tv Bloomberg Markets European Close Bloomberg November 11, 2016 11:00am-12:01pm EST
♪ mark: we are going to take you from berlin to china. we are going to cover stories out of wall street today. here's what we are watching today. inald trump temper tantrum markets as they take a beating. more than a trillion dollars have been wiped off the value of global bonds this week. julie: then we talked to an investor who says there are market lessons we all should learn from big surprises like trump's election win this week. we will get a critical view on forecasting models and what is just plain luck. tradeerging-market carry to the losers of a trump presidency. they are set to intervene in support of an exchange rate. mark: look at where equities are
trading. 30 minutes away from the end of the friday session, and we will rise for the second consecutive week. that will be one week after declining for two weeks. the weekly game is the biggest since july. week where minors and construction companies have received a boost from the election of donald trump. on the flipside, we have seen bond proxies, real estate stocks, utilities decline. stocks are down today and you can see that in the left column. the best-performing currency, the only performing currency rise in against the dollar is sterling. we have bonds sold off right across the globe. those are the yields that arising in europe today. gold is down for the week. anz.s get to alli we spoke to the ceo and shares are rising. a mere 1.2% as of now.
insurer, thirdt quarter profit rising. helped by the life insurance unit. pimco had its first quarterly net inflows in three years. client added 4.7 billion euros and third-party assets. shares are 5% lower today. the dutch postal carrier rejecting a 2.5 billion euro approach from the belgian mail service rival. they are saying the proposal value is too low and potentially puts it under the control of the belgian government. it offered 5.65 euros per share on november 6, half of which would be paid in the belgian company stock, reviving an approach that ended in may. let's get to the bond market. i thought we would only focus on the u.k. bond market. something significant happened today. the yield on the 10 year surpassed the level where it closed on june the 23rd.
that was the day of the u.k. referendum before we found out the referendum result. that day, the 10 year yield closed at 1.37%. earlier we rose as high as 1.4%. look at where we have come from since those record lows in august where the yield had a pointslow of 50 basis after the bank of england implement it the stimulus program, cutting rates further, qe added. corporate bonds and government bonds. because of the weakness in sterling, we have seen inflation expectations increase and consequently we have seen the yield on the 10 year rise as well, which has been firmer by the rise in yields around the globe. we will see further quickening of inflation expectation. 90 minutes into the trading date in the u.s., let's get over to abigail doolittle.
abigail: a great chart on the u.k. 10 year yield. similar to u.s. where you are, we do have declines on the day. the dow, s&p, and nasdaq all lower following a powerful rally, one that has added one trillion in market cap to u.s. stocks coul. the dow finished at a record high and is on pace for its best week since 2011. we break down this rally a little bit by market cap or company size. we are looking at the s&p 500, 400, and 600. this is large cap mid-cap, and small-cap. we see outperformance in the small-cap area. interesting is the idea that these companies derive more of their revenue to mystically and they could do well under a trump administration. faring less well on the week is alibaba. shares are down today by 2.61%. on the week, down 6% for the
worst week in quite some time since february of this year. this comes as alibaba has announced a record singles day four hours into the close of singles day. sales were $16 billion. as for why the stock is down on the day, the growth for this year's singles day is slowing from last year. taking a look at the bloomberg dollar index and what a week it has been for the dollar. we do have the bloomberg dollar index of 3% this week. that may not seem like a big move, but from a currency perspective, it's a huge move being helped. the bond markets are closed, but the 10 year yield has been a record move this week, adding 37 basis points and rising rates do help strengthen the dollar. julie: it has been a monster move this week. thank you so much, abigail doolittle. let's check in on the first word news. we have courtney collins in our
newsroom. courtney: president-elect donald trump is promising a busy day butmbling his government isn't sharing details. he is in a chop tower meeting with senior staff members in new york city. soon be that "he will making important decisions on the people who will be running our government." he has not offered any guidance on what is on the president-elect schedule in the coming days. police in portland, oregon say an anti-trump demonstration turned into a riot. several thousand people smashed windows and damaged cars on the second night of protesting donald trump selection. there were protests in the number of other cities, including new york and chicago. at first, trump tweeted that the demonstrators were professional protesters. later he tweeted that protesters "have passion for our great country." donald trump's election means that talks for a transatlantic trade deal will be put on hold.
the administrator spoke to reporters in brussels. now of course with the new president-elect, we don't really know what will happen. there is a strong reason to believe that there will be a pause and that this might be the biggest priority for the u.s. administration. courtney: the deal would eliminate tariffs on goods in large services markets and increase regulatory cooperation. soccer fans can rest easy. cutter has not assigned to ban beer for the world cup, not yet anyway. the head of the organizing committee says he does not want beer served at the games. beer, wine, and liquor are sold in hotels in qatar and to foreigners with a permit. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, i'm courtney collins.
this is bloomberg. mark: bond yields have surged since the election of donald as the 45th president of the united states. global bonds have lost a trillion dollar since trump's victory. joining us now is the senior investment manager with aberdeen asset management. luke, thanks for joining us. step, $1 trillion wiped off the value of global bonds this week. only the second time that has happened. how much further has this global bond selloff got to run? luke: you can imagine that's the debate that is very much live at the moment. they could easily go further from here with toying with the idea of maybe 2.5% in the u.s. and maybe 1.6% or may be slightly higher than that in the u.k.. this is all around the reflation trade and will donald trump make a big difference in that?
this could go on for the next 2-3 weeks, but i do not think we will check the budget in the uk. that might be a turning point for us. mark: do you think it's going to be hard for some of the government's who are restrained by that budget to actually implement big spend on infrastructure? luke: exactly, mark. i think we need to see a little bit of reality about what leaders and their governments can actually do. we are going to see that first and the u.k.. the fiscal reset that the u.k. has been talking about would be hard to do and any kind of sign to make enough of a difference. inflation is going up and it will spike over 3% next year. it will be hard for fiscal to drive up much more than that before it starts coming back down naturally anyway. maybe that is the point. we will get a better reality come back. julie: you have other political
events coming up. federal the reserve meeting in december and you have elections elsewhere in europe, france notably. given the unpredictability that is coming up, what kind of hedging do you feel like is necessary in this environment and also given some level of unpredictability of a donald trump presidency? events,dging political if we have learned nothing else in 2016, is probably the hardest trait of them all to do. hedging the referendum and the u.k., you probably would have been wrong. hedging the election in the u.s., there is a very good chance he would have been wrong. for even the italian referendum, i'm not sure that's possible. we can think about is the fundamental direction of the economy. we will be talking about reflation for at least the rest of this month and probably through the february budget in the u.s. until that happens, you could see yields go up until we start
getting some reality around how hard it is going to get growth and how hard it will be to get structural inflation and then we will see yields some of them. for now, hedging those decisions -- really hard. probably get it wrong if you tried. julie: we're talking about the so-called developed world. when you look at emerging markets, are you seeing a different narrative there and a need for a different strategy there? luke: very much so. i had a good long chat with our emerging markets desk team earlier today. they have been reducing the size of their long positions coming into the election this year. at least along the markets, they are nervous about emerging markets. over the last two days, you have trace close the half of total returns that you have seen this year. it has been an enormous move. it feels there is momentum behind that as well. perhaps that does not get caught up amongst the fiscal decisions that we are looking up for the
developed market. there is going to be some great opportunities to get into emerging markets, but right at the moment, that is not the best timing for it. mark: what will those opportunities be? when will we know that now is the time to get back into emerging markets debt? everything asset management has about a quarter of its assets invested in emerging markets. you are heavily invested in this region. as we say, we are still long and emerging-market debt. as with many other asset classes, the point of structural dislocation in markets, the points with the politics of prices and economic surprises, those are the points that asset managers can make some money. that is what the team is doing. could see sense, we emerging-market debt, sovereign spreads perhaps get to 400 or over 400 from the 350 level they are today.
that movie would be into cheap territory. within that, there's probably some decent countries and decent stocks we can still get some good returns. you need a good asset manager to whittle them out. the guys are good at that. we are played some good money with them and the funds i invest in occasionally with emerging-market debt, we have taken is off the table for now. it is not going to be that long i think before we will get back anin. mark: luke take more of aberdeen asset management. julie: it is not just bonds that have been affected by donald trump's election. it is putting u.s. european trade deals in serious jeopardy. we are live in brussels next. this is bloomberg. ♪
julie: live from london and new york, i and julie hyman. and just mark barton under 15 minutes left of the friday trading session. the eu is weighing the impact of donald trump's victory on the trade deals. among the topics are how to move forward are the transatlantic trade and investment partnership, the proposed eu-u.s. trade deal. cecilio malmstrom had this to say. >> we simply don't know. a personppointed u to lead and we just have to wait. is natural policy while we wait for the next administration. there is quite some time that strategy will be in the freezer. when it is defrosted, we will
wait and see. rark: joining us now is nej cehic. tell us about the post meeting news conference. like?as the mood nejra: the mood was relatively subdued. this is very much a waiting game for the eu. this meetingthat today was already scheduled before we got the outcome of the u.s. election. purely eu just a meeting. what is interesting is that the way the rhetoric has shifted. we heard the eu was very much committed to the free trade agreement with the u.s.. when we got the election results, they were saying it was totally impossible to tell what was going to happen now. a lot of uncertainty coming in. today we have been getting comments that these talks are
going to be suspended for we don't know how long. to the france traded minister. i managed to grab him after the meeting and just before the press conference started. he had a slightly stronger tone. listen in. >> we have to stop these negotiations. they have not moved on in a proper way. there is no spirit of true partnership today in the negotiations. i'm sorry to say so because we will never forget that the u.s. are most ancient allies in france and they have been throughout history, but when you look at this negotiation, there is no precise movement on the u.s. side on any issue that is a priority for france or other european countries. is the eu going to definitively call time on to tip, unlikely? the ball is very much in the u.s.'s court. these negotiations have been going on for three years. they had 15 rounds of
negotiations in october in new york actually. this has been a long, ongoing thing. now there is uncertainty all over it. one thing that might be a concern for the eu is donald trump's total other trade pacts such as nafta and tpp. is that going to set the tone for the eu? that is the big question. mark: how does the donald trump victory play into the ongoing -- once the u.k. triggers article 50 -- negotiations between the u.k. and the eu? it now seems we move from the back of the queue to the front of the queue with regards to a trade deal with the united states. how does this change the whole relationship between us and the e.u. when it comes to negotiating trade when article 50 is triggered? nejra: you know, that's a really interesting question, mark. it's a question that i post both to the german trade representative and also to who
you just heard from there. the answer from both of them was this does not actually really change anything because they are two separate things and we can work on them simultaneously. that was a pretty civil answer i got. got when weswer i go back to the eu and the u.s., does it matter? it does. i am surprised to learn that the eu and the u.s. are the biggest trading partners in terms of total trade. almost $700 billion in total to a good trade last year. this really is a big deal for both sides. mark: thanks for joining us. nejra cehic in brussels today. julie: three employees for major banks have been arrested in a u.k. insider trading case. why the uk's getting more aggressive prosecuting these cases next. this is bloomberg. ♪
headquarters in new york, i'm julie hyman. mark: i am mark barton county down to the european close. eight minutes away until the end of the friday session. three employees from major banks have been arrested according to people with knowledge of the matter. joining us now is bloomberg news reporter suzy green. why is this investigation important? it shows that the sca is not letting up when it comes to insider trading. it is clamping down on conduct the last eight years and we had a huge investigation that came to conclusion earlier this year. the fact that something else so big on the horizon shows that this is a topic they will continue to pursue. mark: what is the track record like when it comes to insider trading prosecution in the u.k.? the sca had not prosecuted
anyone criminally for insider trading preferring to go after them civilly. convictionse 31 under their belt. most of them in a big case that was largely resolved earlier this year with deutsche bank with an account of going to prison and a number of others who pled guilty throughout the appropriate -- throughout the probe. julie: do you know how long the investigation will go on for? suzi: we don't. have gone on for a long time. they could be a long gap between a rest and charge. they have building up a real expertise in this area and we imagine that we may see these moves slightly faster. we could see some to quick on the horizon. julie: we have seen an uptick in the u.s., too. how does the u.k. approach compared to the u.s. approach in these cases? suzi: the u.s. has a lot more experience in this area historically and the uk's from the play catch-up with that.
it's getting to a point where it's starting to hold its own. is a combinedtion investigation with the financial conduct authority and the national crime agency. they recruited the nca to help them with surveillance. that was something they had never done until 2008-2009. they realize they could utilize it to go after this offensive in a big way. mark: thanks for joining us today. great story. take a look at where european markets are heading. we are heading to the coast. -- to the close. stocks are down today, but up for the week. on track for the best weekly gain since july. it has been quite a few days since the victory of donald trump in the election this week. we have seen a bit of a flip today. those companies hit the first few days after trump was elected, those bond proxies, they are rising today could healt -- health care, the banks,. declines for the ftse down.
look at what is happening in the currency market. something quite spectacular has happened to sterling could when you look at the -- has happened to sterling. when you look at the pound versus all of its major peers, the pound is the best-performing currency against all of its major peers. the focus turning to the euro and upcoming elections and referendums. julie: here in the u.s., we have also seen a turn downward today. i want to look at the groups that are moving at the imap. energy is the worst performing group, followed by health care and financials. quite a flip from the rest of the week. this is bloomberg. ♪
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on speculation -- minor construction firms rising on an increase in infrastructure spending. prompting declines in brohm pok sees. as the index is -- the best week . this is a weekly chart. best week since april, since slumping to an almost five year low in july. it was sitting on an annual loss of 35%. still down by 17%. game, deutsche bank has been hammered this
year. credit suisse among the big gainers. ubs, berkeley, these stocks have have -- have had their biggest week. we are constantly going to see the yield curve steeper across the globe. they could benefit from looser regulation on the finance sector in the united states. the big story has been the selloff we have seen in the bond market. happened twice in two decades. this is the yield differential. both have arisen this week.
this is significant. that is the wider spread. could spill over to december's italian constitutional referendum. a fragile economic recovery. we have elections in holland. those are the big political events. this is why we have seen such a big selloff against the dollar. this is the biggest weekly selloff against the dollar.
donald trump stirred up concerns about potential populace outcomes. there has also been a flight to sterling. which mr. jones will be telling us about. julie: one of the trends is the dow jones industrial average has been outperforming the nasdaq. intove seen a rotation financials and construction companies. that has been characterized the action since the election. thosenteresting to see two indices come back into alignment. crude oil has been going lower,
also as we had her iran and iraq. saudi arabia pumped near record amounts of oil. and finally copper, which has forecasters, is pulling back today. the best and worst performance 500, nvidia trading after the chip maker forecast gave best chipmaker gave a forecast that was above estimates. side shares lower in the company plans to reduce its -- let's check in with the first word news.
courtney: the british government has outlined the case on brexit and will make its next month to the supreme court. a ruling is due next year. record number of minority women are heading to the u.s. senate. , kabbalah heller -- kemal harris, and nevada's former attorney general are heading to the senate. senator, join hawaii's who was elected in 2013. heavily armed man at 10 -- heavily armed taliban militants launched an attack on a consulate. >> heavily armed militants killed at least six people and 120 were injured one day. steinmeyer says german fest -- german special forces pushed the
attack back. bloomberg news, berlin. >> and david foley's art collection has hit the top of the chart. the auction resumes today. the three-part sale includes 350 -- 350 items. news 24 hours per day powered by 26 hundred journalists and analysts in more than 120 countries. >> let's talk about sterling. throwing markets into turmoil. for all of the trumpet inspired currency swings, richard jones joins me now to wrap up the
week. this is sterling against all of this. the real beneficiary of a trump's victory would be the pound, would you believe meac oh >> it would not be obvious. with a lot of different traits we can talk about is that the consensus trades, or the trade everyone had on before the result, a lot of them had gone the other way. at works atoking that and if anything position should be unwound. and the pound has been a big bit -- eight beneficiary. -- been a big inefficient very.
beneficiary. >> this is the pound index. what upside is there for sterling, given the focus seems the elections and referendums. guest: the election of donald trump does sharpen the focus a lot of political risks involved. a big shock to the system. as you said a few minutes ago we have the italian referendum. netherlands, germany, france.
there is a lot of political risk in europe, and judging by what has happened, don't be surprise. >> aside from the pound, the dollar did quite well in the wake of the election. peso.ularly versus the what happens to the peso now? guest: was the result came out, we looked at the chart. drop. an 8% or. percent sideways in the peso has fallen to a record low.
given the rhetoric we saw on the campaign it will be interesting to see if that turns into actual policy. let's see how this pans out. let's see if that is the way the first 100 days go. it will be really interesting to watch and as interesting as 2016 has been 2017 could be even more interesting. >> you have seen some selling of japanese yen. what happened is a bit more muted here. given those trends, what is the takeaway?
>> there has been a selling of vn. getting a warning sign from the swiss franc. i would look at it as the ultimate safe haven. perhaps things on quite as rosy as they think we are and perhaps there is a lot of uncertainty going forward. i think investors putting their money into the swiss franc will serve as a warning sign area mark: richard jones with bloomberg. julie: the president says we own veterans gratitude, respect, and freedom. remarkswatch his full on bloomberg live go.
mark: if you are watching the european close. julie: despite the shock of donald trump's surprise victory there are some valuable lessons investors can take away. he wrote about these in a column today. it is difficult to predict these kinds of events. >> humans have proven themselves to be awful at.
time creating of narratives. of course we knew there was a wave coming. we rationalized what happened, think we knew what was coming and tell ourselves these lies. >> what is interesting is the bounceback is really quick. you had that this time around as well. i'm just looking at a futures chart. >> put it into the rotter context. it looks like hillary was running away with the election.
it was rumored donald wanted to throw the towel and back then and the market really sold off on the possibility of her loss. on the election it is all clear, markets rallied to really hard. around 10:00 when things look like virginia may not go that japan is down 5%, trump is going to be awful, and then we get a modest victory speech from him. it was very conciliatory and it has been off to the races. it is just the collective opinion of millions of people who really know that really don't know more than many of us.
mark: that doesn't last. the models are perfect, aren't they ask a guest: -- aren't they? is the great quotes, all models are wrong and they are useful. we assign them the 538 model, the princeton model. they did very well in 2012 and people thought they were doing really well this time. it turns out they pretty much got it wrong. remember these are probabilistic forecast. ansome but he says there is 80% chance of trump losing, it is like the meteorology coal forecast.
it means the lower probability outcome occurred. pretty good argument to be made that 75, 25, that is not a slamdunk. it means you run a simulation 35 times. is not necessarily that the models are wrong, we ignore the probabilities and look for certitude when there is none. from optimismfer bias, confirmation bias, there is hindsight bias. if we finish your article by saying we won't learn, if we have learned from brexit, if we have learned, what can we takeaway? how can investors listen to barry and take some positive ways for this?
mark: we are stepping away from the markets, too much uncertainty, that much optimism that you can type -- can time this well, look how poorly the macro hedge funds have performed over the last few years. we think we can be nimble enough to get him out at the right time. the lesson is to not look at the emotions of the day. politics affect your portfolio and let the market work on your behalf. that they havean an advantage in these kinds of situations? guest: i don't know of any quantitative model that said here's what the results of the elections are going to be,
here is what the impact of a clinton or trump presidency is going to be, and here is how we are going to be positioned after the fact. this is what clinton needs for health care stocks, technology. trump needs for manufacturing trade, the dollar, etc. as long as you can do that with some degree of object to the you can model off of that a little bit. most in vectors lack any sort of foresight or any sort of skill. it's pretty clear we can't figure out macro events in a way that can be expressed intelligently in a trade. so far they appear to be losing trades. mark: always a pleasure.
remarkable is this white line, pulled from the work function. the probability of the fed having to return earlier this year -- and then in february when we had a lot of market --moil that jumped really that jumped up to 1-3. that was a scary thing for the fed to see. the fed hassee dropped all the way to 15%. left in markets that the market is going to have to be forced to cut back to zero. great news for the fed so far.
>> i thought we would look at assets. how each asset class. treasuries is a two day chart. no trading in treasuries. it fell 1.4% on wednesday and thursday. week onll had its worst expectations of this big push to infrastructure. takeaway thatrst -- that bond'sy got hammered this week. who would've guessed the pound would be the only gainer against the dollar in the wake of a trump presidency out of the currencies we tracked.
major currencies, quite a turnaround from the post-brexit blues. the best performing developed stock markets, a brilliant story. the building materials company which makes most of its revenue. the story of the week earlier. that was when it was up by 7%. >> i want to be invited act, but i have to give it to mr. basel it is time around. he told me something i didn't necessarily know before.
from bloomberg's world headquarters in new york we are covering star -- covering stories this hour. howell president trump change monetary policy at the reserve? tops another record. this despite a slowdown in the economy. we will hear from alibaba's president. and major art sale, which hopes to make $200 million. artessionist and modern joins us. abigail is here to tell us where it stands. nasdaq: we have the moving slightly into the green right now. following