report. before the report the 10 year yield was at 1.60% and it is closer now to 1.57%, shedding nearly five basis points as investors think the fed might delay any rate hike. vonnie: abigail, we will be back with you shortly.
has more.onohoe courtney: an unmanned rocket has andn up at cape canaveral it was owned by spacex. site away from the states were and they the glass blame the explosion on an anomaly and say no one was hurt. donald is trying to reassure supporters he is not waffling on the issue of illegal it immigration. -- illegal immigration. he had -- outlined a hard-line therend made it clear will be a wall between the u.s. and mexico. mr. trump: we will build a great wall along the southern border and mexico will pay for the wall. courtney: earlier he went to meet with the mexican president and said they did not expect --
discuss who would pay for the wall, that the mexican president said he told him they would not pay. border controls were tightened earlier this year along the route connecting turkey to austria, the main entries point for migrants -- entrance point. michelle taylor was sworn in after the senate voted -- mi c was sworn in after the senate voted to impeach dilma rousseff. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. donohoe, this is bloomberg. to markets,get treasuries closing out their worst month in more than a year. they fell 6/10 of 1%. about 60% of traders expect a
rate hike by the end of the year, double the start of the month. 32% is the probability for september, 38% for november. let's get more perspective on this and bring in mohit kumar. number showing a contraction. does that make you wobble if you thought the fed was considering raising rates in three weeks' time? does it make you wobble or change the story ahead of jobs tomorrow? mohit: we are not thinking they're going to height rakes in three weeks' time. does the manufacturing data i withthe big picture? say no and we have to look at it from the broader perspective. the financial conditions index, that has stabilized and is moving higher. whichd look at services
is much more important than manufacturing data that we got today. the unemployment number is very important. mark: is there a number that would sway you? 50, yes, thatow does change the picture but if we get a number of 140 or 150i think the fed still remains on course. mark: 250? i would still say september is too soon for the fed to go. they do not like surprising the market and they have to weigh the pros and cons so sopranos they go in september which is a go hawkish -- suppose they in september, which is a big hawkish bet. that is not something the fed likes. the fed fund futures show a strong correlation with s&p futures because if the s&p falls, the wealth effect is very negative for the u.s.
when i look at the fed's perspective, what happens to the risky assets and the equity market is very important. the fed does not like to surprise the market too much on the hawkish side. vonnie: if you see were treasury and yields are going, what do you like for september given that treasuries have their worst month in more than a year last month? mohit: the way we are positioned for going into september, i think the front end is a bit rich in that it still has the potential to fall off. the way we look at the fed is they will keep the december meeting very much live. have had yellen, fisher, and sides on the hawkish saying there is a difference between what the fed is thinking and what the market is thinking. it will remain data dependent and if that is the case i think the front end could selloff. if the data is -- if the fed is
hawkish, the equities will not take it well. the way we are positioned as we are short the two-year sector, long the 10 year sector. vonnie: and even flatter curve post meeting is what you are looking for and it is already at 78 basis points. let's turn to europe and the ecb because they will be watching this meeting very closely. are they going to change the rules for bond buying at the next ecb meeting? mohit: we are not expecting at the next meeting but we do expect them to address it before the year ends because practically, they are running out of bonds to buy. a lot of things that they can do , if you look at the constraints the ecb has come a one is capital and that they have to by 25% of german bonds. constraints onot
this single issue or limit because they can only buy up to 33%. i do not think the ecb needs to address it. they will likely change their issue limit. ecb not in favor of changing the capital keys because it is politically contentious. they can change it on an ad hoc basis but that is not the response i'm looking at. what we are at is for draghi to indicate what they are likely to do. thecally, he lays groundwork for policy action rather than deliberate. mark: i was going to ask you about peripheral yields but i decided i was going to ask you about the u.k. this chart says it all, how the yields have come down since brexit, especially since the bank of england cut rates to a record low. does today's pmi any fracturing
number change your thinking on how well the economy is weathering brexit, or is it just too soon to make an impression? mohit: i would not just look at today's number. if you look at the surprise index for the u.k., right at the time the brexit vote happened it has only been a one-way street, up. that is because the market and investors were too pessimistic so data has been more resilient and better than expectations. from a we look at it market perspective and brexit, i would divide between three asset classes. assets,d u.k. related negative equity, yes. second, yields. --initely you were yields lower yields. the bank of england cut rates and are doing more qb. which it canassets
say is a proxy for the economy but central banks go more accommodative. after the initial fall we committed to the key assets. how i still view the impact of brexit. mark: mohit kumar, global head of rates research at credit agricole. word,: a quick work -- -- has died ato the age of 85. what happens in vladivostok stays in vladivostok. russia is eyeing the port city as a gaming hub but can it make up for russia's sinking oil exports? ♪
live from london, i am mark barton counting you down to the european close, just 15 minutes away. vonnie: from bloomberg world headquarters in new york, i am vonnie quinn. its ceoordisk announced well retire by the end of the year. ceo. now the incoming golier he joined bloomberg and disclosed plans. >> high key priority is that we need to, in the u.s. we are facing a bit of headwind but we have a strong portfolio of innovation products that we are launching, and we are comfortable that can get back to
slightly higher growth. moment, i can show you the world wind that your stock prices have -- whirlwind that your stock prices have had. you have been the apple of europe. share prices have come up to their highs. what can you tell the investor base about the breath of fresh air you might ring? with the company since 2009. have there been any external candidates? >> there have been many internal and external benchmarks. we have a quite broad portfolio of next innovation products that we are going to take to the market and that will get the growth on track. overall, the industry and your company has been dealing with pressures from drugs and either you discount your drugs to gain market share or you lose
it. what are you going to do to help that? >> i think it is slightly more complicated. the growth in our industry is based on innovation and we have a group of innovative projects -- products. we are facing some christ's -- .rice competition we can bring better patient treatment to sustain volume growth and value growth. >> if you are able to increase prices, how does not -- how does that not wind up hurting your sales? how easy is it to increase those prices? >> we are not increasing pricing. when we launch new products we have a better profile. we get a slight premium on these products so it is not a price increase but a strategy of launching better products. >> are you looking outside the
world of diabetes? >> we have a biopharmaceutical where we have been looking in the growth hormone area but within diabetes, we have diversified. obesity whichnto is an adjacent area to diabetes so i think we are increasing our diversification but staying close to what is a core area of novo nordisk. vonnie: -- mark: the incoming ceo spoke on bloomberg earlier. russia is eyeing the far east port city as a gaming hub. should the casino industry in china be worried? this is bloomberg. ♪
vonnie: live from london and new york, i'm vonnie quinn. mark: i am mark barton. this is the european close on "bloomberg markets." the russian president is taking a big gamble, aiming to take russia's most -- easternmost area into a freewheeling area of casinos with nearly 100 million people. in china, could this spell trouble? we are joined by jake rudnitsky. he joins us for moscow. is this the next vegas? jake: it certainly hope it is. hugh, the lawrence son of stanley hugh, the macau up themagnet, has opened first casino in vladivostok.
he has already poured almost $200 million into it and they are looking to expand and spend another half $1 billion on the next casino. there are three other groups building casinos right now. mark: is russia risking overdependence on power-hungry foreign trying to lure investors? is going ink putin this with his eyes wide open. it is one of the furthest east areas in russia and he said it is his national priority to develop that. you have may 6 million people on the russian side and 100 million chinese south of the border. they are going to have to find a way to bring in chinese money and help develop it to keep them at arms length. begun: putin has artie alreadyg for this --
begun preparing for this. changing the legal structure in vladivostok. jake: they have created a freeport which basically means that you get a lot of tax incentives to go there and open a business. there are no duties and you have cheap export and import, and they are promising not a visa free zone but just where you can show up at the border and by your visa, which is unprecedented in russia. vonnie: what kind of revenues are we hoping for, what russia be hoping for out of this? has anyone scored it out and said this is potentially what is out there? jake: if you believe the investment commitments that they claim they have gotten, almost $3 billion in investment commitments since october. we will see how much of those
dollars actually make it to vladivostok. vonnie: our thanks to bloomberg rudnitsky.news' jake he do not want to miss our , anrage on moscow tomorrow interview with the russian president himself, vladimir putin. tune in all day friday to watch this a stork conversation and ouray, do not miss conversation. at whereing a look european markets are trading as we go to the close, a disappointing manufacturing number in the u.s. changed the tone of the color of equity markets worldwide. stocks in the u.s. falling. not long ago the stoxx 600 was wiping away its post-brexit losses for the second time in three weeks. we finished august higher for
the second consecutive month so the tone has changed but now attention to tomorrow's achy, -- biggie, the jobs report. until that number comes out we will not be able to reassess our view when the fed could or should hike interest rates. stocks are falling, have a peek at it is happening to the currency market. sterling was the big story today, look at that rise against the dollar, up 1.2%. the biggest gain, we went from 48.3 253, this is bloomberg. ♪
we were higher until that raise -- release of december in the united states which showed a contraction in the manufacturing industry. banks are up for the third can akaka -- consecutive day. little changed on the day reached the stoxx 600 its higher on a closing basis for the second consecutive month. that ist to the saga deutsche bank and commerzbank. analyzedbank earlier the sale of all or part of its asset management business as it explores -- explores strategic options. meeting this weekend to discuss their options, they may adjust financial targets so says the wall street journal. they are also exploring a potential merger with commerzbank.
for now as they focus on internal steps, this is according to a person familiar, this is a three-day chart. the three-day movement for what -- for commerzbank, the white line, was 11%, deutsche bank roughly 10%. these shares have been hammered this year. something to discuss with jonathan ties just a second. declines,most of the hayes is a recruitment company in the united -- in the u.k.. referendumlowing the there is increased uncertainty in the u.k. market that has seen no evidence of impact elsewhere. growth inlid overall the u.k. following a step down in permanent activity
immediately after the referendum. stable andquentially the data point of the day, the record increase in manufacturing 58.3, the8.3 to highest since december, all down to the weaker sterling. new orders jumping. market is by far the main factor in improvement in export. they are not as bad as many had anticipated post brexit. vonnie: in the u.s. we are waiting for the payrolls report which is impacting the dollar index, down about 4/10 of 1%. the isn manufacturing in the u.s. did show contraction. withtories about in line reduction in contraction territory. it is a good sign.
dollar-yen, when a 3.19. -- 103.19. the triennial report shows that the yen was responsible for a swath of trading of 6%. -- spot trading of 6%. 68quick check on gold, 1312. announce. crude oil and futures are below $43 a barrel. abigail doolittle is at the markets desk. abigail: we took a look at the laggards. let's take a look at some of the winners, starting with the gaming and casino stocks. these shares are nicely higher on the report that revenue came in 1.1% higher for the month of august. the first rise in 27 months, it has been immediate estimate --
the median estimate for declines. this could be sign of a turnaround. some investors have been betting on this. shares of wynn resorts are up more than 30% this year. this chart may suggest there are some more upsides to come. in ain april, shares put , suggesting there is strong buying momentum. the last time this happened the sock ultimately rose by 128% this could be some reason to think that wynn resorts could climb higher in the future. another area for the market trading higher, arno parts makers. -- auto parts makers. this after every single automaker reported worse than expected sales for the month of
august so investors may think that consumers are going to be maintaining their cars with auto parts. twitter is trading higher for the second day in a row, on reports that activist investors , considering investors have been disappointed by the financials and fundamentals. there have been reports recently that speculation around possible takeover on a stock money that 26% fromdown 40% -- its ipo and down 15% this year. they are hoping for some sort of turn. vonnie: that is abigail doolittle. let's check in with courtney donohoe. courtney: for the second time in a little more than a year, one of elon musk's face sex -- spacex rockets has blown up. the rocket was scheduled to launch saturday and take an
israeli satellite into orbit. the satellite was also destroyed but no one was injured. last year another spacex rocket lou up right after lunch -- blew up right after lunch. theresa may says she wants to end the free movement of people coming from the u.k. to the european union and suggest she is willing to leave the eu single market to accomplish that. the spanish economy minister warns the country cannot hold up forever without a minister. -- rajoy lost the confidence vote in parliament. he would move one step closer to having a third election since december. china's hard-line on hong kong democracy will be put to test on sunday. voters will choose members of the city's council. ---democracy supporters
chinese government has blocked six candidates from running. and urban climber known as the french spiderman scaled a 600 foot high skyscraper outside of paris. it took him 55 minutes. his other notable climbs include malaysia.as towers in global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i'm courtney donohoe. this is bloomberg. mark: let's go back to the markets, an interesting trend we have been following lately. european stocks rotating. joining us is jonathan tice. we have seen a real stellar performance by the european banking industry in the last month. this chart shows it perfectly. which banks are leading and why?
jonathan: let's remember a lot of these banks have fallen 40%, 60% year to date. you have the hsbc's of this world that still have access capital but you are also seeing credit suisse and deutsche deutsche bank, credit suisse, and barclays? jonathan: never say never, but some of the negatives are disappearing. if you look at the year on year drag, they are evening out. if you look at the regulators, they are stepping back. this isss test told us a transitional approach. we have another three years and we are happy with where we are at the moment. some of the bigger obstacles are being removed.
you still have the bad debt cycle turn and it is hard to make money in this environment. i can certainly understand why the underweight would be looking to close and the u.s. is probably quite underweight for european finance as well. versus the mining sector or commodities where there is still a lot of unknowns, financials are looking relatively left back. vonnie: for some of the banks you mentioned that are really suffering, could it be that some of the fundamentals have woken down so badly that they have overshot? jonathan: i think actually, if you look at the revenue and what sustainable revenue is from here, i do not think we are necessarily that far away from what is appropriate. unicredit, theke biggest problem is capital and the bad debt exposures but there
are things they can do. discussions with the asset management venture and deutsche potentially doing a jv. if they sell on the nikkei and turkish and polish exposer's, -- exposures. some of the headwinds are updating. it is interesting to see the easy, more no-brainer kind of world. bank andn the deutsche commerzbank is rallying a bit. vonnie: is all of this depending on how negative the curve is and how far out it is negative? we just had mohit kumar telling us he is looking at equities to decide what to do about the bond universe. jonathan: banks are one of the biggest holders of bonds in the world and they have had a
massive unrealized gain from this. tate is still difficult for the yield curve, flattening not great. it is very painful for the interest income side of the equation but if you think now versus a year or two years ago, what how bad the margin would be. things are relatively less painful. mark: this is a nice chart, shows the ftse 300. the valuation gap is highest in four years. what is going on? andthan: hsbc has rallied they are in the high ratings because they are not as u.k. exposed. mark: deutsche bank and commerzbank, could it happen? what was the fuss? jonathan: i would be very surprised if that happened. is, the german bank
industry needs reform. deutsche bank is not global bank. commerzbank is a semi-european bank. they are not the same thing. when you say do a gary linacre, you say make a bad call? jonathan: yes. vonnie: thanks to jonathan tice. coming up and battle of the charts, i will be taking on oliver renick as we look at the key saga of the jobs report. this is bloomberg. ♪
vonnie: live from london and new york, i'm vonnie quinn. mark: i am mark barton, this is the european close on "bloomberg markets." time for the bloomberg business flash. british banks are being attacked for entrenched elitism. a government advisory panel says people from low income backgrounds are blocked from getting jobs at the bank. half of london's investment banks educated at private schools and bright working class kids are losing out. russia sees no need for oil production freeze as long as prices stay around $50 a barrel. according to the energy minister, they would resume talks but only if prices fall. opec nations and other oil producing nations meet in algiers next month. tomorrow on bloomberg television and radio, do not miss a rare
and exclusive interview with russian president vladimir putin speaking with our very own john mickelthwait. tune in all day friday to watch that exclusive conversation with russian president vladimir putin . on monday you do not want to miss our special hour-long andrt in a revealing special interview, 12:00 p.m. eastern, 5:00 p.m. london time. that is the latest bloomberg business flash. vonnie: we are going to take a closer look at tomorrow's job report and why it may give a clue about the federal reserve's next move. ♪
the day, and what they mean for you. you can access these charts on your bloomberg by running the function at the bottom of the screen. kicking things off, the man who slaughtered vonnie quinn on tuesday. oliver: a bold choice of words. vonnie: totally objective to say that. oliver: i do not know about all of the slaughtering but i going to gently present my chart. this is trying to assess what is going to happen as we get economic data tomorrow. this is going forward as acne -- equity investors purse forward, these two forces battling against each other. the you are looking at, white line is the economic surprise index. economics above zero, data is surprising on the positive side. we dipped below that today with a few messes but mainly since july it has been in the positive.
as a result you are seeing this purple line on the bottom, the financial sector which will do better in a rate hike. it has been doing very well the past couple months. the blue line on top has been flatlining. that is the consumer staples group which has been trending in this range. you have these two groups, fairly big groups with a lot of money going into those dividend type stocks like staples. where over the shorter-term there has been a shift toward the cyclical companies. out, isow that plays going to be very important. away.vonnie, take it you can only over and over again and i just keep coming back. it is gdp and in the last two
years the divergence has been quite remarkable. at is on the decline, we are 12 -- 1.2% year over year. you can see the trend is still upward. this is the conundrum facing the fed, do you hike in this environment? is this lack? is this the lack of productivity and efficiency in the economy? we will have to see what the numbers say and how the fed will interpret that for the health of the u.s. economy. topical, both on the nose, but she has a new title -- bonnie the slaughterer. -- vonnie the slaughterer. well done, you both. oliver: good chart. mark: you better get back, oliver. i will see you next week.
the markets are waiting for tomorrow's jobs report as both economists have made clear. august would be a drop from 250,000 in july. joining us is carl riccadonna. great to see you. how does today's isn manufacturing report change the dynamics when it comes to our thoughts on the fed? carl: i think the chance for a september rate increase has been extremely remote and that has only made the situation worse following the isn. odds for a september rate hike were slim to none and following the isn report, slam just left town.- slim just left mark: they are calling it the overlooked line. what is best and why does it matter? carl: i do not think it has been an overlook line.
it is something that has been focused on were emphasized by the folks who are saying that september would be a potential meeting. yellen is taking a longer view. she is not, has not ripped up her plan and forecasts for the economy. she is still confident this is a slow-moving economy but that things will get better. week, iter speech last was apparent to me that policymakers are eager to move and that probably means december. september would be far premature. there is still some negative downside risks to the economy that the fed will not risk up ending the applecart by hiking too soon. if we look at the economic metrics heading into the september meeting versus where we were last december, a lot of those metrics looked stronger
last december compared to present. september is simply too soon. vonnie: can i talk about some of the brighter aspects of today's data? tighter 4.3%ere from the first iteration of 2% and there was the contraction spending which was more than forecast. it rose to a positive number from a negative number. carl: this all factors into this longer-term view which i think yellen espouses. i do not want to speak on her behalf but i am interpreting that we are moving in the right direction. the fed is looking for 2% growth this year or at least they were the last time they updated their economic projection. we have to have very strong growth on the back half of this year, something close to 3% growth to hit that target and we are likely falling short. construction is going to add a
little bit. the factory sector is not doing well at all, and consumer spending looks good but not great. this is not an economy that is begging for a rate hike. vonnie: the better union labor costs well lead to infection? news that is good labor numbers are starting to build as they should, but not building and a rapid pace that will cause the fed to panic that they are moving too slow. mark: it was not just about the u.s. today, we had the u.k. pmi manufacturing back to the highest level since december at 53.3. as a time to reassess our view of how much damage brexit has done to the economy or is it way too early? carl: i think it is still a bit too premature to do that. nonetheless, this makes an
excellent point that currency levels matter and when you devalue your currency it stimulates the export sector. we are seeing this in britain and saw this in the u.s. when ben bernanke was still the fed chair. the dollar weighted fell to a low. whyan see very clearly japan is trying to ease their currency and why china is doing the same thing. vonnie: thanks to chart -- carl riccadonna. no september rate increase. mark: tomorrow, u.s. jobs. where thek at european market ended today, it was all up to that isn number. ♪
from bloomberg world headquarters in new york, good afternoon. i'm matt miller. we are covering stories from washington and london to beijing this hour. here's what we're watching. u.s. stocks falling with the dollar data showed not expected traction in american manufacturing, renewing concerns about the strength of the world's largest economy. if you are a traitor who's been fed up with u.s. stocks doing nothing for weeks, friday's payroll report may be the solution. does the fed need a blowout jobs report to move in september? republican presidential nominee donald trump doubles down on his hard-line immigration plans, promising robust protection of the u.s.-mexico border. trump: we will build a great