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tv   Bloomberg Markets European Close  Bloomberg  May 19, 2017 11:00am-12:01pm EDT

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bloomberg markets. ♪ mark: here are the top stories we are covering around the world, the stoxx 600 closing at its worst week since november on a high note, investors pushing up shares, looking past political drama in washington, europe, and beyond. in three hours, president trump will be flying across the atlantic on his first international trip as president. we are looking at how the drama surrounding his administration is impacting investments with firms over $1 trillion under management. the true cost of brexit for traders, we will hear from the chief investor of the euro. forrime minister may pushes
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a hard exit. have a look at where european equities are finishing this ride a session. 30 minutes left in the day today. stocks are rising today. heading for the first weekly drop since november. look at these rises we are seeing for currencies across the region against the dollar. there is appetite for risk your riskier assets today. i want to show you the world index. that felt 1.2% on wednesday, following 0.3% yesterday. it is up three quarters of a percent today. it is marginally higher over the week. it is rising for the fifth consecutive week, the best run since march. it is up 9% this year, best year
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since 2013. just to put it in perspective, the drop we saw on wednesday and thursday, those declines on global equities in the world index, $750 billion off the value of global stocks. what a rebound we have seen. sticking with the synchronicity we are seeing within the global economy, the evidence of this .xpansion is pouring in earnings growth is the strongest in years. according to bloomberg intelligence, the stoxx 600 and s&p 500 projected to boost earnings this year. initial expectations of 9%. european earnings set to rise 14%. best since the third quarter of 2011. 2017 is on track to be the first year since 2010 when all the major regions should be posting
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earnings growth. more than halfway through the european earnings season, 69% of european companies have been estimates. let's finish up with brexit. it has been a turning point for europe. contrary to popular opinion, it appears to have been for the better. the stoxx 600 surpassing the performance of the s&p since exit in local currency terms. european stocks have outperformed u.s. stocks by more than 450 basis points since march, according to our equity strategy team. what a wonderful chart. i was looking over there? ulie: we are seeing gains for the major averages. it still looks like we are going to see a down week. that could change by the end of the day given the magnitudes of
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the gains we are seeing. energy and industrials are leading the gains. where watching the airlines today. richard branson said at some point he may start another airline, this after he sold his virgin airlines to alaska air. there has been a dispute between the two over royalties. you will hear from branson himself later in the show. we are seeing rightly gains in the airline industry today. on the other side, we have more concerns in the athletic apparel's business. said itker, the company experienced unprecedented challenges early in its first quarter, negative comparable sales in february, which tends to be a stronger month. the company overall missing estimates. some suppliers falling. nike turnaround. under armour and adidas lower.
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looking at rates today, the 10-year is coming back in terms of its yield after seeing a long slide on buying of treasuries. two basishuge, just points over the last couple of sessions. not so the u.s. dollar, the rebound yesterday was brief. we have a chart of the bloomberg dollar index in white versus the euro in blue. the bloomberg dollar index is the dollar versus a basket of currencies. it has been trending lower. the euro has been doing quite well against the dollar. vonnie: talk about may not being usually a terribly interesting month when it comes to movement. not happening this year. julie hyman, thank you. time for worst word news. >> good morning. anthony weiner will plead guilty today in the infamous sexting
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scandal that ended his political career. he was being investigated over reports he said sexually explicit messages to a 15-year-old girl. seized hishe fbi computer and vacuum else to the hillary clinton aide, his wife, commodity -- huma abedin. julian assange has moved closer to freedom. sweden is dropping a seven-year rate investigation against him. he has been living inside ecuador's embassy in london for the past five years. he feared if he left the embassy it would be arrested and extradited to the u.s. the justice department is reconsidering whether to charge and in his role in releasing classified information. iranians will decide whether to was saying was saudi another chance.
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shownpinion polls have rouhani in the league. -- lead. saudi arabia has agreed to buy new ships from lockheed martin. the deal valued at $6 billion. it may be announced tomorrow when president trump arrives in saudi arabia on the first leg of his eight-day trip. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am courtney donohoe. this is bloomberg. mark: thanks a lot. let's get back to the markets. global equities stabilizing after a volatile week set off by political turmoil in washington. bloomberg spoke to some of the biggest investors in business in las vegas and asked how they are handling the turmoil. we have allp trade embraced and that has driven the markets to new highs in equities is coming to an end.
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>> it is nothing to run around with your hair on fire. we are recalibrating, and a lot of the expectations we have had are getting adjusted. >> we have had more than four months of straight inflows of foreign investments into emerging markets. november,ing the december trade, the big selloff, and that is reversing. >> it is more evidence that the markets are pushing back further, if not discounting completely two or 3 -- one or two of the major reform planks. >> there is some concern, but not anywhere near panic. mark: starting with his take, taimur hyat, with pgim, which has more than $1 trillion in assets under management. what have we learned this week
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given the events, specifically wednesday, but to a lesser extent thursday? what have we learned as investors? taimur: i think we have learned that the trump trade premium in equity and some asset classes thatan the likely parts real policy reform takes. whether it is the infrastructure spending, which everyone has forgotten about, or regulatory reform, whatever the measures, tax reform, whatever the government had talked about is really getting slow down by the drama you are seeing in the white house. to us it is returning back to income markets, which is a much more sober reaction. it is truly reflecting the actual laxity of carrying out the positive ends that the equity markets reacted strongly to. mark: what is priced in and what
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isn't priced in when it comes to his agenda? backdrop issay the strong in the u.s., but globally you heard my truck at the top, synchronized global economic recovery. people point to that and say the trump tax and infrastructure will be icing on the cake. is it important to separate the two? taimur: as the execution complexity of carrying out that reform agenda becomes more apparent, you will see that these premium that are being built in will adjust back. brazil is a good example of a broader trend, which is more important for investors. geopolitical risk has become critical to how investors need to think about the world it is not something to put on the back burner. not just the noise from the
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tweets coming out of the u.s., but what is happening with brexit, the french election, the italian election, what will be the long-term implications of the corruption discussions in brazil. we think that is becoming much more critical in figuring out where to invest. vonnie: just to get back to the u.s., if all we had seen is one which looksof drop, like is happening, today stocks going up again, what happens if we see the possibility of an infrastructure plan coming together? it makes you wonder, if markets only drop for a day or two when it looks like it is going away forever, what will happen if it comes back suddenly? taimur: we don't think there is a huge amount of upside. we think a lot of the upside from that infrastructure, regulatory reform, and tax agenda, speaking for equity markets, is largely priced in.
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we are seeing slight adjustments. the market has largely been sensible in not adjusting. the vix jumped up wednesday, thursday. it has been sensible about not overreacting to statements that may not mean anything for markets. they have been quite good at separating out the noise and putting it to one side and taking the few signals that really matter. that is leading to environments where you are seeing more dispersion across asset classes and securities. it is a very attractive environment for investors like us. we welcome volatility and the fact that it is hard to extract signal from noise. vonnie: are you buying treasuries? you sought rallies there. now it is looking less and less likely, at least it is a binary risk that the fed will move in june. taimur: we have always taken a
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somewhat contrary and position on rates. treasurysome dramatic increases that people addicted, the 10-year going up to 3%, we have seen that not be true. we are seeing that play out well. we do think long-term rates won't rise much more than 2.3%, 2.4% where they currently are. we think that will be the backdrop. there are demographic factors, aging of the u.s. population. we think long-term interest rates will not rise dramatically. rewind to your dispersion comment, but just to give our viewers a taste that we can rewind there. dispersion you like, weak markets you like. i want to ask you a question,
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active versus passive. you have looked at strategy. which strategies work well in different market conditions? taimur: we looked at two things. there is so much rhetoric around us, we said let's look at the data. we looked at two aspects of this, one active and passive. u.s. large-cap equities, where you see the biggest inflows of assets. what is driving, when will active management do well in that area? we looked at 1800 funds for 20 years and what happened to them. you really discover that active equities act counter cyclical he. 10n you think to the last years, quantitative easing and these for banks have put markets in a lull, that has been the worst possible environment for assets. dispersion is growing. quantitative easing is tapering
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in the u.s. you are already seeing stockmarket valuations, the s&p stretching to the highest level since 2000. we're seeing actives perform well when markets are weak. when you combine weak markets with dispersion, fundamental managers will shine. mark: you are staying. you will sit right there. taimur hyat is coming back. pgim chief strategy officer. let's get your thoughts on active versus passive, also the role of alternatives. this is bloomberg. ♪
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vonnie: live from bloomberg world headquarters in new york, i am right wing. mark: i am mark barton, counting down to the european close. roughly 13 minutes time. taimur hyat is with us. we have been talking about active versus passive management. role oflk about the passives. your team has been busy. which strategies add real value? taimur: looking at these over the long-term is critical. the one year view is shallow. the question in the press has often been alternatives, what do they look like, and how high are the fees? the most in th that the most significant -- the most significant reason investors by alternatives is performance.
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we looked across to cycles, which alternatives did well, and which did not. we discovered when you look at the diversification lens combined with alpha, some alternatives do rather well. hedgend relative value funds, global macro hedge funds, real estate, did rather well when you look at it through that lens. go ahead. vonnie: i was going to say, that is very well if you get the best managers, you happen to get into their funds. if you cannot, and most people cannot, you are in trouble. some of the best ones just had $1 billion worth of outflows. taimur: it is true manager selection is critical. in private equity, you see the returns. valueou come to relative
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hedge funds and real estate, you see the median managers generating outflow diversification. we found a very different finding when you look at several areas where we did not think you got value for your money. mark: you look at relative value, real estate, what did you uncover? taimur: you saw the diversification benefit and real asset. when you look at hedge fund oer funds, equity hedge funds, event driven hedge funds, equity capital, we discovered that there is a lot of market data embedded in these returns and the typical alternative pricing structure may not be the best way to go. mark: you discover certain hedge fund strategies were less attractive. taimur: the less attractive ones
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were equity hedge, equity long shot strategy, and events driven. mark: where to invest, where to in aaway from, sum it up couple of sentences. taimur: make sure you're not aaying for market dat alternatives, but when you find alternatives, large-cap rabbit equity, when markets turns out active equities will outperform. chieftaimur hyat, pgim strategy officer. vonnie: bracing for a potential hard brexit, we hear from the ceo of euronext. this is bloomberg. ♪
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♪ live from bloomberg world headquarters, i am vonnie
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quinn. mark: i am mark barton with the european close. the financial industry is bracing for impact as theresa may moves forward with plans for what many are saying is hard brexit. andpoke about the costs implications of the looming divorce. >> brexit means brexit. >> that is theresa may's line. >> that is the point. markets have to realize there associatedsequences with brexit, and those consequences will probably be much stronger and go much deeper than anticipated or many people would like it to be. the reality we are experiencing today where the single currency of the eurozone is one of the european continent, 40% to 70%
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of trading done in london, is fine. where the finances in wall street, the technology in palo hollywood,ndustry in in a world where london has decided to move away from the andicit federal ambition strong regulatory convergence is an anomaly. things will be different going forward. >> well that fragmentation result in higher costs, and will that be ok? >> there will be costs associated to the consequences in the financial markets of brexit. people have to realize that clearly. those inno way that charge of financial stability in the eurozone will accept a
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situation where decisions taken outside of the eurozone will impact the eurozone. euronext chief executive speaking today on bloomberg television. we are literally four minutes away from the end of the friday session. we are heading lower over the week. the first weekly drop in four. a quick look at the currency boards. seeing the dollar decline against the major currencies. euro against the dollar. pound against the euro. the close is four minutes away. this is bloomberg. ♪
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♪ live from london and new york, this is the european close. i am mark barton with vonnie quinn. let's take you through the
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action. we saw a day of gains. basic resources leading the advance. wednesday seems to have been forgotten. that is something we will talk about in just a second. down for the week, first weekly drop in four. biggest drop since november. this is another chart. this is the euro stoxx 50 technical. the euro stoxx 50 is approaching a golden cross on its weekly basis. that is when its weekly average moves above its 200 day moving average. extraordinary, you have the 50 day there, the 200 day, and they are converging with the 100 week line, which is the closest they have gone since 1993. the power of the bloomberg.
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what a fantastic chart. let's look at the euro, heading for its best week against the dollar since that you're a last year. -- february last year. calculating 1.08 in the second quarter. in march, analysts were forecasting the euro to finish 1.05. they are always. bullish. this is the 50 day, 100 day, 200 day. that is good for the momentum. is telling you the euro overbought in the last six months. there have only been a couple occasions where the rsi has been above 70. acquiring a 5% stake in the company today. the countries biggest duty-free
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retailer. it comes after the chairman says ai and robots will cause an economic and social upheaval in the next few decades, envisioning of future where humans are replaced by robots, and they have more time to travel. there is logic in there. vonnie: somewhere. he is probably reading a lot on his way to the airport. anyway, good deal for him. 111.38 on the end. not a lot of movement. that is probably the biggest movement so far. oil trading above $50 a barrel in the u.s.. it, we will see the opec agreement or not agreement -- next friday we will see the opec agreement or not agreement continuing.
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interesting day, talking about how china is attacking itself from market meltdown. 30 trading days, it has fixed the yoyuan stronger. a lot of green on the screen, including sovereign bonds. stock markets and bond markets not reacting in the same way to the same factors. let's get to abigail doolittle. abigail: one piece of the trump trade that is not working out after the political uncertainty this week, whether or not it will mean a reflation reversal, a reversal of the reflation trade. one piece that is not working out, the dollar. the bloomberg dollar index is down 1%. this is the bloomberg dollar index out of the election. at one point it was out 1.7%.
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now it is telling us there is less confidence investors around the dollar and president trump's administration. there may be reasons ahead for the bloomberg dollar index. we take a look at the bloomberg, this is a longer-term chart. we see a beautiful rally higher, and around 2015 into 2016, we see this range of uncertainty recently. this week, the bloomberg dollar index put in the cap cross, where the 50 day moving average goes below the 200 day moving average. this time it could signal a decline of 10% on the recent highs in 2017. time will tell, but this may suggest there is more bearish action ahead for the dollar. when we take a look at g #btv 82723. oppenheimer thinks the s&p 500
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may have stalled this week. the reason he thinks that is because the triple be treasury spread is flat to going down. in white, that is the spread. it is interesting to note it is below the 200 day moving average. should that spread for the bbb corporate index move above the 200 day moving average, we saw the s&p 500 stall the last time it did that. the s&p 500 could come off of its highs. sayingimer saying he is the s&p 500 moving neutral. mark: it is a roller coaster week for global markets. you have trump and brazil. markets quickly rebounded, ending the week on an upswing. what was the calming factor? i love it. i have never used this on air. prompted by you.
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you get all the glory. i get none of the glory. world trends is what it stands for. it is a fantastic function on the bloomberg. if ever it should be used, it should be used today. >> it is a two-day look at the markets, so you can see where things are going, which ones are following a trend in one direction or another. in the top left window, you have got everything reversing higher up. making a comeback today. in the top right window, you have crude oil still going higher. that is one of the factors for the u.s. equity markets. that gives you an idea of what the themes of today is and what we have seen for the rest of the week, we are back in two and unhappy-- in to an environment.
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mark: one person on your team was talking about -- the bullish view is there is too much money out there, no need to panic about in idiosyncratic story, referring to brazil. is emergingtake markets could soon get hit. that could be taken on a global stance, talking about trump and brazil. today investors have their bullish hat on. >> it is the perfect way to sum pup the balance of risks out there. there is loads of cash flowing around. central banks are still pumping cash into the economy. there is plenty of people looking for the opportunities out there. volatility measures have been low coming into this week. whend a pretty big spike we got these two pieces of news, first of all the washington turmoil putting pressure on
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trump, and then the brazil thing as well. kind of, everybody has got to decide where we are going to go from here. there is still cash coming into the system. there is still money to be made. markets can continue, the old cliche, a picking up those pennies. paul, where are the world trends reversing? it seems they didn't for the most part. stocks are rising along with bonds. a few minutes ago it was green across the screen. paul: absolutely. if you look at some of the charts, the momentum we had in european stocks is ok, we kind of wobbled, but it is still going higher. in government wants them ever since the first round of french elections, there has been a rally in the euro arena.
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that still has legs. people seem to be optimistic about the higher risk areas in europe, and eastern europe in particular. it looks at the moment like, apart from idiosyncratic risk we america,latin investors are going to be willing to take this week on the chin and come back again next week refreshed and revived. mark: this is one of my favorite charts of the day, the correlation between u.s. stocks and european stocks. the correlation has broken down, that is lowest level in 20 years. the magnitude of this breakdown marks the breakdown following black wednesday when sterling crash in the 1990's. that tells us many things. paul: what we have really got here is europe looking like the
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haven all of a sudden, which is almost unheard of. our american viewers won't know what we're talking about. it has been such a long struggle through the financial rises and the crisis, and finally the euro seems to have its story together. the last thing we need is for mario draghi to blow all the work away. markets haveropean been on something of a tear, looking optimistic. u.s. markets have had a wobble because of how pumped up they got earlier this year and last year. it looks like we are more likely to get a delay on that coming through in the u.s. and as far as that theme continues to play out, it looks like european assets are going to be leading the way. mark: thank you for joining us, paul dobson, markets live
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editor. wonderful function. markets live go. i live by it. become that is going to a regular feature for us. let's check in on first word news. courtney: good morning. anthony weiner pleaded guilty today in that infamous sexting scandal. he will be heading to prison for 27 months. he sent sexually explicit messages to a 15-year-old girl. last year the fbi seized his computer and found in else to his wife, clinton aide huma abedin. willweek president trump send congress a proposal to balance the budget in 10 years. according to a government official, it calls for deep cuts to discretionary and safety net funding.
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social security and medicare would not be cut. lawmakers in both parties are likely to object to cuts in both programs. the chinese president said she improve relations with south korea. tona has objected installation of the u.s. missile system in south korea. julian assange his speaking on the steps of the ecuadorian embassy in london. he says today is an important victory after sweden drops rape charges. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am courtney donohoe, this is bloomberg. vonnie: i will take it from here, courtney. what is richard branson's next act? could another airline he in the
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works. we will find out from the british billionaire next. this is bloomberg. ♪
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vonnie: breaking news, the justice department has released the rosenstein opening statement to congress. he has been meeting with the senate and house. he said he was not aware of requests for more resources from james comey. he says he stands by his memo on tony's performance. -- comey's performance. he said donald trump's decision to oust comey was appropriate. richard branson is known for
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urgent america's sale to alaska air. he signaled something bigger on the horizon. richard: i expect they will continue to use virgin america for another 18 months, and then they're going to merge all the planes into one brand, alaska airlines. >> don't they have a responsibility to continue to pay urgent for that contract? richard: until 2030, they continue paying royalties unless we decide to start another airline, and then we will see what happens. >> is that something you would be willing to do? richard: watch the space. >> and watched outerspace. finally, let me ask you, it looks like you have been making progress. any notion of timing?
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what is the status of that business? richard: we are having a really great here with virgin orbit, our rockets that are going to go into orbit and put up satellites him and virgin galactic. program is going confident as we have ever been that we are very, there he nearly there. -- very nearly there. richard>> do you still plan to e your mother on one of your flights? richard: she is 93 and out, so we will have to see. that is why i am hurrying them up. vonnie: mark. mark: let's talk football, the european and global type.
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i do love football. let's turn our attention to the huge business of player trading. we have the co-author of a new book, how the player transfer market was infiltrated, and details of how clubs can they .ver $4 trillion a year much of that goes to middlemen. he is here. us,it into perspective for this market, how long is it, how much is it worth, the football that matters for our viewers. iswhat matters in the market it is changing. you have the end of the european season, which is the next two weeks. we will have ferocious trading of players until august. we have a small window where teams can top up or get rid
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until january. we see china has emerged. their big window is in the new year. there is a lot of money in china as well. it is almost a year round trade of these athletes. it,: who has infiltrated and why is this concerning? >> it is concerning because we don't really know who they are. we know. we wrote this book. it took such a long time to dig out these offshore companies based in panama, luxembourg, malta, you name it. they are in the midst of some of the biggest players that have moved around the world. cristiano ronaldo moved to manchester united. a fund was in there. profiting better than they would on probably any other asset class because all
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the contracts we have seen are very heavily stacked in their favor. football clubs are not run by sophisticated businessmen. hedge funds are. vonnie: that is so fascinating. the book is amazing. football secret trade. out in the last few days. is it surprising, because we had all the fee for scandal, and we sportsney runs worldwide. did your conclusions surprise you? >> absolutely not. you just mentioned fifa, and they have been rife with individuals turning against each other for profit. this trading market required great regulation. regulateannot themselves, how are they going to regulate a $45 billion a year trading market for players? question marks are still there.
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fifa have banned the practice is we talk about in this book. these guys will always find a way. mark: i wish we had more time. book,re to pick up tariq's football secret trade, how the player transfer market was infiltrated. the transatlantic battle to end the week, european banks against puerto rico. this is bloomberg. ♪
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♪ vonnie: it is time now for our global battle of the charts, our friday battle as we take a look at some of the most telling charts of the day, everyday. on can access these charts the bloomberg by running the function on the bottom of your screen. alexandraings off is in london.
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alexandra: today i will be looking at the performance of european banks versus insurers. earlier this week, european banks against insurance stops it an 18 month high. that was because banks have been rising on the prospects of higher bond yields and better economic data. some strategists are saying it might be time for this outperformance to lessen. strategists are saying it might be time to switch some european banks into insurers to protect against what might happen after such a long time of outperformance. vonnie: beautifully done. mark: you can find that chart where? 8730.btv >> we know puerto rico has been a big topic. puerto rico is this emerging
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market state we are looking at. #8626.oking at g differentve are two securities, the electric authority is the higher line, gdb government bonds in the yellow. you have the puerto rico electric bonds trading at $.60 to $.65, versus the gdb bonds trading at $.30. investors are saying, after these gdb bondholders this week made a deal with governor, they are trading up $.15 higher on the very edge of the chair. barclays is saying, this is something we can look at a trade going higher, $.14 to $.25 to
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get back to real value. this could be a good month for these gdb holders. mark: two fantastic chart. by the smallest of margins, i'm going to stick with aleksandra. it shows how banks have outperformed insurers, but recently that has taken a turn. i think that can be an interesting chart to look at in coming days and weeks. vonnie: i agree that it is an interesting chart. my pick is laura. this is gripping the community. it is a massive battle. that is the first time i have seen a visual demonstration. let's call it a friday type. ♪
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jonathan: from new york city, i am jonathan ferro, with 30 minutes dedicated to fixed income, this is "bloomberg real yield." ♪ jonathan: coming up, the biggest crisis of the trump residency rights the calm -- breaks the column on wall street. willie chaos in washington throw chair yellen off? thought one impeachment in brazil was dramatic, markets brace for two in a row.


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