tv Bloomberg Markets European Close Bloomberg November 2, 2016 11:00am-12:01pm EDT
vonnie: we will take you from washington to johannesburg and cover stories out of new york and the united kingdom in the next hour. tech earnings in focus. alibaba's quarterly sales beat expectations. now we look to facebook with a focus on mobile advertising. nejra: for once the pound is benefiting from increased political risk. rising to a three-week high. oil markets are turning skeptical about opec's ability to deliver on cost. the chart telling the story right ahead. 90 minutes into the trading day. we have oil inventory. julie: we continue to see the
fallout from that not only in the oil specific market. recent slide. it has to do with the crude oil inventories number. i looked at the chart. take a look. this is the weekly change. to taken all the way back 1982. just a few weeks after we had the biggest draw down on record this is the biggest billed by number of barrels we have seen on record. in percentage terms the week over week change of 3% is the biggest we have seen since 2008. fairly unprecedented. it comes a time when the oil market is already fragile. have already seen a pullback
that is insignificant. 13%, 12.5% in the past two weeks alone. than six dollars being taken off the price of wti already. this doesn't just have an impact on oil markets. it also has repercussions for equities as well. u.s. averages at their lows of the session. it has to do with energy stocks. energy shares down by 2%. that's the worst performing group in the s&p 500 now. utilities, financials and telecom services are selling off today. talking about the heightened concern over the outcome of the presidential election. safee are going into more including treasuries. we are seeing yields fall by two
basis points on the 10 year as people are buying treasuries. the drop in yields has had a negative effect on the financials which is weighing on equities. the big banks today are pulling back. , jpmorgan and bank of america all down. nejra: jitters over the u.s. election on both sides of the pond. if we have a look at where equities are trading right now you are seeing red across the board. two percent. we are seeing the ftse 100 in the u.k. hitting a one-month low. the pullback in the dollar means we are seeing a stronger euro. also stronger sterling. of course we are seeing the swiss franc gaining.
in terms of the bond market you can see the portugal 10 year down almost 10 basis points. spain down 10 basis points. in the commodities space we were seeing metals on the london metal exchange performing pretty well yesterday. best performing metal down 1.4%. gold up 1.2%. european stocks steam -- seeing the stoxx 600 down. we are seeing volatility go up. but these stocks index up for the v the movie stocks -- stocks index up. it's strongest level at the moment since june versus the
euro. also moving into safe haven assets. i've got the german 10 year yield in white. friends in blue. the u.k. in purple. yields headed for the biggest drop in almost six weeks. very much the move toward the safe haven we are seeing in the markets today. vonnie: let's check in on the bloomberg first word news. courtney donohoe has more. >> authorities in iowa have captured the man's susceptible -- suspected of killing two police officers. earlier the suspect was identified as a 46 euros man. officers are working in pairs for their safety. bloomberg poll sews hillary clinton with a narrow edge among independent voters. she is ahead of donald trump 30% to 20%.
gary johnson gets 19% of the independent vote and jill stein gets 8%. independent voters who cast ballots early have gone for clinton over trump. more than half of those surveyed say they expect clinton to be the next president. clinton and trump are tied at 46% in the latest abc news washington post tracking poll. for the first time he is seen as more honest. the most expensive u.s. weapons system ever is about to cost more. lead $500on will million extra to finish the development phase for lockheed martin's new fighter. pentagon'safter the chief weapons tester warned the plane is far from being combat ready. in venezuela the opposition has called off a nationwide protest set for tomorrow.
areators from the vatican trying to diffuse an ongoing political crisis. venezuela has been having your -- hammered by triple digit shortages of food and medicine. i'm courtney donohoe. this is bloomberg. nejra: now from the u.s. presidential race to central bank's decision there is no shortage of drama for the global currency market this week. here to help us navigate the moves is foreign exchange strategist at ing. you heard me talk about in stocks. we'll also seeing increased fx volatility. how are you navigating this? >> after the recent news from the u.s. starting with the investigation this week obviously changing the polls. currenciesbvious
that are outperforming the mexican peso. the key question at this point is there are many trades which are very obvious. the key thing is where to find the trade which is not so obvious yet is also vulnerable to the same drivers. for us at this point in europe it is -- when we look at the volatility premium for its own currency and the relative low performance. we think not enough risk is priced in and the swedish krona will be one of the most open economies. currencies with big trade links will suffer.
is notk in sweden it priced in yet. at this .1 may say that the swedish krona or is in a perfect storm. in europe it is the only currency which feels like direct effects from brexit risk. stock has been trading with a 2% premium. taiwanesen asia the dollar. and he alreadyn said he may call china currency manipulated from day one it will open to other asian currencies. nejra: i know you got some fascinating thought on sterling as well. i wanted to draw your attention to this chart. we have been talking about sterling gaining today because of these jitters leading to a weaker dollar.
this is the daily percentage change. you can see the movement at the end of the chart. if you want to look at it on your bloom -- bloomberg. you see sterling as undervalued but you think it has lower to go. >> definitely. for us sterling is extremely undervalued but it is undervalued for a very good reason. clearly there is a massive uncertainty. because you really don't know and the valuation at this point is the only positive thing about sterling. sometimes we think there will still be ways or events where you will see massive overshot. we don't think this will be persistent because of this evaluation. what do you mean by undervalued? relative to its currency and what kind of basis? >> in terms of the valuation we
talk about -- for example if you want to look at the proper evaluation you need to look at the sterling cross of its biggest trading partners. we think at this point from a which-term perspective looks at medium-term fundamental ,roductivity in terms of trade based on this model euro sterling is overvalued by around 18% or 20%. vonnie: how do you know? you don't know the details of what the brexit plan will produce. how can you possibly know that yet? >> at this point of course we don't know the details of the brexit. we are saying although currently is -- currency is massively undervalued this is not the right time to go along precisely because you don't know the details. what we are saying is that whenever currency reaches
material miss valuation levels it is very difficult for them to weaken even more unless there is a big catalyst. it could be a really bad deal in terms of brexit but we don't know yet. nejra: you are going to say something about this chart. too muchldn't read into sterling price action against the dollar. youou decompose this chart find the big upside to cable was just due to the higher euro against the dollar. after the news about trump leaving sterling actually weakened against the euro. for us sterling is very vulnerable currency and inessential because euro-dollar is higher and strong euro lifting all tides in europe does not mean something fundamental is changing about sterling. trump view the risk of
-- $5.9 billion. it represents a 40% of -- 47% premium. semiconductors and integrated circuits. the maker of botox will start paying dividends and has boosted its share of five back. .- buyback the program was announced in may. third quarter warnings -- earnings missed estimates. -- generate best returns from leasing cars. stockton owns and manages 1.3 million of them.
that is your bloomberg business flash. let's head to the markets desk now. on earnings specifically. on the winner's front i'm just going to look at the three best and the three worst in the s&p 500. the health care products and services company beating estimates. shares are up eight percent. the animal health products company earnings beating estimates and raised its 2016 forecast citing strength in its companion animal portfolio because of increased global sales of one of its drugs and other new products. and them earnings-per-share missed estimates. it's what it is saying that is driving the shares higher. it may join other u.s. health insurance -- insurers in pulling out of market the affordable care act is effective in. insurerseen many major
already scaling back on their aca exposure. than a yeareed more ago to buy cigna for 48 billion dollars. it has been trying to close that deal. communications lost wider than estimated and cut its cash flow forecast. those shares down by 11%. earningsedia companies beat estimates. the operating revenue was below what had been anticipated. the company is on track to complete spin off of cars.com. making progress on a strategic review of career builder. pioneer natural resources is also trading lower by about 6%. missedp -- company profit estimates. thatompany's ceo has said
oil is more than enough to boost the company's returns and that $50 is a threshold that would spur additional drilling. nejra: still ahead, oil prices continue to slide. dubya to ei down more than 3% due to the global luck. we've got three charts. going to show the markets growing skepticism over opec's ability to deliver cuts. this is bloomberg. ♪
markets. i'm vonnie quinn in new york. nejra: from london i'm nejra cehic. continues as skepticism grows over opec's ability to follow through on a production agreement. brent isl benchmark now trading below $47 a barrel. opec reached the framework of a deal to limit oil production. longley joins us with three charts that captured just how skeptical the market has become. great to have you. you say this really says it all. >> people saying we could be heading toward $60 a barrel. we are back below that level like opec never made the decision in the first place. the only question is where we go next.
bearish numbers this afternoon. it seems like there's a load of oil sloshing around. vonnie: the spread between brent and wti collapsing as well. have a look on the bloomberg. the spread is now well below a dollar. what does that tell us? this is the brent first and second month spread it kind of a general indicator of the physical oil market. what we see if there is oil absolutely everywhere. the price of the second month is significantly steeper which means we are really low right now on the latest oil contracts. libya is returning with supply. libya extorting the most since late 2013. you can look outside of opec and still see oil everywhere. there is an extremely bearish
u.s. oil inventory number out. we have bloomberg's opec also at a record. there's oil absolutely everywhere and the market doesn't really believe opec anymore. it needs to see tangible action and we are not there yet. nejra: in terms of where oil goes from here we have seen a bearish sign. your favorite chart i love. it shows because it's actually talking about long position that we dating. >> exactly. the physical market doesn't believe opec. those are the speculators. they have piled into oil as soon as that decision was made. longe speculative positions that the oil price is going to go up. basically what that means for the market is what goes up has to come down.
we are in extreme danger of both sides turning around and saying i'm seeing a lot of quibbling but not actual decisions. those near record speculative long positions come down we will see that as well. nejra: you called them very aggressive bears. >> that's the way they see it. there analysts have been extremely bearish and it all comes back to that oversupply on the physical oil market. there's just so much out there. vonnie: what does the spread tell us at the moment and why isn't it wider? >> it depends on your view of the market. i have some analysts saying they expect to see that go back to parity. whether or not that happens in the longer-term remains to be seen. we had seen some diverging trends between brent and wti.
today thatnumber could go out the window. it remains anyone guess. some of the banks are saying they are worried about where prices go from here. at $50.sees oil back this is just one big referendum on opec. nejra: fantastic debut on bloomberg tv. thank you so much. vonnie: still ahead, a group of economists releases a letter explaining why electing trump would be a big mistake. this is bloomberg. ♪
a former black rock money manager has pleaded guilty to insider trading charges. mark littleton is the latest high-profile figure caught up in the crackdown. >> littleton entered a guilty plea this morning. he is accused of insider trading. he faces as much as seven years in prison when he is sentenced by a judge in december. >> iraqi troops are holding their positions along the outskirts of mosul after entering the city for the first time in more than two years. say it couldcials take months to capture iraq's second-largest city. place twoe took
weeks after the us-led coalition launched an offensive. there has been a shakeup in south korea's government over and influence peddling scandal. the president has fired her premier and finance minister. neither has been directly linked to the investigation but park appears to be trying to shore up support. malaysia has announced new steps in military cooperation will china. it will buy four warships from china. no other details were released. malaysia recently announced it is cutting its defense budget by 13%. the country has been a key security partner of the u.s.. i'm courtney donohoe. this is bloomberg. a group of 300 70 top economists in the world released a letter today coming out against the election of donald trump. an excerpt from the letter reads donald trump is a dangerous
district if choice for the country. he misleads the electorate and holds willful delusion over engagement with reality. joining for moore is m.i.t. economist simon johnson. you just wrote an op-ed for project syndicate entitled the consequences of a trump shock. talk to us about what a trump election might mean. >> i think it would be destabilizing. ideas on trade and also immigration and his broader agenda would take us into uncharted territory. i think the global economy is in quite a fragile state. particularly the european part of the world's financial system. shock would have severe negative consequences for all of us. vonnie: you zone in on trade. these economists talk about misinformation about the
benefits of immigration and other things. i want to read an excerpt from your op-ed. determined to curtail imports through a variety of policies that he would not need congressional approval to slam the brakes on the u.s. economy. it would likely precipitate a serious banking crisis. what gives you such conviction that a trump presidency would do this and that a clinton presidency and she has also come out against the tpp would also do this? >> whether or not the transpacific partnership gets past is forward-looking. i know the rhetoric is somewhat large and exaggerated but it's not that big a deal. much bigger deal is what donald trump is proposing to do to our existing trade relationships
including tariffs on china and mexico. various wild statements that he has made. disruptionbe a major to the way our economy operates and to our big trading partners which of course includes europe. needsst thing europe right now is a big shock coming through their trades channel particularly because some of the larger countries and big banks are not in good shape. if that pushes them into a recession that is going to drag down the entire global economy. the other thing you focus on in your op-ed is the stock market saying any adverse shock like a trump win that would cause the stock market to crash and push the world into recession. are wegnitude of crash talking about and what's the timeframe for that to happen? a it depends on how much of knock on effect is there from us to europe from europe to whom.
the timeframe is now. since i drafted that piece about a week ago we have already seen market reaction to the shifting odds with regard to what is going to happen in the election. i was looking at bloomberg this morning talking about nervousness in markets and changes in the exchange rate ngflecting changi probabilities. people are nervous with good reason about the potential election of donald trump. saya: there are people who that globalization that's been really synonymous with americanization over the past few decades, actually that's not happening so much anymore. you've got countries like china and india that are making it on their own. kind of goes against your whole argument but is there anything positive at all that might come out for these big emerging economies even if we
were to get the shock of a trump election? >> not from a trump election. that would be a big negative impact on all of these economies. if they are a little less dependent on trade now than they were years ago, sure. it has increased dramatically over the past three to four decades. that is the world we live in. that is the world donald trump is threatening to destabilize. vonnie: the reason he's getting such backing or one of the reasons is that he is tapping into a very deep rooted sense of inequality in the country. that peopleibution don't see as fair and a lot of poverty in spite of the unemployment rate coming down. what does a clinton presidency do about that if that is what happened? sides are both
focused on these important issues and i think secretary clinton has a plausible sensible agenda for attempting to reduce inequality through changes in the tax system, assisting people with a better education system and a lot more retraining. donald trump speaks to that to some degree. he is layering this extremely dangerous and destabilizing rhetoric and in terms of what i president actually can do without congress mr. trump would have if he were elected very real tools for immediate action and he says he's going to take those kinds of immediate actions on trade and immigration and maybe other things as well around public security. that would be extremely destabilizing and heard a lot of people lower down the income scale. afraid his rhetoric is inconsistent with what seems to be the policies that he would immediately adopt.
>> one of the criticism is that he would add substantially to the debt. have hadtimes we plenty of liberal economists come out and say it's cheap and we should do it now while we can. very good question. we are a little less worried about our current fiscal stance than we were four or five years ago. to retain the safe haven status of the u.s. dollar and you want u.s. treasury debt to be the asset people hold for rainy days and was all else fails you cannot ruin public finances with the kind of tax cut and profligacy that he is promising. that is the height of irresponsibility. built the how we fiscal position of the united states. it completely breaks with republican tradition. the republicans have breaking with that tradition at least
since newt gingrich was speaker of the house. mr. trump is proposing an extremely dangerous fiscal policy and if he jeopardizes the fiscal condition -- position of theunited states consequences will be even more dramatically negative nejra: this inequality we are talking about is largely what has given rise to this wave of populism we see manifested in brexit and the rising popularity for trump. where does this leave? we have to have a lot more discussion of the causes of inequality. to what extent is it from trade, to what extent is it from technology? i don't think you can stand in the way of technology. i think you need a very skills andpproach to
education. it has to start extremely early and we have to think about why so many individuals are not able to participate and become more productive as a result of these new technologies. in lots ofissue countries and we have not made progress in dealing with that. i think it's going to be a top priority irrespective of what happens after november. iswe get a government that at all constructive and sensible. i'm not sure mr. trump will provide that. you talk about the most obvious dark cloud on the global horizon being europe. what concerns you the most? >> the european banks. the balance sheet have not been properly cleaned up. the repeated stress tests have not done the job they were supposed to do. that since the question of who is responsible for what when a major bank faces some sort of disturbance in the european economy.
that ambiguity is not healthy. you take the fiscal capacity of the euro area as a whole it is strong. if you look at how the market would react and price government debt there is a lot to worry about. get your wanted to take on the federal reserve. a completely independent organization and agency. how could they not be impacted slightly knowing who the next president is in a weeks time? i think the federal reserve looks at the data. it has very clear object is written down in the law. it is of course extremely difficult to know exactly what inflation is going to be a year from now and when and how you should raise interest rates. i don't think the federal reserve has become politicized. i don't think they have been compromised by the election. grant thatldn't you
inflation would be in a very different position this time next year under a donald trump than under a clinton presidency? interestingreally question. if donald trump is elected and destabilizes the world and we have a massive global crash absolutely inflation would be in a very different place. we would have deflation. that's what we experienced at the end of 2008 and early 2009. donald trump will affect the rate of inflation. there's other things to worry about including his broader impact on the stability of the global economy. simon johnson, m.i.t. economist. up, alibabag reported strong sales and earnings today showing once again that a slowing chinese economy isn't holding them back. we examine the numbers next. this is bloomberg. ♪
vonnie: live from new york and london, i'm vonnie quinn. this is bloomberg markets. alibaba china's largest operator of internet shopping malls grew its revenue at several times the pace of the country's slowing economy. the closely watched computing business more than doubled sales. let's bring in paul sweeney for more. is it a surprise just how much this was? >> it was a very solid quarter. they beat on revenue and eps. thestors liked that headline numbers show a slowing economy we have seen over the last several quarters. continuese consumer
to be very strong component of the economy. we saw that with the e-commerce numbers coming out of the economy. i think generally investors feel pretty good. the cloud computing business is really what did for alibaba this quarter. 130%e revenue was up year-over-year. very similar to what we saw from amazon and microsoft. right now alibaba is a major player in the cloud computing business. they are starting to expand into europe as well. they certainly call that out as an area that is going to receive continued investment because they seek continued growth in that business with them. does alibabamost have in china? >> they are extraordinarily well positioned in china. there are competitors but they
have a very strong position with their consumers. they touch their consumers almost on a daily basis. also an business is integral part of the e-commerce china.nce in as the economy continues to cross over to more of a consumer economy in the middle class grows that should continue to drive retail sales in general and e-commerce sales in particular. that is where the company is well positioned. nejra: this all comes a week before the company's annual singles day sales event. let's just take a look at facebook which reports after the u.s. closing bell today. what are you expecting? is discounting very strong results coming out of facebook today. we saw strong topline results out of google.
allocating more of their ad budgets to the digital world, there are only two major places to put it. one is google. the other would be facebook. demonstratedlly they can manage the growth of their business, their migration from the desktop community to a wireless mobile business. they get about 85% of revenue from their mobile users. this company continues to invest in their business and i think most investors feel like this remains a very good long-term play for the secular call of ad spending to continue to migrate to digital forms. you also say the focus is going to be on margins because they have been pressured by the investment spending. >> exactly. we have seen it with google, amazon, about these fast-growing tech companies not being afraid to reinvest very aggressively
into their business. most tech investors generally feel comfortable with that because the fundamental secular revenue growth story is there. in this case social media ad migrating from traditional media onto more digital platforms. facebook is a huge presence with their social platform. 1.7 billion monthly active users. most investors are in the near term pretty comfortable with the investments the company is making with the assumption that long-term revenue growth will continue. vonnie: we didn't even get to the telecom sector. so much to talk about. thank you very much. fromore reports and data bloomberg intelligence just go to go on the bloomberg. , the south african president is under pressure to quit. we had to johannesburg for the latest. this is bloomberg. ♪
vonnie: i'm vonnie quinn. this is bloomberg markets. nejra: live from london, i'm nejra cehic. south africa's graft ombudsman says president jacob zuma must appoint a commission of inquiry into the relationship between his government and the gupta family. aining us for the latest is bloomberg news reporter in johannesburg. tell us how did we get here and what does this mean? >> we have had a tumultuous week. on monday when we just saw that the finance minister had charges against him and that was rescinded by the national prosecuting authority no longer having charges against him. report the state capture requested by the opposition
party. the democratic alliance in south africa had said there was undue influence by friends of the president, jacob zuma. the group to family. the public protector or the ombudsman has said she would look into it and created what is now the magisterium of the state capture report. the public protector had decided to lead office at the end of her term. perhaps this report should not be put out. it was put out today after the president himself decided to rescind his indictment on the beort saying it can then released. the court ordered the report to be released by 5:00 p.m. south african time. it was released before that around half past 3:00. a lot of pressure has come out of it to put the president out of office before the end of the
year. his term comes to an end only in 2019. nejra: the report is out. talk us through what zuma's next move is. >> he has come out saying he would like to review the report itself and then will perhaps comment further. his ruling party has said the exact same thing. whopublic protector herself a new charge, we now have public protector who took over in the month of october. theone who was in charge of state capture report when it was initially handed to her said she felt like she was a little too lenient on president jacob zuma and perhaps should not have listened to the lawyers in being a little more respectful. president did not answer any questions from the public protector herself.
we don't have any collection of data from him. the report itself is quite damning relating to at least three ministers and the hiring and firing of the finance minister which was the most prominent here and the offering of another job of the finance ministers job to the deputy. vonnie: it has all been too much. the ratings agency threatening to downgrade the country. what does this mean for zuma? does it up the odds he will have to leave? >> we have seen confidence waning with regard to the early elections. that is bound to continue from here on. the president is reeling with regards to support. even people in his own ruling party say he should step down. the union which has around 300,000 members yesterday said he should step down as well. we have a lot of support for
jacob zuma waning and he is losing a lot of that foreground and may need to resign very soon. vonnie: the brand is strengthening today. what that means for investors we will have to see. thank you. we will follow that story. nejra: coming up on the european close, stocks falling in europe. nervous about the potential outcome of the u.s. presidential election. we will a strategist perspective in just a few minutes. here's a look at european stocks. you can see red across the board. this is bloomberg. ♪
bloomberg markets. ♪ nejra: we will take you from washington to germany and cover stories out of london and wall street in the next hour. here's what we're watching. vonnie: european stocks selling off her and a today. investors are getting action before the u.s. election well we also await policy decisions from the fed and the bank of england. politics has new reporting on how the u.s. candidates are faring in early voting. this is donald trump and hillary clinton surrogates hit the campaign trail with just five days to go until election day. we look ahead to the federal reserve and bank of england's decisions. recent data has taken the pressure off the boe to ease further.