tv Bloomberg Markets Americas Bloomberg July 3, 2017 10:00am-11:01am EDT
fewl also cover the next hours. for some breaking economic data. let's go to abigail doolittle. aigail: we are looking at pretty nice beat for the month of june, the index came in at 57.8 versus the survey at 55.3. above the month of may at 54.9. anything above 50 tells us the economy is growing, so this is a pretty good print for the month of june. on the average, not too much of an influence. we were looking at gains ahead of that number. the dow and s&p up half a percent. the nasdaq have been up about .6%. the other averages less. now we have the nasdaq trading lower but still we have strength
after weekly declines are all three major averages last week, especially the nasdaq. had been down 2%, the worst week of the year. let's look at some of the more breaking data coming out. june,les for the month of gm, ford, toyota, nice rallies here for the three big carmakers here in the u.s. outside of gm, we had beats with light vehicle sales. general motors missed but it seems the optimism around the second half are helping shares. tesla higher by 2% after elon musk said the company received -- notl for the model 3 approval but regulatory requirements were met for production. they expect the first model three to be produced this friday. worth noting, the stock up 69% , and not a sell the
news event. investors are buying this. now let's take a look at oil, row, it'says in a since last year. the supply glut fears erased right now. perhaps an interesting trading thing going on. if you look at the bloomberg, this is the one-your chart showing the moving range for oil. the blue line in the middle is the 33-day moving average. this comes from a trader who used to trade off of this. after it bounced off of the green line, 10% below the moving average. now we have a oil hitting the 33-day moving average. interesting to see if it will pop higher, or if it goes back lower into that range. mark: what a difference a week
makes, a month makes, and a quarter makes. 600 friday fell. today we are up two new quarter, newmont. rising for the first day in five after the worst week since november. biggest monthly drop since june last year post-brexit. first quarterly dropnewmont in . new quarter, new sense of feeling out there by basic resources, banks, autos. that's what's happening on the headline. from the u.k. showing manufacturing slowing more than forecast in june, uncertainty hitting the man, raising doubts about the outlook for the economy in the second half. fellasing managers index to a three-month low, 54.3, down from a revised 53.6.
adding to evidence of the inconclusive election we had in june, the start of brexit talks weighing on companies, how some could strengthen rates given the comments from mark carney. this is sterling, falling for the first day in nine versus the dollar after the longest winning streak in five years. int enjoyed its best quarter two years, rising 3.8% in the second quarter. strategists are not rushing to revise their forecasts. goldman sachs sticking to its call of sterling. hsbc still sees a depreciation by december. foran year-end forecast is $1.27. the ftse finishing last quarter
weaker after reaching that record on may 26. jpmorgan says investors hung up on brexit may be missing out on a buying opportunity in the stock market, pointing to the ftse looking attractive when you look at the p/e ratio adjusted for inflation over the last 10 years. jpmorgan saying the ftse is attractive. vonnie: certainly is a lot lower than it was. maybe a holiday shortened trading week in the u.s. but we have plenty of events and data to assess. we just had the latest manufacturing data. wednesday, we get the june fomc minutes. friday, nonfarm payroll reports. joining us now is a former u.k. economist and he is part of economists for brexit. we will get to that and a minute, but first i want to ask you about u.s. rates. we had a big move last week, a pivot by major central banks
around the world, in the opinion of strategists. do you see a change in central bank thinking, and if so, work for the 10-year yield treasury end up? >> you are right to draw attention to this because it is a theme for investors. last week, the ecb central banking for him was very much interested, this could be an inflection point in terms of monetary policy going forward. bankw the european central hinting that it may well retreat from its qe program. strategists are talking about that. qe program may come to an end at the end of next year, may start to see further tapering as soon as october. we also saw an interesting u-turn from the bank of england where the governor mark carney rateslking about interest
, did an about-face, allowed for the withdrawal of stimulus. the fed has been on a slight tightening monetary stance but it is now looking like it is no longer data dependent, which is interesting. certainly more focus on the fed looking to unwind its balance sheet before the end of the year. vonnie: i'm going to push you on what you mean by no longer data dependent and with the 10-year at 2.3% today, albeit a letter trading day, could that move higher by years end? the key technical level bond strategist will be looking at is 2.6% on a 10-year yield. you'll recall previously that was regarded as a tipping point, if you like. we got up to take points -- 2.6 and then retreated from that. what will be important if we
break that level, some evidence that market-based inflation expectations are starting to turn around. one of the interesting things is inflation expectations have been declining, we have seen the inflation gauge fall back to 4.4%. that's an important indication. even with the recovery in oil over the reported on last eight sessions, it's not been enough to lift inflation expectations, so the fed is essentially tightening into a situation where the data is mixed, we had some ism data today. the economic surprise index that we all look at on bloomberg is at its lows for the year. inflation expectations are low. fed tousual for the think about tightening policy against that sort of background. the economic surprise index, it gives me the opportunity to look at the equivalent in the u.k..
our down to levels that we saw leading up to the post brexit vote that year. how do you read the economy given these hawkish comments from carney, given this divide we are seeing within the mpc right now? is now the time to raise rates, take back some of that emergency? neil: this is an interesting debate. , in theinteresting aftermath of the recent elections, there is political uncertainty, uncertainty over the future direction of the current government, possibility of a change in tax regime, increases in borrowing. those things are what is very different from what we saw in the aftermath of the brexit referendum. abovek. pmi data is still last year -- it is still above last summer's levels.
i think we have moved on in terms of the u.k. economic outlook. there is no doubt the economy is slowing. the political uncertainty has a lot to do with that. consumer spending slowdown, savings rates at the lowest level in 50 years. evidence in the pmi data. certainly in the months ahead it will be difficult. yet, we are seeing the bank of theand, a minority on committee thinking about withdrawing stimulus. the big difference tween the u.k. and the u.s. is that inflation rates in the u.k. is much higher because of the exchange rates. that is a potential issue. vonnie: you have been listening to neil mackinnon. we will return to him in a moment. first, let's get some first word
news with emma chandra. president trump says he will be making phone calls to the leaders of germany, france, and italy today. yesterday he's book with the chinese president and japan's prime minister. the focus of both of those calls was north korea's nuclear weapons. the administration has said china needs to do more to rein in north korea. in germany, at least 18 people were killed when a bus carrying a senior citizens group rammed into a truck and burst into flames. police say another 30 people were injured. bavariadent happened in there the border with the czech republic. qatar has offered their formal response to saudi arabia cutting off diplomatic links. made 13 demands including cutting back ties with iran and shutting down the al jazeera television network. no word if cut her has agreed. in japan, a setback for shinzo
abe. his democratic party one only 23 seats in an election for the tokyo assembly. the upstart residence party 149 seats. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. neil mackinnon is still here. apologies to our viewers, you are interrupted. a slight sound issue. could the boe raise rates? neil: i think they could. mr. carty was intimating last week. economists think it could be as early as august. mark: can the economy withstand it?
neil: that's a good question. the program would suggest that the economy is slowing. is the bank of england making a mistake? was it too hasty last summer in trying the kitchen sink? should it have raised interest rates earlier further down the road? one of the things last week that the bank of england announced was measures to control the growth in consumer credit. there are these challenges for the bank of england, high inflation, some indication of us long economy. that makes it very difficult as to how they can tighten policy. that is an issue for all the major central banks. we have talked about the fed, economic picture is mixed. inflation is lower. pulling back a bit. debate amongst investors and economists as to whether the fed is making a
policy error here, how far they may be able to go in tightening policy. it's interesting times in speak. bank very high on the agenda. mark: thanks for joining us, neil mackinnon. vonnie: speak coming up, oil ris u.s. production shows signs of slowing. tune in tomorrow at 8:00 eastern time. alix steel, carol massar, and matt miller will host the boston pops fireworks spectacular. this is bloomberg. ♪
oil is gaining a straight days, the longest streak since december. here to discuss the path of crude and more is a senior strategist with ii trading. bill, you say this short squeeze is not done yet. not done yet. last week we saw a marginal increase in crude oil but we also saw a record short position in all four major petroleum contracts combined. the shorts are still going to get squeezed. think we can think we can run t dollars. aside from that we had some small fundamental [no audio] maybe the tropical storm had something to do with that. we also had rick falloff for the first time in 24 weeks. this will be critical when we get to the oil data. will it stop the rally, kenneth extend the rally?
critical time this week. not as many on the floor of the cme as her typically would be. is there a way to take advantage of that given that rates are moving higher? bill: right now, a lot of data will be coming throughout the week. even though we have a holiday tomorrow, there are holiday hours, and we have to focus on what the week will bring. manufacturing data from ism beat expectations. minutesmployment, fed and then the ism nonmanufacturing, and then payroll next friday. so we have a huge week. last week when we saw with currencies, we are stunned to see a shift in central bank expectations. does that continue? saw i feel a lot of what we in currencies is overdone due to the poor u.s. data we been getting. when it comes to the data this week, do we beat the expectations? before, we started
to see a bottom in the u.s. dollar that came in may, a little late this time of year, but we had strong data in july. i think we will see that again, could bring the dollar back to about 98, 99 level throughout the month. vonnie: bill baruch, thank you. happy fourth to you and all of the other guys at the cme. mark: time for the bloomberg business flash. four former barclays executives said they will plead not guilty to fraud allegations. among those accused is the ceo. they are charged with conspiring to commit fraud over capital raising with investors from qatar. red ventures has agreed to buy bank rate for $1.4 billion in cash, a 31% premium over the
for the most affordable car yet, the model 3. let's go to jamie butters in detroit. is this a giveback for last months dismal figures? jamie: it still may be a down month over all the declines we are seeing are pretty substantial from gm, ford, fiat chrysler, but not as bad as anticipated. as you see the reaction in the markets, even gm, which had the big mess, their shares are up, too. what investors are liking is a little bit of discipline on incentives, not eating into their margins, and especially the mix shift. the shift of light trucks and suvs, that is where automakers make their money, especially u.s. automakers. that is the overriding theme of the sales, why investors are so bullish today. u.s. hearing from ford's
sales chief, says the industry has he can and it is not likely to top last year. is that a view held by all of their peers? jamie: absolutely. the big issue is are we going to be able to stay at a pretty high level? record, 17.6 million. can we say around 16.5, 17 million, with a heavy truck mix, that will be profitable and healthy. or are we starting toward a traditional cyclical downturn that will take three or 4 million units out of sales and really put everyone's profits under pressure? this year, things look pretty good. the question is what is your view next year and the year after. will we have a recession, will interest rates rise so much it will destroy everyone's profitability and send them into contraction? vonnie: the other thing automakers are watching closely twitter because
he posted that the first model 3's will be available friday. 20,000 by december. is that possible? jamie: we will see. this is great news for investors. when elon musk first-order to talk about the model 3, saying this would be his mass-market car, would be in the second half of 2017, a lot of people thought maybe they will make one in december. then he said july 1 is our goal but it's really a stretch goal. here we are in the first week of july and the start of production is right around the corner. tesla has had a history of products that backs, especially manufacturing. it's very challenging, as he has announced. making cars is really hard. maybe they are learning to do it better. they have prioritized the simpler build, two wheel drive before all-wheel-drive, trying to get production going. sounds like he is making some
optimistic noises, and that has to encourage investors who are long on tesla. mark: how big is this car going to be? 370 5000n, tesla said people have placed a $1000 deposit. any idea of the potential figures? jamie: he is aiming to make 500,000 by next year. if they can do that, even spread over the world, that is progress for the company. vonnie: jamie butters, thank you. ofk: still ahead, the rescue been a tow. looming decisions on monte paschi. withe live in rome next the head of italy's banking association. this is bloomberg. ♪ these days families want to be connected 24/7.
it all adds up to our most reliable network ever. one that keeps you connected to what matters most. so we need tablets installed... with the menu app ready to roll. in 12 weeks. yeah. ♪ ♪ the world of fast food is being changed by faster networks. ♪ ♪ data, applications, customer experience. ♪ ♪ which is why comcast business delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. ♪ bloombergve from world headquarters in london and new york, i'm vonnie quinn. mark: and i'm mark barton to -- and i'm mark barton.
let's check in on bloomberg first world news. emma: in france, president amanda macron is promising to do more to prevent terrorist attacks. he wants to lift the stake of emergency that is van place in 2015 also plans to toughen permanent measures for islamic extremism. china's president has complained about a negative term in his country's relationship with the u.s. that complaint came as a phone call with president trump, calling him to curb nuclear weapons program for north korea. they expect to meet this week at the g 27. achieving sustainable goals under a united nations plan will hand. on the paris climate agreement despite the decision to abandon the accord, there is optimism and renew commitment by other
nations to make climate change goals. in illinois, the state is taken a step ending a two-year budget impasse. lawmakers approved a 32% increase in. income taxes. the senate has to vote on the measure. illinois that they do not pass the budget, the state could be the first ever to have its cutting -- have its tax rating cut. i'm emma chandra. mark: thank you. european union's framework for dealing with struggling brinks coming into focus, pouring into 7 billion euros into two struggling lenders. this is monte dei paschi. joining us from rome with an exclusive look is giovanni
sabatini. he is the chairman of the european banking federation. thank you for joining us. it is been a week or so since the unwind of those two banks. what is your assessment of the deal? giovanni: good afternoon, mark. deal of all, i think the that the italian government was able to reach with the european institution after the -- is marking the a turning point for the entire italian banking sector. coupledrly liquidation with the green light on the paschiion of the monte
will remove the dark clouds hanging over the horizon of the italian banking sector, as it has been a clearly -- as it has been grilli demonstrated by bullish reaction of americans in the recent days. italian banking index is up more than 2.5%. i think this is an important agreement, which is within the new rules. also, i think it is important to european that the military framework is able to deal with complex, and difference situations -- complex and difficult situations. as it has been pointed out by they needhi,
different policy measures to minimize the impact of the real economy. i think in the end -- mark: you say that this deal marks a turning point for the italian banking industry. does that mean there won't be any more banks needing -- in italy? giovanni: this is a question you should ask supervisors, either european our national supervisors. banking industry has not privileged that information. the minister of finance for the bank of italy, i think after the solution of the three troubled banks, there will be no need for additional state intervention. mark: you say it is a turning
point for the industry. let's dig deeper. -- for- is it nonperforming loans. turning point when it comes to eliminating nonperforming loans? that the well, i think solution of the two banks in the monte paschi will remove something like 50 billion euros of gross, nonperforming loans. bringing down the amount, the total amount of nonperforming loans. net,ould focus on nonperforming loans. nominal value netted. this is the real exposure of the
banks. signs ineing positive all,ast years, first of inflowsial -- new net is increasing, going back to precrisis levels. this is implying that the stock of nonperforming loans is decreasing. general economic situation of italy is improving. growing at a lower pace with respect to other european countries, but is growing. for thepositive also credit quality, which is improving. so, according to our estimates, operationsnsidering
is a massive sales for nonperforming loans for the next two or three years, the ratio will return well below 10% and the italian banking sector. this,the criticism of this wind down we will call it, it spreads the cost of failure onto taxpayers rather than the banking system. so, does thatng damage the credibility of the eurozone banking union? well, first of all, about the cost of the deal. the italian government has committed up to 7 billion euros. but this is a commitment, not the costs of the deal. be cost of liquidation will computed at the end of the liquidation process once the
asset management company, owned by the treasury, will complete the work of -- of working out and selling the assets that have not been transferred to the bank. we are confident that, in the end, the cost of the liquidation it ise minimal, and possible that it will turn into a profit. the liquidation is a procedure that is coparent with -- is coherent with the european framework. co-communication has been very clearly stated by the commissioner in his public statement.
i think this measure, on the one hand, is complying with general principles that troubled banks should exit the market. and this is an exit be performed in an orderly manner with the help of the italian state. i think that -- mark: if i can ask you one final question, given your glass half full view of the italian banking industry, do you feel it is ready for further consolidation now? do you think we will see further consolidation now among the popularity banks. giovanni: first of all, you have to consider that complying the s willal loans, the bank merge into major banking groups by the end of the year.
by the end of this year, we will probably end up with less than 140 banks, or banking groups active in italy. in thegress consolidation of the sector is already in place. we cannot exclude additional consolidation, but i think that also, consolidation at the european level could be welcomed. , theeal issue, i think regulatory framework, which is always uncertain and unstable. we have new rules issued almost every day, that is not helping banks in defining their strategy. at the moment where profitability is the major issue, and therefore, both of the banks should focus more on business than compliance. sabatini, thank you so
with a dictatorship determined to stay in power. now syria has become the middle east's biggest mentoring disaster in decades. homegrownrians jihadist battled forces love to the president and each other. the u.s. attacked syrian forces in april, launching a missile strike on an airbase. spoke of afficials need for a sod's departure. rex tillerson said the first priority remained defeating islamic states. both russia and the u.s. were drawn deeper into the conflict by its terrorist attacks. russia's support enabled theassad raising to gain momentum. was succeededdent by his son in the year 2000.
peaceful protests in 2011 and unleashed attacks by likely armed rebels. after a poison gas attack in 2013, the u.s. and russia worked together to get -- work together to destroy chemical weapon's stores. russia has used it security council' till to repeatedly repacked -- to repeatedly protect the regime. how the u.s. might remove his removal is not clear. peace talks led by u.n. has been stymied. there is a question but what happened in assad would depart. on can read more about syria the bloomberg. expected to be a point of contention between
president donald trump, his first meeting with vladimir putin at the g-20. --at the g-20 summit in hamburg, germany. let's bring in bloomberg's economic correspondent. in this meeting, one of many this week that will completely keep our attention, what is the most we can expect to come out of this putin-trump meeting on the sidelines of the g-20 hamburg? >> it is interesting because they have two different goals. for donald trump, it is keeping his head above water. it with no particular planner subject he wants to discuss according to his aides. , butll sort of going it yesterday showed he can stand up to a guy with a reputation of a very tough negotiation -- very tough negotiator and very strong leader.
putin has a good reputation at this point. a lot of people are expecting donald trump not to measure up. publicity that he will get, the pr at home from standing up to the u.s. president and making his points. vonnie: and then for the other leaders, michael, like for angela merkel? what will her goal be? she will be trying to talk to various leaders and forming alliances? michael: her goal is to keep the organization on track. thegerman goals that become g-20's goals would move forward and avoid protectionism. trump'sects that election has upset. he has stared them off track. she would like to get everybody back on track. it is going to be difficult because the president will bring his "america first" campaign.
and there are so many things going on around the table. shinzo abe arrives in a week. areu.s. has decided that we not as badly as the chinese that we were a couple of years ago -- weeks ago, but we still need them for north korea could vonnie: what will happen in the end? the communique will be as bland as possible. they will not be able to reach negotiations on trade language. they have not been able to do that in previous meetings. they will keep that out of it. they will talk about the benefits of free and fair trade, but not talk about protectionism. there will also probably sidestepped the issue of climate change. it will be interesting to see because angela merkel is so strong on it. might there be a potential for disaster or an
embarrassment? michael: there are all kinds of potentials for that. member when donald trump went to the nato summit until the other members of nato, by telling them they had to pay the latest is what they owed and refusing to endorse article five. you also have other sideline issues that could blow up in the meantime. to the otheronding members of the gulf cooperation council this week. saudi arabia, the driving member behind the isolation of qatar is a member of the g-20. no one knows what will be happening. between the chinese, japanese, russians, there is so much going on. it will be a fascinating meeting. vonnie: lot is going on in the international arena. thank you to michael mckee. on the brink of a downgrade on death next.icipal
♪ vonnie: illinois catering on the brink of becoming the first junk rated u.s. state good they approved tax increases yesterday as lawmakers scrambled to end a budget impasse, which is in its third year. it is the third consecutive fiscal year without a budget. that began on saturday. for more, let's bring in john miller. $745 million of general obligation bonds. thanks for joining us. is it in your interest for this to be happening, a stalemate and the potential for s&p's downgrade to junk? john: we would like to see a budget agreement. -- illinois has an $800 billion economy, but it has been
and a stalemate for over two years now. and yesterday's action was the first break in that stalemate. vonnie: the senate has to pass it in the governor has promised to veto it because it involves sales tax increases and whether governor considers unnecessary tax increases to spending. john: that is right. however, 50 republicans in the house moved over to support the tax increases. that creates a veto-proof majority, voting in favor of the tax increase. in the senate, the illinois state senate, already has a veto, proof majority as well. we are spending something to get past an overwritten. peak, the its bloomberg have the illinois bond yielding 6%. that is not a bad yield.
why are you so invested in a solution to this problem? john: well, it only makes sense. every state across the country has to have a budget each year. so, it is already a president that illinois has gone to do for years with no budget -- has gone two years, now it's 30 year. now illinois can service its debt with capital margins, even at a depressed or low income tax rate. the debt service represents only 5.5% of those revenues. the revenues could go up by 5 billion the estimate with these tax increases, grading better coverage. you are right. the 4.66% is fairly attractive on an ongoing basis. vonnie: if there is a downgrade to junk you are making it sound less likely, would you load the boat on illinois debt? we are still interested in
still believe it will cover its debt service. we have been continuing to hold position and periodically adding different positions across the state. we do think it is less likely now given the progress of the weekend that they will be downgraded into below investor grade. we think they will keep investment-grade ratings, but there is work to be done. vonnie: what about other states? states that are behind on their pension obligations and they on their pension obligations and we want to show this to be worse. what other states he interested in purchasing municipal debt on? performers have been states like new york and california, where there are significant amounts of wealth the benefit from the high taxes in those states. and they are on a relatively,
healthier trajectory in terms of their pension funding and in terms of their budgets. we are in the higher-yielding category. investmentswatching in new jersey, which we think will gradually muddle through. but illinois has been by far the least expensive bond in the state, general obligation market by a wide margin. vonnie: we should note that new jersey is not operating budget less as well. thank you to john miller. mark: great interview. coming up on the european close, we are following stocks. session stocks are up today. new month, new quarter, new semi-year. stocks are up.
bloomberg markets. ♪ mark: top stories we are covering. european stocks rising to begin the second half of the year as arduous equities, but will the rally continue? anities may be in for interesting rest of 2017. in banking, one of the last big firms in the commodities trending business is weighing its options. what are the options for goldman sachs after a big slump to start the year? and in european politics, french president a metal macron speaking to parliament, outlining his agenda. meanwhile, there is words -- that is words that macron, angela merkel, and putin will have a joint meeting later this week at the g-20 later this week.