tv Bloomberg Markets European Close Bloomberg November 14, 2016 11:00am-12:01pm EST
mark: we will take you from new york to berlin and we are going to cover stories out of the u.k., wall street and japan. here is what we are watching. prime minister theresa may will give her first major speech on foreign policy since taking office in july. she will argue that changes in the air post a donald trump win. vonnie: u.s. stocks continue their rally in the wake of a trump election, but the new president's best hope is offering equity change. we await a new conference from president obama later, today. mark: let's have a look at where european equities are trading
with 30 minutes to go before the end of the monday session. stocks are rising after the best since july,ast week all of these currencies are falling against the dollar. look at the bond selloff continuing, all these yields arising across europe. commodities, gold selloff continues. ziemann agreeing to buy mental -- $4.5 billion, its largest acquisition since 2014. the german engineering company is extending its industrial software capability. share,ll pay $37.25 a 21% above the closing price on friday. ziemann is pushing deeper into software applications that are crucial to running its industrial equipment, shares up by 1.25%.
rwe posing a larger than estimated third-quarter loss. prices slumping in europe's biggest market. they reiterated that profit forecast for this year, basically they are on the wrong side of europe's biggest economy and their unprotected -- unprecedented shift towards renewable energy. after listing its renewables grid and retail arm energy last month, the focus for this company is unconventional generation from nuclear to coal plants, shares are down by 3.4%. today, copper, the ascent continues. we have been up as much as 3.4%. we are up a near -- a mere one third of 1%. last week, copper had its best , up by 11%, one
point on friday, on track for its best week ever. it did not finish that way. goldman sachs is the initial market reaction to infrastructure spending posed by donald trump is excessive. it reiterates it is sequentially lower prices and the postelection rally had copper prices seemed too much, too far for us. this is copper going back six months. is relative strength index an 85, that tells you the copper is overbought, last week, the above 90,e rose to which was the highest, ever. quite incredible moves we have seen in the copper market. julie: aside from that incredible move we have seen and the copper market, i wanted to look it our usual board of the major averages with one addition.
this is the russell 2000. the dow rose to a record and is now falling back a little bit. the russell 2000 hit a record and is holding on to its gains, up by 1% as small caps have been outperforming ever since the election. they are more domestically oriented. really notable that we are seeing that dramatic outperformance of the small caps. the russell 2000 versus the dow. the s&p lower and the nasdaq taking the biggest hit. what is bringing them down? technology, the fang stocks. there is concern about what the new administration is going to mean for some of these companies, and the concern seems to be persisting to this week. instead of being the leaders of any kind of rally in the market, that trend seems to have ended.
take a look at the bloomberg. this is what we have talked about before. the bank stocks versus the s&p 500. when this line is below the red line, it means that these stocks are underperforming. they have been outperforming cents last month. there are questions about how long a rally in stocks can be supported, if these companies are not going up. what is going up today are the banks. they are hanging onto the gates, so this is the strongest group in the s&p 500. we mentioned the financials are at their highest since 2008. rise,d yields continue to we are seeing a selloff in bonds that are pushing yields higher. whether you're looking at the shorter or the longer end of the curve, we are seeing substantial rise in yield. the two year yield is up six basis points, so a big move in particular, and all of this means a gain in the dollar, so
thatollar is up versus -- bloomberg dollar index is at a nine-month high. vonnie: thank you for that. let's check in on the first word news. taylor riggs has more. taylor: barack obama leaves today on his final foreign trip as president. trump's election has upended his agenda for his journey to greece, germany and peru. he must now reassure global leaders that donald trump will be ready to lead, come january. president obama will hold a news conference and you can watch it here on bloomberg tv beginning at 3:15 p.m. eastern. that all trump has made it clear what he is looking for when he selects supreme court justices. the president-elect was interviewed on the cbs program 60 minutes. >> i am pro-life, the judges will be pro-life. in terms of the whole gun situation, we know the second amendment and everybody is
talking about the second amendment and they are trying to dice it up and change it. they will be very pro-second amendment. taylor: trump says the issue of same-sex marriage has been settled by the supreme court and he is fine with that. a massive earthquake has rocked new zealand. at least two people were killed. a hidden area north of the's -- of the island city of christchurch. damage was estimated at several billion dollars. 2016 is on track to be the hottest year. average global temperatures this year or 2.2 degrees fahrenheit above the levels during the industrial revolution. the temperature was boosted by el niño weather patterns. global news 24 hours a day powered by more than 2600 journalists and analysts. mark: let's get back to markets.
-- ident-elect donald trump the start of a new administration is often a bullish time for equities. by getting a bear market over with, it can allow donald trump to preside over powerful advances just in time for predecessors,his bush and obama did. thank you for joining us. the outperformance by global stocks this week was the strongest since 2011. how long can this divergence continue? i think it can go on a little longer because what we have to understand is that all through this year, if we look at slows,
-- flows, monday has been flowing out of equity and into bond markets. victory, wet the have started to see a reverse, but there is still quite some way for this fund slow reversal to go -- fund flow reversal to go. mark: there have been some obvious things like health care, mining, infrastructure, those bond proxies. is that how we play it? if we look at the bond proxies, and we look at something with the u.s. utility sector, this has been a sector massively into the low volatility strategies such as low volatility ts. we are seeing this unwind, but we are able to go some way further.
i expect bond yields in the u.s. to go further. on the flipside, let's not forget that health care has had a pretty torrid time on fears over what president clinton might have done and of course now that that is not going to pass, they are announcing the unwind of that. we are seeing growth of a sector that is quite cheap at the current times and i think still has links to go. the textbook wisdom is that at some point, a bull market dies of something, and the idea would be that donald know, even if he does not it, he would like it to die soon so we can get another run before he needs to get reelected. is that at all the case? can the bull market continue? >> i don't think it will continue, forever. if we are looking for triggers,
the obvious trigger will be recession. if you look at previous bull markets, they were all ended by recession. if we look today, we have seen a period of slowing growth in the u.s., where unemployment is below 5%. when unemployment goes up by 0.4% from the low, that signals oncoming recession. there is not much president trump can do. it is all about the u.s. economy and whether we are going to see recession in the next few years. there is significant risk that we do see that recession. the end of the bull market will be signaled by oncoming recession. vonnie: could president-elect donald trump actually create a recession? could his policies and updating the u.s. into recession? up putting the u.s. into recession? >> again, if you look of the
u.s. economy, it is much more sensitive to long-term interest rates than they are to short-term interest rates. if bond yields go up too much and money gets too expensive, this could be what starts a recession. companies might spend less money on investment and things like mortgage rates going up may stymie the housing market. these could be the causes of next recession. mark: talk to me about emerging markets. predicted -- he says there is an emerging market crisis building up into the inauguration. we have seen the selloff in all emerging market asset classes. how bad is it going to get it yield keeps rising and the dollar keeps rising and the fed gets set to raise interest rates in december with tighter policy
down the line? >> the problem is if the fed stops raising rates and the on goes higher, you have monetary policy -- money -- tightening of monetary policy in the global economy is most sensitive to rising rates. from a point where emerging market equities and bonds have seen very strong inflows from retail investors, this year, up to recently. that is now being -- with a stronger dollar, we are seeing monetary rates that continues to -- cem underperform could continue to be an issue. personally, i am not convinced china is going to hit a crisis anytime soon. there are a lot of political changes about to happen in
china, and we think that the chinese authorities will do whatever it takes to continue growth above 6%, at least until then. me, to stopkey, to e.m. turning from underperforming into a crisis. mark: great to see you, thank you for joining us. vonnie: coming up, theresa may will say that changes in the air in her first speech since donald trump's surprise victory, last week. this is bloomberg. ♪
the u.k. prime minister will give her first major her firstlicy speech, in-depth comments on donald trump's victory in last week's presidential election. what should we be listening for? joining us with a preview is bloomberg's brexit editor. is trumps victory a problem or an opportunity -- donald trump's victory a problem more and opportunity? opportunity?or an >> it creates the likelihood of a trade deal with the u.s. if europe is worried about security concerns stemming from a donald trump presidency, -- the uk's military might be able to get them some concessions from the europeans. bethe flipside, and might
that the europeans double down on this attempt to not back nock back-- k populism in their own countries. if she does stray into being closer to donald trump then they perhaps want to -- than they perhaps want to. mark: she needs to balance addressing voter anger with embracing global trade. >> she is trying to do that. she will talk about change in base fornd a positive globalization and free trade globalization and that people have to make a better effort to justify and explain them to a disenfranchised people. how much did donald trump and theresa may have in
common? he appropriated the idea of the brexit for his own campaign, potentialhimself to a election of brexit. >> there are parallels between brexit and the election in the u.s. to some extent, they were both delivered by a group of voters who built disenfranchised by the financial crisis, multiculturalism and mobilization. at the same time, there were quite important differences. -- there are quite important differences. idea of getting out of the eu is to make a better case for the u.k. in the open markets. theresa may obviously did not
win the election, itself. she -- it would seem that they -- it will remain to be seen how much common ground they are able to find. -- revisit the days where ronald reagan and margaret thatcher were so close. i believe there are grounds for mutual interest. vonnie: it takes some time to get everything done so theresa may will have a busy calendar. at least domestically, things are looking good going into the holiday season. the u.k. consumer is doing pretty well and spending money on food and clothing. >> the take away from this data since the referendum is that it has strengthened the hand of those seeking brexit. bloomberg intelligence writing in today than it could create
problems down the road, because the europeans seek to punish the british in the brexit negotiations. in france or germany or spain and looking at the u.k. economy going along just fine, maybe you'll be encouraged to think about leaving the european union. you will have to have the british have a difficult divorce. it is good news now but could be bad news, later. mark: thank you for joining us. vonnie: still ahead, deutsche bank says he is worried about italy as a flashpoint for european economic problems. this is bloomberg. ♪
european close. from bloomberg world headquarters, i am vonnie quinn. it is time now for the bloomberg business flash. making alectronics is big move into the automotive technology business, agreeing to buy harman international technologies for $8.5 billion in cash, representing a 28% premium to harman's closing price on friday. they make automotive audio technology. the firm says it is acquiring -- so we can expand its expertise in energy deals. terms of the deal were not disclosed. subsidiary of a weinberg. that is your bloomberg business flash. mark: the u.s. election of donald trump served as a wake-up call for europe as it looks at its own economic challenges.
deutsche bank's chief economist spoke -- describe the current climate. >> my worry is that as we come closer to the referendum day, and as donald trump's changes make themselves felt, you will see investors pull back ,ompletely and we will go to 4% then you will have an impact on the banking system in italy and the rest of europe. for me, italy is the country that i would worry about as a flashpoint. look at where european markets are trading as we head into the close on this monday session. we just came up the best week since july. it looks like stocks will finish the monday session higher, today. that reflation theme is continuing to play out across markets worldwide. we are seeing bond yields rise and equities rise as well. we are seeing money move into the u.s. currency. this is what is happening to european stock markets.
let's start with the bond markets. look at the yield on the u.k. 10 year. months ago, itf was at a record low and this is a massive week for the u.k. because we have inflation data which could show inflation rising above 1%. we also have the governor of england, mark carney testifying between -- before mps. this is of course when the bank of england went neutral on interest rates, saying it could raise rates or cut them. that is what is happening to stocks, four minutes away from the european close. this is bloomberg. ♪ wow, x1 has netflix?
hey, drop a beat. ♪ show me orange is the new black ♪ ♪ wait, no, bloodline ♪ how about bojack, luke cage ♪ oh, dj tanner maybe show me lilyhammer ♪ ♪ stranger things, marseille, the fall ♪ ♪ in the same place as my basketball? ♪ ♪ narcos, fearless, cooked ♪ the crown, marco polo, lost and found ♪ ♪ grace and frankie, hemlock grove, season one of...! ♪ show me house of cards. finally, you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. >> live from london and new york , i am mark barton with vonnie quinn. stocks finish higher than last week. the rest week since july. the yield curve benefiting those
trumpsesources and infrastructure spend will boost demand for commodities. those utilities and the real estate companies as well, stock companies up today. -- drugs chart maker maker is in talks to buy adam neil pharmaceuticals. seeking to bolster its business and then consolidation in the industry. held amnealosely list and a wave of mergers that swept the industry. the takeover of allergan. for drugmakers as well, prosecutors bearing down on than eric companies in a sweeping criminal investigation with shares in the markets down
by two thirds of 1% today. u.k., right to move says that u.k. house prices fell by 1.1%. it is normally a slow month to sell. asking prices in london fell for a six-month. much smaller than the 1.5% average seen in november. donald trump may be good for the london housing market, so says right move today. his victory could spur the return of international investors seeking a safe haven. london's most expensive districts have fallen out of favor since brexit. we have a surcharge on investment properties as well, just to give you a flavor of the movement we are seeing in yields .cross europe on market earlier, i showed you the difference between spain and italy. the italian yield is now 50
basis points wider. yearss the widest in five which affects -- reflects risk of the italian referendum. this is the brexit on the 23rd, , weday of the referendum have 1.37%. .own in august, we fell since then, we have come up to 1.40%. level webove the finished that, but a before that we had the brexit result. testified before lawmakers on the bank of england's last quarterly inflation report. vonnie: busy week for central bankers. that is on thursday. let's look at where u.s. stocks, bonds and fx are positioned. is probably the worst index
at the moment, apple dragging that down and earlier, the other stocks also dragging down, things like the s&p 500. still, grinding higher on the idea that fewer regulations under a potential presidency that wants fewer regulations is good for businesses. the fx charts, you can see that all currencies relative to the u.s. dollar are weakening today, particularly the save haven currencies of the and wetinuing to weaken have the dollar index here down. percent, 27 in out ofd u.s. drillers the race as well since may. the two-year basis points are a phenomenal milestone. 96 basis points and if you look
at the 10 year yields, 2.21%. we are having a look at currencies and yields. i pointed out the 2.22% for the 10 year and that makes it $.10 for 100 54 basis points. look at these currencies. let's start with the yuan. in fact, it is actually one of the better performers among the market which has taken a huge tumble. peso, look at the mexican it is down more than 7%, trading at close to 21. we mentioned the yuan and the dollar index earlier. taylor riggs has more from our newsroom. >> fighting intensified today for the city of mosul, which iraqi forces are trying to recapture from the islamic state. from dubai -- >> fighting the islamic state in eastern mosul, after a suicide
.omb attack with the fighting now taking place in close quarters, the risk of civilian casualties cannot be backed up by a live report. >> european union foreign ministers have their support for the iran nuclear agreement. donald trump found to renegotiate. calling fors are more robust european defense and a greater european voice in world affairs. will makeime minister the case for free trade in person when he meets with president-elect trump this week in new york. trump has pledged to scrub the transpacific partnership which covers 12 countries and makes up 40% of the global economy. global carbon emissions are growing and at a slower rate this year according to the
global carbon project. they will increase 1/10 the decade,te of the past one reason is china's gas output is falling. global news 24 hours a day powered by 2600 journalists and analysts in more than 120 countries, i am taylor riggs. mark: a selloff in the emerging markets today after a record $1.2 trillion was wiped off the value of global bonds last week. investors looking to reposition themselves ahead of fiscal policies. from the president-elect donald trump. we have had all sorts of other things. general,at legal and the investment manager of more than $1 trillion in assets of the management. john, so many questions so little time. this is emerging-market assets. the white line is the emerging markets currency index.
which, since trumps victory is down by 3%. the blue line is the stocks index and the purple line is the whichsovereign bond index is down roughly two or 3%. how much more of this selloff is going to come? there are really two drivers behind this. it is getting partly caught up in the trumps slump, as you called it. -- you've also got the cold the slowdown in china. that tends to proceed a slowdown in economic activity and so, while the october economic activity did hold up, there is in a dictation about how we are now slow over the next few months. it could really reinforce the effect of donald trump. >> i would hate to put numbers on it but 7% decline in equities, another five, in
currencies -- it said 3% -- where does it end? what final figures are we looking at? >> if we get an enactment of a you could easily see the outperformance of the emerging markets wiped out which would be other 5% and it could go good if the latest china concerns turned out to be worth january and february of this year. becauseget a bit harder they have to put so much credit growth behind guessing the economic growth. vonnie: one of the interesting things about this is how much currency has weakened from the euro to emerging markets currencies to the yuan. central bankers are secretly a little bit pleased, including the bank of japan governor. >> absolutely. this is a godsend.
he is able to maintain yields when he wants them to pass and they have been the standout performance when he wants them so it is some evidence that his yield targeting reports could really work. for others it works less well. in particular, it has been mentioned but in europe, the spread is coming at a bad time for that. and then, we have the emerging markets where the increase in u.s. interest rates pushes up that cost of funding. vonnie: where might we see problems? we have had our eye on venezuela and brazil that for terms of the direct impact of higher u.s. rates, where might we see some big fallout. it will tend to be the fragile five again. where effectively they have thee high needs to finance,
effect is that as rates rise it picks up. it should be a cross developed market -- emerging-market, sorry. you have to be careful about this interaction with the potential china slowdown and the reason for that is that on the oil side, a lot of emerging markets have benefited from a close butn of relatively, predictable in some way, moving within the range. , whichoming opec meeting could have a chance of significantly pushing up oil prices it is really worrying how much they have slipped since the announcement in september. we are now back at oil prices in the august levels. potential upside risk that we could be headed up to 55 or $60 if we got a positive surprise from opec in terms of how much they cut. what does that tell you about the fundamentals and the reality that china has been a huge margin of fire.
has been the china savior of the global oil market and the reality is if a step away, it will be heavily felt by the balance of supply and demand. a fundamental basis, we are looking at more is 3,40 a barrel, which 4, 5 because of the upside risk. if we were down below 40 it would already be a main focus. we are missing some of it because of this upcoming opec meeting. >> in global bonds, last week over a trillion dollars wiped out the value of local bonds. this is a lovely chart, really getting to the essence of what has been happening. this is global stocks versus global bonds and the global stocks was the biggest since 2011. could we have another week like last week? > we think it gets increasingly difficult. we are back to around where the
staff is the u.s. treasuries and we find it difficult to see them rise. when you look at the number of fed rate hikes, then actually somewhere around 22 225 feels like sensible. the rest are pulled up by the u.s., so when you look at germany nothing has changed. they are still facing very low inflation, well below that target in the eurozone. the reaction function is everything moving higher on the u.s.. vonnie: my chart in the terminal goals, it shows the strength index for bonds and yields between bonds oversold. it is just another way of seeing what marcus is saying. the point is, where do you see yields next year? that 2.5% forying
this year or more. it back down to 1.35% for next year. i think we are into that. of the divergence. in the u.s., the expectation is that rates continue to rise so when actual rate hikes happen, inevitably, the fed revisits its long -- term bond yields. you can expect to see that revisited at some point and against that backdrop you could expect to see the u.s. go higher. for rateno potential hikes and very low inflation, so more., the ecb needs that would keep yields down. but fundamentally, there won't be many rate hikes. where you could see more divergence and where -- which is a big risk -- is if we saw
tapering in the eu, you could get a lot of divergence. this is a realization that means countries have lost or at least reduced. mark: john roe of legal and general. vonnie? vonnie: activity in the online space.g taking the canadian company private. shareholders are delighted. more on his troubled history next. this is bloomberg. ♪
the bloomberg business flash. some of the biggest stories in the news right now. these accused of forcing them to pay with hundreds of millions of dollars. suing, theetailers parents of top shop. these fees have been set lawfully. -- amayaer of a maia in a deal valued at $6.7 million. it is position as a private company. that is the latest on bloomberg business flash. european foreign ministers met to discuss eu u.s. relations in the wake of trump's victory. to cooperatesed while vowing to stand by international agreements he has
questioned. earlier today, on bloomberg surveillance, luxembourg finance minister on how a trump presidency would affect europe. >> we have to look at the things there is seriously and quietly. president trump has made a lot butromises in the campaign since the day he was elected, i think the words he chooses and the ideas he defends are pronounced in a more calm way and obviously, he is giving himself a presidential look and outreach and he has said that he wants to cooperate with all the countries and i am pleased to hear that. all european countries equal the work with the new president. a are you worried about european existential crisis and whether that will come in the form of more extreme politicians europeinto election in
or actually, would you give brexit more of a voice? i think that the answer to brexit on the one hand, and the is warranted to the election of the american president, that we need more europe. we need a europe that knows where it wants to go and, for one thing, which is clear for me, is that we need a eurozone that is stronger. to doe plans how we want that and we need to be united to be heard. vonnie: are you concerned that a trump presidency means europe will be heard less? you have some kind of foreign policy were the u.s. is stronger with russia or china or the u.s. is much stronger with the u.k.. you guys are suffering a little. well, the european union is
500 million people, even after fourrexit, it will be hundred 40 million people, the most important single market in the world. it is the closest business partner of the united states. we have to continue to work together on it. and also on brexit. we have to do that negotiation which hasn't even started yet. we must not put the cart in front of the horse, for the time being the u.k. is part of the european union and we should take the problems one after the other. vonnie: you will be at the negotiating room. what lines are you setting in these negotiations? with the u.k.? >> we will be in that room and ben it starts, it will triggered in a couple of months. in the first quarter of next year.
difficult to know, where exactly in the united kingdom they want to go. we, as europeans, must make sure that we have a common mandate to negotiate with the united kingdom. mark: that is the luxembourg finance minister. battle of the charts next with the election out of the way. europe's focus turns to a series . whereot a charge tracking the next populist breakthrough might be. this is bloomberg.
group of investors that does not like the rally, that is the bears. they have the most people experience in the most four years -- in the last four years. i have the goldman sachs basket and look what happened over this past week during this postelection rally. on the bottom i have the one week rate of change. at the bottom, this is a 10% increase. these heavily shorted stocks fall -- saw that last week. too happy,ot although other investors might be happy about this rally. #bcb.n look at that at g, vonnie: mark barton, beat that. if you want simplicity, i like to go for multi-lines and multi-colors, but i am keeping it simple.
we have had the likes of italy sell long dated bonds, we are talking 50 plus years. that is because of the low yield. if trumps -- is trumps election victory a bad omen? ago,a matter of weeks vonnie, if you invested 100 million euros in this bond, last friday, you would be sitting on a 13 million euro loss. it's the ecb decides to take her -- taper, these would be suffered by this type of long day. the theory is that there will be a flight. that makes the meeting in december a very important meeting. if you don't think bond yields can rise, in italy, the 30 year bond yields are two percentage points less than the average during the first decade of the
euro's existence. that simple line is very important. c #bcb. vonnie: thank at ms. i didn't have 100 million euros to invest because i would be sitting on that. i am going to award you the crown today to reward you for that one for mine. it is phenomenally important. you are seeing impacts on the u.s. mortgage rates as well. president obama is holding a conference at 3:15 eastern. we will bring it to you live. this is bloomberg.
>> from bloomberg world headquarters in new york, we are covering stories from new york, washington and geneva. donald trump set up a power-sharing arrangement with his top staff appointments. secretary of the u.s. department of homeland security, jeh johnson on how his department is preparing for a transition to the donald trump administration. we are seeing deals across the pharmaceutical industries today, breaking down our merger monday in this week's deals. let's get a check where things stand now from julie hyman. >> we had a pause in the postelection rally. at a record,ading and the s&p and the nasdaq have given up any early gains that they were experiencing. a sideways market here, but again, we are seeing this phenomenon