tv Bloomberg Markets Americas Bloomberg January 27, 2017 10:00am-11:01am EST
vonnie: stores at a san francisco, tokyo, and paris. breaking data in the u.s. following gdp and durable goods orders. consumertest read on confidence, coming in at 98.5. this is from the university of michigan. the current condition index lower than estimated. it looks like expectations are what led to that there. of thating on the heels gdp number for the last quarter. read issumer confidence a 13 year high. reflecting some confidence over
the promises of the current administration. seeing much change here mirroring yesterday's lack of action. we have some micro moves going on for the individual stocks within the s&p 500. many coming out with earnings. we also have been watching the mexican peso. if you look at what it is doing in the wake of all of this rhetoric, we are seeing a recovery in the peso. the dollar falling versus 9/10 of 1%. the trend has been for the dollar to rise. general we have seen the peso fall to a record low. we are looking at risk reversals, and this is essentially what kind of protection are investors buying against a further decline in the peso.
it looks like that is a relatively high level as well. a lot of pessimism is being baked into the peso at these levels. some ofbeen watching the companies reliant in various ways. railroad company gets about 48% of its revenue from mexico. north american rail operator. they have a lot of workers in mexico. general motors, we talked about its discussions with president trump over this. it has 17 plants in new mexico as a test in mexico. as well as constellation brands. it is 55% of its revenue. that is what constellation brands make. this is a snapshot of some of the companies. we talk about a 20% import tax.
taking advantage of the u.s.. it would be affected by such a border tax. also down by a percent. most in to see groups down. -- most industry groups down. the highest since december. most since august. the margin and wealth management business declined for a third straight quarter. every.73 in revenue on $100 in oversee wealth management. that is the lowest in bank history according to the chief
executive who spoke to us. said they are repatriating money at a faster pace before this government starts sharing. data with tax authorities. on the flipside taxed profit tripled in the fourth quarter. chart, showing how the big european players have fared in the last 12 months. up 28%. down by roughly 13%. big deal on the retail space. they pulled the bigger supermarket chain with the biggest sailor. going back to a big growing segment of the retail. analysts at the global fed say it is a game changing deal, this
completely from left field. more about this a little later. for itsd is on track second weekly gain against the dollar. sterling reached the highest level since december 13, having rebounded 4% from almost a 32 year low. -- thes forecasting flipside has a 134 course. this is the chart i sometimes go back to. brexit vote, nothing to do with her. sterling rose. i hard brexit fell. and of course the speech last week where she said parliamentarians would gain a vote. a wonderful chart. it is all about may and trump. hisresident trump beginning
first full week in office is meeting with corporate executives. today he will wrap up the week with his first meeting with a foreign leader. joining me -- and from london is our politics reporter. you just spoke with kellyanne conway, trump's senior adviser. did she have more details about what we might learn about what will take place in the meeting between theresa may and donald trump? >> they are going to meet privately ahead of a scheduled press conference. following that they are going to have a working lunch. behind me are folks in the receiving line to receive the u.k. prime minister theresa may. conway,g to kellyanne they will be speaking about trade negotiations and how the u.k. and u.s. can potentially get to some type of deal. her what, if any role,
the trump administration could play in assisting the officials in meeting that march 31 brexit deadline. she said that was something they were going to discuss. trump wasay complaining he did not have his trade cabinet pick in the room. the negotiations himself. but theresa may's handler -- am i right? >> absolutely. in fact you can't find anything until they are officially out of the eu, which won't happen for another two years. the promise of a trade deal is going to be one of her major cards when she negotiates. >> a big event in the last 24 hours. the mexican president pulling out of the meeting with trump next week. does that highlight the hazards of dealing with donald trump, , when theresident
order negotiates issues such as trade? the small that country like thick u.k. can negotiate a deal that is a win-win situation for both indeed seems dubious. about someme concern of the things theresa may is going to have to give way on. is going to be in the details. details on other matters, non-trade matters. i to ind made don't see on everything between climate change in view of the world. may going toa square that with trump views? >> theresa may may say opposites attract. whether that applies to diplomacy remains to be seen. she has said she will take a firm stance on torture, which is
something she does not condone. that is almost certainly going to come up and questions from the press. >> we will get that press conference later on. there will also be some chat about nato and foreign policy. >> absolutely. the u.s. commitment to nato is something theresa may has said she would push forward. it is one of the biggest concerns in europe at the moment. theresa may is going to be keen to have that on the table. a special relationship is likely to come up again. great headlines for the u.k. prime minister. this is an opportunity to say we may be on the brink of exiting the eu. look at all these fantastic deals we can make. >> it is not just about the u.k.. the president tweeted this morning mexico is taking
advantage of the u.s. long enough, massive trade deficits -- trade deficits must change now. we thought that the idea that there may be a 20% border tax, it has been punted around the white house, whether it will actually come into play or not is another question. why continue to antagonize the mexico government? >> that border tax originally part of a border health proposal. i pose that question to the chairman of the foreign relations committee, senator ron johnson. he told me are what republicans and their aides are echoing through the echo chamber. they believe president trump is beginning negotiations, that this is just the first step in a series of negotiations. that said democrats pouncing on this, saying this is an early political hiccup, that this is a sign president trump is unable to effectively meet with foreign
leaders and handle global diplomacy. that puts all the more pressure on today's meeting to go smoothly and efficiently. think senior trump aides are confident today's political dealings with the u.k. prime minister theresa may will go perhaps more smoothly than perhaps the back-and-forth we president.e mexican >> alternately congress has to approve a border tax. given the close relationship between mexico and the u.s., you mentioned the democrats. what about the gop itself? a move beble what given the closeness of two economies? >> it would be incredibly difficult if it was just an individual tax. yesterday house republican leaders meeting with senate leaders as well as the administration at --
administration official. i can tell you the first two priorities will be working with president trump to repeal parts of obama care and the football care act, but also tax reform. with regards to it -- to immigration, they must receive funding for bolstering the u.s. and mexico border. the estimates are anywhere between eight to $20 billion. when you get to the issue of how mr. trump would allow for mexico to pay for that, that is where tariffs and whatnot come into play. >> our counselor at the white house. stay tuned to bloomberg for live coverage of trump and may's joint conference. that is 6 p.m. in london. on bloombergune in
tv go. >> both the white house and the kremlin confirmed russian president vladimir putin will speak by phone with president donald trump saturday. putin congratulated trump shortly after his election, but the kremlin says they haven't spoken since then. the kremlin has -- president trump is scheduled to make his first visit to the pentagon as commander in chief. the new york times reporting trump will announce a plan within a month to more aggressively strike the islamic. francois hollande says the new trump administration says the trump that menstruation creates trade issues. he read the comments at a news conference with german chancellor angela merkel. and there is going to be tighter security on some european trade. an agreement with france and the path intos to talk a passport checks.
and international rail services. the move will tighten security on the high-speed trains and help track criminals who may be using them. news 24 hours per day, powered by 2600 journalists and analysts in more than 120 countries. this is bloomberg markets. >> thanks a lot. coming up, ubs putting $15 billion last quarter. find out what chief executives had to say about the banks wealth management challenge. >> and we will check in with our reporter in san francisco. that is an absolutely beautiful sunrise. what they just reported in terms of earnings. this is bloomberg.
>> this is bloomberg markets. 's business news, ubs shares trading lower. beat profitbank estimates, the bank says outflows reflect primes repatriating money at a faster pace. but a positive picture was painted when he spoke to >> iterg earlier today was more challenge thing -- earlier today. >> it was more of a challenge that in 2016. of these -- proclivities once -- once again
contributed to this environment. and investorsient about it. we do see a readiness and , noting for investments only potential financial markets but also the underlying businesses. it is quite clear investors are looking for concrete actions by the new u.s. administration's in order to go into investment mode. >> have they physically changed and moved to transaction? >> not really in a meaningful way. there is a bit of a better momentum. i do have to say the fourth quarter in the u.s. was a positive one. i think the situation hasn't really changed a lot. look at the situation in
europe in general, particularly on the political side. there is still room for improvements. wealth management and with management america. are we seeing the end of this regularization? is this the end of the cross-border outflow? >> no. what we saw in q4 was the acceleration of a process of -- we would go through. what we see is a phase where emerging markets and in some asian markets, this is -- saw -- we doows we see tapering.
vonnie: it is time for our latest business stories in the news. prosecutors in germany are extending a criminal probe into deselect missions cheating scandal. that will include former ceo martin -- he is one of 37 investigative -- investigated for fraud vile -- fraud violations. ofresigned back in september 2015. fourth-quarter profits that matched analyst estimates. the country has benefit the from oil prices. producer of -- and tesco is making an acquisition.
here to discuss some of the , our seniore quotes etf analyst at bloomberg intelligence. of these to some quotes. this is a huge conference. according to your first quotes, it is going to get even bigger. hitpredict etf assets will 25 trillion by 2025? 2025." it is big in the u.s.. about 20% of tells assets. he also have institutional assets. dive. did a deep
if that goes up to 10 or 20, you are looking at an extra six or 7 trillion. then you get 10 trillion and mutual active funds. that's another boost. i think it is going to go up. definitely i think everybody is very positive. >> that also provides support to these various assets worldwide. >> we also have this major rally in the past seven years. market.ntingent on the >> president trump came up. swan -- black >> everyone is wondering how to position portfolios.
how do you read around his tweets? the word from the wide -- word from the wise is to diversify. some of his regulatory reforms were being discussed. they probably won't happen. i don't know if that will matter. >> unfortunately we have to leave it there. you can follow eric on twitter. he gave a lot of the highlights as well. >> a mixed quarter for tech earnings. a look at the winners and losers. this is bloomberg.
let's check in on first word news. trump isdra: president set to meet his first world leader since taking office. it is being hailed by the british government that the transatlantic special relationship is valued by the new administration. the visit comes a day after mexican president enrique peña nieto called off his trip to washington off their angling for who would pay for the wall along the mexican border. coming up, trump and may will holding joint news conference. it will bring you that i'm bloomberg. the 20% tax on products from affect a wide range of products. they purchased four times more avocados than the next biggest importer. sellssounds -- mexico twice as much fruit. trumpr member of the
administration is calling out the media. the "new york times" is saying stephen bannon is saying news organizations have been humiliated by the election outcome and described the media as the party of the opposition. he said the media should "keep his mouth shut" and listen for it while. sean house press secretary spicer says an investigation in what president trump calls widespread voter fraud will include looking at where the problem exists. trump will likely launch executive action to launch the program today. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. vonnie: thank you. microsoftintel, and reporting earnings after the bell.
microsoft topped estimates, while the other two companies fell short. joining us is bloomberg's cory johnson who covers tech from san francisco for us. a beautiful sight behind you. cory: sunrise. we like it. the day getting longer. vonnie: before we get into paid clicks about which you are looking for, alphabet beat. cory: i think what is important with the trend and what really struck me was the rise in revenue. this is one of the largest businesses in the history of mankind, think about that, yet it grew at a 22% annual clip. the pace of growth for this giant business -- it is profitable, a lot of free cash flow -- a lot of important things, but the pace of growth is so important and better than it was a few years ago.
the company has capitalized on mobile, new platforms for ads -- new types of ads at different price points. they have change the world of advertising. if you pick up a copy of "sports yorker,"ed," "the new so much of the revenue has flowed into online and google, where the ads are targeted and smart, you can see success on topline numbers. vonnie: it is a testament to management's discipline, and also what they are choosing. for example, consumer hardware is something we may not have expected google to be bullish on, yet they are spending an awful lot of money on that. cory: hardware is something a lot of the endless talked about in notes. virtually every analyst i read talked about the hardware costs. i think there is too much emphasis on the hardware. in the same way android phones are meant to drive search, and ishas worked, the hardware
meant to drive search and drive people into the google ecosystem. the other focus is the google other category -- the fiber, the blips, the self-driving cars, all of them. under the cfo, there is a lot more, sort of, itemization of that, if you will. you can see those numbers clearly and the $1 billion loss the division put out. again, the size of the rest of the business -- that is less than 5% of revenues for the overall company. the size of the advertising business is massive and successful. you saw that in the quarterly and annual numbers they put out in the relief last night. --k: cloud, alphabet, google it is big for microsoft of course -- is it fair those two companies are pulling away from the pack? cory: there are so many ways to define what is happening in the cloud. the way i think about the cloud is the fundamental change from what companies would buy when
they buy hardware, servicing for the backroom, networking pcs,ment, lots and lots of to more and more stuff happening somewhere else and companies not having to buy as much. where do the dollars shift? most go back into the company? they are able to spend dollars on other stuff. the dollars are going into the cloud, whether it is the purchase of software, or renting space in what was once called server farms. you see the success of that. first and foremost as amazon and amazon web services dominate the business. microsoft has made itself a second most important company in the cloud when it comes to the hardware component, the computer processing, and the storage part. the success is notable -- about 50% of sales right now. it was only about one-third fsis in terms of percentage of sales two years ago. they have gone after this big and captured a lot of it. it has helped the market.
profits for microsoft were strong because the car business was profitable. mark: on the issue of server farms, let's get to intel. it pretty good first-quarter sales that will meet estimates. the interesting question is is there still, profit-wise, too much time to writing service computers in these giant data centers? cory: the data center business has been wonderful for intel and interesting, the pc business was good for intel. they saw pc sales increase while the pc business is declining. they gained market share. gross margins were strong. they saw solid growth -- gross margins and expect even better margins into the next year. the problem is the other stuff they sell -- the internet of things, the modems, the memory stuff will have worse margins and that is where the margin
guidance with flat year-over-year. vonnie: cory johnson and san francisco, thank you. a special treat -- cory johnson is hosting "bloomberg technology" at 5:00 p.m. ceo. his interview with vm mark: coming up in politics, president trump floating the idea of a 20% tax on mexican imports. what former u.s. trade representative michael foreman said about the high stakes of the basel. this is bloomberg. ♪ -- of the proposal. this is bloomberg. ♪
this is your global business report. ubs suffering in client withdrawals, but the chief executive tells bloomberg he is optimistic about the future. we will hear why. prosecutorsan doubling the number of people they are investigating in the diesel emissions cheating schedule and the scandal, and among those investigated, the former vw ceo. mark: and a look at the trump campaign's promise to rewrite trade policies. with the help or hurt the u.s. economy? vonnie: pbs says clients pulled more than $15 billion in the last quarter and profitability of the wealth management business declined, but sergio ermotti was optimistic. sergio: the most important thing for me is to see how clients are optimistic, particular with our u.s. investors and clients.
i think this could be a turning point, but it is very important to see the new administration also puts in action their plans, and gives investors even more confident. mark: prosecutors in germany are extending a criminal probe into volkswagen diesel emissions cheating scandal to include the former chief executive. he is now one of 37 people being investigated for fraud and competition violations. he had already been targeted in a separate investigation of market manipulation tied to the scandal. he resigned from the automaker in september, 2015. hasu.k. supermarket leader agreed to buy the number one u.k. food wholesaler, booker group. esco tol will enable t gain access to the fast-growing market to supply restaurants and hotels. the bank of japan boosted
purchases of bonds into in five and 10 years after benchmark yields climbed, confirming the market to the level that serves as the upper limit of the target range. the bank also made clear it has less interest in containing yields on so-called super long bonds that have risen to the highest level in a year this month. vonnie: time for the quick take -- where we provide context and background on issues of interest. virtue ofnturies, the free trade went almost unchallenged by economists and politicians. now it is the target of a populist backlash that helped to propel donald trump to victory in the u.s. presidential election. president shall, on january 23, signed in order to withdraw the u.s. from the transpacific partnership, a sweet impact better known as tpp. talks have been scheduled to -- andeshaping nafta
they were scuttled three days later when mexico's president enrique peña nieto said his country would not pay for a border wall. president trump's actions call into question the future of both trade agreements, especially the tpp, which trump is abandoning. trump also promises to hit china with punitive tariffs. trump's gave say the president is open to negotiating to a trade deals, including one with the united kingdom. dealsworld war ii, trade focused on a wave of protectionism that crypt economic growth, and led to the formation of a general agreement tariffs, and most countries are now members of a global rule setting body with china joining in 2001. here is the -- trade has raised global living standards and enabled for countries to close
the gap with rich ones. consumers gained access to a broader range of goods, and in wealthy nations cheap imports drove down the cost of basic items. even so, the benefits can be harder to see than the cost of about on this argument standard theories underestimate the social and economic impact of free trade and gains through new export markets for multinational copies should be weighed against the collapse of manufacturing towns. retraining displaced workers does not make up for lost earnings, they say, making opposition to free trade a rallying cry for chickens of the middle class. you can read more -- champions of the middle class. you can read more at bloomberg.com. mark: staying on trade, veterans administration proposing a 20% tax on mexican importers -- the trump administration proposing a 20% tax on mexican imports to
pay for the border wall. michael foreman told charlie ward -- charlie rose why the tariff could have global indications. michael: under nafta and obligations in the world trade organization, we can not oppose and leave the door open for other companies to be carried. if we do that, we are violating obligations. it means mexico could raise tariffs on our exports, and mexico is our second-largest export market. we asked for hundreds of millions of dollars of goods to mexico every year, supporting u.s. jobs. mark: joining us is economics and policy correspondent michael mckee. the economies are closely intertwined, can you pry them apart without causing huge economic unrest? more still -- michael: it would be hard to do. the companies are intertwined specifically in supply chains and that is true in auto supply
chains. you have components made in the united states, mexico, a sum of or the other country, putting two cars, brought into the u.s.. it would be hard to disentangle the whole thing. which other industries might be affected by the implementation of such a tax? michael: if such attacks went into affect, for mexico specifically, two of the biggest areas you would have our machinery and electronics. most of the television sets sold in the notices are assembled by parts brought into mexico. agriculture would be severely affected. people are already talking about carveouts for things like agriculture, because mexico produces things we do not get enough of here in the united states, like avocados. you have heard talk about paying more for your super bowl guacamole. it'll be a complicated thing for
them to do. vonnie: bloomberg found of all -- if all imports would have been charging 20% duty, importers would have paid a $54 billion in tariffs. that would have been partially offset by other items, but on a morning where we have seen imports were, what, up 8.3%, and exports were, what, down 4.2%? what does that mean for the u.s. economy? michael: takeout trade figures for the recent quarter because they were distorted by a jump in soybean exports in the third quarter that came back this quarter. when you look at what they are talking about, the 20% tax is designed to fill a hole in the u.s. budget if you cut the corporate tax rate. they want to cut it from 35% to 20%. that would create a deficit. they feel that with an import tax that brings an extra cash. 20 white house is talking about amount ofco pays x
dollars, then we could say they paid for the wall. for theally not to pay wall, but it gives them public relations cover. it was a fairly obvious and transparently wrong explanation, so the white house walked it, and they are not necessarily endorsed this border adjustment tax, but it is not a specific plan to pay for the wall as such. vonnie: can the wall cost will be about $15 billion. michael: it will be more than that. $15 billion is what the congress has, the administration says $12 billion, and most people in engineering, m.i.t., coming up saying it would be closer to $40 billion. vonnie: let me go to a tweet by lindsey graham, which is interesting -- he is against the idea of tariffs. more security, yes -- vonnie: he goes on to send
anything that drives up the cost of corona or tequila is a bad idea. there is a serious point -- they can also levy tariffs. why not? michael: it is not only that they can, they would impose tariffs on the u.s.. there have been disputes within nafta with the u.s. did not -- live up to the agreement. mesko important selective tariffs. those things are adjudicated by the wto, but in the meantime you have penalties on the industries affected. while mexico has more at stake, because their exports are a bigger percentage of their economy than ours, it could still hurt the u.s. very badly. mark: i was looking at some of the bloomberg data -- fascinating numbers. the trade deficit, which surpassed $53 billion. germany, $75 billion. billion, not taking
into account the multi-hundred billion dollars deficit with china. is it only a matter of time? now he has rhetorically gone off to germany. could he go off to japan and germany? michael: he could, and nobody knows why he has this feeling exports are bad or a trade deficit is necessarily bad, because it is the way we pay for important things that we want to have. is a way that makes our nation richer. economists are scratching their heads about the whole thing, and they are scratching their heads about why this is happening now when the u.s., mexico, and canada have this working well agreement that could be upgraded, but does not need to be a battle. when you have the trade deficit with china in 2016 going down, yet we are worried about what is happening with the chinese. vonnie: what are economists saying it would do to middle classes? we get cheaper products because of imports for the most part, and we have a strong dollar at the moment. michael: economists will always tell you it is complicated, but
in general terms if there is a border tax, prices for imported taxes with go up. you would pay more to when it comes to integrated -- more. when it comes to integrated supply chains, various centers have done studies. in michigan, they said if you put a tax on auto parts, you would lose tens of thousands of jobs here in the united states as auto-parts makers that make things that go to mexico to get put into cars lose that advantage. so, it would cost jobs here. the hope for the administration is there would be an offset with more jobs created. mark: are we talking about -- is there a potential for stagflation here, michael? jobs lost, prices rising -- how does the fed counter this? michael: there was an adjusting piece from megan green on the subject, where she suggests if we see the dollar start to rise, that will have an attack on
inflation, and money is going to come in from around the world to the united states because we are starting to have problems with -- not problems, but the dollar could get to problematic level, and then that cuts growth. at that point, you can run into the stagflation problem where you have inflation and slow growth. mark: michael, great to see you. thanks for fitting us in. michael mckee, bloomberg economics correspondent. do see that charlie rose interview tonight, six copy of, 10:00 p.m. -- 6:00 p.m. and 10:00 p.m. in new york. breaking news. trader -- former bond has been convicted. prosecutors say he lied to customers who sought to buy mortgage bonds at the best possible price, therefore a defrauding pension funds and retirement accounts.
first. stocks falling today, rising over the weekend four weeks out of five. that is the winning run for the stoxx 600 today. the dax is lower. may 2015 highs were the levels we saw yesterday. down today. the u.k. prime minister gets ready to meet president donald trump. stirling is lower today, but up for the second week. up, aeekly winning run is multitier winning stretch. -- multi-year winning stretch. bonds in the u.k. and germany they are falling. rising in spain and italy. this is bloomberg. ♪
york. mark: well, we are going to take you from washington to london, but get a couple of stories out of san francisco, paris, and tokyo. these are the top stories we're following from around the world. in politics, u.k. prime minister theresa may will be the first foreign meal -- foreign leader to meet with president trump. from the white house to brussels -- we have the global reaction to whether these talks will bear any fruit. but is this meeting at risk of being overshadowed by one that won't be taking place? mexico's leader enrique peña nieto pulls out of talks on his own country's trading terms. president trump tweet mexico has