tv Bloomberg Markets European Close Bloomberg December 1, 2016 11:00am-12:01pm EST
in terms of the general community, the general business community, there are some specific companies that may be in that whole situation, but we are far from being any kind of risk in the country. the banking system continues to be very welcome to jurisdictions for foreign policy. to what at this time, we saw back in the big financial physician. good is going toump .ndianapolis today is that necessarily a bad thing for mexico? what would you say in response? >> in general, i would say it is not good news that a company
tot was planning to go modify's decision. -- investors. event that is just one that could multiply in many other cases. an important role in our economic development not only on the business side, sustained economic growth in mexico, i trust that will continue in the future. >> thank you for joining us today. the governor of mexico. we will send it back to you.
>> thank you indeed. the year ahead 2017, a new era for two neighbors. we have a panel for the economic impact of desktop in mexico. also, erik schatzker will host a panel and you can watch all of the events on your terminal. you do not want to miss that. you also do not want to miss the equity market close. let's look at where they are right now. we saw the equities close off for a first -- a first monthly gain. 1.1%, a u.k.wn ftse 100 .8%. we see thepace, dollar retreating a little bit from a nine-month high. we see a hybrid -- a high euro.
sterling rallying up .9%. 12623. we have seen the decline for two weeks after comments from the brexit secretary and also dutch finance minister which means investors season a little on the prospect of the u.k. retaining some preferential access to the eu. seen sterling hit its strongest since the 11th today. year treasury yields move higher again after the worst month for u.s. treasury in seven years in november. you see 10 year yields in germany. generally, moving up to the global bond rout. in commodities, brent hit its highest yesterday on the opec
deal. $53.88 per barrel at the moment. if we look at what is happening in the sector breakdown, you are seeing red and he much across the board except energy stocks up 1.9% at the moment, on the higher oil price. as we look ahead to the italian referendum, the austrian referendum vote, what you are -- jumping to its highest since exit. julie: we are seeing a mixed dow tradingeen the at a record in the nasdaq down nearly 1%. traditional industrial old companies, the s&p caught in the middle. groups on the move to explain
what is going on here. information technology is down almost 2%. we are seeing some weakness in apple. a report said the company is reducing its iphone 7 orders after an initial serve -- surge. stocks continue to be weakened. , financialsaries are up today along with energy saw -- energy stocks. i want to look at the recent trajectory of those stocks. we have the s&p energy index in white and both are quite volatile around the opec meeting as we get headlines ahead of the meeting. we have seen those energy stocks surge p or is up once again in today's section in reaction to the opec meal -- deal.
natural gas is having a remarkable run, at the longest run in years. to what we are we have seen an increase in the u.s. dollar versus the peso. now.tock market is down at the mexican currency, we are seeing a move higher in the u.s. dollar, still gaining versus the peso here. thank you. caterpillar trading was suspended over 2% just before trading was suspended. we will keep our eye on that. courtney collins has more from the newsroom. courtney: donald trump begins with what he calls his thank you soared today.
the factory in indianapolis -- 800 workers jobs in new mexico. trump had made those jobs a part of his campaign. he later will hold a campaign rally. in moscow, putin made his annual speech at the assembly. >> an american administration based,carry on relations mutually advantageous basis. russia and the u.s., we are interested in resolving the global international problem in and ensuring -- courtney: putin also said russia wants to build its own present and future without unsolicited advice from others. government-sponsored hackers have lost a series of attacks on saudi arabia in the last weeks
according to people familiar. the attack three on computers as well as five other targets. digital evidence suggests the attack came from iran. two new studies on cancer patients with psychedelic mushrooms are being held with breakthroughs. cancer patients experience lastinge and long relief from anxiety and depression when they are treated with the active ingredient in those mushrooms. these studies are in the new issue of the journal -- journal of psychopharmacology. global news 24 hours a day. i'm am courtney collins. this is bloomberg. >> now onto the top story, the 30-year-old all market in bonds looks to be ending with a bang. the global aggregate total return index lost 4% in november. bonds in europe declined with
opec's's agreement to cut production with a prospect of higher inflation. where is this creating opportunities for investors? the head of global aggregate fixed income, thank you. great to have you on the program. you on the chart which shows what is happening the treasuries index. u.s. debt being hit by stronger economic data. the expectation of red hikes on the fed. further does this rate have to go? >> if you look at where the index is, it is back to where it theat the beginning of year. it is not necessarily the case the market will move at the same rate. we have taken away the deflation pricing at thee
middle of the year. we have taken away the fears the bank of japan of the ecb forever cut into negative territory. we are back to pricing in on the two fed hikes. it reflects the fact that the thatt is not -- and what may due to inflation in the laborgiven that the market is at full employment. being positive on the u.s. dollar, higher interest rates, we think tax cuts, that duration is not attractive enough, and yields are not high enough yet, to make a valuation case for u.s. rates. higher the the dollar goes, the more that has a deflationary effect. those that mean you really do think the market is not icy in
the higher inflation? click cs. if you look at the price of reflation over the next 10 years, it is hovering around 2%. the target is about two, which creates core cpi above 2%. the market is not really pricing a lot of inflation risk. we get the stimulus, the outlook of the u.s. economy theld be growing, foundations are being built. the worst-case scenario is you are owning an asset with relatively good value. attention lot of good if inflation does accelerate. it is about evaluations. it is difficult to look at the market and say higher in nation and reflation is fully priced at this age. we have not priced in much higher inflation. with the u.s. on market for the moment, we had a major rise in bonds and yields.
there was not a whole lot of contagion. could we get that kind of a move again and relax if we do now? market seems to be fine with this. >> the thing we have not discussed is the liquidity market. that is the volatility you have seen over the past 12 months. thinking we are going to see another sharp 70 basis points interest rate rise. i think it will be more looking at the economic data as it comes out, looking at the fiscal plans as it comes out as they begin to fit -- take shape and the market will be reacting to those, not necessarily feeding on itself in a frenzy. >> you see some unit -- movement on the european yields as well, though as much as anticipated. alone,e next few weeks
where are those attractive, if anywhere? >> that is a very good question. our preference is owning assets that price these risks. portugal, 3.5% over government bonds, a lot more than france gives you 50 basis points over german government bonds. the risk is difficult to anticipate because it is a binary event. want to center your whole portfolio around an event you do not expect to be materializing. but that is how we are approaching it. underrate in the euro. >> we will continue our conversation with you right after this. stay with us. this is bloomberg. ♪
>> counting you down to the european close, we are just about two minutes away. quinn. i am vonnie >> head of global aggregate fixed income, we were just talking about political risk in europe and you were saying that was one reason to basically cut your exposure to the eurozone. look here, draghi's dovish stance has not stopped italian and bonds trading. there is an argument that european bonds, even if we get higher inflation and economic data, we could see the ecb tapering. if you are saying investors can
be cutting exposure to bonds, does that not actually provide opportunity if everyone is following the logic? >> you have got this since the be any of november. you will see italian bonds have cheapened up even more than spanish bonds. contrary to the chart there. for us, we have a conservative stance, italian bonds. if you get a good result out of the referendum, you can see the bonds rally. it is difficult to sustain a strong rally because the next step is to hope is on dutch elections and in french elections. the thing that could be the catalyst to start a very strong rally is the ecb, targeting more of their purchases of spain particularly italy. i think the likelihood is the ecb again has to react to the market. the pressure we have had in the market so far is not enough to raise real concerns about some kind of panic or crisis in
europe that changes gear in terms of the bond buying program. to me, the risk reward is asymmetric. spanishmuch prefer bonds to italian bonds. french bonds the time bonds. ir the sector as a whole, think the risk reward is still asymmetric. the upside that you lose it and something happens on a positive note, is relatively low compared to the downside. >> talking about the eurozone which you also thinks -- think investors should be shorting, is your argument that the weakness is inevitable if reflation trade is not priced in as you were saying. if so, when does that turnaround? us, being positive on the dollar is a key part of the story and the question is what currencies do you want to short? arguably, you should take a basket of them and not try to be too clever. athink what you're looking are the political risks. we do not expect her to win the
french presidential election. if she were to win, it would be a real moment that the -- they begin to break out again. after the brexit and trump, i do not think the market will be complacent. that will help keep the euro-dollar relatively weak -- and it is a good way to protect yourself because if you price -- than the euro, you would expect to be weakening. >> very briefly, we have got u.s. jobs data tomorrow. still extremely important despite the fact the market -- >> i think so. i think it just needs to be ok. if we have a big accident, then you know, it raise concerns. but even if that 100,000, i think it would be ok because a string of economic data, not just labor market data, suggesting the market is doing
fine, one rate hike with a market fully priced will not derail that recovery. >> miles bradshaw, head of global aggregate fixed income, thanks for joining us on the program. vonnie: news coming out of caterpillar now. julie has all of the details. julie: thank you. comments are made in a presentation caterpillar will be giving at a conference before credit suites the shares have just resumed trading just as you came to me here. it looks like they are heading lower. i am not sure if we have a chart of that but i will pull it up on the bloomberg. down in thehares wake of the headlines coming up. let me bring specific headlines to you. the company said the consensus estimate of 325 in earnings per share for 2017 is too optimistic. the head -- headlines on sales is too confusing.
it says the $38 billion revenue forecast is a reasonable mid point expectation. the company says oil prices remain volatile on a macro side and that oil prices are not high enough to drive substantial investment. oil companies are among caterpillar's clients, ordering equipment from the company here. the company is also talking about cost cuts, $2 billion in cost reduction for this year and cost cuts included a combined reduced function for people who ask for the company as well fewer positions overall. these are the headlines we have from the presentation at the credit suisse conference. the shares are bouncing around in the wake of the headlines coming out. we will get you updated on the stock throughout the hour. vonnie: a little negative twist there on that news.
>> live from london, county down from the european close, just about five minutes away. vonnie: and i am vonnie quinn. we want to go back to the year ahead 2017 summit in the city. we're taking oil this time. the group -- bloomberg mesko joined joined by as very special guest. carlos: that is right. thank you for being with us.
thank you for the invitation. just learned yesterday there is an agreement from opec to cut production. what is your reaction to this decision? i think it is a positive development, for the public finances. we have already seen a reaction in oil prices, about three dollars yesterday. today, there is another three dollars, and we are around six dollars. of freshld be a breath air for public finances in mexico. probably a good thing. >> production is going to be below what they were producing. now they are deciding to cut products in venezuela. they just do not have the capacity to permit -- to produce more? you have many players for the
opec and non-opec players. are hard toeements come by. where we hadement a decrease in production was 2008. it has been quite a long time since opec decided to cut production. i think it gives an idea that the atmosphere is conducive to further agreement. positive thing. it is always difficult to maintain and we will see how the because opec are the major oil producers but not the only producers of oil. it is hard to say exactly, but i think it is a good development for the oil market. >> let's talk about mexico now. this is particularly important in regards to the opening of the sector. for the first time, they will
offer next monday deepwater feels here is some of those very close to the u.s. in the gulf of mexico. you are joining forces, with chevron. do you have any idea how many deals with them? >> yes. we're joined forces with chevron field.this on the is the most important part the fact that the field was put on the block and we put it as part of the block -- the main difference between this and the is a fields is that this production field. it is not an exploration field. the projects, instead of involving a couple hundred million dollars, we're talking of $11e development billion. it is a very large project. it has almost 500 million
barrels of reserves. is an important field, and it would be the first time in history it has a joint venture in the upstream with risk involved. i am nervous but i have high expectations. i hope for the best on monday. >> how soon will we start seeing who will be the other company ?artner >> very quickly. the investment takes place very quickly and the production takes a few years. asexpect investment as soon 2017. we have worked quite a bit on the field. it is a production project and not an exploration project. the work can be continued relatively quickly. >> production in which year do you think it will start and at what level? and 2023.etween 2022
it gradually increases. i cannot remember that number to the daily production. it will depend on how it evolves. but it is a substantial field. >> let's talk a lot the other areas, probably a bigger headache for you. we spoke in april, you were talking about the importance of finding partners fast to sell some of your assets, for your upstream assets and downstream? know you already hired bank of america to try to find buyers. are seeingr hand, we how refineries in the u.s. are having a hard time to find buyers. how confident you are at that they will find somebody who is willing to buy a stake in a refinery or a refinery system? if you do not find anybody in the short-term, what is the plan
b? >> i am confident for various reasons. we stated it in the business plan. first, mesko presents an attractive market in two dimensions. is the sixth largest gasoline market in the world but it is a growing market and with the exception of china and india, it is the largest growing gasoline market in the world. ant in itself makes it interesting prospect. there is also the process of the liberalization of the price of gasoline, which also provides an interesting opportunity. interestingly, geography matters. wealthhas access to the and the pacific. well,y say to yourself, the u.s. does as well, but there are 3000 miles in between. in mexico, there are 200 miles in between. to give you an idea, south of
the only full scale refinery is in mexico. it makes it an attractive market . i am optimistic, but we are working very hard. it will not be easy for all the reasons you mentioned. hopefully we can find a partner and increaseerate the efficiency of the operations. it will be difficult and it will not be an easy process. i think there are important issues that make it attractive. you took the helm of the company just in february and that is one of your main goals, to improve efficiencies. heard in another interview a few minutes ago on there is a race for a downgrade and that matters a lot because it is probably the
largest almost every year, the largest insurer in latin america. you that you are could avoid a downgrade? >> i think we should stick to our things. he should worry about the interest rates and the money markets. i can say the following. we have been in close contact with the rating agencies and perhaps most importantly, as is said in the business land, today, stable finances, that is a long way from april. we have done a very important budget adjustment, a very large one. today, there were questions about whether or not we would be able to do it. with confidence today that that happened. we're almost at the end of the year and we managed to carry it out. we can also say the government took the measures to support the
balance to improve the balance so a long-term structure of the company, the markets have looked at this positively. aboutsk has decreased by one half. i think these are all good developments. with a presentation of the business plan, i think what we have is a roadmap for what we need to do. a lot of work to do. now we have to do it. thes you were presenting business plan to investors in new york and london, i am sure one of the most important questions was about the chump effect. the administration of the u.s., do you see any challenges there? >> we have to wait and see. evolve, it is only in transition. oil andame time, the gas markets, as you have seen, they are truly global markets
a million imports barrels of gasoline per day more or less, mostly from the u.s. someone is happy on that side and we are happy on this side. we export millions of barrels of oil, much of it to the u.s. we are happy about it and someone is happy on that side. trade is a win if not a win, lose situation. it is win-win because most people -- the buyers are happy about it. business is al truly global business and it will continue to remain a global business. >> thank you so much. back to you in new york. vonnie: our thanks to you as well. us.os rodriguez joining >> stocks finishing up the day in european trade.
let's take you through all of the market action today. that action has been downward holding two days of gains for the stoxx 600 in what was the first monthly gain in november. he looked across equity overseas and greases down more than 2%. the dax is down more than 1%. 1.1%ard pressure, north of caps on higher crude prices. crude above $54 per barrel. you see it hit its high level this year after the historic agreement to cut out what we got yesterday. a mixed picture in metals markets. in terms of what is happening, we are seeing the dollar retreating from a nine-month high. . stronger euro the swiss franc is higher as well and sterling is rallying up .6%. we have seen it decline the most in almost two weeks and it hit
the strongest level since november 11 after comments from the u.k.'s exit secretary and the dutch finance minister which meant investors have seized a little on the prospects of the u.k. retaining some preferential access to the eu after breaks it. we have seen the selloff continue after the global bond see in november, you european yields tracking treasuries, the german 10 year up eight basis points. looking at what is happening across the sectors here at the close, the stoxx 600 has closed overall, but energy stocks have been outperforming up 1.8%. and financials are not doing badly either. to the italiand referendum this weekend, the austrian presidential election week,e ecb meeting next euro-dollar volatility has been spiking, to the highest since
breaks it. vonnie: i am looking at country market movers as it relates to the united states. you can see we are not seeing much movement for some of the major industries. when it comes to the nasdaq 100, tore down 1.2% down mainly send -- semiconductors, 5% or more. concerns they are primarily moving those stocks. if you look at all of the currencies, the dollar is not having the best week. week,consolidating this lowering a little bit. the currencies are all benefiting including some commodity currencies benefiting on back of the oil news, brent crude up 4% at almost $54 per barrel. above 51 for the first time in a long time. let's get back to currencies. the dollar may be weakening but the only currency not benefiting from the weakness is the yen, which is also weakening.
about the only currency at the moment it is depreciating against. you can see the mexican peso is weakening. we got news that he will leave, he got a job he applied for. this is not even a one big spear move after the new the mexican peso had already been weakening anyway. the ruble is benefiting a little bit from the oil news that opec fell below 54 for the first time in a while. china, your attention to still holding below 6.9 even on news that there may be some move to restrict capital outflows and so forth. the 10 year yield in the u.s., look at the 30 year yield here 3.12% is sending those mortgages quite a bit higher. gold, belowrude and 1180 per ounce.
glencore.ove on to it is one of our top corporate stores today, last year, commodities crisis was so bad that glencore had to ask investors for more cash and now it will start paying them back. it plans to reinstate $1 billion dividend in 2017 as rebounding bolsteror zinc and coal profits. joining us now is jesse, who covers commodities. glencore is out of the woods? >> if you think about where we were last year, having conversations comparing glencore to the lehman brothers. this is a full on crisis. to scrap dividends, commodity prices are way down the may had in. the company had $30 billion of debt. to engineer the turnaround we have seen, it has been quite remarkable. .hare prices tripled that is being held a lot by commodities prices.
they have enacted a big debt reduction program. today announced they would reinstate the dividend. to go from the conversations last year to pay for $1 billion dividend next are is a leap forward for that company. >> i believe it is one of the best performing stocks on the ftse 100 this year. has this been primarily driven by the rebound we have been seeing and commodity prices, which might ask questions over sustainability, or has it been the debt reduction plan and with the management has been doing? definitely both. look at coal and commodities for glencore. both are up 70 send this year. they have sold $6 billion of assets, reduced the level down to $16 billion by the end of the year $230 billion by the and of last. analyst about it last year and he said it is 6040 in favor, they have die really good job and should be commended
for it. there was a lot of backslapping from some people on the call. to david, they fourth-largest investor on the show quite regularly i believe. he was pleased with the return of dividends. >> he was. the parte best move on of glencore in the sense these commodities prices could turn quickly on any variables, from drought to a demand care? should they have kept the cash on hand for the next time there is a trading or commodities crisis? prices, 70% this year, driven by a rebound in china. they cut supply there. in terms of the cash going forward, dividends, $1 billion next year and they have instituted a new policy for 2018 whereby they will pay a payout ratio from the division, a $.25 minimum. we heard the chief financial
officer a couple of hours ago say conceptually, we could even pay 100% of the cash flow that comes from that. investors would no doubt sheer that decision. obviously some competing ideas in terms of m&a, so we will have to wait and see -- vonnie: and that is my point. was it the best move to make? investors are filled but they could sell their stock at any time. should glencore be a little more risk adverse and hold on for a while? >> it is a good point and we have seen them in the past come out to aggressively with the capital management programs. they engaged in a share buyback right before the crisis hit them two years ago. they got a lot of criticism from investors around that, saying, that was a bad this agent. have been quite conservative with $1 billion and the payout ratio gives them a bit of a shield and a buffer. i think maybe some people who would agree with your sentiment
there, a lot of others would be pleased to be rewarded after 12 months of really tough time as a glencore investor. >> all right, jesse there for us. one disclaimer, the chairman of bloomberg lp, a parent of bloomberg news, is a senior independent nonexecutive director at glencore. coming up, are there more -- coming to the united kingdom banks? we will to you what you need to know about potential moves at credit suisse and rbs. this is bloomberg. ♪
time now for a look at some of the biggest business stories in the news right now. unemployment in the euro area has unexpectedly fallen to its lowest level in more than seven years. the jobless rate declined in october 2 9.8%. gambling revenue posted its biggest increase in three years last month. 14% or more than it did a year ago. the fourth straight month of gains. operators have been attracting more families and casual gatherers. latest at business flash. on the chopping block, credit cutse is about 25 jobless in london to cut costs. analysts at our cleat's say rbs
will likely deepen cuts at investment banks after the lender flaunt boe for stress tests. moore, me now is michael who covered u.k. banks for bloomberg news. run us through the numbers and the latest. michael: credit suisse last year late out a major restructuring, the bank cutting thousands of jobs. this is the latest part of that. they have the investor day next week in which some analysts are expecting more cost-cutting, going even further than they have gone so far. this is part of the theme of european banks in particular getting smaller. the trading environment picked up in the third quarter but over the last few years it has been significantly down. cost-cutting across the board has been dramatic. rbs has shrunk their investment bank, but given the news yesterday that they failed the
bank of england stress tests, they have got to do more as well. is will abig question cost-cutting the enough to turn the banks around? particularly rbs, the question is profitability. will this be enough? >> not on its own. get to a hoping to scenario where there are fewer players in every line of his. he will focus on the things they are good at and get a little bit of pricing power back. spreads a little wider and be able to make a more sustainable profit. they are hoping for an uptick in the cycle, for trading activity to come back, and also for some of the regulation, if not to get easier, than to just stop getting hired -- harder. >> if looking at banks in europe and the u.k. the moment, i
suppose they are making a balance as to whether president doll ciampa is going to be a positive for banks by loosening regulations versus the risks particularly for u.k. banks. how does that sort of fit together? >> you might see jobs moving because of that bifurcation there. you might have some of the rules get rolled back a little bit in the u.s. in the u.k., you have got the brexit and the eu, making on its of track, there is some kind sentiments of kumal he cannot go too far on the rules coming out of the eu, but certainly, not rolling it back the same way there is talk in the u.s. there may be a bifurcation there and you might see new york benefiting from that while london traits. >> just to look at the u.k. banks, i sure you were following very closely mark carney's press conference yesterday with the financial stability report. one thing he was hinting at was
the risks to overall economic stability. and the banking sector. is that the way to look at it as an investor? or is it more to do with individual banks themselves? view.depends on your specifice looking at banks, a lot of them are facing the same challenges as each other, but they each have individual elements to that. is still majority-owned by the taxpayer. it still hasn't returned to paying a dividend. things on a number of its plate including a doj settlement that eventually has to get done. they have one-off issues. credit suisse has its own. they are laying out the next update for their strategy next week. there are individual elements here. on the whole, it is a question of profitability. it is a question of interest rates.
>> it is time now for our global battle of the charts where we take a look at some of the most telling charts of the day and what they mean for investors. you can access these on the bloomberg. kicking things off his abigail doolittle. stories one of the big this week is the massive sellout in bonds for the month of november. 1.7 trillion dollars in value was lost for the global bond market. the most on record going back to 1990. will this last?
chart of theterm 10 year yield. we see a dissenting trading range. move up, we see the 10 year yield is at the top of the range. suggesting the bond glow moore, that the yield could pop up 2.65% or so. it is more likely we will see consolidation, the box in yellow . in,oomberg client did right a quantitative strategist, he went in and said we've added this to the bottom, we see the rsi is near 60, and according to augustin vara, it has gone above 65 times since 1980, basically suggesting we could in fact see . pause in sellout bonds
maybe by as much as 1.6%. with the action ahead for bonds and yields. >> thank you. i like that you included a comment from a client as well. >> bob parker was on this morning on bloomberg television. thanks to him, he is strong attention, the deputy chairman of credit squeeze. another way to look at china, forecastis trying to or read between the lines and figure out what he is doing. thermal electricity production. he gave it to be around 2.9.
medicine exports, vehicles, i know this is a little bit like saying let's put the good parts of the economy, and a lot better. it is another way to look at things. >> thanks. i am loving both of the charts today. it is too hard to choose and i am calling it a tie. >> you do not want to miss our bloomberg editor in chief. this is bloomberg. ♪
david: we are covering stories from san francisco to new york and london this hour. we will speak to the former nato secretary general about the future of the alliance under president-elect donald trump. fox shares advance 4% today. fox ceo joins us later. we will speak to the chef of a restaurant named fourth best in the world this year. julie hyman is here with the latest. julie: and what is another mixed day. we see another similar pattern with the dow higher, touching a record high on a closing basis of the nasdaq trading sharply lower with the s&p hovering in the middle. oil continues to be part of the story. we see