tv Bloomberg Markets European Close Bloomberg September 13, 2016 11:00am-12:01pm EDT
european close on bloomberg markets. mark: we are going to take you from new york to london. we have a story out of argentina and switzerland. this is what we're watching today. the agency is out with a new forecast saying surplus will persist into late next year, pushing prices lower in trading today. vonnie: wells fargo is taking steps to eliminate a sales scandal. they are limiting goals for retail bankers. carson block says european investors are not doing their homework. companies thinks many are a ticking time bomb. at european look
equities. it's under 30 minutes till the end of the tuesday session. look with the equity column we are in the red once again. we are higher early in the day and weird down for the fourth consecutive day for the stoxx 600. that's the worst trend since august 7. the four-day drop is the biggest since july 7. it is 2.5% drop. investors are pondering the central banks in the world. we are talking about the fed, the boj, the ecb. they are meeting. some of the big movers are a dutch lender, the chief executive is stepping down next year. the lender leads a longer-term lead a its break up and return to the market. he won't complete the term that was expected to expire in 2018. he took the helm that can to
thousand nine after the disastrous takeover led by the royal bank of scotland. that led to a bailout. it led to the financial crisis. those are the shares. they are down by 2.2%. he shares are up by 5%. finance a issue to airgas of the knighted spates. that is the biggest -- united states. they get one new share for every eight day hold. the new stock will be priced at 76 euros each. sodacount refineries, bodies. is a foothold in the u.s. market. investore up by 5.3%. confidence is unchanged from set timbre after recent data.
analyst expectations aim development. this is .5 as you can see clearly from this chart. there is an increase to 2.5. germany is benefiting from record low unemployment and borrowing costs. isdued growth from brexit wayne on its business confidence. this is the most since august 2012. investor confidence is unchanged in the last month. 19 -- 90 minutes into the trading day in the united states. julie: we will see what investor confidence next month and receive volatility pick back up. i hope investors have their seat else fastened over the next couple of days. we have seen this return of volatility and this website.
it is a downdraft again after we got a big increase yesterday. her dovishernor cap -- kept her devon's stance. that has melted away we see this big decline. but it's a bloomberg the last three days of trading. the big slump we saw on friday is the largest since june. the biggest climb since july, it's down once again. the three day return is negative 2.4%. what's driving this down today? almost everything. it's almost everything read on your screen. there is one green, that is due to apple. we see energy shares are the biggest drag along with the interest rate sensitive groups. that has been the trend we have been seen over the past several days. oil prices are lower at the international agency said a glut is going to process -- persist through next year.
previously they had said we could start to see a balancing by the end of this year. this is really a change. oil is down 3%, below $45 per barrel. that is pushing down other stocks. chesapeake is quite volatile, it is down 9% today. there is new coverage and its underperforming. they are worried about the company's stability. lockhart is out as the atlanta fed president. he will step down on a february 28. presidentn named the of the atlanta fed in 2007. yearsenure is about nine worth. let's check in on more top stories in our first word news. courtney: bill clinton is filling in for his wife at
campaign events in california and nevada. hillary clinton is resting at her home in new york city. the democratic presidential candidate has pneumonia. bill clinton spoke last night with charlie rose. >> she is doing fine. she was eating dinner last night before she went to sleep. she just got dehydrated. courtney: you can watch that interview tonight on charlie rose at 7:00 p.m. eastern here on bloomberg television. in philippines, the president distanced himself from the u.s. he says he wants to end joint naval patrols with the united states in the south china sea. he is considering wearing -- buying weapons from russia and china. he wants u.s. peschel forces to leave the philippines. u.s. warplanes sent a message to north korea. two bombers capable of carrying nuclear weapons fell -- flew over south korea.
the command says it was a show of solidarity. north korea had a nuclear weapons test. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. mark? mark: we are getting some breaking news. each chief executive is not available for a second term and we heard this a few moments ago. the cfo will be leaving the company. this is the wake of the collapse of the deal, the merger and the deal between linde. we are seeing the collateral fallout of the collapse of that deal between them. the ceo will be leaving. we are hearing the cfo and the ceo will not be available for a second term. the shares are up high 3.8%.
let's go back to the markets. european stocks are falling. u.s. shares are falling as well. join us is an investment strategist. assetsve $30 billion in under management. the leading market in the taker , it has been pavlovian it. simple.maybe not as basically, the good jobs report above 200,000 means for the next month the market rallies. the best example is july. we saw a number of about 275,000. people expected 180,000. the s&p had highs for the year. we have now seen it drop. >> we have seen the payroll.
>> exactly. in the last payroll report, we saw 151,000 and here we are a week on and the markets are having a little bit of a peak. the: many link it to overview that central banks like bce might not be as open to lose policy as originally thought. estimate of why we have seen this burst of volatility? 2014 whenthrowback to bad news was good news because rates were going to stay low. the economy growing was bad news in the economy fell. i thought we got over that. it is back on the scene. it's about the same time as last year when we had the fed rate under scrutiny.
i think it's simplest it. i don't think we can argue that the bank of japan stimulus has helped the japanese stock market this year. you can argue exactly the opposite. the yen is so much stronger and the market is still 10% down. what -- surem not what people were expecting from mario draghi. how does he know if it's effective or not? he is clever, but he's not psychic. vonnie: are you just waiting it out? >> exactly. we have taken a little risk off the table. we have been discussing it for a few weeks. it suggested to us that with the time, it's better to do it before than after. we are sitting in more cash than we've held before. a quarter of our portfolios are in cash, ready to be deployed once we get through this time of uncertainty. the 21st ofup until
september when the fed meeting is. vonnie: that is next week. we will get the bank of japan assessment on the same day. where do you the opportunity coming? >> there has in a big story all through the past week about cyclicals and how they are poised to do well if growth returns. we have been over that trade for a long time. we have been in value baskets. we hope that will come true. nowhere more do we hope it comes to then in asia. we hope all of the capitalists in asia have good growth. it seems like a decent place to be. china and india are places we want to be. mark: how does the focus run its course? it has been a big investment theme? the divergence between the stoxx 600, it's widening. it is outperforming dividend payers.
this may be from the brexit referendum. is that still a trade that we can benefit on, focusing on those dividend payers? morgan stanley said yes it is. they have got a lot more expensive for the last five years. the dividends have gotten lower every year for the past five years. relatively, it's not so attractive. thecially when you're on edge of what could be such a great time for some of the more cyclical stocks. bank stocks in europe are an interesting place to be. it's not without risk, don't get me wrong. if interest rates though up a bit or they start to do something on the long end of the curve at the ecb, banks will benefit hugely. mark: thanks for coming in today. it's great to see you. , we may being up
mark: live from london, i am mark barton. your candidate down to the european close, just 15 minutes away. vonnie: i am vonnie quinn. let's turn to the debt market. are we rates are raising to the point where some companies can no longer ignore them. sally has been covering the story. she joins us now. to do withn a rise regulations coming in money market wise. when they do finally come in, should the rate klein again?
>> the consensus is that while it might track down it, it's going to remain elevated for the same amount of time, maybe a couple of quarters. companies are going to have to start thinking about how they handle securities. viewerswe want to show my bloomberg. you can see this. and 2013.through 2012 there is a phenomenal rise that picked up just in the last month or so. that is a chart library. why is this a significant? >> it matters in this corner of the loan market. this market is governed by flaws. they grew popular after the financial crisis. fell,ter how low rates they always got a yield cushion.
most leverage loans have flaws of about 1%. there are about $230 billion worth. month rate above that, companies that took out loans are going to face a highest -- higher interest expense. if you are a company that has seen falling stocks and higher default rates, you will have more pain. mark: can companies lower the benchmark rate on their loan? to a lower baseline? >> they can indeed. at the point of borrowing, they select a specific rate. when that interest rate time expires, they can choose another rate did we have seen a company called advanced waste disposal do that. when the three-month interest expired, they had a one-month time. this lowered the interest rate.
we ll see me of that going forward. mark: this leads to the question will the one-month libor raise up question --? . -- raise up? it depends on how many choose to roll over securities. that's lot of them do, going to roll over to the one-month rate. that's going to create more pressure and we will see the rate rise again. mark: sally, great job. thank you for bringing the story to us. thanks. it's time for our latest look at the business stories in the news right now. the atlanta fed president. down at the end of february. civic work to pursue and private business. the search will begin to find his successor from a diverse
group of candidates. wells fargo is taking steps aimed at preventing another scales sandal. they are eliminating sales goals for retail bankers. fined $185 million because employees opened accounts without customer approval. they fired 5300 employees involved in the case. we've made fundamental changes as a result of our findings, taking disciplinary termination to employees who were counter to our values. we had our own internal investigation. this did not happen all at once. it took place over the last five years. 99% of the people were getting it right. 1% were not. 7 is breaking sales records and t-mobile. four times asived
>> the asymmetry in the toolkit with lead me to expect policy to be tilted somewhat in favor of target against downside risks relative to preemptively raising rates to guard against upside risks. the fact hasn't increased rates is not lost on harvard university professor marty feldstein. i think the fomc keeps looking for excuses not to raise rates. they did that at every meeting all year. stan fisher in jackson hole had the same message, the time has come to start typing. the people who don't what the titan don't see the adverse consequences of running with zero rates all along the curve. what are the adverse consequences right now? martin: one is the inflation pressure.
there's no question that inflation is rising. cpi, that'sat core not the fed's chosen number, it's up to .2%. wasou look back a year, it 1.7%. it's starting to tighten because the labor markets are tight and product markets are tight. david: you look at this, it's been along time and you have had really low rates. we haven't had a problem with inflation. 2.2 percent inflation is not a problem. is this an asymmetric risk if they hurt the economy? martin: they don't want to take the risk and that is a political risk for them. at some point they have to do what they are there to do. i think their strategy is to keep rates very low. 25n if they raise rates by basis points over the next 12
months, rates are still going to be exceptionally low and there will be upward rusher -- pressure on inflation. they are heading for a higher rate of inflation intentionally so that once they've gotten to an inflation rate of 3.5%, that's when they can jack up the short-term rates and why do they want to do that? down,the economy turns they can cut those rates. they have no ability to lower rates if the economy goes soft. vonnie: that was marty feldstein on bloomberg . mark: this is what's happening to european equities five minutes away from the tuesday close. it's down for a fourth consecutive day. it dropped by almost 6/10 of 1%. there are concerns about central banks and the pathway of central banks that weighs on investors.
600 -- ftse is lower today. look at what's happening in the currency market. there is macro data here in the u k. input prices are surging the most since 2011. many believe the weaker sterling is only a matter of time. it's going to lead to higher inflation. sterling today is 1.2% lower compared to the american currency. the european close is literally minutes away. this is bloomberg. ♪
they have 2% declines. this is a four-day drop, the biggest drop since july 7. that is the dropping of seen in four days. we have four days of decline. let's talk about some of the big moving parts today. dividend shares are very interesting. this is a great chart that highlights the dividend share components of the stoxx 600. morgan stanley says it's time to step back in. they have high-end sustainable dividends. done this badly versus the stoxx 600 since 2013. the blue line is the morgan sightly -- stanley. the blue line is the dividend index and it's down by 13%. this is a move into cyclical shares since e end of june.
this has been driving the recovery. they are sensitive to economic trends. that's very interesting for a chart. one of the big sports retailers, shares rallied by 4.3%. shares rose to a record up by 56%. that led the entered -- toependent retail analysis call this astonishing. it's a rival when it comes to market capitalization. bright, spacious outlets. they have brought in a savvy sports customer. seemingly falling out of favor. this is what we have seen it, the ceo is going to leave the company when his term ends in april. this is following the collapse
of merger talk. the financial chief is blamed by people for undermining the deal. he is leaving immediately. he isn't available for another term. that is quite astonishing news since august. the deal broke up this week. it would've and a massive deal in the industrial gases industry. as you can see, shares and linde are rising on that news. vonnie: i am looking at the fix again today. we are above 18 again. that's a substantial game. it's way below the level of the financial crisis. we're not anywhere near it that. we're looking at the dollar index. there is some strength against currencies, including the euro which is trading at 11238. you mentioned that earlier. crude oil futures are down
almost 3% after the forecast of a global got -- glut through 2017. at 77 basis is points. getting acurve is tiny bit steeper. let's look at the u.s. markets. the dow is down 1.4%. the s&p is down 1.5%. the nasdaq is down 1.3% with a moment. abigail doolittle has more from the nasdaq in midtown manhattan. abigail: we have a reversal on our hands from yesterday. the snap act rally from friday, it's too early to say even with the nasdaq at session lows, whether this is a continuation of the friday selloff with the index above friday's lows. time will tell. the interesting thing is just not the reversal, it's a rose personal of the sector.
yesterday, health care was one of the best and today it's one of the worst. theech is down 1.2% did biggest boost yesterday is dragging the most today. there is one exception and that's apple. boost to,he biggest up 2.5%. they are having the best tuesday winning streak since july 28. john ledger earlier treated that preorders for the iphone 7 are at a historic best, beating the iphone 6 by four times. apple said they would not release those numbers. it suggests the pre-order numbers are just fine, even the best in history. vonnie: as for the shares in apple over the last year, it's difficult. investors are uncertain if the iphone could see revenue growth and abigail: -- growth.
that range.e is with global uncertainty around the iphone, most recently we saw the stack -- stock above the range. they put in a golden cross. this is above the 200 day moving average. the suggest maybe we are going to see apple stay above this range. it will be interesting to see how all this plays out in exciting market action for the nasdaq. innie: thanks, live manhattan. courtney: the president of find ana says he will country with better upside. there was an exclusive interview in buenos aires. , this is a very important player. we are talking about traditional energy.
renewables. agro business. now i have mining. are the second leading reserve in the world. courtney: they are looking to reduce taxes and the budget deficit. obama will veto legislation that allows 9/11 victims to sue saudi arabia. congress could override the president ito for the first time and make the bill a lot. president obama says the measure could expose american soldiers to legal jeopardy in foreign ports. the british business secretary confirms the government is on the verge of deciding whether to go with the hinkley point. the decision will be made very shortly. there are concerns about security since the chinese copy would provide one third of the financing. there are concerns about cost. the decision to leave the european union has increased
support. that's according to a poll. after factoring out undecided voters, 53% of the scottish want to say with the u.k.. that is similar to the referendum two years ago. every region of scotland voted against brexit. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. mark? mark: the bond market may have peaked. they have borrowed euros last week. the mood music playing in the bond market is reminiscent of what preceded the bankruptcy of lehman brothers and the financial destruction that followed. this is why the bond market is hitting a new ukrainian chicken farm moment. i have to start with the question, what is the time? >> it's priced to perfection.
everything is going up faster. farm,inian chicken vertically integrated, it grows the feed. it feeds the checks. -- chicks. they came to market for the first time, $250 million. whoas one of the bankers midwife this deal into the market. enoughrs could not get of the bonds from this ukrainian chicken farmer. they had never heard of it before. it was off a 10% yield. ask then, that was as rare gold for chicken eggs. later, chickenks flu hits hong kong. 30% of the investment is gone overnight. investors got repaid in the end.
the bonds were paid in full. it was a sign that the market was more than frothy, that in unknown, body had heard of this company. the bankers were astonished at the demand for this deal. mark: we are trying to link it to the two. this is the first time they had been able to persuade investors to pay for the privilege of borrowing. we had seen this with swiss banks. there were deals of minus percent. this might not in a crazy thing to do in this currency environment. in five years, with you doing? putting my pension money into a bond? if you hold them until they repay, you are guaranteed to lose money on this investment. acquittednding you
and you promising to only pay 95 pence act. it's a sign of for the markets are. it's mostly caused by central bank policies. it's also a sign that investors are desperate to buy anything they can. vonnie: what if we don't get inflation? >> it doesn't matter. you pay the face value for these bonds and you will get pain -- paid back at face value. does, youhe economy have locked in a capital loss by buying something more than a hundred which will only repay you 100. that tells a lot about the background of the economy and what the central banks are doing. it tells me which is the that the 2006 parallel. investors are desperate. they are desperate to find money somewhere. vonnie: aren't they worried about the movement in the coming years, inflation, any kind of asset having them no return
whatsoever, including hard assets like real estate? >> everything is a relative value trade. you are spot on. if i'm willing to put money into a security that has a negative knowing other places are going to do even worse. but still, i don't want my pension money going into things i know for certain and sure are going to lose money, even if everything goes perfectly for the next three years. i am as guilty as the next showman. mark: are you getting the tingly feeling? >> i am is guilty as everybody else for getting whacked in the financial crisis. you start to see parallels. look at what the german bond market did year ago. you had a yield of 10 basis points and it went to 1%. you see the move in the past few
days, people getting nervous. there is just a lot of worry. vonnie: i think we need a new indicator, mark. i think we need the tingly feeling indicator. [laughter] mark: mark, it's great to see you. thank you for telling that great story. the ukrainian chicken moment. vonnie? a jump inere is borrowing rates and that could be bad news. this is bloomberg. ♪
and what they mean for you the investor. you can access these charts on the bloomberg. the function is featured in the bottom of the screen. i am very competitive. lix: i am very competitive. this is how much it actually cost to borrow in hong kong. as the white line in the chart. it moved up 95 basis points. at the same time, that blue line was the shanghai composite and it dropped by 2%. that purple line is the s&p. it wound up dropping. they want to curb shortselling. there are a lot of fun the needs heading into the quarter. that's why you see this move higher. when we see it spiked higher in the past, like august, like january of this year, the seller rating market fell off.
you saw the shanghai composite fall off. if you see funding costs continue to rise and you want to borrow, does that precipitate some sort of overarching selling that if it does spread to the u.s., is that the risk we are waiting for? mark: that's really interesting. we saw better-than-expected data out of china. the big indicator is the housing market, something people are looking at. where can we find your chart? alix: check it out. using two.m only one is the 10 year u.s. treasury. , you might want to have a guess at it deals with emerging market bond funds. intove seen huge inflows underlie emerging
markets. basically, we have seen a massive increase in that. yield difference is at its narrowest in a long time. if we had mark gilbert back, he would say his tingly sensors were bothering him. you can see my chart on bloomberg. mark: it's very close. it's very close. i don't think i've ever been on battle of the charts on the european close show with alix. duty, to the first timer and to without a doubt the most person, i/obe otc board this to alix. alix: i need to win on merit. i am that competitive.
matter, we have never commented on the size of our position. it's a meaningful position. we are still short. obviously, the next few weeks and months could see a number of interesting developments in that story. >> let's talk about that. there is a split between what you are presenting. i am hearing you will get another piece of information and another substantial piece of information. is that correct? is there more to come on the validation from your side? >> if you asked me this question week ago, i answer would be absolutely yes. that saint lawsuit jude has filed recently,f we release additional information now or we do it as art of some court filings, that's all to be determined. releasing we will be
more information on vulnerabilities, but in terms of it, i and the litigation can't say at this moment. >> let's talk about the litigation because you have a lawsuit now from saint jude. what do you make of that? do you stand resolutely by the video you have released, that it's a crash attack? they say that it did not show that. it showed the systems going into a safe mode. >> that is a little bit funny. somethingfe mode is they invented a few years ago weresome of the devices experiencing major malfunctions through the merlin units. developers,e to the none of them are failure with mode."m "safe it's not safe.
it's a major malfunction in the device at it requires explant. even if they are correct, this is a major problem. a third party should not be able to broadcast signals at a device and cause it to malfunction like that. vonnie: later in the interview, he wasranny asked if still interested in the supermarket chain. >> we are still short on the rally. we are going to be releasing an update on casino and rally and the companies in this orbit in the next one or two weeks. >> have they made progress? will the report show progress in terms of the debt reduction? >> they realized more in their assets sales than the market prices had been implying at the time we initially published in
the pieces remain. this company has so many debt at -- much debt at the parent double level -- level, this is where its trading right now. >> anywhere near closing your position? >> no. we are hanging in there. it's been a challenging position. that's true. we have conviction that eventually gravity will catch up. >> gravity will crotch up. that's a wonderful praise. -- gravity will catch up. that is a wonderful phrase. where are the taking tom bombs? is it ranks? is it debt laden companies? i wasn i said that referring to the companies themselves at them in piling up a lot of debt on the alex sheet on financially engineered statements. or heavily engineered financial statements. that is still the case.
i think one of the major issues in europe and what made it interesting to us is investors in europe aren't doing the hard work of really trying to dig into the financial statements and understand the economic reality that lies beneath. meanwhile, companies are borrowing at extremely cheap rates and these pressures just build up until one day, they become a problem. founderddy waters talking to our own manus cranny. take a look at how equities finished the tuesday session. four days of declines. that is operated. we had declines in energy biggests, this was the problem in more than a month. crude is lower. commodity producers fell for a fourth day.
that is their longest losing stretch since june. all the major indices fell. we have not seen this since august. take a look at the currency board. i want to show you what happened to the pound today. the big piece of data it was the cpi data. that is back in line with the previous month. it's not as strong as economists had forecast. it was the input prices. see a speed we will through from the weaker sterling. the pound is at the lowest level since august 31. this is bloomberg. ♪
scarlet: live from our world headquarters in mid-town manhattan, we're covering stories from san francisco to buenos aires. here's what we're watching. oil prices are sliding, continuing a wave of volatility as investors focus on central banks and interest rates. bloomberg is live at the argentina investment forum. we sat down exclusively with the president of argentina. spoke on how the economy will play out there and how they will get out of possibly recession. in a rare sit down, marc benioff joins us live this hour. he has thoughts on the future of the cloud. matt: