tv Bloomberg Markets European Close Bloomberg April 19, 2017 11:00am-12:01pm EDT
this is the european close on bloomberg markets. ♪ mark: we will take you from new york to once in the next hour. covering stories out of harris, and tokyo. here are the top stories we following on bloomberg and around the world. political risk cues up on either side of the english channel. france sprints to the finish with four major presidential candidates in a dead heat. in the meanwhile, the u.k. braces for a snap election in early june. vonnie: then, how will this political risk -- larry fink gives bloomberg his take positioning in france and the u.k. and, a $13 trillion elephant in the room. we will explore how the eventual unwinding of central bank
balance sheets may affect your portfolio. mark: look at how european equities are trading to the end of the wednesday session. novembert drop since yesterday for the stoxx 600. european car sales rise 11% in march. sterling down by one quarter of 1% against the dollar today. it rose yesterday after theresa may called for the snap election year parliamentarians voted in and of the election on june 8. yesterday's increase was the biggest since january 17 and the highest since october the third. sinceng still down by 14% the referendum in june. it biggest decline since october quarterly sales, missing analyst
estimates and accelerating decline in the americas region and falling revenue in hong kong showing the scale of the task basically facing the chief executive. sluggish sales gain showing not all luxury companies are feeling the benefit in the rebounded demand. industry leaders have taken .teps to overall design a cost-cutting program cutting back on the number of its products. the week pound, risen by 46%. the world posse second brewer reported and -- an increase in beer shipments, profit rising 11%. the brand has been driving growth in asia why can's biggest markets include vietnam and
cambodia. big data points today, the eurozone, the vital reading of headline inflation, 1.5% since march, down from 2%. investors were talking about target ofon the ecb's 2% core inflation, a measure that mario draghi likes to look at. .6% for a long time. that is the record low. no evidence of core inflation picking up. inflation is looking in the wrong direction. 90 minutes in the trading day in the u.s. julie: if altering of the run weeks earlier in the day, the down 60 points, that is the toll ibm is taking. more on the dow, and that is
for it responsible underperforming versus the other major averages. this is a relatively familiar pattern for ibm even though the company has heat on sales in recent quarters. the stock is not out for. reports the last 11 after we have seen the stock go down, it has gone down in this same range on a not in freak basis here. sales are down for 20 consecutive quarters although the latest drop was a steeper one than estimated, which was in contract -- in contrast with recent quarters. movers we're watching on the upside includes intuitive surgical, the maker of the surgical robot and one reason the nasdaq is outperforming today. that topic posting its fastest procedure growth since 2013, led by u.s. general surgery and worldwide urology.
shares 7%. the chipmaker coming in with numbers beating estimates and competitors are rising as well. is rising after it was to reflecter rbc improved fundamentals in the north american container board market. i also want to take a quick look at the u.s. dollar, which we are seeing have its best day of the month, which i pointed out earlier is still below the moving average, pretty sad it is up, the best day of the month. oil following the inventory report, now pretty solidly lower by one third of 1%. it seems the rise of gasoline inventories, the unexpected part of that report and pre-much everything else in line, fed is now taking down the oil prices. mark: thanks a lot here let's get back to the major stories we're following in europe.
down to the wire for the first round of presidential elections. first up, let's get to westminster. lawmakers are voting in favor of threes amazed'-- theresa may's call for an election. standing by with the latest, i suppose the vote was a bit of a formality of the end? >> yes. lawmakers did vote overwhelmingly in favor of the general election happening june 8. in favor of trees a may with the general election three years before it was scheduled for 2020. it comes at a time when theresa in the polls ahead of the opposition labor party is at 21 percentage points. the biggest opposition
might not come from labor, but from liberal democrats. about a half hour ago, i spoke to the leader of the liberal democrats and i asked him what might happen if theresa may, judging by the polls, does increase her majority by the house of commons. listen in. >> any democratic government and the world, the worst -- that is what we should fear. particularly if she wins big. >> the liberal democrats have said they will campaign to stay in the single market and they also say they want a referendum on the final deal that comes out between the u.k. and the eu. in terms of that comment, theresa may getting a worse deal if she gets a bigger majority, she would of course argue against that. her reasoning was she wanted more unity in the house of
commons and in parliament to be able to take forward this mandate of brexit and be able to negotiate. some say getting a bigger majority with strength in her hand in these negotiations with the eu mark: one of the men fighting for the u.k. to remain inside eu was former chancellor george osborne. it seems his political career is at least over for now. >> that is right and this has not come as a huge surprise given there were questions over when he took the job over whether this might have any conflicts of interests at all. yes this has stolen some headlines today but the focus has very much still been on a vote for the election to take place on june 8. still a lot of questions. theresa may far ahead in the
polls. and given the reaction in the markets, there is a feeling among investors that theresa may does increase her majority in the house of commons, and she maybe in a better position to make some concessions to the eu or perhaps get a slightly softer version of the hard brexit that she is going or. also even if the negotiations need to extend a little beyond two years, she would be in a better position to do it without a general election looming. still a lot of questions. the campaigns will start hard and fast. seven weeks. mark: thank you. bonnie: another big story in terms of elections, standing by are there any
candidates gaining momentum? is there one that is getting a little bit of speed now? >> we have seen the far left wing candidate gaining momentum over the past couple of weeks. a lot of pressure on the two front runners. in the final four days before the first round on sunday, the a differentre using technique. trying to return to some campaigning, visiting factories and markets. using a hologram technique, physically doing a rally but also as a hologram and six other cities across the country, including the remote region.
you have a republican candidate who is actually, you could also say he is getting a little bit of momentum, trying to unite his former rivals. he was joined by his former rival in the republican primaries last november. he is the hologram an actual strategy that is working? could he actually pick up votes and momentum on this? appearsay argue that it .t can appeal to young vote it makes them more modern. and instead of driving to seven places, he can be only in one place. it is an idea that came from a woman in his campaign who was supporting bernie sanders campaigning in the u.s. last year.
that is quite interesting. is cheaper according to the organizers. 300,000 euros, very active on social media, more than one million followers on twitter. only marine le pen beat him in terms of twitter followers. he has created this video game so you can see the candidate fighting the likes of christine , trying to take their money. there was a terror threat yesterday. the fight against terrorism in this campaign? >> this might surprise you but at the end of last year, terrorism and security were the two top priorities of the edge. now the economy and unemployment
are the two top rarities -- top priorities. could have targeted the presidential campaign itself. they found weapons, and also a newspaper showing the republican candidate on the front page. this is something that will be mentioned tonight. marine le pen is doing her last rally in the same city tonight and you know the rhetoric of the far right wing candidate, she she wants to -- send all foreigners back home and restore borders on thursday of the election. we can say the two suspects were french citizens.
mark: thank you. bonnie: thanks. first word news. >> let's get you caught up with the headlines in the u.s. sector.g to the private the house oversight committee chairman said he will not run for reelection or for any office in 2018. he lets to congress in 2008, he said his decision was not based on political sense, and in his reelection. former new say england patriots player arron hernandez has killed himself it's tied his prison cell. says -- lifee sentence without possibility for was 27.this the u.s. says iran poses like to terrorism could scuffle that agreement.
they certified iran is complying with the multinational deal but in a letter to congress, he said iran remains a leading sponsor of terrorism and the review will determine whether suspending -- tions to iran one of the most expensive cities in the world is about to get more costly for business. singapore is posting a 30% fuel cost, water, and carbon tax. it usually ranks among the top when it comes to global competitiveness the cousin of low tax rates and good infrastructure. it has one of the highest costs of living in the world during the global news 24 hours a day powered by wood and 2600 and analyst in more than 120 countries. this is bloomberg. funny: coming up, what bill gates is about brexit and how it could affect scientific research in the united kingdom. that is the and this is bloomberg.
mark: the european close in roughly 12 minutes. note could affect scientific research and technology in the u.k. discussing the issue with the bill gates, microsoft and cochairman of the bill and the gates foundation. >> the u.k., whether from microsoft where they have a huge lab there, amazing work right next to cambridge, or the
foundation where we have over $1 billion of active rants to institutions in the u.k., to us, theld tools for united states is by far the number to place with a huge difference to number three. maintaining that scientific excellence will sometimes involve foreign-born scientists coming in and joining teams there. have in the right kinds of collaboration, part of the eu, the u.k. has been a huge net recipient of r&d dollars. at both thepleased chancellor and the prime , scientific leadership, creating new jobs, having strength in the u.k., that they will work to maintain that, because it would be a huge loss
to the world and the u.k. if that is done. it can be done. a little more cobbled it'd by not being part of the eu, and what will the worst -- the rules be about people, and money like that. some people are getting concerned about that. 10 or 20ation will be years here. -- will be here 20 years from now. and will be asked, how do you keep the very strong momentum, whether it is up in scotland where the livestock is just unbelievable, traditional universities, and the u.k. strength is there. i think they are being careful to make sure they are not dropping off on that. hear more of that bill gates interview throughout the day today on bloomberg. he discussed his hopes for president trump's
vonnie: live from bloomberg world headquarters in new york, i am vonnie quinn. mark: the european close is seven minutes away. fell by justries over one million barrels. you can see crude moving around following the announcement. secretary general spoke with bloomberg and said opec is moving closer to ending -- and rebalancing the crude market. >> the numbers are much more encouraging,more overcomehat gradually,
[indiscernible] in the first few months. we also spoke with the oil minister for united, and he said oil producers made to be patient as the protection -- production takes effect. time and i think they will take a long time to use those stocks [indiscernible] decide on may 25 whether to extend the production cuts started in january. now for a look at some of the biggest business stories in the news right now. we start with morgan stanley, shares trading higher, wall
street's biggest percentage increase in bond trading revenue. equity trading revenue fell about 2% and the first quarter, still better than estimates. stanley ceo called it one of the bank's strongest quarters in years. blackrock posted first-quarter earnings that beat estimates and investors poured into low cost funds. boosted by the stock market rally, black-market manages $5.4 trillion. dispute ising trade heating up and home builders could be the losers. more than 20%o a increase in wood prices. homebuilders may end up paying more and the u.s. is poised to impose paris. is at one:n dollar
-- 13448 right now. take a look at where european equities are trading as we head toward the close. stocks are higher today rising in the markets except the u.k. stoxx 600 up by one quarter of 1% today. sterling dipping a little bit today ginny after rising two point 2% yesterday, the most since january 17, down by one quarter of 1%. finishing off with the bond board. stocks are rising and bond yields are rising as well. the close is next. ♪
yields, autos moving up on the back of strong auto sales data out of the euro area. by 11%, european car sales in march. biggest decline yesterday, 1.1%, since november. the yellow line is the ftse small cap, the purple the ftse and the blue line the ftse 250. yesterday we saw the foot the wake offtse sink in the the may announcement to call a snap election. sterling's rally pushing the ftse 100 lower and it is down again today. higher and the ftse midcap is unchanged. the ftse down for a fourth day, the worst since march.
these are three indices that have rallied since the initial selloff post the brexit vote in june last year. i am not going to show you sterling against the dollar. i am going to show you the intraday swing between the pound and dollar. this chart takes the spread of the high price and low price for sterling on any given date, and it goes for over a year. in the last year the only time this was a wider spread than yesterday was brexit, and october the seventh. that was the day of the flash crash when sterling was down by a matter of 6% in a matter of minutes. sterling jumping 2.2%, the most since january. it is down by 14% since brexit. volatility measures surge before the french election on sunday.
germany appears to be a relative area of haven. dax has reached its lowest level since january 2015 relative to the price of protecting against euro stocks 50. that is fascinating. vstoxx bothd climbing this month. hitting its highest level since the aftermath of the brexit vote. investors were telling us coming using germany as a protectionist -- protection against unfavorable outcomes. he compared germany stocks to fangs. vonnie: then we get to do it all over again two weeks lower and a couple of weeks after that i am checking yields. the treasury safe haven is the trade that is pretty popular at the moment. his 215.level to watch
we are at 2.22 on the 10 year and 103, so on our most recent extremes. the dollar index is still below 100. after the inventories, crude oil has come up a little bit. i am not quite sure what that is. i feel that is probably a one-year return but we will ignore that, the fact that crude is at 52.0 to a barrel. let's go to gmm. wti crude down three quarters of 1%. have a look at some of the top market movers, the s&p 500 is among them, the german dax. australia down about half a percent. a couple of the other currencies that are moving include the yen which is a little weaker, above 109. that might be pleasing to the bank of japan.
let's get to abigail doolittle. abigail: on the week we have 10 year yields down for the six week in a row, the longest streak since july last year. the 10 year yield is on pace for it biggest monthly drop since last june, right around brexit. we have a bit of a haven bed. this is a chart we have been looking at for many weeks. out of the election we have a big backup in rate and around the time the fed raised rates in december, we see this uncertainty forming. last year we had the 10 year 2.3%,dropped below suggesting we could see a measured move all the way down to 2% and maybe lower amid expectations the fed is likely to raise rates at least once this year. we have a chart that takes on the fed's balance sheet. it is a 10 year chart and in yellow we have the fed balance
sheet, $4.5 trillion. that accommodation seems to have helped the s&p 500. perhaps this is the true reflation trade, and in blue, the 10 year yield has pushed those lower. suggests we could see the 10 year yield move back below 2% or lower, despite the fact that the fed has been talking about unwinding the balance sheet as a policy tool. the balance sheet may stay where it is. time will tell. mark: sticking with central banks, all weighing plans to tighten their balance sheet. that trip into uncharted waters could have a major impact on investors, with a combined $13 trillion on the books. mckee.et to michael avoid thetral bankers
2013 taper tantrum when it comes to normalizing balance sheet? michael: by tapering, that is the idea. they announced instead of just stopping their reinvestment and buying securities to replace those that are maturing, they would set a percentage or dollar amount each month that they would cut back in terms of how much they buy to replace the securities, similar to the way the fed and did it qe program until they were finally at zero. the feeling is that gives the markets unpredictability. they can measure -- gives the market some predictability. they can measure supply so what will not be as crazy as with the taper tantrum. mark: bonnie? vonnie: what are we going to hear from federal reserve officials? right now for another interest
rate increase they are coming way down and we are looking at one for sure. michael: you will see that fluctuate with economic development. everyone is focused on the gdp report from tomorrow to show the first quarter was week, and we have had a seasonal adjustment problem. if we get a second quarter snapback, that thinking will change. the fed is looking at the balance sheet separately from its interest rate moves. they want to put the balance sheet on autopilot and back it down but the question is how far? if you look at the money supply that they have to offset by keeping the balance sheet bigger, it has grown significantly. if you want excess reserves to keep the monetary policy with reverse repos on the bottom, they will have to have a bigger balance sheet than they did. could be $2.5 trillion. if you take mortgages out, that is almost where treasuries are
so you might not have to do a whole lot with treasuries anyway , which would have almost no effect on interest rates. mark: the thought of the fed beginning to normalize its balance sheet does not seem to be spooking investors to much. sid: that is been a complete surprise to many, perhaps to some extent good global data has bailed out some of the bulls. to some extent there is the suggestion that the fed will take steps, they may try to look at some suggestions that they might delay the pace of interest rate normalization. so that may temper. bidave seen a long risk on and lots of credit -- pockets of credit markets. vonnie: are other central banks looking to the fed for direction? it is not just the fed balance sheet. to get: everyone wants
out without causing disruption in the market so they will be watching the fed closely. the ecb not close to this yet, but they will face much the same issue plus my own bonds from other countries. -- they own bonds from other countries. the bank of japan is interesting because they own so much of the market they probably cannot get out in the same way, the interest rate and expectations are so -- are so low people are not thinking we will see a taper tantrum if they change their policy. mark: we will rattle through three of your chart, we have the french election on sunday. this chart shows the cost of hedging against euro stocks 50 volatility. hitting an all-time high. event takingg place on sunday and investors are positioning. sid: on the surface, it might
look like the relative calm in european equity markets but in options markets and derivative market, investors are hedging against the prospect of price declines and they are paying a big premium. we are seeing a lot of fear being expressed. mark: let's look at another chart, because given sterling's 2% rise yesterday, investors are asking how high could sterling go? there seems to be a change in sentiment given the market was so short. sid: it is not clear whether yesterday's rally in the pound was driven by a fundamental the medium-term prospects for the u.k. political economy, or a good old technical short squeeze where too much momentum has been built up and the pound has seen record shorts.
since the data goes back against the pound, so clearly there are technicals that might have driven the rally. mark: another big question, is the consumer, he and she have been the big driving force for the post economic -- post-brexit economic bound. does that not have legs? sid: consumption has outpaced income. be, whation would would it be before? we have strong job data. the real question is income opportunity, you have seen real income growth. you have seen households do not really have much of a buffer should inflation rise. that is going to be a big question mark about the durability of the u.k. economic cycle. mark: sid verma and michael
mckee, thank you. tomorrow, mike will be having breakfast with robert kaplan from the fed. let's check in with emma chandra. : in london, the house of commons has made it official. lawmakers have voted in favor of theresa may's push for an early election. she wants to increase the conservative party's options. the conservative party with a 21 point lead over opposition labor. in france, when of the suspects arrested for plotting it attack has been on the radar of belgian officials. the country opened an investigation into the 23-year-old after his family alerted officials he had been radicalized, and possibly planned to go to syria. 's the middle east's biggest airline is releasing the number of flights to the -- reducing
the number of flights to the united states. the airline says the cuts will impact five of its 12 u.s. destinations, starting next month. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. chandra. this is oomberg. vonnie: thanks. coming up, we will hear from blackrock chairman and ceo larry fink on brexit, the french election, and u.s. markets. this is bloomberg. ♪
this is the european close. larry fink is keeping a close eye on france and the united kingdom to where political risk is uncertain. he spoke with erik schatzker to discuss brexit and the french election. larry: i would say from our fears of the third and fourth quarter going into the first quarter, the fears have abated. we still do not understand what brexit will mean for the u.k.. i have been in constant dialogue with the administration and they asked us what our intentions are. we will stay pat and watch, until we understand what brexit means related to europe. what are the key elements that people have not talked about? europeans have been discussing items like, we want you to manage all european liabilities in europe. most firms use london as its platform for that. if they can find a way to force
that type of behavior change that you have to manage, so you have to have your traders, portfolio managers in continental europe. that is the key, because if we have to move to europe to manage it, then the banks move their , iting desks and everything can be quite disarming and difficult. so until we know where that stands, it is pretty anti-trade. that is a real severe issue but a pivotal issue for financial institutions related to being in the city of london are outside. to me, brexit is a wait and see issue. i think the prime minister is doing a very aggressive thing. the popularity of the party is very strong. obviously, if the polling is correct and there is an overwhelming win that validates
and solidifies herself as a pm, and the party, i look at this is more of a gesture of strength than anything else. we have the french election this weekend. i don't know. we still have a strong view that itlooks like macron can eke out but every day is a different day and we see an incredible horserace. the market today is anticipating, i would say, a probable good outcome. >> why is macron a good outcome? larry: i think they are more fearful of the two tails. lon outcome would be perceived as good. i think the market is looking for a more centrist outcome that has the french government looking to stay within the
eurozone, more pro-trade. so we will see. verynk it would be difficult if we had one of the tails winning, and the market would probably reverse and go down further. draw contrast between europe and the united states? there are risks. of course there are risks. there is the question to whether the risks are appropriately reflected in asset values. you are among the people -- and there are many -- who were surprised the u.s. equity market rallied as hard as it did after the election and furthermore, consolidated those gains. paint us a picture. how does the future look for u.s. assets? how does the future look for european assets with the underlying macro fundamentals? larry: it is probably the most
expensive, this is why earnings season is probably the most important issue for the markets today. the marketplace had higher expectations on quick actions out of our government related to , andeform, infrastructure then deregulation. those are the things the marketplace looked for and that will take obviously more time. so if we don't have earnings pes,ated in these higher we can adjust down 5% or 10% from here, and if the administration does succeed in some of these items the market will reassert itself going higher. mark: blackrock chairman chief executive larry fink on bloomberg daybreak: americas. time for the bloomberg business flash with some of the biggest stories in the news. murdochs sayng the
bill o'reilly will not return. after comingcation under fire over allegations of sexual harassed. he is fox's most-watched anchor. xo novella has come up with a new strategy to fight off a $24 billion takeover offer from tpg industries. it will split off its chemicals division and return $1.7 billion to shareholders. it will be carried out within a year. that is the latest bloomberg business flash. charts.ttle of the the u.s. election against inflation, this is bloomberg. ♪
the most compelling and telling charts of the day and what they mean for investors. you can access these charts on the bloomberg. kicking things off, the runner-up, christina kia know. the biggest news on this side of the pond is the u.k. snap election so that is what my chart is about. the pound seems to think that is good news. look at the blue line, there is a blip that is the six-month high, and we are still trading near that level today. that is bad news for the ftse 100 which tends to benefit from a weaker currency. take a look at the bottom panel, the correlation between the pound and the ftse 100, the most negative correlation since the early 1980's. that is even before i was born, nearly 30 years ago. that means that any further gains for the pound from here would be a bigger headache for the ftse 100.
if you want to stay on top of these moves, download this chart. mark: here is someone that does not remember the 1980's, although i gather she was a durand durand fan. vonnie: there should've been a soundtrack for that chart. my chart is on the no more great expectations seen by kit juckes and others, the demise of the reflation trade. that is because of the demise of inflation expectations in the u.s. and yesterday we hit a milestone because the 30 year breakeven went below 30%. i do not have that line in this chart but it is fascinating. spread and when you ,ook at it, the two breakeven 10 breakeven, and five year breakeven are well below 2%.
inflation trade is over as evidenced by this chart. mark: such a big shift. when i saw christine's chart i thought you have not got a chance. when i saw christine stirred -- vonnie: thank you for the confidence. mark: that is when thatcher beat michael foot in the election and some are saying this election could be similar. two wonderful chart, i cannot separate you so as emperor, i say it is a tie. vonnie: if i had the deciding vote, which i don't, i would give it to you. mark: well done. look at what is happened with european equities today. bloomberg markets continues. ♪
from bloomberg world headquarters we will take you from washington, d.c. to san francisco and london. a mixed picture for you as stocks and the dollar is rebounding. the nasdaq is leading gains while the dow is edging lower. treasuries slumping as the 10 year edges above 2.2%, the pound extending gains after hitting the strongest level since october. blackrock ceo larry fink sees "warning signs" for the u.s. economy and thinks they need validation that the economy will stay strong. we will have more from his interview with bloomberg television. morgan stanley posting first-quarter numbers that beat