tv Bloomberg Markets Americas Bloomberg May 8, 2017 10:00am-11:01am EDT
." ♪ what kind of economy will emmanuel macron inherent in france? the challenges as he prepares to take command of europe's third-largest economy. the: market reaction muted, nuro falling, whether macro could spark a trump-like rally. crude oil bouncing around, failing to post significant gains. saudi arabia and russia are prepared to extend cuts. why investors are not buying the news. there is a new french president. will be sworn in
on sunday. better to travel ban arrived is a quote i have heard from analysts today. big gains came between the first and second round, little changed today after rising to a 20 month high on friday. we did rise for a second week last week. attention turns to fundamentals. morgan stanley says 47% of the companies in the stoxx 600 have exceeded consensus by 5% or more in the first quarter, putting it on track for its best quarter in a decade. analysts busy of dating, trimming them this time of year as the initial positive outlook starts to look at less rosy come seems to be changing, the undercurrent of the european economy, and the european stock
market as well. , thiss the cac 40 benchmark rose by 7%. that is a massive rally, down today, the french benchmark. the gain in between the first two rounds was the biggest gain ever. we reached an rsi of 78.1 on friday, the most since early 2017 was of that tells us even before macron was elected president on sunday that political risks dropping, the rally spurred, pushing french discount,a smaller the cac 40 trading at 15.4 times. this is the spread, 42 basis points. the big move in the spread came after the monday after the first round with a difference in
yields of 19 basis points. we are up 42 today, the narrowest since december. the euro-dollar, earlier up, now lower. profits, taking some 2.5% was the game between the first and second rounds. the euro is a clear sign the macron victory is priced in, and ecb, a focus on the sell on rallies above 110 against the dollar. >> we are not seeing much reaction as it was priced in, but all major averages touched on an intraday basis record high , but then pulled back. not much of the decline, but no longer at record levels per at
one of the biggest drags on the , paying costco falling out a seven dollars special dividend today, so a technical adjustment as the stock falls to account for the payment of that dividend. berkshire hathaway continuing to fall in the wake of its earnings report late friday and is shareholder meeting over the weekend, at which warren buffett talked about failing to pounce on tech stocks. both at confirming he sold a third of his stake in ibm. bernstein this morning saying don't buy ibm on weakness. he says the success of the company's turnaround effort is uncertain. we have a lot of m&a activity. forlair buying tree been $3.9 billion, tribune trading higher by 6%. coach agreeing to buy kate spade for $2.4 billion, lower than
some of the highest estimates for that deal, but shares popping 8%. straight path communications, a bidding war between at&t and ve rizon, now trying to outbid that company. amon, elliott management closing a stake in the company, so popping as well. vonnie: thank you for that. attempting ton heal divisions after his victory over marine le pen. i would like to say a few words to those who voted for madame le pen today, don't doo them -- boo them. they have expressed their anger and belief and i respect those as well, but i would do everything i can in the years to see these people no
longer have any reason to vote for extreme ideas. vonnie: joining us now from paris, inauguration next sunday, what will macron's first test be? be he torst step will name a cabinet, a first prime minister. that should happen on monday. , this will benow his first big challenge, to get a majority during the legislative elections. at the moment, the opinion polls we have showed that he could get a small majority, but it is also a possibility that he would have to form a coalition with some of the right wing republican party representatives because emmanuel macron may have won this election with 66% of the vote, which does give him some sort of
legitimacy, but without a majority, he cannot push through the reforms he is planning for the country. mark: we are seeing some protests taking place, some pictures of that. i don't know if you are aware of that. the fact thatg in marine le pen lost with 34% of the vote. what part will she play, what part with the national front play in the next five years? between is a difference what she would like to play and what she will play. she would like to play the role of the opposition party, but the system in france with the two-round the system, even if -- the system makes it difficult for her to get more
themp's in national assembly, so it will be hard for marine le pen and her party to break this glass the opposition party. however, she does have an idea to do that. she wants to renew the national front party but change the name of the party. that is what she said last night. in order to do that, she has partylliance with the that did 5% in the first round, a party that is a protectionist party that doesn't want to leave the euro. vonnie: reporting not far from the eiffel tower in paris. thank you. by thee are joined portfolio manager at janus capital with 4.5 billion dollars of funds under management. he joins us from colorado.
george, thank you for joining us. are you surprised by the market reaction? it is tepid. we have heard lot today that it is better to travel been arrive. would you expect a rally and equities, euro, equities down, bond yields falling across europe. > it. >> it is a surprise because this is good news for the global economy and france in particular, but if you think about the returns the markets have achieved in the last two weeks, there is some substantial as the event happens, it is not unsurprising to see short-term traders take profits as the event occurs. what is more important is what this means going forward. this is an unambiguous positive. you set france of four important structural reforms that that country needs to grow, and you potentially set the european union up for a better construct going forward.
clearly that is helpful. when you look at the valuations of european and french equities in particular, they have not healthy,e for constructive outcomes, but they have been growing. mark: what is the next big event? there always seems to be something. before france, the dutch election, trump, brexit, so on and so forth. what is the next event you are watching that could potentially be a banana skin, political or macro? >> there are several first is what will happen with u.s. regulatory and tax reform. that will take some time to play out. near term in europe, what will happen with respect to the of elections in the united kingdom? that looks like it will go theresa may's way and the tories will consolidate power and be as stabilizing influence with respect to europe. not only will she be better able to negotiate brexit, but more
power and stability in the united kingdom, which is helpful. the one worrying event out there on the horizon from a geopolitical perspective are the elections in italy. they have elections by may of next year. clearly given the strength of the five star party there, which party, youkeptic could have a question with respect to the european union stability. onhink that is the outlier the horizon, but the events going forward see more construct to than the narrative we have had for a long time. vonnie: on that note, we have seen the french-german spread come in a bit in the last few days. if you want to look at my bloomberg, you can see how far it has reached, twice what it is now, 41 basis points. where do you anticipate the italy-german spread between now and the at the elections? >> i think spreads converge and
continue to narrow going forward. i think the french election was critical. it allows a better construct for the european union to reform going for it and be a better experiment for all of its multi-speednot have economies that converging coalesce into a union that is healthier long-term. clearly there are some flaws with respect to its construct, so if you have the potential for a strong franco-german aligns that builds a stronger european union that build the periphery come of that should allow spreads to converge to the bund spreads. vonnie: what are your traits now that we have a definite new french leadership that might have been priced in, but until today we were not sure? it is fullyhink priced in. i think the trade was priced in over the last two weeks, but the long-term impacts are really underestimated.
this is as significant an event or ben mario draghi bernanke backed up the markets post crises. we had a true existential crisis in the eu, and it has passed with flying colors. two out of every three french ised for macron, and he clear pro european union, so that is helpful. it allows stability from a political and geopolitical perspective. forave the promise structural reforms to the french economy that could unleash the tremendous power of its people and resources. tonce, we forget france used be a very harmful economy and it is only in the last 10 years that it has languished. if france can adopt the regulatory reforms similar to what the 90 did through the 1980's to fix its malaise, france could be a powerful economic engine. it is the second largest economy in europe, a g-7 member.
getting france to do better would be a an important element for france, europe, and the global economy, and that construct is important and sets up a better europe. a bitter europe is a better global environment. msci i'm looking at the u.s., a record high, stocks touching an all time high. where is the value out there? toa couple of things consider. first come even though the indices are at all-time highs, there are differing elements. it is a two-speed market. the safety bond yield market, utilities, staples, telecoms have done extraordinarily well. asdown cyclical such financial and energies have done poorly. better me is a source of opportunity, and it really comes from a normalization of rates. as the error of low interest
rates starts to subside, the benefit to financials come energy stocks, and other cyclical spec can capture that earnings power will grow, and those stocks are substantially cheap, not only relative to their history, the relative to the rest of the market. mark: great to see you. thank you for joining us today. let's check in on first word news. prime minister theresa is asking british voters for a mandate larger than emmanuel macron received in france. of the vote. may says she needs that kind of support in the election to fight for britain in brexit talks. says it supports extending opec oil cuts beyond the end of the year. the six-month deal is is scheduled to expire next month. russia's energy ministry says that extending production cups will speed up market rebalancing. saudi arabia also said the
agreement could extend past the end of 2017. in the u.s., an obama administration official who warned the trump house at about a key at is on capitol hill today. sally yates testifies before senate hearing. she has not spoken publicly about former national security adviser michael flynn before. white house officials said she merely gave them a heads up about michael flynn's contact with russia, but is likely to testify her warning was stronger than that. president trump will take another step towards his goal of shifting the nation's courts to the right. he will announce five conservative nominees to federal appeals courts. nominated have ties to the conservative federalist society. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i am emma chandra. mark: thank you very much. right, coming up, oil trying to
from saudi and russia to not only extend output, but possibly extended into 2018? things.ple of number one, it has been talked about, so you'd don't keep discounting the same piece of information over and over. bank, the market is three dollars off the lows it was friday ay, so washout in the market or is this the beginning of a momentum change where if the market can keep gains towards 47 dollars or higher today, will that add to kicking wtiart brent towards the $49 or $50 mark. the russians say they are on board and everyone is saying they will go for the end of 2017 and possibly beyond. where do we get the math, that will be part of it. china is the largest importer of
oil at eight point 5 million barrels a day. the u.s. is producing nine point 3 million barrels a day, so we are looking for the sweet spot. where does china's economy allowed to get another 500,000 to one million barrels a day? i think we will continue waning off imports and become an exporter, so that is a hard problem for opec. they are caught between the rock and a hard place. if they don't extend, you're looking at $40 in wti and at low 40's on brent, so they will extend and now the question is world amanda. mark: talk to me about copper the selloff in both continues, a link to china as well, demand. how low can these commodities go? takingcopper market is it on the chen recently, a
market that was just over 2.6 zero and now low two-40's. a tightening monetary policy stage and quietly agreeing to take steel exports and cut them down. they are already cutting what they call shadow refiners, their smelters. as that continues to go on and there are economy is not producing at 7% growth, but 6.5% growth, we will keep the commodities complex under pressure. they are the elephant in the room, and that elephant is not asing in as much iron ore they took in the first quarter. they took a lot in the first quarter, but for a year on year basis, we are seeing declines, affecting australia, one of the reasons the aussie dollar has been under pressure, and will continue to see that, so no, i would not look for anything in
the bull market for rebar or copper. you need to get china back in balance and they are trying to guide there are economy wider. mark: always good to see you. thanks a lot. stuff. great thank you. still ahead, merger monday up from media to retail, details on today's biggest deals. this is bloomberg. ♪
it gives them access to big media markets like new york, chicago, and miami here it seeing claire may sell 30 stations it owns. there is a deal today in the luxury handbag is ms.. coach has agreed to buy kate spade or $2.4 billion. coach has been trying to build a multibrand company through acquisitions. sales turnedtore negative in q1. more details later in the hour. that is your latest bloomberg business flash. still ahead, some of the world's top money managers looking to give returns of those. this is bloomberg. ♪
emma chandra has more from new york. >> let's get you caught up. french president and manuel micron joint with president françois belongs to celebrate ve day. he won in a landslide, beating far right candidate marine le pen. strength, the energy, and the well, because that is what has carried us to this position, and that is what has made us, and that strength well in sure our future. we won't give in to fear, division, and lies. >> krohn is an independent who had never run for office before. -- macron. rex secretary of state tillerson will meet wednesday with his russian counterpart in
washington. he and sergey lavrov will discuss syria. syria agreed to the establishment of so-called "de-escalation zones," but fighting continued over the weekend. trump is distancing himself from michael flynn's troubles. he is tweeting that it was the obama administration that gave him the highest security errands. former acting attorney general sally yates is expect it to testify in a security briefing that she warned about conflicts between flynn and russia. order aimedxecutive at temporarily halting travel from six mostly-muslim countries . global news 24 hours a day, powered by more than 2400 journalists and analysts in more
than 120 countries. i am emma chandra. this is bloomberg. vonnie? vonnie: thank you for that. european indices lower following victory in the french elections. if french elections are not on the radar so much? joining me now -- our guests and thank you for both joining us, and, andrew, let me start with you. where do you, you know -- where does macro investing in for you? -- end for you? inyou watch what happens washington? surely, you must take some account of it? do.e these challenges, the macro environment, the political
environment, these are reasons macro investing have become popular in recent days. it is because investors are searching for more, and if you want more than a market standard outcome, it can deliver higher returns with lower risk and greater diversification. where's talk about exactly in the portfolio -- a lot of times people say this will replace active investing. do you see that? that is the key question today, how can we put factors ultra and index? it is not a question of or. it is a question of "hand." "- it is a question of "and. we have efficient ways of investing. but the fact is, it gives us insights that active managers have taken for decades, but
they do it in an index-like fashion. dani: but what exactly do you define as value or quality? i know you're coming out with an outlook. what is your outlook right now? what factors should investors be tilting towards right now? long value and momentum. if we can echo the same things said earlier, we define ourselves a blackrock in the reflationary growth environment. there are recent trends -- wide stock dispersion, making those factors attractive. howie: we have a graphic of the different factors have been doing. comes from your own research, in fact. if we pull that up, you can see value is the purple line at the bottom. momentum is the white line at the top.
getting someey are flows from blackrock, at least. of course, they would do better. how much are flows distorting this market? andrew: the amount invested currently in smart data strategies are very low, so the flows do not play that much role today. if we look at the s&p 500, 20 trilliond dollars. currently, of that $20 trillion, less than 1% of that is in mark data strategies. dani: i think this is an important point here because you have almost a notorious clip of assets, not debating about valuations eating pumped from flows. -- getting pumped from flows. is he wrong? andrew: we do have the view that weis possible to time, and certainly do it blackrock. i think the way we should start
with this is start with a diversified multifactor combination. the key here is not short in and out coming. the key here is tilting and gradually rotating around that strategic multifactor allocation. made reference to the great debate, rights -- on which side does blackrock come down? andrew: we believe it is possible to tilt moderate list -- modestly, accurately, with conviction. dani: i am curious about value. people have said -- you continue this going forward. why is value a good play now? andrew: we see a couple signals that make value attractive. valuations have come back a little bit, but they still relatively attractive. there is a value in value. dani: so value and momentum
right now? andrew: and there is wide dispersion across different stocks and that dispersion measures how large the opportunities that is. we want that dispersion. the larger dispersion, good opportunities in value. dani: so how do you look at how to till dispersion? andrew: where we are in the economic cycle. dani: and one of them is relative strength, right? andrew: yes. : how do you know that is not just people rushing in? andrew: relative strength is a little different from the economic regime. that, itself, is the most important input we have into these types of tilting models. the relative strength -- it's not enough to just look at the past return. what we are really looking at is the past return on the factor relative to itself and also
relative to other factors. how much does blackrock have in the strategies now. how much do you tilt toward size? high-growthaller, companies are something that you prefer. andrew: small, i high-growth company should do well, but currently there is a neutral position to read there are a couple things tilting us not to the same overweight position as an value and momentum. blackrock currently has a platform of $160 billion in various strategies. vonnie: wow. bloomberg's danny burger, thank you for bringing that, and andrew ang. mark: fascinating interview. coming up, emmanuel macron will the next president. we will look at the 39-year-old centrist's rise to power. this is bloomberg.
vonnie: live from new york, i am vonnie quinn. i am markin london, barton. it is time for bloomberg markets. now let's look at the biggest business stories in the news right now. the largest poultry producer in the u.s., tyson foods, has been questioned about florida's attorney general about anticompetitive conduct. the company says it's cooperating. tyson is already under investigation for allegedly colluding with other producers to drive to can prices higher. prices toexpect home rise 3% over the next year according to a fannie mae national housing survey.
month's reading resumed an upward trend after dipping last month. the study also found that most americans think that now is a good time to buy a house. people are more confident about keeping their jobs. southwest will shift their 30-year-old reservation system to a new platform. it will cost southwest $500 million. the airline is hoping to avoid the havoc that plagued other carriers with similar transitions. that is your latest bloomberg business flash. vonnie. vonnie: time now for our bloomberg quick take. the gold standard for assessing politicians, elections, and voter concerns -- polls. not shining all that brightly now. almost every poll missed the state-by-state support for
donald trump. this failure to predict the leave campaign the brexit referendum and the measure of the support of the people with the colombian farc group also. a majority of people live in homes without a landmine in the u.s., so firms have increased calls to mobile phones. to do this, they have to dial numbers right hand, since it u.s. law bans cell phone auto dialing and they have to make more calls because mobile phone users tend to screen out unknown callers. it can cost nearly twice as much. george gallup created the first scientific political poll in 1932 for his mother-in-law, who is running to be secretary of state of iowa. gallup founded the american institute of public opinion, later called gallup polls.
the 1948 in presidential race helped improve accuracy. so, here is the argument -- academics warned that judging the accuracy of polling models in the mobile phone era will require years of comparisons against final voting results. in the meantime, some think bad polls are good for democracy. more people might vote if they did not think the results were preordained. you can read more about polling and all of our quick takes on the bloomberg. let's turn to the world's most recent election, i emmanuel macron, of course, sweeping to victory in the french presidential race, vowing to fight the forces of division that undermine france. the 39-year-old centrist candidate defeated the far right candidate marine le pen. bloomberg takes a look at france's new leader.
emmanuel macron has swept to victory in the french presidential election, pledging to unify the country and reinvigorate the economy. the 39-year-old is the first president from outside the two traditional main party since a modern republic foundation. his centrist, pro-european, open border views stand in stark contrast to the rising voices of yours resurgent far right. this is how his unabashed ambition drove him from star pupil to big banker, to political rebel. macron was raised two hours north of paris. this is the house he grew up in. the eldest of three children from a family of his, he attended a jesuit school. a precocious kid, he preferred the company of teachers to other pupils, and it was at school he met his future wife. they worked closely together to
rewrite a school production. 40, and6, she was married with three children. gossip about their relationship again to spread, and macron left -- in paris.sh after school, he attended university in paris, studying philosophy, and then went to prestigious national school for administration, a breeding ground for the french political elite. he moved to the renowned investment bank rothschild. macron was quickly parachuted into managing a massive acquisition. to bynestlé has agreed pfizer from nutrition business for $4 billion. reporter: when the deal went through, he got a big payout.
then he went to work for the french president and personal friend françois belonged. two years later, hollande gave him the prestigious position of minister of finance. by now, françois lond, popularity had fallen. disliked, and the legislation had to be forced through parliament, sparking protest. macron increasingly criticized the government, but still enjoyed the president's support ridley last year, he launched his own political movement, en marche, or "on the move." he has really come out of nowhere. three years ago, emmanuel macron was unknown to the general public. >> i am on the campaign trail
with emmanuel macron. aporter: he was seen as presidential longshot. >> when he started his movement, everyone, including many journalists like mice elf, were -- like myself, were like, that is cute. but he is not going to going where area reporter: but borrowing from barack obama's playbook, he took to social media. by the time france went to the polls for the first round of voting in april, he successfully reinvented himself. he was no longer the free market reformer working under a failed president, but a new voice in politics. ench]peaking fr [applause] reporter: he secured the most
votes of any camp in the first round, putting him in the run up with another political out that her from the far right, marine le pen. with voters facing a choice and an a pro-eu centrist far right candidate who wanted to pull out of the union, macron one with a resounding majority. with his party unlikely to form a majority of the next agendaent and a policy that straddles ideas from both sides of the political spectrum, his success depends on building bridges with the traditional parties he has defeated. officially takes power sunday at 10 a.m. paris time. buy kateoach agrees to spade for $4 billion bill.
mark: live from london and new york, i am mark barton. vonnie: and i'm vonnie quinn. this is bloomberg markets. a deal has finally been inked. coach agreed to buy rival kate spade in a deal worth $2.4 billion. joining us with a look at what the deal means for the companies our bloomberg gadfly columnist who covers retail forest. is this to the credit of the coach ceo who came in and energized the brand, or the activist investor who is trying to have kate and value? >> probably a little bit of both great coach has had a
turnaround, but i think they can to the realization there was that much more to grow. if they are going to keep growing and they cannot add sales with coach itself, they will have to buy other companies. enter case made. vonnie: coach went into footwear. it was a bit of a head scratcher. coaches always been known for henpecked. can that become from entry? > that is the idea. there's not quite a lot of cost synergies, actually, between the two of them. they will be able to help kate spade's manufacturing and supply chains. they are keeping the brands separate. maybe idea is to create a conglomerate, or a mini conglomerate. mark: shelley, it has been a choppy ride for kate spade shareholders. what's we make of the price? >> cade was -- kate was trading
at $40 per share. once the deal got started, it was really this choppy ride, as you mentioned. shares went above $20 with some really bullish analysts saying, oh, this could fetch $30 a share, but coach was not willing to pay that. as time went on, kate's eight had worked and worked for sales. they eventually ended up with 50 per share, which is the same as their 200-day moving average. so, both win. mark: coach itself has come out of its own turnaround. is this deal out of strength, or a position -- let's use the word weakness? >> they smartly managed to their own money to have the cash to buy this kind of company, but it is out of a smart realization that this whole strategy of just trying to grow sales through
discounting and more outlets was not working for coach. so, instead of that, let's tamped down, -- let's tamp down, have the realization they would not grow much bigger and instead by other companies. the upperd we put out to comment, and we have not heard, so we cannot tell whether they are happy. and now there is putting more debt on the balance sheet. m&a call andan they said, you know, we are still looking at acquisitions, but they are not going to think of anything higher than what they paid stewart wiseman, which was $5 million. that is still a hefty sum. there are still rumors around jimmy chu, valued at $800 million. that could still be a target. but coach is saying, right now we want to focus on kate spade. vonnie: sounds like it is all in
footwear these days. honestly. gads.out her columns at go. mark: it is about 75 minutes until the end of the monday session. yes, we had macron winning the french presidential election, but we have the ftse higher. check out what is happening to the currencies. by roughly atially fifth of 1%, but as you can see it is down six cents. let's look at the bond yield. stocks lowers, euro is lower. finishing with the bonds mainly today. the closes next. -- the close is next. ♪
" on bloomberg markets. ♪ mark: in politics, emmanuel macron cruises to a victory to become friends' president. how will this win affect france's business climate? we are live with the nation's top executives. how will this affect angela merkel's reelect meant --election campaign? merger monday with coach, kate spade and tribune, being held up is a ce