tv Bloomberg Markets European Close Bloomberg January 12, 2017 11:00am-12:01pm EST
markets european close. mark: we are going to take you from washington to london, we will cover stories out of germany and china. here is what we are watching. epa accusing chrysler of cheating on diesel emissions test. shares are tumbling in the u.s. and milan. vonnie: further steps to appeal the affordable care act after a senate vote. the latest on what stays and what goes as it moves to the house. unwinding ortrain a pause?ors taking u.s. stocks after yesterday's trump news conference. mark: have a look at european
equities, just under 30 minutes until the end of the thursday session. is the trump reflation trade running out of steam? that is what some are saying. you have some big declines. luxembourg lux is down. lower. in germany, 1.1% these are the currencies that are rising against the dollar. you are seeing the dollar fall. the euro is up two thirds of 1% against the dollar. bond yields are mixed today. declines for the portuguese ten-year, the u.k. 10 year. the yield in the u.k. down. yields in italy, sweden, and switzerland are higher. commodities are rising today. a big breaking story, a guest decline ever and fiat chrysler shares listed in the lawn. the epa is set to allege a
missions cheating. 60%.s fell as much as we are barely above that, 15.6% -- 50.6% lower. we had a reuters report that the u.s. government will accuse the company of using software that allowed access emissions for about 100,000 vehicles. this following the troubles volkswagen has been experiencing since it's admission of emissions cheating. fiat chrysler getting absolutely hammered after news of that crossed the bloomberg terminal. richemont, 8.6% higher today. 9.4%, jumped as much as the biggest gain since 2008. optimism the swiss watch industry a be bottoming out after the biggest downturn.
a gain in sales of timepieces at the cartier owned stores, but wholesale orders may start declining. they also said sales to retailers are dropping as demand in china has improved. has propelled an unexpected 5% gain in revenue, excluding currency shifts in the three months including december. 90 minutes into the trading day in the u.s., let's get over to the markets desk. with fiatant to start chrysler because we have headlines coming out from the call with the epa, which is indeed saying the company has been cheating in terms of the clean air act. it is accusing the company of violations, that it allegedly installed and failed to disclose software. these allegations cover about 104,000 vehicles, and the
company did not expose all of this. it may be liable for civil penalties. two vehicles affected are the jeep grand cherokee and dodge ram diesel. they are announcing these in a press release. "skirtedfiat chrysler rules and got caught." talking about another automaker potentially cheating with omissions. this covers the model years 2014 to 2016, so quite recent. the shares are tumbling in u.s. trading as well. the primary exchange is in new york, and 16%, a record drop in the u.s.. it is not affecting just fiat. getsngine maker cummins about 2% of its revenue from fiat chrysler, according to bloomberg calculation, and those shares are also falling as we get these headlines. look at the broader market,
steep selling. it is the worst day for the dow and s&p going back to october 11, the worst for the nasdaq since december 1. this is the first nasdaq declined we have seen in eight sessions. mentioned, there is a lot of caution coming back from the market after the so-called trump bump and now we are seeing a trump slump. 500, all are negative. telecom unchanged. financials taking the worst of it as we continue to see yields go down, continuing to see a rally in the treasury market. tech stocks, industrials, also falling steeply. in terms of industrials, we see these fall into that category. delta came out with earnings falling, matching estimates, but
they are talking about increasing costs persisting throughout the year and not seeing an improvement in profit until the second half of the year. it is pulling down the other airlines. vonnie: lots going on in the transportation industry today. for more on fiat which has just david, we will bring in wells, bloomberg era chief. maybe would not mind, compare this with the volkswagen scandal. this covers 104,000 vehicles. with: volkswagen started 500,000 for the two liter engine and had more for the three liter engine. --s is much smaller so it but it does not mean it could not do a lot of damage. the cost for volkswagen has surpassed $23 billion given all the fines, settlements, consumer actions.
i do not know if you can do it proportionately, but it would be a great financial bill for fca if they are found guilty. vonnie: tonight we end up with indictments -- might we end up with indictments and please? david: that is a long way away. in terms of how they will defend themselves, companies do have a lot of software, a lot of microprocessors in cars. are heavily computer-controlled and operate differently under different conditions. we will see if what they had in there was for that purpose or to cheat. mark: do we know which models were affected? david: the dodge ram pickup truck and jeep grand cherokee. involvedhe two models in the volume is relatively small. still going to be a very big bill given how the government
treats this issue. mark: i cannot help but wonder about the timing. vw just settling with u.s. authorities, removing a big hurdle from the diesel in emissions scandal and here we are with an allegation against the act. fiat.ming -- against the timing, can i use the word ironic? david: here is how we look at it. government has limited resources to look at this. working with volkswagen to find a way to fix that and meeting with them, as that started to close, then they probably had already been looking at fiat chrysler, but they could really focus their attention on this one. once the volkswagen scandal broke they were looking at everybody's diesel engines, because it did not look like many carmakers could meet the tests without really heavy equipment on the engines and exhaust system, or some kind of
software. vonnie: how was this actually discovered, and or their investigations ongoing at the moment of other automakers? david: we do not know. the justice department was looking into daimler for a civil suit, a class-action. it was thrown out of court and the plaintiffs have filed a different way and are trying to stay in the game. we do not know if the doj is still looking at that or not, but that is still out there. fca and thenk volkswagen diesel situations were found in the same way. the epa actually found what they think is a problem with chrysler. mark: we were talking last week about the plan to pay down debt and reach various targets by the time he retires. a damper on the
works if this is true? david: absolutely. we are talking in volkswagen's case, over 23 billion bill -- $23 billion. the question is how many consumers in a to buy out or fixed vehicles for. it would be probably a lesser bill, but still quite a bit of expense. vonnie: our thanks to david welsh. still waiting on a comment to bloomberg from fiat chrysler. shares are down 16% and halted. courtney donohoe has more. theresa may will make a speech on her approach to brexit next tuesday, according to her spokeswoman. she has been under pressure to lay out her strategy for triggering the formal negotiations. senate republicans have cleared their first big hurdle to appeal obamacare. they attached a measure to a
budget resolution which would allow them to repeal much of the affordable care act without votes from democrats. republicans have not agreed on a replacement. donald trump says he would force the pharmaceutical industry to bid for government business, putting him on the side of democrats. kellyanne conway spoke about the issue to bloomberg today. >> if he can talk to private industry, if you can bring along the public-sector, it is a healthy conversation to have. we hear from people daily, as i am sure journalists at bloomberg do, that they feel crushed the cost of the drugs they need. we should at least have that conversation. courtney: pharmaceutical and biotech stocks are falling again today. american soldiers are now on russia's doorstep. soldiers being
deployed in poland. threatmlin calls it a but did not say how it would respond. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i courtney donohoe. this is bloomberg. mark: thank you very much indeed. just seeing trading is halted and fiat chrysler shares pending news. trading has been halted on the nyc the nyse. -- nyse. rudy giuliani to reporters at trump tower right now. the french national front leader marine le pen is also at trump tower. or is no indication the meeting between president-elect trump pen, who is running for the presidency in france, she has often praised the policies
mark: from london, i am mark barton counting you down to the european close, 15 minutes away. vonnie: from bloomberg world headquarters in new york, i am vonnie quinn. mark: donald trump's comments on health care are sending biotech shares lower again today with the dollar. trump saying the industry needs more competitive drug bidding. the potential new trade restrictions and all sorts of other matters, johanna kyrklund
is here. she is global head of asset management at schroders. thank you for joining us today. interesting you increased your 2017 gdp global forecast on expectations from trump and china, but we did not hear anything from trump yesterday, did we? hence the disappointment. johanna: we are still below consensus so people are forecasting further growth for 2017, but we would say there is still attentional for a bit of reflation. mark: can fiscal policy promote growth? that is the big question. i know it is in your notes. i am going to throw it back at you. johanna: we believe it would be helpful in the important thing to note, there was an improvement in activity even before the election of trump in november. from a cyclical standpoint we
were getting more optimistic on the global economy irrespective of the trunk when, just trump win. .- trump win in terms of tax policy and the fiscal policy side could help magnify but that gradual pickup we are already seeing in the data. vonnie: there is soft and hard data of italy. how do you decide what to do with your asset allocation model given that the two are diverging at the moment? johanna: we tend to focus on manufacturing activity. both the hard data and soft data. you are right, some of the hard data on the spending front needs to come through. generally, we are focusing on a broad range of cyclical indicators. that predates the election of trump. areie: what asset classes
you more bullish on these days? johanna: demand thing we buy is valuation. a year ago we started to rotate quite aggressively into value stocks, which entailed a rotation into cyclical assets. from a relative valuation standpoint, that is still where the opportunities lie. mark: you have established positions in japanese equities, commodities, reduced your exposure to government bonds. how have you tweaked that? johanna: we have reduced some of our emerging market exposure. trump could be helpful but worrying you will not see a pickup in trade activity. trade activity still is quite muted. japaneseue to lack equities, the u.s. dollar, and are very much positioned in value stocks.
that is a position be rotated into a year ago. mark: tighter financial conditions, how much of a worry is that? johanna: it will become one but not much yet. vonnie: talk to us a little bit about the border tax. you mentioned this a moment ago, saying there is good and bad from this. it will probably net out to something ready neutral for the u.s. johanna: we would agree with that. at the moment, that policy is not driving our asset allocation. vonnie: emerging markets, as you impact ofabout the currency weakness? , it takesk at adxy out the yen from the equation. is showing phenomenal weakness. even as the dollar index, u.s.
dollar index shows strength. so what do you do about currencies and hedging for currencies? johanna: we have been long dollar, and that is a position we established in october, really driven by concerns, the view that we would see some tightening in the u.s. and potential risk around trump. we continue to have these positions, long dollar against asia. when i was talking about emerging market assets on the equity fund we have reduced, we have continued to lack them currently. there continues to be an attractive carry and a lot of these currencies with improving fundamentals. with emerging market assets, i would not chart them all with the same brush. mark: where is the value in europe, given the politics this year could be a bandstand? johanna: a lot of the value
resides in the banks which is a potential concern. front, i thinkl the challenge is that we tend to focus on individual events and politics that tend to capture people's imagination, the flashpoints around elections. i think what is happening in europe is more of a regime change that is playing out over the last years, and will continue to play out gradually, as opposed to a single event. i think there is a shift in sentiment against the euro that is emerging across the european region, but i do not know if it was actually translate into hard election results. mark: will it translate to parity for euro-dollar anytime soon? johanna: i think it could. ofk: johanna kyrklund, head multi-assets investments with
schroders. let's get back to the fiat chrysler story. vonnie: we now have a response from fiat chrysler responding to the epa, saying that fiat chrysler does not believe this is true. the company believes the emission control systems did meet requirements and has proposed a number of actions to address the epa's concerns. , fiats trading has halted coming out and responding to the the emissionat control systems did meet requirements. that is right after the epa said that looks to be cheating in the diesel engines of fiat chris ault, some of their cars, about 104,000. we will continue to monitor headlines and keep you updated. ♪
mark: live from london, i am mark barton counting you down to the european close, about five minutes away. vonnie: from new york, i am vonnie quinn. , is a big day for banks. mike mayo discussed why he thinks big u.s. banks will be back in black. >> banks for the first time in a decade should transfer from value destruction to value creation. they are in their cost of capital, and if they do as we think they will, bank stocks have increased 50% and have another 50% to increase over the next few years. act black is a good place to be. take a look at where european equities are trading as we had to the close.
the level of the stoxx 600, it is down two thirds of 1%. will it be 13 in a row for the ftse 100? looks like it well might be. i want to bring fiat chrysler shares. they have been halted after plunging the most intraday on record. fall, down massive 16% after the government in the u.s. accused the company of using software to allow excess diesel omissions in about 104,000 vehicles. fiat believes its emission control systems do meet requirements. we will keep it on fiat, this is the close on bloomberg. ♪
how unlucky can bark -- mark barton be? it is a trump reflation sell over. we will be asking patrick spencer in just a few minutes. utilities, which have fallen since the trunk election, have risen. look at fisa -- fiat chrysler shares, 18% lower earlier, the biggest intraday fall and now shares have been halted. they are down 17% in the biggest decline ever after the government in the united states accused them of using software to cheat diesel emissions on about 104,000 vehicles. violationnt a note of to fiat chrysler for allegedly violations of the clean air act, and failing to disclose the 2014, 2015, and 2016
and dodgeand cherokee ram trucks. fiat has responded and they do believe the omissions controls meet requirements. they plan to address the epa concerns, including software plans. they say they will meet with the incoming administration, big news just crossing the bloomberg. fiat chrysler shares down 17%. on the bottom of the stoxx 600, look at the big declining industry. it is the autos. look at the individual autos, just two out of the entire group are rising. daimler down 3%. this news is infecting the entire auto industry across europe.
or unlucky 13ky for the ftse 100? looks like it will be lucky 13, i am talking about the winning run for the benchmark share gauge in london. 13 days of gains, that is the record. 12 was a record. 13 means we have had 11 straight all-time highs, it's also is a record before today -- is a record. before today we had the best performers where the miners. all that 19 stocks on the index rose. the ftse remains overbought according to the 14 day. 13 days of gains, who would have guessed it? as martin gilbert told me, where else do you put your money? vonnie: i am starting with gold because we finally saw it rake threw the -- break through the 1200.
hsbc saying this might not have had much to do with the trump news conference, it happened .fterwards a weakening of the dollar, it is all mixed in, but it is holding above the $1200 mark which is pretty psychologically important. wouldhad a third digit we know this is below the most recent isolated low. that strong demand yesterday and the day before continues as investors seek perhaps a little haven trade. not so much for the mexican peso, unfortunately. it is weakening, 21.70, 7/10 of 1%. this is a big move, the offshore yuan. now, it is stronger by half a percent. you can be sure that is china's
authority working very hard. we will have a look at some of the other asset classes. in the united states, stocks are lower across the board, automakers dragging. is bloomberg dollar index lagging. 114.en holding just above brent crude is higher, even though we got a major left in stockpiles. obviously not enough to keep his prices down. we had a chat a moment ago about yields. courtney donohoe has more from our newsroom. courtney: theresa may will outline her vision for leaving the european union in a speech next tuesday. she will try to answer calls for .hat she wants to achieve those negotiations are due to begin by the end of march. the un's secretary-general is morning there is no "quick fix"
to the decades of division and otherprus' greek committees -- communities. they have been divided since a program to and a turkish invasion. putinemlin hopes vladimir and donald trump get along, but it does not expect them to agree on everything. a spokesperson said they say u.s. military deployments in poland as a threat, and they do not agree with rex tillerson who said russians took land that was not theirs when the annexed crimea. french national front leader marine le pen is in new york. it is an unannounced visit four months before the presidential election. she is making a visit to trump tower. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120
countries. i am courtney donohoe. this is bloomberg. vonnie: house speaker paul ryan is holding a news conference now . he says efforts to repeal and replace a obamacare are on track but will be done "in the right way." he is also calling it a rescue mission for the american people. you can watch the entire thing on the bloomberg function. mark: the dollar sliding with u.s. stocks. ftse is raising a loss and heading for a record 13 straight advance. spencer.e now, patrick were you disappointed trump did i's and cross the
t's on fiscal policy? patrick: he is in the process of putting his cabinet together which was full of politicians previously but is now full of businessmen. it is hardly surprising, but he is a deal maker. he is very unorthodox as we have seen so far, so i expect a lot more surprises. i think he will deliver on some of the bigger items. mark: what is holding back from dow 20,000? patrick: only 50 points basically. everybody was getting so negative, i spoke to a couple of clients and they are concerned about the market, what i remember distinctly when we went through the dow 10,000 and giuliani was the chairman. you had hats and streamers and the excitement. there is no euphoria today so even though people talk about it
being overvalued, i suspect the market has a ways to go. 20,000 will be hit very easily in my opinion. i want to update viewers because fiat chrysler has begun aboutg again, still down 15% on allegations it has been cheating on it diesel engines and 104,000 vehicles including dodge rams. this is an allegation from the justice department that they are denying. we have news about auto sales out of china, patrick, and in the u.s., they are holding up. you expect that china and u.s. consumer will keep demand healthy? patrick: we have just recently had our auto analyst through, and he talked about the three primary fundamental drivers of car sales. that is employment, and you have got record employment at the moment, low interest rates, and you have historic low interest , and consumer sentiment.
all of those are very positive. 18hink we are looking for million this year, which would be a record number of auto sales. despite the rhetoric, we have seen a blowup of similar types of news in the past year, i do not think this will affect the group as a whole and they will continue to do better. vonnie: what about the border be and fact that it may not great for the u.s. as a first mover advantage? a great story on the bloomberg today entitled "the world is not waiting for trump on trade." what are the dangers here for the global economy? patrick: you talk about that in the currencies, and various concerns about mexico. if you see what is happened to home, inncy closer to mexico, talking about autos.
even though ford made the announcement it is going to move its plant, but generally if you look at what is happened to the mexican peso, it is down 20%. they are talking about border fees of slightly less than that, so it is a wash really. it is sort of the headline figure, but the actual fundamentals of the stocks i do not think are going to be significant. hammeredgs, biotech, in the last 24 hours. trump said "they are getting away with murder." he said obamacare will be repealed and replaced. can you invest in the sector until we have back to where we started? -- t's arecrossed crossed? patrick: it has been a strong growth area for the u.s. and has traded at a 25% premium on the s&p but that is gone now.
the stocks are looking at very good value, so for long-term stable, conservative money, they may not get -- the last time i was here we talked about the cyclical trade, the value trade outperforming in the short-term. i think health care will outperform in the short-term. u.s.,ing boomers in the that sort of dictates that health care will remain very strong for many years to come. the baby boomers are all retiring in five years' time so i think health care be something like 20% of gdp by 2020. you have huge drivers, and it is volumes that generally make the money, not pricing. as long as a health care companies can get the right drugs, people will pay the prices. mark: what big themes are you embracing? patrick: i think trump will make a difference.
even if he was not there you will see a bull market as you look at world pmi's. the big theme in my mind, we talked about the value trade, the cyclical trade. you have had a huge multiple expansion last year with very little earnings. traditionally the market has grown gdp one and a half percent to 2%. now with trump, you can start getting back to 3% gdp. you are going to move, i think the big trend, is to and earnings driven expansion in the u.s. mark: you mean 3% to 4% has been cited? patrick: it has. we are looking at without trump economics, 10% or less. that is because of the lower earnings last year, gain, they are not going to be as low. generally, the economy is in good shape and you will see 10%
plus. you put an fiscal spending, and the market will really take off. in sideways moving markets, there has only been eight times that is happened, and every time the average move has been 40%. watch this space. mark: patrick always beats me on his stats. vonnie: patrick, if you say that tax cuts which are paid for by the border tax adjustment, leading to 3% plus growth, if you say that that is the situation where should we benefit most? patrick: that is a good question. the last time i was here we talked about the value, cyclical trade, and i talked about warming to the banks the last time i was here. we just moved that group to overweight. we just moved oil to overweight and we remain consumer discretionary overweight, but
have been in that position for quite some time. materials we would have upgraded but they have had a hell of a run so far. we like financials. they traditionally always selloff i had of the earnings. and oil and consumer discretionary are our top three areas. spencer,rick vice-chairman of equities. federalbe airing reserve chair janet yellen's townhall address. she will be meeting with educators across the country at 7:00 p.m. eastern time. vonnie: happening now on capitol pompeoongressman mike the choice to head the cia is facing senators at his confirmation hearing, one of several being held today, answering questions from the senate intelligence committee. you can watch this and other hearings live on the bloomberg. type in the function live go.
and newve from london york, i am mark barton with vonnie quinn. this is the european close on bloomberg markets. angela merkel says brexit will be a catalyst for the block to confront the thorny issue of corporate tax rates, with the u.k. painting it may use that as leverage -- hinting it may use that as leverage.
brusselss from our bureau, what else did she say? an: she has made it clear that brexit will challenge the view when it comes to security and defense. she is looking at the election of donald trump. she said the e.u. cannot be naive anymore and has to stand on its own two feet. she says they really need to up their game when it comes to anti-terrorism, security, that kind of thing, and the thing up their defense against the enemy. mark: according to theresa may's spokesperson, she will lay out her grand vision tuesday. we look forward to that. you wrote a wonderful piece today about strategies that theresa may might employ to cut e.u. unity.
what are the strategies? ian: hopefully things will become a little bit clearer on tuesday when theresa may speaks because at the moment, nobody is sure what her strategy will be. several ways she can undermine the unity of the european union, that is vital because at the moment the 27 countries have been remarkably united, showing a common front. more than anything she can pledge money because when the u.k. leaves the e.u., it will leave a hole in the e.u. budget of about 11 billion euros. most of that money goes to fund projects in eastern europe so if theresa may says, we will still pay that, perhaps eastern european countries will say we will offer you a few things in return. there is things like the 3 million e.u. people living in the u.k., what will their status be? defense.things like they arer brexit,
going to rely on the u.k. defense. there are many ways theresa may can play one european country off another, and that will be vital when negotiations start. mark: will these strategies work? ian: at the moment, it does not look like it because they are all singing from the same song sheet in the e.u. these negotiations will go on for two years or more, and they could get it or, they could get arduous. -- bitter, they could get arduous. it benefits everyone to get a good brexit deal in the end. mark: our e.u. government reporter. bloomberg television, we will take a look at gold since the u.k. referendum, that is coming up in battle of the charts. this is bloomberg.
mark: 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 charts on the bloomberg by running features on the bottom of your screen. we go to vonnie quinn today. let's shake things up a bit. vonnie: have a look at this beautiful chart. it is very elegant. it is an elegant chart. .here is finally capitulating i like to say bears are going back into hibernation. interest in the market is down at its lowest since back to may 2015, a sure sign that bears are losing faith.
is a bullish or bearish signal is anyone's guess , but it is something to keep an eye on because it has been going down since march 2015 where it markets. peak in u.s. that is the market broadly, not just the new york stock exchange. a very simple chart. mark: where can we find that chart? 5535.: mark: that chart is beautiful in its simplicity. we have a high, a low, and a trend line. we have a debutante on battle of the charts. denali, what have you got? most investors that we know have been playing on this ride. jack miller bought here and sold
on the u.s. election -- stanley druckenmiller bought here and sold on the u.s. election. there are a lot of investors that road a wild ride, and people expect the price of gold will go right below $1000 this -- this year.me at the same time, a survey of bloomberg economists believe prices will rise more than 13% this year as well, so we will see how the volatility and prospect of rising interest rates affects it. mark: i can see your tv. vonnie: that was a phenomenal performance. mark: who is that from, that message? >> it is not of my business school friends. vonnie: she is in business school.
tradition for all debutantes, they always get the crown so congratulations. vonnie: she would have anyway, in fairness, anyway. >> i lost last time. vonnie: we look forward to a rematch. mark: they are obviously having a great time. congratulations on your first. have a look at where european markets ended the thursday session. the ftse rose for the 13th consecutive day. the record run continues. ♪
♪ david: from bloomberg's european , here's what we are watching. investors europe for a kickoff tomorrow morning. expectedet firms are to post the biggest fourth-quarter since the financial crisis. we speak to an expert on emerging markets and what is next for the country. and the senate took the first steps towards repealing the affordable care act in a razor thin boat. the tradingay to day. stocks pulledng back sharply. rallied goingy into today so this is the first