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

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european equities into the close. we have been seeing broad-based gains in european equities. the stoxx 600 rebounding between two weeks of declines. cac-40 not only apple forming the stoxx 600 today and not only since the french election, but also in 2017. 40 up more than 90, while the stoxx 600 up some 8%. that is more pronounced since the french election, something we will talk about in a moment. here is the stoxx 600. i have shown you the imap, so you can see how various markets are performing. we have seen gains in industrial metals.
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andstrials and energy financials and i.t. stocks more than 1%. we have seen the rebound in tech stocks globally. we have been seeing yields push higher pay that was kicked off by the trend -- by the 10 yea treasury yieldollowing comments by william dudley. if we look at the euro, we were seeing it study earlier. we are seeing -- we were seeing it steady earlier. william dudley's comments saying imperil thei would economy. look set to break out. what is key is leverage funds are net along with the euro for the first time since 2014. this is g #btv 185 on the bloomberg. this is volatility on cable, one month volatility.
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ever soseen it tick up slightly. look at it compared to where it was in brexit. julile: -- julie: the nasdaq gaining steam as the day has gone on. we see this rebound in tech stocks on relatively heavy volume. tech shares are the main reason the s&p 500 is higher. both tothe dow and s&p records. also seeing strengthen the financials as the rates rise. you heard nejra mentioned the comments from bill dudley. he said he is confident the u.s. expansion has a long way to go. the dollar bouncing almost one quarter of a percent. what is interesting is even with are stille, rates
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relatively suppressed, considering we have seen a full point increase in interest rates in the u.s. bloomberg. the fed just raised interest rates another 25 basis points. here are the four interest rate increases we have seen. here is the level of the 10 year when we first. the increase, yet we are below that level. we still got yields below where they wear when rates went up for the first time in the first increments of this one percentage point increase. it is helping banks. if you look at regional banks, they have been sensitive to rate changes. they are all trading higher. we are watching steelmakers. longbow research confident on the sector, raising recommendations on a number of them. coilsts optimistic on
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prices and government support for steelmakers. wilbur ross saying that the president intends to take bold action, rhetoric we have heard before. he is reiterating and saying it will be coming. vonnie: julie hyman, thank you for that update. time to check in on the first word news. courtney: in london, the prime minister has visited a mosque hours after a van rammed into a crowd of worshipers standing outside. one man died and others were injured. may condemned the attack. >> as i said two weeks ago, there has been far too much tolerance of extremism in our country over the past two years. that means extremism of any kind, including islamophobia. courtney: may says the attacker alone.
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in london, authorities say the death toll in the high-rise apartment fire is likely to be at least 79. it is based on resident reports of who was in the building last wednesday when the fire broke out. government is now investigating similar buildings. a warning from russia after the u.s. shot down a syrian air force jet. the russian defense military track u.s. planes west of the euphrates and treat them as targets. it was the first time the u.s. has shot down a manned aircraft in almostman combat two decades. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am courtney donohoe. vonnie: thanks. the french president gained a historic majority in the french legislature, winning 350 of 577
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seats. but most french voters stayed home, making the turn at the lowest ever. caroline kanaan joins us with --t it all means for macron caroline connan joins us with what it means for macron. is hoping for the businesses, the companies who have been wanting labor reform for the past 10 or 15 years. we willt labor reform see in terms of details is going to happen june 28, in about 10 dayes. -- in 10 days. the prime minister will ask parliament to allow him to bypass some of the extensive debate we have seen in the past in parliament. with this majority, the prime toister is hoping to be able
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push for the end of the summer to implement labor reform by september. it is very urgent, because france still has doubled the rates of germany or the u.k. nejra: the lowest turnout ever means the macron party cannot really celebrate this win, in a way. we also need to talk about the gains in seat's for -- in seats for marine le pen and socialists. if macron were to fail, this -- does this mean we could see a rise in popularity for these extremist parties? caroline: absolutely. the government is very aware of this. it is the first thing the prime minister said last night. , 57%,d with this majority the highest ever on record in a
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legislative election in france, that means the government has the obligation to succeed. that means macron cannot fail. as you are mentioning, the other thing we can know is that the extremes, even though they are not gaining so many seats in parliament, marine le pen, the national front leader, is, for the first time, gaining seats in the national assembly, after failing four times in the past to get elected. and is jean-luc melenchon was also elected in marseille. he says there is still an anti-elite and antiestablishment feeling among the french people. and his party, representing the far left wing, will offer resistance against this total majority by micron. vonnie: has macron said anything hamps-elysee? believe we do not
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have any reaction from the president yet, but the police it has beenhat reopened, which means that this incident could be considered a terrorist incident. a car rammed into a police van ysee about an-el hour and a half ago. the driver is probably dead, , whichng to the police we heard about 10 minutes ago. police have said to avoid the area. also, in two days from now, the cabinet is supposed to present new antiterrorism measures and to extend the state of emergency france has been living under until november. nejra: caroline connan
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reporting. macron's victory comes as the facesminister of the u.k. pressure to soften her stance. for more, let's bring in m&g investments manager eric lonergan. thank you for coming in. i want to ask about france first. we have been hearing about emmanuel macron's policies. positive will this be for equities, negative four french bonds? -- for french bonds? eric: possibly. i think the french election fits into the narrative which mainstream technology does not motivate voters. it fits in with corbyn, trump, u kip. nationalism motivates. labor market reform does not. this is, in a sense, the mainstream win is when people do not show up to vote.
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i think we have a structural challenge with democratic regimes that is not going away, which is policies are ultimately about detail. they can be donald -- they can be dull. at the current juncture in the context of europe, it is a downside better for everybody that we are dealing with micron rather than le pen --that we are dealing with macron rather than le pen, for sure. nejra: are you thinking that france is, perhaps, somewhere more stable to invest at the moment? or do you still see uncertainty around that as well? or is it the case that since we have seen such a rally -- we have seen how much the cac 40 has outperformed the stoxx 600, but that was already priced in. to makewould be loathe french-specific bets.
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most of what is driving this is still sectorial. -- re seeing i still think year has some pretty huge fundamental structural -- i still think europe has huge fundamental structural issues. the challenge is we still have not resolved whether there is a backstop to the sovereign bond market. the conditional guarantees from the ecb. macron is trying to challenge that, but i think we all realize his possibility of success is still low. andie: where in europe, let's add the u.k., our bonds correctly priced? eric: i think the entire government bond market is very , globally.rrently
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there are interesting opportunities in parts of emerging markets. you might argue there is some valuable data in a 30 year treasuries, where you are getting a positive return. but the experience of bond investors have been fantastic the last five years ago. but if you look at the perspective real return, the best you can hope for is not to lose too much money. because you are getting negative implied real returns. that is absolutely a finite game. if you look at the five year real return, it is negative. nejra: we will talk about treasuries in a second. i want to show you this chart. growth inflation and the boe, talking about the u.k. we are looking at 10-year gilts 1.03%. at should that be higher?
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personallyld not worry too much about stagflation. i think the growth rate is actually reasonable. there has been some deceleration, but this is a far better outcome for gdp growth in the u.k. then people were anticipating 12 months ago. i think you could see rates normalizing in the u.k. ts market isgil priced to deliver you negative real returns. i think we could see higher rates than people currently anticipate. nejra: eric lonergan is staying with us to give us his outlook on u.s. markets and more. this is bloomberg. ♪
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♪ nejra: investors are digesting decisions from central banks. eric lonergan is still with us. i want to turn to the fed. we had comments from william dudley that have pushed the dollar higher, but we have been talking about how 10 year yield has been coming down. we have this great chart -- g #btv 121. this goes against economics 101. since the fed has tightened, we ,ave seen gains in the s&p 500 yields are down. you have talked about the negative real returns in bonds. is this impetus coming from the bond market, number one? and when will it change, if it does? is very reminiscent of a conundrum under greenspan, when the fed was raising rates. bonds rallied in the face of rising u.s. interest rates.
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that chart,at particularly in the 10 year yield, it is a story of two halves. the bondlast year, market rallies considerably. that is because the bank of japan cut interest rates and the bank of england cut interest shock about a supposed that was supposed to come from brexit. this is not just about u.s. interest rate expectations, it is also about global phenomena. then you have a reversion where you have extreme levels of yield and the bond market were prices -- re-prices. to move materially higher from here, either you need a big change, so people one, decision -- want compensation for owning bonds, or you get a shock from policymakers. i think on markets are vulnerable to both of those. nejra: interesting.
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someone commented whether the -- questioned whether the bonds were a risk-free return or not? vonnie: exactly. about emerging markets. you mentioned there are pockets of value. where? some of the emerging markets have definitely decoupled from the fed. eric: if you look an fx space, there is value in emerging markets. e.m. started ton discount interest rates rising if you go back to tapering. so you have three or four years of extreme e.m. weakness. if you look at brazilian bonds, where you have political shocks, mexican bonds, where you have the trump episode, those are our fruitful areas, in addition to parts of asia. if you look in equity space markets like korea, some of the
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areheast asian markets attractive as well. and we have a great chart talking about that. thank you so much to eric lonergan, m&g investment funds manager. vonnie: still ahead, bruce fairholme funds is still confident about his bets. he will be on the show, next. this is bloomberg. ♪
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♪ nejra: live from london, i am nejra cehic, with the european close minutes away. vonnie: and do in new york, i am vonnie quinn. erik schatzker sat down with bruce berkowitz. toce: it does not make sense me, but i am not a gross
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investor, not a visionary. i am the guy looking to buy a dollar for $.50. if i am wrong, i will get my $.50 back. if i am right, i will do better than the dollar over time. erik: you are underperforming, but you are hardly alone. why do you think it is so difficult for active managers to beat their benchmarks? bruce: the big problem is when you are it an investor in public security, people have to agree with you. in other words, i can be right, but until others agreed i am right, i will look very wrong. what it takes for me to be right is for a the companies i invest in to fix the problems that are fixable. erik: but you are a values investor. there are lots of other active managers who are not values investors, but they are underperforming as well. it is like a disease. why.: i do not know
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i do not pay a lot of attention to other people. -- i just go by the math. i basically follow the cash. i stick to that process. as long as i still think the value is there, i stay with the investment. normally what happens is the investment declines tremendously in value during my investment process. eventually, the problems and issues are resolved, and the cloud disperses, and people get a better look at the assets and liabilities within the company. and if things work out well. well. things work out erik: when you look at the must stock, facebook, amazon, apple, netflix, google, or other high flyers like tesla, who do
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you see? bruce: i see companies that are priced for a very rosy future. and if it is a great rosy future, we will do well. what a couple of problems, and it is going to be difficult for investors to recover over a period of time. vonnie: fairholme capital founder bruce berkowitz, speaking with erik schatzker. close ise european minutes away. the stoxx 600 have rebounded -- has rebounded from two weeks of declines. this is bloomberg. ♪
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>> live from london, this is the european clues -- the european close. day, let's take
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you through all the market action. i have the function of year, broad gains across european equities. theria, sweden, finland, dax in germany, gaining as well. the stoxx 600 bounding from two weeks of decline. in the fx space you are seeing broad dollar gains off the back of comments from the fed. sterling weaker now by 4/10 of 1%. the euro is down 3/10 of 1%. williammments from dudley have pushed the 10 year treasury yields higher and we have seen core yields in europe move up along with that. in the periphery we have seen movement downwards. portugal 10 year yields bound -- down more than four basis points there. if we take a look at stoxx 600 here, the industry groups how are they performing, material stocks leaning the gates -- leading the gains.
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some of those yields moving higher in the sovereign bond market. you're seeing energy stocks performing strongly too, most energy groups of higher today. up 9/10 of a percent. one i have been watching in ardo, one of the best-performing stocks on the stoxx 600 or it this comes after the amazon deal to buy whole foods. that acquisition provides extra reason for grocers to some -- to provide extra agreements with the cargo. o. it has been double upgraded, there are talks that it could be a takeover target from other analysts. finally, taking a look here, we have been talking a lot about we have, it was weaker, been talking about repricing in terms of expectation from the oe, this is the b
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looking at the september 2018 contracts. what it is showing is investors are not yet convinced that the boe split decision was a decisive game changer. bonnie? --vonnie? vonnie: some more hawkish statements from the fed last week. the u.s. back in below $45 a barrel. earlier saying was in the $55 range. it does not look like we are breaking out of it. this is an interesting one. 12.93 -- the rand. graft is suggesting the central bank in south africa -- that ismandates tied to currency levels as opposed to a price stability
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mandate. that is one to watch. has more thanso changed directions since the november elections. it has now reversed all of those losses. 17.93. gmm having a look at emerging markets. interesting to see the south african main benchmark up 2%. the ruble's weaker as well. more on the fallout from the amazon-whole foods deal. >> indeed we had that big story on friday. amazon is buying whole foods for $13.7 billion in cash. we see for both the acquired company whole foods and amazon the acquirer, we're still looking at gains. it is worth noting that the stock is about one dollar above the bid of $42 per share that mace -- that may suggest that investors will come out ahead.
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activistthink that investor jenna partners, the third-largest shareholder of whole foods could push for a higher price. amazon higher for the second day in a row having spent two day since the beginning of january. you do not see that all the time. investors are positive. thinking they will be a disruptor in the space. he saw a huge selling and retail space overall. amazon pound gorilla of gets into the grocery space. as take a look at other names. kroger is up 1.5%. attractive,e and they're also saying that the stock is trading at a 50% discount. grubhub is up. this could be the next acquisition target for amazon. look at costco. down 2.3%.
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earlier we were talking about the degree of selloff in the space and it not making sense. especially for cosco considering it is a business -- it is a different business model. it is having its worst two day since 2008. it will be interesting to see if there is a snap back there. walmart now trading higher. mixed bag for retail. vonnie: and speaking of movers, let's take a look at snap. adssting in the company for , this is according to the wall street journal, it has the stock moving, erasing the loss today and it is climbed to 3% on the session high. time warner has signed a $100 million deal for snap -- you just saw pictures their of the president of panama, arriving at the white house. trump isdent donald meeting with them today and is having a working lunch with the pen name -- with the panamanian president. here in the u.k., brexit
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talks have begun as prime minister theresa may is urged to soften her stance. taking a look at the whole foods-amazon takeover, as the online giant plans to cut whole foods pricing. questions arise as to how the credentials of the food chain will survive. with vernon hill who joins us now. delight to have you. thank you for joining us. let's look at the u.k. first area in you have written a book about how to create growth companies in a no growth world. certainly metro bank has been a fast-growing company. what is no doubt that not growing fast right now is the u.k. economy. we have seen slowdown in terms of gdp as inflation rises. with the economy slowing this year, can you maintain your rapid growth while keeping similar levels of profitability? >> yes we can. our profitability is growing up
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each quarter and our growth rates are strong. this is a company designed to take market share from the big five banks. it is a disruptor model, changing the way people and businesses view there. while there may be a little slow down in the u.k. market, the becauseor us is so big there is so much market share to take. nejra: you said before you are actively chasing 100% of market share in every area. turning consumers into fans. one thing i want to ask you about his lending. depositsbeen getting in the southeast, but you have not been able to get the same pace in lending. why not? >> that is not true actually. our growth in loans was higher than our growth in deposits last quarter. we are growing our loans very fast. our core philosophy is the value is a low-cost toward
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deposit base. provide aigned to unique service and convenience, gather deposits and use that money to make loans. they've been growing at a strong rate. nejra: what do you see as the future for the british economy? >> as brexit negotiations start. >> we have not seen a change in the market. the consumer community seems to be strong in london, particularly, it is a dynamic market. i have no fears right now. vonnie: we have a story on the bloomberg today how london home prices are dropping substantially particularly -- will this impact or business? >> no, i don't think so. the housing prizes in greater london are at all different levels. you could argue that housing prices have gotten too high and it would be fine for them to
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plateau at this level for a while. nejra: in the past, mr. hill, you have talked about growing organically. your rival is up for sale. would you ever consider buying co-op bank to grow? >> no. >> why not? uniquere built around a model about service and convenience. it is hard to convert someone to this model. we had the advantage of starting fresh and from scratch and it would be very unusual for us to buy something that size. speaking of the retail business in general, your background is there. i wanted to ask you about the amazon-whole foods deal. what is your take? >> it is very important. it is what we believed all along. it is our job whether you're selling groceries or whatever to give the consumer the best service in every channel. in stores, online, or mobile.
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this acquisition reinforces that idea. that every provider, apple is another great example, they have to provide the best experience in every channel. the channels have to be united. nejra: do you think we might see more and in a in the sector in the u k? i was talking about acardo shares gaining. >> i'm not an expert on that. certainly the grocery stores in america are very concerned about this. vonnie: that is for sure. you see forat do u.k. interest rates and how that could impact your business in the next three years? >> every time i predict rates, i am wrong. so i don't want to. vonnie: but you must be in the business of planning several outcomes? >> generally you can manage bank so the level rates don't matter. is shape of the yield curve
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what matters, not the rates themselves. we would certainly like the yield curve to steepen, meaning the long-term rates are higher than the short-term rates. that is always the best environment. hill, a final question. there are so many permutations about what sort of brexit we might see for the u.k. chancellor philip hammond pushing for one that focuses more on the economy rather than immigration. what would be your ideal brexit scenario? >> it is hard for me to answer that. i think whether britain leaves or doesn't leave, the relationship with europe will be , and up looking like they look now. much, vernonyou so hill, metro bank chairman and cofounder. pleasure to have you on the program. vonnie: let's check in with news. >> hello there. british prime minister theresa may visited the london mosque today that was the scene of a deadly terrorist attack.
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a van rammed into a crowd of ramadan worshipers outside the mosque last night, killing one person and injuring seven more. theresa may says the attacker was targeting muslims. the suspect is under arrest. meanwhile in paris, a jive or who rammed a police van is dead. the car caught fire because it was carrying gas canisters. police have not approach the body because the bomb detection squad has not given the ok. the supreme court has agreed to take up the case on gerrymandering. democrats in wisconsin have challenged republican boundaries for state legislature districts. the court said they were drawn unfairly to minimize the influence of democratic voters. president trump meets today with some of the biggest names in technologies. apple ceo tim cook will be among those at the white house taking part in a major meeting of the american technology council. the ceos of microsoft, ibm will also be there.
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global news 24 hours a day, powered by more than 2600 journalists and analysts in more this is countries. bloomberg. vonnie: coming up, a new boeing jet is set to fly. we will hear from boeing ceo next. this is bloomberg. ♪
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nejra: live from london and new i'mnejra nation -- cehic. >> the new macs 10, boeing jet. receive $30t to billion worth of orders and commitments already.
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,e sat down with boeing ceo .ejra dennis muilenburg >> the orders for commercial airlines remain steady. airlines700 commercial in backlog. that is seven years production. that long-term backlog give strength to the marketplace, and to our operations. >> and this will deliver more as well? >> yes. this week will be highlighting the max family. the of the 737 max nine flying. respect news about the max 10 as well later today. we are seeing good incremental widebody opportunities. >> let's talk about the max for a moment. the max nine here, we are waiting for the bell to be wrong on the arrival -- the bell to be ringing.
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the questions surrounding the max 10, we talked to a lot of your customers. they had wanted the 10 for a while. why has it taken so long for you to respond? could you have had this earlier? >> we think the timing is just right. if you look at the max eight and max nine continue it -- they continue to be the heart of the market. we are ramping from 40 to a month and production rate to 57 a month in 2019. the max 10 will act to that -- the max 10 will add to that. even against this profile we are oversold. the timing of the marketplace is good. the max 10 will be available and to the -- in 2020. >> you think people will flit from the nine to the 10? do you think it may cannibalize the nine? >> we will likely have some
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conversions as is normal. you will see it adding to the family. the key is we have a family approach now, we design airplanes. when our customers can go across these lines, that adds value to their operations. >> let's talk about another aircraft. 797. i have heard seven and seven did i've heard mom. this is the 6-7 replacement aircraft. a lot of people are talking about it. when you think you will sign off on that? >> we will talk more this week about the market interest rate we are evaluating, talking to customers. we are gauging interest in the middle of this market space. the need for an airplane that is larger than the 757 in terms of passenger count and longer range, a 5000 nautical mile airplane -- 250 passenger seats.
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he -- potentially there is a solution. --ht now we focus on what knowing what our customers are looking for. making the business case work. we see a potential market there for 4000 aircrafts. we will do our due diligence. we will have time to make the right decision. if we do this airplane it will , time of entry into service. if we have time to do this development program it will be back on -- on the back of the triple seven next. >> let's talk politics. this,weeks into significant changes. there is the potential for cancellation, deferrals. how closely are you monitoring that? >> we are keeping a close eye on the situation.
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the relationship between the united states and qatar is important. we have a number of customers there on the defense and commercial side. important to are us. we have a backlog there. we are seeing some stability there. we think in the long run that relationship will be worked out i think a good sign post last week with the u.s. government signing the deal for f-15s with cutter -- with qatar. there are some issues to work her. we are hopeful that the country relationship will remain solid and we know we have an important role to play in that. we will serve our customers. in both commercial and defense sides. bloomberg. was coming up it is time for the battle of the charts. a hawkish ecb faces off against apple's technicals. this is bloomberg. ♪
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vonnie: it is time now for our monday global battle of the charts where we look at compelling charts of the day. and what they might mean for investors. -- youexa's these charts can access these charts on the bloomberg. >> thanks so much vonnie. a rebound on the nasdaq up more than 1%. this comes after the big selloff in technology. the biggest factor in the nasdaq and s&p 500, these technicals may look bearish. this is a long-term chart of apple. they fell below the 50 day moving average hanging above the 200 day moving average. this tells us that the sellers pushed it down. the last few times it is happen the stock has dropped, here, here and a few other times. there are times when it flirted with the 50 day moving average.
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this probably suggest there could be weakness ahead. without waiting for the nasdaq and s&p 500 may tell us that the rebound in tech knowledge he could be short-lived. but let's go across the pond. nejra: i want to talk about the ecb. with an ecbterview councilmember. he said that he sees price stability -- no signs that price stability can beast sustained -- can be sustained. suggesting is is that mario draghi will become more of a hawk if you're a's labor market is any guide. unemployment is the blue line still high at 3.9%. more than double the u.s. level. it is the lowest since 2009. if you look at three previous episodes highlighted in yellow,
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the ecb acted when the jobless treein europe hovered the 9% and 10%. with the latest jobless reading falling below and almost two decade average -- that is the red line highlighted their, and then the fed highlighting its plan to stay the course, some would say the clock is ticking for the ecb to move. that is what this chart is suggesting. nick of jpmorgan on bloomberg radio this morning and he said that one surprise might come from a deposit rate hike of the ecb. vonnie: that would be a fascinating surprise. particularly since we talk so much about jobs over here. it is part of the fed's mandate -- full employment is a goal. like that inctly europe. i wonder what for climate is in -- i wonder what that is
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like in europe? nejra: i think this challenge we talk about is one that all central banks are facing. we talk about it in relation to ecb. that is a good point about the mandate. the ecb does not have that same mandate. they are more focused on inflation. i thought this was a very interesting chart when we are weighing up the dovish or hawkish outlooks. vonnie: we want that number to come down. i love your chart but i'm going to award the prize of the day to abigail because i think it is one of the questions on investors mines in the short term. thank you to both of you. great contenders. ♪
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vonnie: it is noon in new york, 5 p.m. in london and midnight in hong kong. welcome to bloomberg markets. ♪
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>> from bloomberg world headquarters in new york, here at the top stories. tests maysful stress mean bigger payouts from banks. easing the pressure on banks could put $30 billion more cash into the pockets of shareholders. brexit talks begin in brussels. we are expecting talks and comments in a few moments on where negotiations stand. -whole foods, -- be asking all those questions in the next hour and we are halfway into the trading session. >> where especially in the green . we're seeing a bounce back from recent declines for technology in particular.

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