tv Bloomberg Markets European Close Bloomberg December 14, 2016 11:00am-12:01pm EST
we will take you from new york to london, to paris and stockholm in the next hour. here is what we are watching today. decision day, the fed gets ready to raise rates for the first time in a year as the dow flirts .ith 20,000 vonnie: president-elect donald with the mostng powerful leaders in the tech industry. a massive shakeup at goldman .achs a how leadership is changing behind the scenes. mark: let's look at where european equities are trading. investors twiddling their thumbs
, sitting on their hands ahead of the announcement from the fomc in just under three hours' time. here is what is happening across your markets. declines in belgium, spain, portugal, and sweden. the dollar off record highs. you look at the bloomberg dollar. up against the dollar today. those are the government bond yields. down today. go is a wonderful function. a lot of corporate stories to tell you about, shares up i-40 percent today. -- by 40% today. preparing to split its medium marked away from the cash and res up by 4%ood sto
today. the big story we were talking about today, sending shares of actually on by 4% today. the lower. shares earlier sinking a bit lower but still 10% lower over the day. j&j abandoning talks for the $21 billion swiss drugmaker because the two sides couldn't agree on terms. i want to focus on some data out of the u.k. today. employment data, fascinating data, employment falling for the first time in a year. the labor markets showing some signs of weakening as the number of people in work falling by 6000 to 31.7 6 million people. the jobless rate was unchanged. the labor market appears to have
flattened off in recent months. regular pay growth accelerated to 2.6%, fastest pace since august last year, leaving real wage growth at 1.7%. minutes into the trading day in the u.s. how's it looking there? julie: people are doing some hand sitting as well here. all three major averages, very little changed. points.is off by 28 we've been watching oil prices in the wake of that supplies report 30 minutes ago. some ofee oil paring its earlier declines. this is as we saw a drawdown of nearly 2.6 million barrels in u.s. supplies last week. there was still a build in cushing, oklahoma. watchbe continuing to oil.
watching naturally the bond market and we heard from jeff good lock of double line capital, giving one of his websites -- webcasts late yesterday. he said if we do get to 3% on that could yield, constrain liquidity. we have drawn a line to show you where three would be. this is a measure of liquidity by the u.s. government, the higher it goes, the more constrained liquidity is. it's already been trending higher. his concern is if we get to 3%, it will be constrained even further. a change from recent trends here, that is sending yields lower across the curve. something to keep an eye on. the dollar index, the bloomberg dollar index is falling down by about 1/4 of 1%. at 2:00his can change
p.m. but these are some of the charts we will be watching at that time. vonnie: thank you. let's check in on the bloomberg first word. courtney donohoe has more from our newsroom. courtney: theresa may says it's time for the vladimir putin to say, enough is enough in aleppo. a cease-fire in aleppo broke down today. russian backed forces resumed hounding the few rebel areas that are holding out. the fighting has threatened plans to evacuate rebels and civilians. president-elect donald trump has head theck perry to agency he wants promise to shut down. when running for 2012 presidential nomination, perry said he would shut down the energy department. the goldman sachs ceo lloyd blankfein is happy that having
former goldman bankers in government is no longer seen as a negative. gary: is stepping down to serve as head of the national economic council in the trunk administration. another goldman alum, steve mention, has been nominated to be treasury secretary. blankfein spoke in london. recognize how much it does for society to have people working in banks in government. >> blankfein appeared at a business0,000 small panel hosted by bloomberg. the new prime minister of italy has now survived a second vote in parliament. that paves the way for the government to lead the way into the next election. the democratic party does not have an absolute majority in the upper house, so he has to rely on reports from senators who could then change their minds.
global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm courtney donohoe. mark: fed decision day is here with a hike almost certain. the consensus has official sticking to a prediction of 2 hikes next year. most expect yellen to be -- global head of breaks in fx strategy, and investment manager at aberdeen asset management. what is the key tonight? .e get the fed rate hike what is the key tonight besides that? >> first you want to look at the economic forecast. i don't think the economic forecasts are going to change much. i don't think the dots move at all. then you need to look at the warning.
the risk today is that they would describe the risk as allen's rather than rough rebalanced. that could signal the we are about to see and maturation in the fed tightening. cautiously.ceed the dollar has rallied a lot. i don't think they want to shock the market going forward too much. i still believe there is room for the markets to reprise. vonnie: -- 2013 if we compare it to when there was a shift in monetary policy, can we draw comparisons with three years ago? >> i don't think we will see those levels of movement in the asian market. asian balance sheets broadly from aasian balance sheets broay from a come -- from countries to corporate son households as
well, will be able to absolve some of this impact. i do not think any one particular thing will be decided today. we are in it for the long view, and it will only be through the passage of time that we will get greater clarity on what the trump presidency means in terms of fiscal and monetary policy. we will watch and see. vonnie: we've seen a huge regime change in terms of yields and rates in the last wto days -- two days. i might you to dip into the bloomberg. it is jeff good luck's view that they will go to 3% grade if they do, liquidity will be impaired. what are your thoughts on both of those things? will liquidity be drastically impaired? >> we do believe that 10 year yields in the u.s. will rise towards 3% next year. that is in our forecast. i believe that indeed we are
seeing a major transition in bonds, as the economy overall is doing better. inflation expectations have turned. they are rising. we are seeing a policy rotation, more fiscal stimulus, lets you pull from the monetary side. as we wrote, we have an unprecedented exposure to the interest rate risk. i'm worried that in the coming , we will see a little bit of unwinding of that risk, and that will prove bearish. he talked about liquidity, a big question for me is to what point that increase in bond yields starts to impact and effect the risk complex, equities in particular. that will be the interesting part, but i'm quite confident on the view that yields will be heading higher next year. vonnie: what is the thinking? strategist at the lindsey
group says it's amazing how the stock market went from loving slow growth to now living basically quicker growth, no qe, and rising interest rates. what's going on? >> well, yes. it's quite remarkable indeed. what the market is pricing is some support coming from the fiscal side, but also potentially more inflation. we are seeing that in inflation break evens rising sharply which potentially will restore some pricing for companies. i think the equity market is sense, butit makes the risk is at what point we are seeing the surgeon bond yields yieldse in bond starting to affect optimism. mark: since the trump election victory, they have underperformed in the u.s. and europe, asia, japan.
3% u.s. 10 year yield, what is the knock on effect? >> the cost of capital would increase and there would be more stress financially. that's why it's important for be very careful about what their time frames are and what their risk tolerance is. you can be in the asian markets. these are one of these times. you do have to be very selective and quite mindful of the rising difficulties in the market. mark: give us some picks for 2017. we like what we see and samsung electronics. we think what they have done is actually quite focused, and they continue to be a very diversified business conglomerate with not just the
contributing to income. that is why the product recalls we have had, it's been quite resilient earnings numbers and the cash flow profile has been quite good. mark: on a geographical basis, a country basis, do you have a preferred country in asia right now? policiesnetization have been quite innovative. we think what they are trying to do is actually pretty good long-term. in the short term there will be some pain as they try to clean economy, butmarket we like the opportunities we see in the market. we like the banking sector in certain areas and stocks. that's one of the things she would -- mark: vonnie, one more. vonnie: i was going to ask about emerging markets. would you give your estimation as to emerging markets, we
should maybe stay away from as we go through a year full of political uncertainty? >> you have some usual suspects u.s.we talk about higher rates. some asian currencies also are exposed, the taiwan dollar, the korean yuan. we are beginning to be defensive with those currencies. preference for currencies like the russian ruble. we continue to benefit from rising oil prices, and potentially a warming up the relations with the u.s. mark: fascinating, could talk to you all day. we are governed by time. right. you are watching bloomberg television. vonnie? up, a: coming conversation with the former president of the ecb.
mark: european close just 17 .inutes away vonnie: i'm money the former easy as former chairman of the group of 35 with "bloomberg surveillance" this morning. >> work in the g30 has been to concentrate on the global issues of shadow banking, both i would say in the advanced economy on and sides of the atlantic
in the world as a whole, namely incorporating the problem of the overall emerging economies. , if i sum it up, our first, in the advanced economy, we had made progress and we have succeeded in diminishing considerably those very dangerous instruments that proved catastrophic in crisis. the cdo's, the very complex structured instruments, all this has diminished quite a lot. in a way.assuring on the other hand, when you look at the global picture, you see this overall leverage in the global economy has augmented perhaps since 2008. we know that the crisis came out of leverage, public and private. we have to remain very vigilant. we have to remain very vigilant
at a global level. >> you lived european banks that ofld not merge because culture and borders. you and i talk about this years ago in our london had orders. -- headquarters. are the borders and nations of europe more together now, more coalesced, so we can have mergers, acquisitions, troubled combinations of banks? right.ink you are we discussed that already together. we have necessity for restructuring and concentrating in many, many areas in europe the banking sector. we have too many banks that are too national for many of them. i understand that banking union, one of the major structural reform which the european have decided to embark on, should help normally.
but it is true that it is still laborious, it is too slow. in that domain, we have to be as active as possible. this is a problem for the euro area, the single market and single currency as a whole, but .ou have more issues of course including italy. issuess?link these two how much of what we are seeing in europe is the inability to create better institutions is down to overregulation? shadowked about the banking sector. maybe we shift risks from the banking sector to the shadow banking sector by regulation. i'm wondering whether one of the unintended consequences is that europe is still in a mess with its banks because the regulatory burden is too great for them to make money. i don't think so.
i don't think this is the main problem. i think the main problem is that they have to restructure, to be able to be more profitable. one of the difficulty which has nothing to do with overregulation is simply that the banks in europe in comparison with the united states of america are financing the bulk of the economy, when in the u.s., the banks are only financing 20% of the economy. in europe we are up to 60% or 70%. the task of the banks is heavier in europe. they can less concentrate on what is highly profitable as they do in the u.s., helped by freddie mac and fannie mae. we are in a different universe, which is demanding, and we have to work actively to reinforce
the possibility of our banks, that's true. vonnie: that was the former ecb president and chairman of the group of 30. mark: we are nine minutes away from the end of the wednesday session. we will hear from the swedish finance minister on what she thinks a trump residency will mean for monetary institutions around the globe. this is the european close and this is bloomberg. ♪
vonnie: live from london and new york, i'm funny quinn. mark: i mark berger. this is the european close on "bloomberg markets." six minutes away from the end of the wednesday european session. vonnie: time for our latest boom bloomberg business flash. american factory production fell in november for the first time in three months straight production was down 1/10 of 1%. production wasl
down 4/10 of 1%. utility use slowed because temperatures were warmer than usual. uber and volvo are expanding their testing of driverless cars. the companies had been testing about 1/2 dozen cars in pittsburgh. a is what they say is significantly larger fleet of vehicles in san francisco. that is your bloomberg business flash for this hour. mark: the swedish finance minister says she is surprised by the positive market reaction following president-elect donald trump's election victory. she says while there could be short-term gains for the global economy, long-term risks remain. some believe fiscal stimulus when it comes to investments will enhance growth. on the other hand, when it comes to financial market regulation, some believe that he would deregulate national markets which in the short run could
stimulate the economy. on the other hand, the risk for having a new crisis would increase with less regulation on the financial market. mark: let's take a look at way -- where europe is heading. pausing for breath. the fomc announcement in just 2 1/2 hours. 100% probability of a hike. stoxx 600 down. look at the currency board today. investors just waiting. the close 4 minutes away. this is bloomberg. ♪
they are awaiting a rate hike, but it is what else that comes that matters. second decline in only eight days after reaching a high in january. lots to tell you about, including metro. biggest gain since march. german retailer forecasting slight growth in sales. saturn electronics stores away from its cash and carry. metro says the outlook does not reflect the chief executive plans to accelerate growth and increase profitability tha by creating two new companies by the end of next year. i love this chart. what a wonderful title. basically poses the question, is disinflation off the agenda in 2017? this chart covers it. the white bars having positive in recent months. the online is average and no
earnings -- annual earnings in the u.s. crude up. we have seen a resurgence, but will that continue? averaging 2% a year again for the first time since 2014. for aan inflation up sixth straight month, something that hasn't happened since 2004. disinflation will not be an word in 2017. vonnie: i am looking at cnn go. the stock market not doing a whole lot, but we are seeing a little backing off yesterday. interesting look at currencies because the data. the iceland rate cut is impacting currency. the norwegian is weaker.
others are stronger sending the dollar index lower. oils.l skip over the oriole the 30 year down for basis point. let's check in on bloomberg first word news. taking a look at the cease-fire and aleppo, it has collapsed and that is threatening plans to evacuate rebel fighters and tens of thousands of civilians who are trapped there. out say russian backed syrian forces have been tumbling down with rocket fire. the u.s. is accelerating the deployment of deterrent troops to poland. the commander of u.s. troops in brigadeay it armored has already moved out.
london mayor is selling three wanted can is that were intended to be used against riders. they have never been used. proceeds from the sale will go to tackling gang crime. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. i am courtney donohoe. vonnie: thank you very much for that. let's get more insight on today's federal reserve decision and the look of the year ahead under donald trump. joining us is greg from harvard university. former economic adviser to george w. bush, and he advised the federal reserve banks of new york and boston among many other achievements. is it too difficult to factor in fiscal stimulus? is it worthwhile talking about fiscal stimulus until we know
exactly the policies that will be implemented? rightyou are absolutely that there is a lot of uncertainty about what future policy will be. i have no doubt that we are in a situation where the fed will be tightening. the economy is in good shape. the unemployment rate is what we think of the normal equilibrium level. inflation expectation is creeping up a little bit. time to move monetary policy back to normal. fiscal policy is a big wildcard. what is president trump going to do? he has talked about big tax cuts, infrastructure spending. how big these will be will affect the path of the economy and how the fed will respond to that. vonnie: today the federal reserve chairman be asked how the fed will respond to it. what can you possibly say that will markets? after all, if you take a look at my bloomberg chart, you will see it is very close to meeting its mandate. it may already have with the unappointed rate. certainly not far from it when it comes to this.
greg: you are right. janet yellen will read about the fact that fiscal policy may be promoting aggregate demand when we do not need aggregate demand expansion. as a result, she will lean against the wind. she will have to raise interest rates a little faster than she otherwise would. how much fiscal stimulus we will get is the uncertain thing. my guess is it will be substantial given what president-elect trump has talked about, but we do not know what he will push and what congress is willing to do. vonnie: before we move on and a little more into the president-elect's potential policies, what do you anticipate on the federal reserve next year from actual policy? greg: i think we will see a few rate hikes. i do not think they know exactly what they will be doing because they are always data dependent. and a time of very high uncertainty, the will rate to decide how much they will raise rates.
i think they would like to get back to normal, and that suggests several rate hikes, but how quickly they will come will depend on both the data and the policy as it evolves in the white house. vonnie: what will be summary of economic projections showed today? greg: i am not sure. be we ares it will continuing all on the line we are doing right now. i am guessing most economists will not predict the 4% growth there president-elect trump said he is inspiring to -- aspiring to. it seems to optimistic for me. vonnie: i want to point you to another chart. term premium,the which is negative for most of the year. it basically surged after dawn from's -- after trump's win. where should that be? greg: it is normally positive.
in a sense, we are moving back to more normal yield curve. market saw such an increase in rates, the markets are expecting quite a lot of fiscal stimulus, quite a bit of budget deficits. sometimes the president said he will not. sometimes he said he will have big tax cuts that will become inevitable. his economic team is a little bit of a mystery right now in part because they do not have a long track record in terms of thinking about policy. a very talented and smart group but the ones announced so far do not have a strong track record so we do not know what he will advocate. vonnie: let's work with what we do know. we know the president-elect has promised corporate tax and income tax.
what impact do you think that will have on the economy? greg: the corporate tax reform will be important. there are two things going on there. one is lowering the rate, which is a thing. --g good thing. there is talk about moving away from a corporate tax to a cash flow tax. we get the expense investments immediately. there may be some fundamental reforms here, which if they haven't a look of the tax code since ronald reagan in 1986. there could be very big changes on the corporate side. that is the most interesting to me. on the personal side, lower rates. we see that go back and forth between republicans and democrats. democrats want to tax the rich more. republicans want to move to a lesstly flatter tax, focused on redistribution of income and more on economic growth. the corporate tax is really
interesting because we could see fundamental change in the way we tax corporations. vonnie: will these tax policies be a net positive for the u.s. economy in your estimation? greg: i think they will. i believe that taxes are distortion or. -- distortionary. i think that will be positive for economic growth. my guess is it will not be as positive as trump want it to be. he aspires to great rates. we will see slower labor force growth in the future than and the past. we will not get the very high growth rates he aspires to. vonnie: let's move to infrastructure investment. doesn't matter what kind of infrastructure investment we get? or will it be a result of the economy whether it is public-private partnerships or creating lots of jobs or not
creating jobs? greg: no. in the short run and the long all the short run i have for infrastructure to be positive. that is good for the economy, especially in the long run. if you build stuff that is not valuable, you are hiring people to do nothing of particular value. creating jobs but not valuable output. we to figure out how to create jobs in the short run but also build valuable infrastructure. you have to really make sure we have a process in place that is not building bridges to nowhere or walls we do not need. is that, we are building volatile infrastructure like better roads and airports that would increase the economy. vonnie: i want to quote something you had in your blog recently. may want to give a shout out to your blog as well. greg: thank you. vonnie: you wrote about the idea of net exports being a little
bit difficult to read because if freshman knows they go hand-in-hand with -- you are basically saying these protectionist policies, we have to see what they are but it is not certain there are not downsides to any outside the president-elect might be assessing. greg: there are some good things trump is talking about like the tax reforms, but i am fearful about some of the things he said about trade. threatens tariffs. he wants to micromanage .conomies a trade deficit is a subset of a capital inflow.
that will cause more capital to want to come into the u.s. and cause the dollar to appreciate and lead to larger trade deficits. focusing on the trade deficit is not useful. focusing on the conditions that foster economic growth is useful. vonnie: you mentioned regulations. how many of them get done away with? what are the ones that should be done away with? on that note, the janet yellen get replaced? does she leave? greg: the second issue on janet yellen, i am a big fan of janet yellen. i can she has been a good job. trump said he would replace her. my guess is that is probably what will happen. there are good people who can take a job. initial regulation, for sure some relief makes sense. you have to go to regulation by regulation. it will not happen fast. as the newpen slowly
team which is more probably to business will look at the regulations and figure out which particular was to keep and which ones to jettison. regulatory relief is on the horizon, but do not expect anything to happen in the first 60 days. you can see major tax reform in the first 60, 90 days. vonnie: thanks to greg, professor of economics at harvard. thank you. mark: coming up, trump and technology. many of silicon valley's titans are meeting today with the in what oneect analyst calls a groveling session made for reality tv. this is bloomberg. ♪
york, i am mark barton with vonnie quinn. president-elect trump meeting today with top tech executives. joining us now from manhun manhn is cory johnson. not a lot of love from the tech industry to trump during the campaign. is today essentially a groveling session? that theould doubt trillions of dollars of market cap will do any groveling to the president-elect, but they will press their case. meetings somewhere secretly here in manhattan -- some are meeting somewhere secretly here in manhattan to prepare. gathering. she did not stop to talk to the
press, but i caught up with her quickly, and she had some interesting comments. she said this is a very important meeting. better trade deals are tremendously important, she said. said better trade deals are very much in our interest, oracle's interest, but also all technology companies. if they can get better trade deals, they would like that because international trade is very important to the world of technology. mark: going to be a fascinating day. thanks for joining us from trump tower in new york city. let's talk about another big city sticking with the trump transition. the goldman sachs president is leaving to join the new administration. the bank promoting harvey schwartz. they with solomon is copresident. earlier today clsi america's
analysts spoke about the abolition of goldman sachs. >> the pendulum happily has swung by to recognize how much it does for society. mark: excuse me for that technical issue. we will move on. the covers goldman sachs for bloomberg news. thank you for joining us. is two better than one? why two? >> this is something goldman sachs has typically done in his recent history. they like using two executives for the number two role. over the subsequent years, one of those executives typically elevates himself over the other one, and a person can go on to be the next ceo. mark: what do they bring to the table, schwartz and sullivan? dakin: harvey schwartz has been
the ceo for the last four years roughly. he has been asked to cut costs, keep efficiency high at a time when revenue on wall street and the banking sector has been hard to come by. he came through the trading business and has had some other jobs around the face. solomon has been heading the investment banking division for roughly the last decade or so. he has done a great job from everyone i have talked to. they had record reviews in the last couple years. solomon and schwartz are two guys who are senior in the firm. these are the two that we have been hearing through our reporting that we're the two likely to get this role. not a huge surprise. should be interesting to see how the next couple years workout with them in these roles. mark: should be interesting to see who ultimately follows on on. who is the favorite right now?
dakin: good question. i think it is still to be determined. i think there are different groups within goldman up behind each of these guys. will have to watch over the next 12, 24 months as long as lloyd sticks around to see how the politics and the power structures play out. mark: great to see you. thanks for joining us. just getting some breaking news. the justice department in the u.s. accusing two executives of colluding with other generic pharmaceutical companies to fix prices. this is the first criminal charges stemming from these sweeping two year investigation. jeffrey glaeser, a former ceo, and jason malik, an ex-president, were charged in philadelphia on wednesday. the antitrust investigation
vonnie: it is time now for our global battle of the charts, we take a look at some of the most relevant and interesting chart of the day and give you a number so you can look at them afterwards. we will kick things off in new york. >> with the s&p up 6% since the election, you might be thinking investors may be getting a little worried or do something to hedge their gains. as you see in the top cap, that has not been the case at all. etf, the ratio of bearish to bullish is the lowest
since 201 not only are we near a record high4. but hedging is at a 2.5 year low. we are looking at short interest so this is something maybe you ders arethat maybe tra doing a directional short but, not a hedge. they are also very meager. our current level is well below the average of the last year or so. you can find this chart on the bloomberg terminal. vonnie: what is the overall conclusion? is that a bullish sign? >> very much a bullish sign. we erik lamela strategists and that they areysts waiting for signs of that to happen and it has not happened yet. vonnie: i want to know what you have for me today. mark: the squeeze in u.k. real wage is on, or is it?
rose 2.6%. that is the blue line, which is the strongest since august last year. realpage grown 1.7%. growth 1.7%. we have mission creeping inflation. that is the highest in over two years. the suggestion is that the white line is going to overtake the blue line sometime next year. that means a real wage growth will disappear. that is when you really start to see the brexit pain. what is interesting is earnings has out strengthened inflation for the last two years. from 2010 to 2014, inflation the average per earnings is
1.8%. the average for inflation is 2%. boe tomorrow. can't wait. vonnie: it is a top one today. ughave to say it is a to one today. when our dear members of the staff, i was told to treat him very nicely, i can take anything that comes my way. today, you, mark, are my winter. mark: i will protect you. whoever that be to the person is, i will be your browser. bloomberg america's continues. ♪
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from bloomberg world headquarters in new york, we are covering stories. here is what we are watching. it is fed day. we are two hours away from the most anticipated decision of the year. theill you know as we await announcement. alan greenspan shares his thoughts on the economy and politics. trump meets with some of the biggest most powerful leaders in technology industry today, including the ceos of apple, amazon, and ibm. cory johnson is live at trump tower. a rare and exclusive interview with douglas flint. in we are halfway into the trading day. julie hyman is standing by. julie: stocks are not much changed, which is not terribly