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tv   Bloomberg Markets European Close  Bloomberg  December 30, 2016 11:00am-12:01pm EST

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we will take you from new york to london and the next hour and we are covering stories out of italy, russia, and japan. a big year for some european .tocks the ftse 100 surges to an all-time high on this final trading day of the year. saw a year that voters vote to exit the u.k. union. there is more to it and we'll bring you that and the market action. rising tensions between the u.s. and russia, vladimir says he will not take out u.s. diplomats. be fewer media companies at the end of 2017? media sector may take off on both sides of the atlantic with mergers. close. the european
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you can see that the stoxx 600 was up about 1/3 of 1% on the day and the ftse was higher as well. the german dax was up 30%. cac 40 up as well so the final trading of the year is showing some gains. if you are trading british pounds and buying the ftse, you would have done well. looking at currency movements, this is related to the u.s. dollar. these other currencies that did well. versus the u.s. dollar. went 21%lian real higher on the south african rand and some of the asian currencies
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are doing well. the canadian dollar appreciated 3% as well. the british pound was the laggards of this year, down almost 70%. the mexican peso as well -- down almost 17%. we also had safety trades. many strategists say there is much more there. this is the 12 month outlook. it's the final trading day in the u.s.. abigail doolittle has your market news. looking at small the kleins for u.s. stocks on --se last day of trading small declines for u.s. stocks on the last day of trading. the dow is on pace for his first weekly decline since the election. it's a little bit of a bearish
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streak at the end of 2016. the last five days has seen relatively little action. the s&p 500 looks dramatic but you can see the move down of of 1%. we have the biggest drop of the 1% 500 at about 8/10 of since october 11 this year but relatively quiet overall with volume down. all theth noting averages are nicely higher on the year. the eighth year of the longest bull market in history, the second longest bull market, we take a look at a great chart. this chart may suggest that everyone looking for a bear market that relative to president-elect trump, he may hope a come sooner rather than later. market over the
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last two administrations and for both george bush and president markets camer relatively early in the administration and ahead of the reelection prospect. perhaps that's a hope for the next administration. finally taking a look at the dow and the winners, it outperform year in500, it's best three years, up 12%. united health, caterpillar, and goldman sachs and caterpillar was up quite nicely and united health was one of the few health care stars this year. investors like the fact that they will exit obamacare next year. profits are set to grow well goldman sachs benefited from the big move up in yields this year. were just talking about the affordable care act and how the scenario will change. we will keep an eye on that. let's check in on first word news with taylor riggs. russia is the story,
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vladimir putin overruled his foreign and decided not to retaliate from the president obama expulsion of 35 russian diplomats. he said he would not expel his foreign minister urged that 35 american diplomats before it's to leave russia. the russians were kicked out of the u.s. in retaliation for russian interference in the election. the kremlin says the obama administration is trying to sabotage donald trump's outreach to russia. we will have more on this in a moment. in syria, the cease-fire is holding despite minor violations. russia and turkey worked at a true is between rebels and the syrian government troops and hope it will lead to talks to end the civil war. a parliamentary committee in turkey has voted to give sweeping executive power to the president. gan says he needs the powers at a time of increasing threats to turkey including attacks by kurdish militants.
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the full parliament must still approve the measure. of u.s. some criticism secretary of state john kerry for his condemnation of israeli policy. the british prime minister theresa may says he focused too much on israeli settlements but she said he should not have attacked the political makeup of an allied elective government. the state department says it is surprised by her remarks. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. vonnie: thank you, let's get back to relations between the u.s. and russia. aadimir putin is avoiding tit-for-tat escalation after president obama ordered the expulsion of 35 russian diplomats. joining us from our washington bureau is marty shenker. he decided not to retaliate but he let the foreign minister come out and threaten retaliation, what do you make of that?
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>> i think nothing happens that is not well orchestrated. i'm not sure the foreign minister really understood or thought he was going to do what he suggested. it's another brilliant move by vladimir putin who is a strategist of the highest order. many say russia plays chess while the u.s. plays checkers in terms of foreign policy and this is another example of that. vonnie: wasn't it a mistake on the part of president obama to an act of the sections and enforce these expulsions? president trump can just undo those actions of he feels like it3+ . ago inong as two months october, president obama said there were going to be countermeasures imposed on russia for their attempts to hack the uxo -- the u.s. election so should not have come as a surprise. we only have one president at a time.
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he obviously felt strongly he had to do something. history would not be kind if he had left this to an incoming president if he did nothing. i think he actually did what he had to do. we always talk about how european sanctions are more effective when it comes to russia because they are a bigger trading partner but what about the sanctions imposed by the u.s. so far in russia? have they had any meaningful reaction in russia? are not heldinly in full in the russians will tell you that. the drop in the oil prices had a bigger impact. there was an $8 billion investment from glencore so it has not been that effective. vonnie: what about rolling back the sanctions and perhaps
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allowing the diplomats back into the country? will donald trump do that? back 35ll not bring specific ones that have been expelled. but he could turn this into an an vantage if he decides -- advantage if he groups this into a broader sanctions discussion that results in benefits to both russia and the u.s. it is possible. talkingwe have been about systematic relations between the u.s. and russia but shouldn't we be talking about the cease-fire that russia has potentially brokered that is supposed to start tomorrow night in syria? >> yes, that is quite possible. cease-fire has held probably longer now than any of the previous ones so it is a positive development. finally, the beginning of the congressional session starts next week so what will be the first thing to hit the headlines? >> the election of paul ryan as
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house speaker and then the agenda setting for donald trump's plans for domestic economy they will take on first. probably infrastructure. vonnie: and then the inauguration, thanks for joining us from our d.c. office. up, why 2017 could be the year of media and wireless megadeals and t-mobile could be the big profits are. this is bloomberg. ♪
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vonnie: from bloomberg world headquarters in new york, i am
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vonnie quinn counting down the european close. many markets have already closed in europe. it's time to look at some of the biggest business stories in the news. the italian rescue of its aschi bank monte p will cost over $7 billion. the european commission says whether the rescue is within their rules. driven up theas expectation for higher bank profits. analyst at morgan stanley say that will not keep wall street from cutting more next year -- cutting more jobs next year. they say banks will use traders and branches. anre's another fight between american broadcaster and a cable company and viewers may lose out. nbc universal says bronco and usa may be unavailable to charter communications subscribers as of sunday. the broadcasters says they have been unwilling in demanding better terms. charter is not commenting.
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your bloomberg business flash for this hour. 2016 was a big year for changes in the media landscape. based inng giant wpt london was up 16%. you have the u.k. educational publisher pearson which is up 11%. other advertising giants gained and technicolor plunged more than 31%. was down 25% and the pay-tv company sky is down 10% for the year. 20th century fox recently agreed to take full control of sky for $23 billion. staying on the topic of big media, let's bring in tara.
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you have written that 2017 will be the year of wireless and media. what makes you so confident these deals will get through igulators question mark >> think at&t buying time warner will kick off this new era of conglomerate building in media. i think that will rope and a lot of other companies. we will see other telecom companies like at&t and verizon affect apple and others. i think everyone is trying to get bigger and offer as much as they can to customers and try to show how they can grow which is what shareholders are looking for. it's hard to see that organically. major: we have seen the ones but what's next, midmarket? be theink it will megamergers. t-mobile is one to watch. many companies will have their eye on them going into the new year. comcast and sprint have long wanted to merge with t-mobile. tobe even dish so we have keep an eye on charlie ergan.
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was supposed to be in merger talks with viacom because they used to be one company years ago. they will not go forward with a merger and it makes you wonder what cbs's up to. seen posturing from some companies. what will the landscape looks like in terms of companies in the future? are we looking at distribution and content companies combined? >> i think that's where were moving toward an that has happened in europe already. the u.s. has been slow on the up the companies here are some of the bigger. they will be getting even bigger which is hard for my regulatory standpoint. is the trump administration going to let at&t by time warner. on nbc down hard universal which was done years ago so companies are moving toward that. it will come down to whether they are allowed to do this and
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whether it's bad for consumers or something that is beneficial. the newly created companies be involved in all these things or will it be seen as a company where distribution and content creation and advertising work together nicely? >> i think it will be an experiment we will see with at&t. their ceo has spent his whole career in the telephone business. suddenly, he's getting into the hollywood business so there will be culture clashes. it comes down to how they manage and will it be seamless or will there be clashes? that's where it will make or break the field. vonnie: what about a company like disney? >> bob eiger will supposedly be retiring in 2018. vonnie: maybe. >> he has done great deals but
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they have been movie studios. at espn, very valuable but it is a drag on the stock right now. will he think of something bigger, perhaps separating espn and maybe that makes it easier for him to find his successor. maybe he can focus on someone who can run disney and not worry about the networks. cbs earlier. cbs and espn could make sense together so you could see this musical chairs begin. vonnie: it's an exciting time, thank you so much. more on the global stocks outlook for 2017. later, the global equity strategist joins mark barton and myself on bloomberg markets. weas we move into next year, will see whether the earnings expectations are validated. i suspect they are.
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we are earning from no earnings growth to something close to 10%. the u.s. has a little bit of upside. we are on 17 times earnings and historically when the fed raises rates, valuation multiples have come down. i think it will be less this time around. are closebreak evens to 2% which is the fed target. they are doubling the pace of the timing cycle. i agree with the growth expectations. valuations are higher than normal and i think you need to because she is. i'm looking at europe and you are staying cautious on the continent. what is behind your being cautious? whereare looking for earnings will surprise. i think they will surprise in the u.s. and emerging markets and perhaps negatively in europe.
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the only way europe looks attractive is if you get a positive surprise to earnings. that looks very unlikely given the extort nearly high levels of uncertainty you have in europe. traditionally, it depresses earnings and growth. later, he joins us on blumberg markets. then cartland will join us later and has plenty to say about the u.s. sanctioning russia over cyber hacking. this is bloomberg. ♪
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vonnie: live from new york, this is the european close. now we will look at how many policies in the u.s. will change under donald trump. university ofhe
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chicago college professor. >> where he positions the united states and the global war, the fact that he is a just -- that peaceis a -- there is talks in syria that do not include the united states. it's the first time a major decision in the middle east, the united states is absent. that is my first worry. the second is whether donald trump will do something about protectionism. there is a lot of talk and proposals. i suspect this will remain the case. the world is worried about whether tariffs will be improved -- imposed and what else am that will be disruptive. there is also the tension that we just discussed about the
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involvement of russia and the u.s. election. and the retaliation, i would not , i expect that the united states will retaliate with a tit-for-tat and they start revealing some stuff about vladimir putin. we know he has a lot of business dealings that are not transparent. if a metal with our election, we should do the same with their political process and the best way is to expose or start exposing vladimir putin. i don't know why this was not done. i hope it's not because we don't have the means to do that. francine: is this a new world order? george soros says --
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it seems like the real check in terms of checks and balances in the u.s. will be his own party and possibly the only ones. >> i agree with that. in terms of the cabinet of donald trump, it it's mostly been on the conservative side of the gop. i think the gop will carry some influence but we should not underestimate donald trump's independence. we are in for a new order, i think. what is the balance in terms of influencing the markets in terms of politics not just in the u.s. but also europe am a possible of fiscal policy in the united states? >> in the united states, the fiscal policy would be the main driver.
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in europe, we will have a combination of two things -- the trickle down effect of u.s. policy which i suspect will be sort of a high interest rate in the united states and the pressure to have high interest rates in europe as well. we know the situation in europe is difficult to begin with. high interest rates could make it more fragile. areor three major elections coming up in the euro area and they could be traumatic. that was earlier on european, up next, markets over the year. this is bloomberg. ♪
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vonnie: from new york, this is the european close. stocks have closed in european trading but closed positive.
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the europeanu to market action today and 2016. it was a mainly good year for the european averages. most of the averages were trading higher but starting up a slightly bad news, the stoxx 600 is down about 1% on the year. it's the worst year since 2011 and reflects the banks along with the drug makers. the ftse 100 closed the year at a record high. 2014.heir best year since for the ftse 100 at these record highs, it clearly outperform the other averages, has it gone too far, too fast? date chart of to all these averages. the one in orange is the ftse 100. the one reason to perhaps
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because she is is you can see this area of congestion. these are bearish technical patterns and led to declines in the middle of the year. the ftse 100 seems to be carving out another area of bearishness so will that pull back down? the other european indexes are leading and may be ahead of itself. it could have to do with the british pound being weak. chart, i willther white, up right here, in we have the british pound and orange is the ftse 100. the strength in stock is being fueled by the weakness and the pound which is a carry trade. helping the ftse 100 which was their best segment. shares of anglo-american lung are nicelyliton higher.
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we are looking at huge gains, nearly 300% for anglo-american. two hundred 7% and bhp billiton was the laggard 71% on the year. majors, to the u.s. they are quite nicely higher but we don't have any red. and theand the nasdaq russell 2000 are up in a stunning way after much volatility earlier this year. almost in a bear market in the s&p 500 and the dow had been an unofficial corrective territory but now we have the dow having its best year since 2013. quite a recovery for u.s. stocks. vonnie: thanks to the u.s. dollar as well, thank you. we will delve more into this because it's not quite as clear cut as it seems. here with more is mike reagan.
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you listened to abigail you thought it was a fantastic year but that was not quite the case. >> she is right to point out the pound weakness which explains the ftse 100 gains. priced in dollars with that index down for the year. the stoxx 600, the regional benchmark, down about 1.2%. if you price that in dollars, it's closer to a 4% drop. vonnie: because the euro dropped 3.5%. >> that's right, take that for what it's worth. shape of the european market for the year looks similar to the u.s. market. it's more exaggerated to some degree to the downside. the beginning at of the year was nasty in europe with the stoxx 600 down about 27%.
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it recovered until brexit. that post u.s. election bump but not quite as dramatic. one reason is the banking sector in europe is still the never-ending soap opera. the stocks in the banking sector are down for a third straight year. as ithe bank is down 25% struggled to finalize the mortgage settlement with the u.s.. another big story in europe is the drugmakers. major weights the in the stoxx 600 as a proxy for the overall european market, it's not dissimilar to the u.s. drugmakers are heavily weighted. stocks like novartis and roche and bear are among the biggest drags on the stoxx 600 this year.
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astrazeneca was also week. a similar story to the u.s. we saw this crack in the rally in health care stocks in the middle of 2015 and it carried on . the concerns about drug pricing, they have not quite going away. if you look at the group, it's the third worst, down more than 10%. telecom as well. group but the health care is so important to the european market as is the banks index. as a whole, it's only down 7% but those are the two heavyweights in the index so they were major drags a market. vonnie: that aside, can we pick up next year? >> the analysts are optimistic about earnings. they are looking for 12% earnings growth in europe.
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3.5%strategist, it's about gain in the stoxx 600. mildly optimistic and obviously europe has more issues to deal with than the u.s. it needs to solve the banking issue and they have seen a steepening in the yield curve in germany and other nations but not quite as perky as in the u.s. which bodes well for u.s. banks. the donald trump effect on the u.s. will only have a limited effect on europe, more of the basic resource industrial companies, nothing to get too optimistic about. optimism and ad lot more political risk going into 2017. i will bring up this chart again to show the huge difference in the stock return when it came to the u.s. dollar. the brazilian real was one of the best performers but next year, will it be about
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currencies again orgilts and the european bond market? >> a lot depends on the commodity market. the major big moves apart from againstngthening dollar some of the majors -- the big moves and currency were all from commodity producing countries. smaller nations in africa that have big mining sector saw a big gains in their currencies. the question is will trade, how much more is there to that? can we depend on that going into next year? that's an open question. vonnie: bringing up the a little index, we saw bit of volatility but not a huge amount since the middle of the year. we are down ever so slightly. could this be the beginning of a
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reversal for the commodities? obviously oil, led the way in the commodities market. ande was the opec agreement putting a floor under oil prices and allowing them to trade back in the $50 per barrel range. that is a fragile recovery. opec deals tend to fall apart sometimes. there is a question on how u.s. shale producers will respond why adding supply. i think the oil market will very much be a focus for the equity market going forward. vonnie: thank you for that. anybody left in europe? >> i'm sure there is someone. let's check in on first word news with taylor riggs.
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taylor: vladimir putin has decided not to play the game of tit-for-tat with the u.s. russian president will not be expelling u.s. diplomats in retaliation for the president's expulsion of 35 russian diplomats. they are being expelled over allegations that russia in her -- interfered with the u.s. elections. vladimir putin says he will not participate in irresponsible this promising -- in irresponsible display was a -- diplomacy. taiwan has confirmed that -- the president will make two stops in the u.s. which is likely to irritate china. he will stop in houston and san francisco and china has repeatedly asked that taiwan should not be allowed to travel in the u.s. are preparing a case against donald trump's nominee for treasury secretary. banker, itman sachs
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they will accuse him of preying on bankers according to the washington post. democrats will focus on his purchase of a failed mortgage lender that is being accused of wrongful foreclosures. the new year is a driving with a frigid bang. the u.s. and canada could get hit with a brutal cold and russia will probably bear the brunt on the other side of the globe. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. vonnie: thank you. coming up, you will hear from george magnus on what he expects for europe and china in 2017. this is bloomberg. ♪
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vonnie: this is the european close on bloomberg markets. we have been asking our guests what's expected in 2017 and earlier today, george magnus was talking. about the political risks in 2017. >> what i think we can see going on here is a kind of reverse pivot. american foreign policy looks like it will pivot more toward russia and away from china. issuesh there are big that we in europe face with important elections in france and possibly in italy as well,
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which have existential significance for the eu, i think the u.s. -- china relationship is the big one, to be honest. alix: talking about china and what we saw on the markets overnight come i want to get your take on the euro spike we saw. take a look at the terminal which illustrates what we have been talking about which is euro-dollar. up 1.6% versus the dollar. how many more instances like this do you think we will see in 2017? you have thin liquidity causing real volatility and disruption in the market. honest, i certainly cannot predict what kind of rogue elements will creep into the pattern of foreign exchange trading. a lot of people are expressing opinions about this and having their opinion solicited about whether dollar-euro will hit
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parity and maybe go through that. my view is that the potential for political risk in europe is really high. if we get through to the thele/end of the year and five-star movement does not when possible elections in italy and the opposition does not win in france, things will kind of back off a little bit. it's a wing and a prayer at the moment. there is a big danger that dollar-euro will go through parity not just because of political risk but because of the combination of what is happening in terms of american policymaking in the first year at least of the donald trump presidency. which is dollar supportive. david: if we were talking a year ago, i'm not sure we would have's band as much time on
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geopolitical risk as we do today. we've got anear, election in france and germany and brexit is far from resolved. we have donald trump coming in and if you go around the world, there is a lot of political uncertainty right now. how do markets price that in? how do markets do with that? >> i don't think it's a high water mark. i think we face years ahead of us of volatile and rising political risk. 2016 was recognized as being a remarkable year and is just the hors d'oeuvre. i think it will get more interesting from here. i think markets cannot price this.
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the markets are very sophisticated at pricing ranges of wherees in terms people can assign probability but you can get outcomes that people don't expect or that hit you completely at random. for example, you asked me about the biggest geopolitical risk. the trade war between the u.s. and china for me would be one of the biggest risks out there. any waythink there's that markets can price that until they see the whites of the eyes of what that means. alix: you also mentioned hors d'oeuvres which the ones we had this year did not cause indigestion. election,onald trump we recovered, with brexit we recovered, the idea that we have these unexpected geopolitical events in markets went back to where they were. yeah, and looking back, it's almost like we can say that we got off lightly. we being financial markets have
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ended the year on a high regardless of brexit, retard -- regardless of fears about donald trump winning the presidential election. actually, looking at next year, the global economy does not look that bad. it's not great but you will actually have some kind of fiscal stimulus in america where the economy is at full employment. the chinese are desperately trying to keep stability in their economy until the end of 2017. congress is out of the way. there are not political upsets in the euro area, the economy is not great but it will do ok by european standards. that is why i think it's difficult for financial markets to price political tension or rupture when the economy for the time being or the economic outlook looks reasonably calm.
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george magnus. later today, senator ben cardin from maryland will be joining us and he is the ranking democrat on the senate foreign relations committee. latestme for our bloomberg business flash. a new report says the outlook for the british labor market is fairly bleak. there will be slower growth, lower wages and an increase in uncertainty in britain and eight could leadoups as a to a shortage of workers from the eu. china may be ready to abandon its 6.5% growth target. chinese leaders could push to contain bubbles. to ascould lower its goal low as 5.5% next year. executives were buying
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jpmorgan stock. jamie diamond but more. the stock has become increasingly expensive. that is your latest bloomberg business flash. coming up in our last battle of the charts of the year is our year-end edition. we will look at who was right and wrong about the s&p 500 and put that against the outlook for the european markets. this is bloomberg. ♪
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it's time for our global battle of the charts, the final 20163+ we are taking a look at the most telling charts of the day. you can access these charts on the bloomberg. kicking things off is an epic battle of the charts, we have abigail doolittle against oliver renick.
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a rough it has been year for the euro which is down on the year by 3% but that pales in comparison to last year when it was down 10%. white, we have the euro with a massive decline and more of a decline this year. in orange is oil so there is a strong correlation between oil and the euro for a variety of reasons. was interesting is most recently, we see a bit of a day virgins between oil and the euro so the question is what is ahead? this chart goes very bullish and it charts that oil will keep the recent gains of not climb higher isle the euro on the bottom basically a buy or sell signal for investors. signalbeen below thebuy which suggested that oil is oversold but now oil is starting
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to climb and the euro has climbed with it so it appears that oil is likely to at least hold steady if not climb and the euro may recover from this year's decline, perhaps even the big declines from last year. parity defying the calls. that would be a turnaround. abigail doolittle is known as the chartress and has the most amazing charts. oliver: i only have one panel and i don't have a nickname. i am looking at the stock market as to what has happened with strategist predictions from the beginning of the year. they actually did really well. the market ended where they said it would be. the blue line is the s&p 500 strategist calls and where they expected the market to end up and the redline shows the end of last year where they said the market would end.
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we are looking pretty good and it's the most accurate they have ever been. the catch is that they both always call for an average 10% gain in this year we gained about 10% which is funny. there is also the idea that they literally stick by their calls. and they tested them dropped their calls after the first month of the year when stocks fell. vonnie: and nobody predicted a donald trump victory. oliver: no one said we would get back to the levels because of donald trump. we know that forecasting has problems. we could not really watch the the forecasters themselves. it's not a science that will go away anytime soon. as you were saying earlier, you
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are apparently [indiscernible] oliver: absolutely. vonnie: i knew you are telling a fib already. i was going to award you the prize. don't put me in an uncomfortable situation. we want to end on a good man -- on a good note. vonnie: they both tie for the chart of the day. take a look at where european markets ended the year. another few hours in the europe -- in the u.s. session. ♪
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♪ vonnie: it is noon in new york, 5:00 p.m. in london and 1:00 in hong kong. i am vonnie quinn. oliver: and i am oliver renick. welcome to "bloomberg markets." ♪
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we are at bloomberg world headquarters in new york. we will cover stories from illinois to france. u.s. stocks are on track for the best year since 2013 and the russian ruble on track for the strongest year ever against the u.s. dollar. we will take a look at the biggest stock and currency movers. donald trump has a tough choice after president obama imposed sanctions on russia for hacking emails related to the u.s. election. will he rivers course or jeopardize his -- will he reversed course or jeopardize his relationship with vladimir putin? we are halfway into the trading day. us.ail doolittle joins do not be too distracted by the wine. abigail: we have the dow, s&p 500an


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