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tv   Bloomberg Markets European Close  Bloomberg  September 5, 2016 11:00am-12:01pm EDT

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'm mark barton. this is the european close on "bloomberg markets." u.s. exchanges closed for the holiday. from london to frankfurt. here's what we are watching today. with euro area inflation stuck at zero for two years, what if lengthen -- mario draghi lengthened qe? barclays finally filled its top former, naming tim, a jpmorgan executive. in an exclusive interview with bloomberg, russian president vladimir putin reaffirms his exports.the state run
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have a look at where yo european equities are trading right now. there is a holiday in the u.s. today. movers, lovely function tells you everything you need to know about global markets. look at the left-hand column, the equity indices where we are rising across europe today. we were headed toward the highest close since january. now, since we've come off the highs, we are at the highest 5%se since april -- altice higher, agreeing to buy 22% of thatrench unit sfr group it doesn't already own for 2.4 billion euros. taking steps to unify operations
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after 50 billion euros in acquisitions. phone the mobile broadcasting business in france. it struggled in a competitive environment the last two years. hugo boss has been downgraded to sell from neutral at ubs. 48 euros from 34 euros. shares down by 2.3%. 48 euros from 54 euros. this price target implies a 10% down slide from the current share price. let's cut to some interesting data out of the euro zone today. the economy losing momentum in august.
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a gauge of private sector growth falling. purchasing managers index for manufacturing and services slipped to 52.9 from 53.2 in july. divided when more measures will be announced by mario draghi and his fellow policymakers. let's get to the bloomberg first word news desk today. nejra cehic has more. nejra: saudi arabia's oil minister says there is currently no need to freeze oil output. he spoke after signing an energy agreement with his russian counterpart. crude prices jumped 5%. there was speculation they would agree to cap output. president obama discussed syria, ukraine and private security in a meeting with sergio paz. -- with vladimir putin.
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president obama: vladimir putin , but typically, the tone of our meetings are , businesslike and this one was no different. nejra: the two did agree to forge ahead on reaching a cease-fire in syria. of china and japan also met today as tensions rise in the east china sea. she sinking engines oh oblique jingping and shinzo abe had a meeting. the drivers are frustrated the refugees tried to opt their vehicles so they could cross the
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english channel. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm nejra cehic. this is bloomberg. tens of billions of fromrs in new deals emerging-market debt funds received a record $80.7 billion in july. our next guest says it's time for investors to consider joining this great migration. joining us now is sergio paz, head of emerging markets. migration makes you think of many things. paint the picture of where this great migration is taking us. in february, you had a turnaround of monetary policy
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dynamics in the developed world. but a metals in emerging markets bottoming with oil and commodities. -- fundamentals in emerging markets. you get a 10% rally and investors are asking if we're too late. this is where we invited them to join the great migration. they were under pressure of negative rates. we were forcing stabilization in oil prices. all the boxes would be ticked during the summer. brexit investors rushing into emerging markets. funds --t into active it was indiscriminate. a great migration, overwhelming. this has happened and now, we
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$15 higher in emerging-market performance could -- the next step is moving the high data low alpha phase. you don't care about fundamentals. most of the performance comes from the index rather than the often generation. -- health the generation. -- alpha generation. that is going to continue to be with us, but eventually, less powerful as an engine. the discrimination is going to happen amongst managers, amongst investment and with an asset allocation. mark: give us an idea of the selection. sergio: if you remember at the fragile012, you had a
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five in front of your nose, but people were buying all emerging-market countries. they did not look at fundamentals. current deficits were there, but it took time for people to realize other countries were week. you had the side moving out and all the problems exposed. say to investors, hey, remember that time -- let's not make the error twice. let's look at the weaknesses come of the countries that can do better if the time comes. the commodity exporters that enjoyed 10 years of a bull run during the 2000s were the losers post tapir tantrum because they forgot to do their homework.
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you had india, china, mexico, turkey and now, we see that mexico, turkey, india are eventually starting to backpedal on their reform agenda. institutions are a bit more challenged. this is where we see eventually the time moving out and the tide being investors who have been as the tide moving out in the tide being investors it as overweight. they wouldople doubt break $50, but we believe ,ventually in a reflation world oil can get a second leg and eventually challenge $60.
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under this scenario, plus taking the lessons of the oil exporters that have learned during the oil tantrum in december of 2014, all these countries have basically does were obliged to do reforms. if oil prices move the right direction, all the russians, colombians, malaysians have done is going to pay off. taking the ride on a more positive commodity price -- mark: the top three picks would be? sergio: russia command in asia brazil -- indonesia,
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we saw congress wobbling during the impeachment vote. eventually, brazil is going to be more overweight -- the commodity exporters is still a great place to be. mark: shows you the difference between the sovereign bond index and the jews have been developed thereign bond index -- bloomberg sovereign bond index developed sovereign bond index. what is going to tell us if emerging-market debt is in a bubble? sergio: normally come in a bubble, it is a change of paradigm. it is expensive, but you have models to see this is actually cheap. do -- thee trying to way we look at it, fundamentals
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but where are they? improving, but there's time to be selective. s can take aket policy normalization. to half a point. where we are a bit worried is the duration side. although we can buffer on the spread side commemorate rates separately by 30% on this end. -- spread side, rates have rallied by 30% on this end. i doubt the entire compound will behave well. duration is a major threat. monetary policy divergence being the input for that. mark: talk to me about
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liquidity. there is some evidence investors are reluctant to sell their of lack ofcause liquidity. have you noticed this trend? is it affecting your strategy at all or not? sergio: liquidity in emerging markets is the name of the game over the last 25 years. if you are rates continue to go rates continuer to go negative, whatever you buy you will have to sell later. when is the end of negative rates or when is the end of this nice ride we are having in fixed income? where you need to focus is on the selection. , this great buy i migration reverses, you need to be sure of what you own. mark: be careful of when the
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tide comes out. sergio: the rally is there. but mind what you buy. , head ofgio paz emerging-market debt at black rock. you heard about russia from sergio. don't miss our special program on vladimir putin, his exclusive conversation with john. this is bloomberg. ♪
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mark: you are watching "bloomberg markets." u.s. stock markets closed today for the labor day holiday. angela merkel vowing to stand by her refugee policy after her
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party was defeated in the state election. with more on her efforts, patrick donahue joins us live from berlin. how can merkel win back the nation's trust? patrick: that's what she says she aims to do. it is a waiting game. it is a big loss for her party in the state election yesterday. wasfirst time the party beaten out right by the right-wing populist alternative party. she says she will stay on course and continue her policy. the influx has slowed to a trickle this year. one million asylum-seekers came into the country. this year, they expect 300,000. the numbers are sort of on her side. mark: he's her standing irreparably damaged -- is her standing irreparably damaged by
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this election or not? patrick: by this election defeat? no. it is bad. the first time they were beaten out right, but there were some caveats. it's not a stronghold for her party. it never was. the party performed a bit worse than expected. but it was not a monumental loss that would somehow undo her chancellorship. will it have any impact on her decision whether or not to run for a fourth term? patrick: she has not said yet whether or not she's going to run. the simpson is she well, but she has not said so. last week, she gave some that the possibility is linked to her reelection party's chairwoman. will, assumption is she
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but she has not said so. mark: wouldn't this result make it more difficult for her to reestablish her authority and leadership? patrick: the national election is a year from now. that is a very long time in politics. a lot of things could happen from now until the end of the year, until next year. there is a huge election next may. so many things could happen along the way, i don't think many would venture at a prediction other than to say the a section is she will run again. -- the assumption is she will run again. about twoario draghi pull a bernanke? could we see another installment of asset purchases? this is bloomberg. vladimir putin:
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-- this is bloomberg. ♪
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mark: you are watching "bloomberg markets." economists are split over whether the ecb will add fresh stimulus when it meets this week in frankfurt. this ava does not happen on thursday, it will happen by the end of the year. -- they say if it does not happen on thursday. how much pressure is on draghi two hike this thursday? >> to be frank, not much. the economic signs are not all that bad. the tier rating survey data come including the pmi that came out today which showed activity at a 19 month low. but still expanding. you have a fragile economy. the risk area is whether the brexit shock. longer andt a bit
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gauge things in october or december? mark: isn't there a risk the ecb will run out of bonds to buy? does it have to tweak that qe program? paul: that is the key. if the decision comes to extend qe, you have to think about is there enough stuff to buy. q will only run another six months. if you want to send a signal, you have to do is centered -- you have to do it soon. floor,g the deposit rate buying greater than the 30% share of bonds. economistshe things see as most likely. there are others as well, of course, such as expanding into new asset classes, equities and etf's.
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up, might be a bit further but there is no doubt the ecb is going to have to think about convincing the market that it can extend qe. mark: here is the view, paul. this is our survey, what is next for the ecb. laying out all the options come as you said, the most likely option is the program will be extended following a deposit rate cut. ecb isblem is, paul, the a long way off its inflation target. data last week showed inflation is stuck at .2%. doesn't that tell us there is some necessity for the ecb to act now or is it still confident that target will be reached in the two-year horizon? paul: no, not the horizon. the ecb is confident it will get back, but it's not happening
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anytime soon. at the moment, forecasting no earlier than 2018. fresh forecast will come out on september 8. it could be the ecb has to push them out even further. that would be a worry. in particular worry for credibility. you look at five-year inflation expectation measures, they are not good at all. mark: talk to me about brexit. what's been the impact a couple months off the brexit referendum vote? paul: the confidence numbers in some areas have been down. the pmi numbers published today unexpectedly fell. the key weakness for those pmi numbers was germany. that should be some concern because that is the powerhouse economy of the euro area. you cannot read too much into
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one set of numbers. the u.k. pmi numbers for august were particularly strong. ,.k. doesn't suffer too much you may find the euro area doesn't suffer too much, either. they will have to sift through the data they've got and make up their minds as to whether they want to be preemptive or not. mark: a big week for the ecb. the european closes next. -- is next. no trading today in the u.s. because of the labor day holiday. looks like right now, the stocks 600 -- stoxx 600 is going to close at its highest level since december 16. this is bloomberg. ♪
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you areve from london, watching the european close. imr arden. it looks like -- i am mark barton.
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it looks like -- since generally six, the oil and gas companies lead in the events come up by 1.2%. theya, saudi arabia say will work together to stabilize the global oil market. that means actual measures -- we do not know. but it takes us nicely to the algiers meeting later this month. it looks like the index is going to finish at a high since .enerous exper it is plotting to cut about 525 jobs at the london headquarters. 30 million pounds per year. the plan cost cuts come in the steve rowe is planning to -- and his court portfolio here in the u.k., whenever it announces the interim results on november 9. the company reported almost 9%
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drop on closing sales in its most recent quarter. this is the most recent job cut in seven years. -- this is the most significant job cut in seven years. this gauge of services activity jumping the most on record in august, share saying the pmi jumped to 52.9 from a seven-your love of 47.4 in july, the biggest gain since the survey began two decades ago. economists forecast a rise to 50. market predicted an imminent recession will be avoided, but urged caution, saying data since the referendum pointed to a stagnation so far this quarter. many firms remain confirmed -- concerned about the outlet, after manufacturing rose to the highest level in 10 months last week. we saw a rebound in construction activity. as well, this highlights the resilience of the u.k. economy. mark carney testified and faces
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a grilling from lawmakers on wednesday. i want to finish off with a pound because today's sterling is at its highest level in seven weeks against the dollar following that pmi data, on track for its fourth consecutive weekly gain, the longest winning stretch since february 27. it is rising for a fifth consecutive day against the euro, the longest stretch since january 21. is higher since july 21 because of the data, it rose against all 31 against its major peers. at 1.33. the median forecast of analysts made by bloomberg is 1.27 by the end of the year. "bloomberg in on first word news," with nejra cehic. nejra: theresa may does not plan to let the brexit vote hurt the
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country' relationships p she spoke in china today at the end of the g-20 summit. theresa may: i set out to become the global leader in free trade. meeting, i have signaled our determination to secure trade deals with countries from around the world. the leaders from india, mexico, south korea, and singapore said that they would welcome talks on removing the barriers to trade between our countries. may also said she has no date set for formally beginning the process of leaving the eu. shinzo abe wants predictability from the u.k.. he met briefly with may and said japanese company's one more certainty about brexit as they consider the future of their investments. exitingncerned that will be too tough for the u.k. that if mr. obama
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raises the issue at this wii's summit at southeast asian leaders, he will swear at him. hundreds of people have been killed in police operation since he took office june 30. drugs. a war on illegal in hong kong, candidates who want a vote on the future of chinese rule have one seat in the city's legislature for the first time. voters turned out in record numbers. more than 2 million ballots were cast. it was hong kong's biggest selection since the pro-democracy protests two years ago. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am nejrauntries, cehic. this is bloomberg. mark: barclays chief executive, recording, extensively from his former employer, jpmorgan. his latest hire is jpmorgan's tim frost late.
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-- great to see you. who is this man? >> he was another one of jes staley's peers. he has been running jpmorgan's global equities businesses in 2012 but will take on a much wider role at barclays this time around. he will be running credit card divisions, wealth management, and other operations. he has a big task ahead of them, but he seems to be up to it. a drop in trading, revenue -- is it a big ask to turn it around? stephen: it is a very big ask to turn it around, but jes staley has been running the husband bank for a while now. --clays has been doing ok has been running the investment bank for a while now. barclays has been doing ok this year. no one has been promoted through
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the ranks. it,: it is not unusual, is for a leading executive to come from one company, go to another, and then go back to his old company. something jes staley clearly is doing. he is mining the talent at jpmorgan. stephen: he is also building a group of people loyal to him, who he knows he can trust. as you say, this is not an uncommon thing. when the ceo came into lloyd's coming he brought lots of people from santander. he is known as the conquistador. mark: are you going to be the man who creates a name for jp loss to jes staley? stephen: buy my account, this is the first part -- this is the third person jes staley has brought in that he knew at jpmorgan. and it is the seventh on the committee. mark: it is interesting, the
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last quarter, the profit fell. the increase in capital, those were the bright spots. there are still some dark clouds, beginning with brexit. that is a dark cloud, isn't it. stephen: the dealmaking environment is great at the investment banking for the moment. just exited most of asia, pulled out of moscow, brazil. it really is very dependent on the fortunes of both new york and london. really, the strategy has already been set by jes staley per this guy has been brought in to execute it. mark: do we know what he is going to do with passporting rights are not granted to investment banks yak of do we know what that means when it comes to numbers? stephen: they will try to move as few people as possible because it will be expensive to relocate them.
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they do have licensed subsidiaries inside the eu and in dublin, so we will see more of these businesses booked through those. this will all come out of the wash over the next two to three years. the banks trying to seek special transitional arraignments mince -- transitional arrangements anyway. mark: thanks for joining us today. stephen morris. i just want to show you this great chart that i myself created for you. highlights the the virgins in performance of the major u.k. banks since brexit, -- the divergence in performance of the major u.s. banks since brexit. hsbc andn see, the standardchartered, chartered up by 13%. the emerging market focus, these of the banks that last year were on their knees.
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and you have barclays down half a percent, rbs down 21%. lloyd's down 17%. a wonderful chart created by yours truly. banks are struggling, particularly the world's oldest bank, which has received two bailouts since the crisis. the finance minister is saying if it fails it risks a domino effect or joining us now is alyssa. great to see you. it certainly was the big elephant in the room, wasn't it? >> that is the take away. it is striking that just a month ago, off french fresh plans ton this around, tapping investors theanother time, i guess fact that it is still at the top of everybody's conversation, it
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is a reflection of the fact that it still seems to be a very ambitious plan that they have. mark: where are we on this plant? how close are we to a rescue plan. elisa: the plan is to get rid of the bad debt, but we are already hearing potential debt for equity conversion of the subordinated debt may be on the cart, and that is a reflection that the rays may be too much. mark: is there a plan b? the bailout fund of the eu area has been touted as a potential alternative. is it being considered? it has beene moment ruled out, but the pressure on management to carry this through , allr rather than later options at that point would be aschi. table for monti pesci
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mark: is there anything in play if the restructuring plan does not work? elisa: it is all about the confidence, isn't it? unicredit has offered into the market for a large amount of stock toward the end of the year. the absence of confidence in that industry could make it very difficult for the funding and capital needs? is there a need for italy, if things turn sour, to act as sort of the lender of last resort? that is the last thing italy wants. is there a c jackson -- is there a suggestion that that is on the table? elisa: at the moment, the focus is getting the monti passion monte dei paschi -- the monster passkey plan --
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they tried to spin an optimistic -- i spoke to the former prime minister on friday, and he said it is all these --xiteers trying to describe trying to distract from brexit. maybe that is not true. .hey have come up a little bit off theetting that plan ground, getting that capital in between now and the end of the year, that is really what the market is focusing on. mark: and you will be here to tell us all about it. thank you. gazprom is an example of a conservative approach to economic reform. we will hear exclusively on vladimir putin, on why he has a face in the energy charge. ♪
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mark: you are watching bloomberg markets. u.s. stock markets are closed for the labor day holiday. lost 80% of its value over the last decade, but president putin says he is happy to leave the company's longtime chief executive at the helm. he spoke with john micklethwait in an exclusive interview. the me give you an example to her you have recently made changes on the political side within your administration. but if i look at a company like gazprom, for instance, i just checked. in dollar terms, gazprom is worth less than a fifth of what it was 10 years ago. and it has fallen from being in
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the top 10 companies in the world to 198 per you have had the same manager running it for 15 years. you have given him another five-year contract. what i am saying is that you are not as tough on the business the oil side as you might be on other people. you puthink -- why do up with this yak of you are a famously efficient man. putin: gazprom is clearly undervalued. this is an absolutely obvious fact. yet,ve no plans to sell it and this is the goal of the peculiarities of the russian economy. russia'ss part of energy system. one of the gas pump functions is to secure failsafe passage of
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maximum to supply the big energy companies. it fulfills this function. i think gas's valuations are speculative -- i think gazprom's valuations are quite speculative. this absolutely does not worry us. we know what gazprom is and what it will be worth in the coming years, despite development of shale gas in the united states or other regions of the world. pipeline gas will always be cheaper, and gazprom is increasing. look at gazprom's reports, especially for the past few months. sales are rising. i am certain this will be the case in the future. why? because in the near future, despite the development of alternative energy, when you
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look at the economic elements and environmental demands, when there is no other source of primary energy in the world other than natural gas. well, perhaps there is nuclear energy, but there -- country that is obviously the world leader in gas reserves, but our country, the russian federation, and gazprom carries out all the functions it has been assigned, that the management has been assigned. of course there are issues and there are problems. we see them. i know that gazprom's management is taking a strawberry steps to resolve these issues, and that -- to do it well, poorly, that is another question. many criticize us. they say that it needs to be
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more flexible. -- the gasuld have business is very consistent. it is not even like trading oil. business in transportation. this means that producing structures must be able to sell at a good price. russian president vladimir putin speaking exclusively with john micklethwait. do not miss our special program utin, tonight at 5:00 p.m. london time, 12 noon in new york. something you do not want to miss. this is bloomberg. ♪
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mark: live from london, i am mark barton. you are watching bloomberg markets. theresa may attended the first
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ever -- her first ever g-20 summit in china. attention was put on trade steals in a post-brexit world. immigration policy also crept in. let's bring in bloomberg london bloomberg chief, ross thomas. immigration off the menu, it seems. like a that's right. she said she does not want to go down that route. that was the proposal by the brexit campaigners. mark: it is boris johnson, her own foreign secretary. mma: it was always short on detail, more of headline than anything else. says i know of what i speak, and it really doesn't work. she gives some examples of when she was home secretary. border officials,
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saying that people game the saying thathe was it might not be the most effective way to control immigration. some in the u.k. are saying that this suggests she is backsliding. it is not entirely clear to me that saying no to a system like that is saying -- mark: she wants to introduce controls on how many eu citizens can settle in britain. emma: absolutely. that came out last weekend was the first redline on her stance on brexit. mark: what else do we know about her views on brexit? she did not endorse any of the 'ther cabinet brexiteers commitments, did she? whenever we ask the
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question, she just says you do not reveal your negotiating position. what she is saying that is -- what she is saying is that she will be ambitious on getting as much access to single market as possible. she does not seem to be ruling mark: even though you cannot control migration and have the access you want to the single market. the brexit chief, brexit secretary speaking, speaking in parliament, he says britain is seeking a unique deal, unique with the same verbiage. emma: absolutely, but without any details, we have been -- almost insinuating that theresa may would leave the negotiations, so not him.
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i guess we could have guessed that already, but that was a piece of new news. he also talked about free trade, which also theresa may has been talking about, being a champion of free trade. you could say that gives you a hint of the direction -- mark: all in all, how would we grade her first g-20? she spoke to australia. that was a test. the u.s., maybe not so much. china was a tricky one. how did she come away from g-20? probably is austin. it was a very tough couple of days. you cannot even count on your friends to be nice to you, obama, as you mentioned. australia was a bright spot, as you say. at the same time, the g-20 in
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italy, she has also been told to hurry up and that europe cannot waste time messing around with -- tok: she is not going trigger article 50 this year, is she yak of the big question is, when? emma: she is sticking to the line that it is not going to be this year. mark: bloomberg's london bureau chief, emma ross thomas. a put in,l program on literally in four minutes time. that is it for the european close. highest levels for european stocks since january 6. our big exclusive, with vladimir putin, this is bloomberg. next. ♪
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>> since the start of the century, the fortunes of russia have and and flowed, so, too, as the country's relations with the rest. -- with the west. one constant is vladimir putin, getting to power at the end of 1999, first as president, then as prime minister, then as president again, he has built russia in his own image. an economic rebound and rising living standards.

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