tv Bloomberg Markets European Close Bloomberg July 10, 2017 11:00am-12:00pm EDT
mark: these the top stories we are covering around the world. european markets are starting on a high note. food markets are leading shares higher. we will look at what she name may be the best value play in the second half of the year. minister is a bolstering her case for breck is a -- brexit. jeremy corbyn is speaking to parliament right now. the metal exchange is making a major push into the gold market. why they are releasing their first gold futures contract in three decades. let's have a look at where
equities are trading with 30 minutes left in the monday session. stocks are rising for the first day after rising for the first week in five. the red cars are your currency falling against the dollar. janet yesterday will testify in front of congress. carillion is a big decline here in the u.k.. shares fell as 41%. that's the lowest since 2003. profit will be lower than expected. dividend payments will be suspended. the chief. down. -- will step down. they have major contracts and the company will undertake a comprehensive review of the business and the structure. this will boost the stock rice. investors had also been
skeptical about the stock because before today it was off 19% already. it was the shortest stock in the u.k. according to ihs markets. they are 41% lower, a record decline at the open today. let's get to gold. that was the biggest production since 2015. etp and precious metals will cap flows. they saw more investor money and total assets. gold shares are the top etf's. they fell to the lowest level since march. evening with -- even with signs it will dropnsion, five straight weeks. that's the longest slump this year. keep an eye on gold and china. ppi is up for june.
that is back in line with the estimate, well off the 7% reading four months earlier. saying that's the blue line right there. we are down from the economist forecasts. china was very much held up as a beacon of global reflation trade. it kicks off in the middle of 2016. for the world economy, slower ppi and sobering news. the prices were going to be driven up in china, that would help profits and wages. in thetes into training u.s., how is it looking over there? julie: we are led by technologies. they are trading higher.
that is helping the major averages. there is a split as well within the chips. i pointed out earlier. i want to look at the upside of that split. we are looking at intel and nvidia. tectonic shift in computing. he thinks that will help nvidia. intel is based on the data center model. froma will benefit parallel processing. shares are trading higher today. one of the areas of weaknesses retail. it's not just abercrombie. they took itself off the table as a potential sale. they said they are terminating talks with potential acquires. shares are down 20%. we see a downdraft throughout retail. gap, kohl's, macy's, they are
some of the worst performers. take a look at the bloomberg. we've got a look at some of these groups. the s&p here is in yellow. anything about this red line is a positive return. we have department spores -- stores and manufacturers, they have been sliding. abercrombie could not find a buyer and that is creating more selling within the industry. oil, oil is on spiking higher. it is up 1%. we had investors weighing the possibility that libya and nigeria might consider production caps that the rest of opec has agreed to. the russian oil ministry was talking about raising the price forecast. maybe that was a catalyst as we see oil shooting up a bit worried -- that.
by benjamine joined segal. they are up nearly 21% in the last 12 months. obviously, what have you been waiting on? benjamin: m&a as for an companies look to europe for interestingly priced transactions will pay mobile. athink the currency has been major benefit. , europeanency terms stocks are doing well based on the recovery. when you figure in the currency high,ff the post election
that adds up to compelling returns for u.s. based in vectors -- investors. vonnie: will we see more of that? i know you have a 50% in five years rule. must be 50% more valuable in five years. are some there interesting opportunities in europe right now and in japan and other international markets. for structural growth companies were we can have a high degree of conviction over the next three to five years. if we are looking for something worth 2% more, we want to make sure that it is going to be around. that's the first thing. companies, you were talking about retail in this transition are-commerce and a lot threatened by the movement online and new business models,
motor engines are worried by tesla. there are certain sectors we want to avoid. structural growth sectors with low levels of risk we think are compelling at the moment. let's talk about the valuation. that makes my life much easier. we are at the levels we were at 2016. that's the highest since before the financial crisis. is that warned to at all? benjamin: it is certainly warranted. if you look at the projected isurn on equity, i put what generating. in europe, it's about 8%. companies work harder and
you should be paying a higher multiple. the question then becomes if u.s. returns are fading if not rolling over in european returns are accelerating, you want to normalize that 13% down. you want to be 8% up. i would agree with you that with the acceleration we are seeing outside the u.s. compounded by the currency upside, that looks like too much of a discount to us. allocations,your the u.k. jumped out at me. what types of companies? is this a ftse 100 type western mark are they benefiting from the week pound? benjamin: moore the latter than the former. it's a mix of domestic companies and global companies. the large cap banks are looking
compelling. u.k. is 20 to go in the property market. it's an expensive market. there is a structure building to the homes when there is demand of a50 and up backlog million or more homes. we think the structural underpinning is there for the banking system to look good. the distribution business and companies like rps, the environmental advisory some are global and some are local and we find them interesting. the u.k. is a large section of our portfolio. we are slightly underweight because it is such a big constituent in the index. swiss-baseds the multinationals. they are well out of japan,
which is a much bigger market. we find in switzerland sweet -- niche health care businesses and wealth and is meant businesses operating globally. vonnie: this is what i find so interesting. you say you are a bottoms up fund. one of them is the move to automation. you are involved with japan and forompanies that are good takeover. you are involved in things like the swiss companies you mentioned. what are the structural themes? benjamin: increasing wealth, one wealthbenefits of the disparity is there is disposable assets chasing expensive automobiles. grabs for the swiss wealth management fund, there is
activity for the stock market as well. stock exchanges in europe, we are avoiding the banks in favor of the fee driven business models like stock exchanges and wealth managers. automobile, companies making the components, you had a big segment on tesla. like volkswagen and gm on a huge army of suppliers. some of those are going to strip -- shrink with the decline of the combustion engine. some of them are going to thrive because they made this transition to the new electric smart automobile. sensors in particular, sensing the basic level when the fuel gauge is down and sensing when the tire pressure is down and when cars are nearby and the difference between a tree and a dear for example, all of those
companies look really quite interesting for us. they are integrating the sensing with the intelligence at the heart of the automobile. those are the receptors we are aware of. clearly, health care in an aging in theion, increases adoption of latest generation medical products emerging markets, even though the u.s. wants to constrain its health care, some of those out-of-pocket expenditures that are not controlled i the government that are paid for out-of-pocket like hearing aids are quite interesting in switzerland. mark: that is absolutely fascinating. vonnie: you will have to come back and we will press you more. thanks to benjamin. a programming note, janet yellen delivers her semi annual report
to congress. she will testify before the house wednesday and we will have complete coverage on bloomberg tv and radio. let's check in on the first word news. courtney: a spokesperson for vladimir putin says he is unaware of the meeting between donald trump junior at a russian law your during the election. they cannot keep track of every russian lawyer and their meetings. takingts of most all are to the street after victory over the islamic state are in a few militants remain. some 900,000 people were displaced from their homes during the battle. greetalth care fight will lawmakers again as they trickle back to the capital. mitch mcconnell is trying to find enough votes to muscle the
health care measure. several republicans opposed the bill. .he president tweeted finally, more and more americans are's any there golden years on the job. 19% are working part-time. that's according to the latest jobs report. this has not been higher in 55 years. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. mark: coming up, theresa may is using her opponent for brexit. does she have any chance of succeeding? this is bloomberg. ♪
mark: i am mark barton. we are counting down to the european close. theresa may is calling on opposition lawmakers. say come forward with your own views and ideas about how we can tackle these challenges. after losing the majority, she has come under fire. she is trailing the labour party in opinion polls.
tomorrow, whatever time it is, she is coming from a standpoint of weakness. that she is reaching out to other parties, that is what people are crying out for. robin: yes. the problem with this speech is the message and the timing. last year whenis she became prime minister, i think she would've one audits as an being inclusive. she would've been in a position against the labour party which was very weak. they did quite well in the election. had she done this the day after she got that surprise election drubbing, it would've looked like taking the bull by the horns.
waited and now she appears to be noticing that she doesn't have a majority and she can't get one. mark: is she on launch a book? rob: can people change? the criticisms of always been that she is stiffnecked and she sticks to her line and is not flexible. she is not nimble. having spent the weekend with her at the g-20, there was little evidence she is becoming a freewheeling politician. she is still very stiffnecked she is quite -- she is robotic. pointed out, it's
hard to escape from. mark: we are working on a very very big trade deal. cop spoke of this deal being concluded very very weekly. that has to be the main margin. rob: the hard part is not a green that you want to do them. the hard part is everything between that and doing a trade deal, everyone wants a free trade deal with everyone else. somehow, they take a longtime to happen. the argument is perhaps it's easier if written is doing it without they eu. you could still see a lot of problem's. just because trump says he wants something to happen, it does not mean that thing will happen. mark: the talk that has just winning verynot far beyond the initial hurdle.
the rumblings out of europe, those are not exactly positive. rob: the nationals are going to have a worse deal after brexit under may than they would have currently. moment, they have more rights in britain than british citizens living in britain. government said they should have the same rights as everyone else. is to do with who you can marry and bring in from outside the eu. there is that problem. it's a very interesting story. frexitavis, the secretary, has been begging her to make the offer. the lack of an offer was poisoning the discussions with
fellow european negotiators because they could not get past it. they wanted to know what was happening. the fact that it took a year to make the offer, he felt was damaging relations. we are seeing that a bit. had she made the offer immediately, timing. mark: the speech should up and made a year ago. come back. thanks. you can watch may and corbin. they are speaking right now. vonnie: getting ready to launch. thank you to both of you. still ahead, how will this impact airline earnings? he says business at his airline is on the upswing. this is bloomberg. ♪
mark: let's take a look at where european markets are trading. this is the end of the monday session. the earnings season kicks off in the u.s. and janet yellen testifies not once but twice before congress. this is down half of 1%. by 30rman tenure is up basis points. that's the next chart. i can show you the currencies. the yield is down three basis points. away whating to take it has lost.
the only industry group gaining today. it's a massive week. the u.s. earnings season is underway. we have micro and macro. fed chair janet yellen speaking before congress. frame.tocks in the european investors selling their debt holdings, likely to make room for undervalued stocks as bond yields rise. so says -- the msci value index tracks the region's cheap a-shares. it just posted its -- cheapest shares. it just posted its best in two m onths. higher bond yields are you -- boosting the profits. gauge as arope value proportion of the msci europe -- it's rising. the blue line is the german 10-year yield, which is gaining as well, up by 30 basis points
over the last couple of weeks. now talking about central banks, not just about yellen this week, this is a great shot, showing you how interest rate forwards are now pricing the outlook for rates within the eurozone. two increases of 10 basis points each in the ecb deposit rate next year, compared to none as recently as june. expectations for monetary tightening had receded through most of the last couple of months. the first 10 basis point boost may come in july next year, followed by another in december, lifting the ecb rate to -20 basis points. this is according to -- wonderful chart. the governing council is to decide on its next change in its stimulus in the fall. that's according to the governor of the bank of france. we. are hearing more from him in just a second, so i won't tell you anything else about our interview. finishing off with qatar. institutional investors
from the six-nation gulf cooperation council were net sellers of qatari stocks in almost every session since june. wave of patriotic buying has countered the disposal. local money managers purchasing $322 million in stocks against $240 million of outflows from gcc institutions. qatar's main stock index has declined 10% since that spat began, more than any other global benchmark. wonderful chart. what more do you need to know? what are you looking at? vonnie: really, nothing more. i will show you some trading in the u.s. aboutle risk appetite, 0.1% weaker, the yuan. the ruble is interesting. it's been weakening. well above 60 now. speaking of oil, we are down at
$44.71. this, which produced that massive yield, has caused the two-cent spread to reach out to about 98 basis points. it did top 100 last week. back to movers. the mexican peso is back, just barely above 18. currency manipulators having a wild ride these days, particularly with em currencies. the rand at 13.43. we want to get into commodities a little deeper now. abigail doolittle. abigail: before we look at commodities, look at this rally we have for some of the fertilizer stocks. all up more than 4%. mosaic on paper is having its best day since january. put cash and agri-him -- potash and agrium were upgraded.
there is suspicion that this ongoing strength reflects weather conditions where these crops are planted, basically drought fears. if we take a look at some of the grains, including wheat, soybeans, and corn, here is that rally. a commodity strategist at bloomberg agrees. we see this big strength today. but on the year, wheat and corn are just -- both having their best year since 2010. that is normal when there are drought fears. if we see a drought that's anything like what happened in 2012, it could suggest these prices could actually double. thisestingly, soybeans -- is the one spot of perhaps weakness on the year, up only 3%. big catch-up potential. that would come on a short squeeze. all these grains had been heavily shorted. we have a great chart that shows this relative to wheat.
it's a five-year chart. in yellow, we have wheat. we see how the price of wheat did more than double in 2012 on the back of that big drought. in white, we have the net long position -- this short position. as the shorts have unloaded and we are now back at long levels, close to levels last seen over the last five years, the highs, we have wheat rising with it. the question is whether or not a drought comes. if so, there could be even bigger group -- gains in the grain market. they are seeking to grow as the u.k. exits from the eu. bloomberg's caroline connan atke with stephane boujnah the annual economic forum in france. stephane: one thing is absolutely certain.
the world we knew before brexit, where a significant part of europe and finance was in london, is, to a large extent, over. and there will be, going forward, there will be distributed finance a centers -- distributed financial centers, in the european economies, within the european union. you have a saturation of people with a relatively high standard of living. network a very intense of global companies and very successful financial institutions. financial centers will be distributed among various cities, which, all of them have different competitive advantages and different features. some businesses will move to dublin, to amber -- amsterdam, luxembourg, paris. but these cities are different sizes, different lifestyles, different regulatory
environments. but they all are sitting in very intense financial communities. >> i have two follow-ups. one is, when is this starting? we've been talking about moving, relocating services to the continent for a year now. as a follow-up, in terms of banking federation said it would bring 5000 jobs to frankfurt. how many do you reckon in paris? stephane: i don't know how many jobs will come to the continent and how many jobs will come specifically to paris. i think the trend is starting. if you want to make money and do business with the companies to p group ofvings in this 27 countries, 19 of them using the same single currency, then you have to be located in that part of the world.
how fast this transition -- this know,ion will be, i don't but the trend is certain. the direction is certain. it will depend on various companies and their specific business. what is clear is that many decisions have been delayed because many players needed to --e some visibility on what on the political outlook in europe. you remember the noise about maybe the risk in the netherlands and france. this is over. clearly, over the past 18 months, the outcome of the austrian elections, the dutch elections, the french elections -- the stability is on this side of the water. many players were waiting for some stabilization of the policy landscape in the u.k. it seems there is more volatility than stability for the short term at least.
so, decisions are being taken almost as we speak. i believe that the summer will be a catalyst. the new milestone is probably the german elections in september. i believe that will be very quick. never forget that -- he wants to finish the discussion in october, september, 2018. so, it's just one year. 2017 to 2018. mark: that was stephane boujnah. from the same conference, we heard from the air france-klm chief executive in another exclusive interview. jean-marc janaillac said tourists from asia and the u.s. are returning to france. jean-marc: i think what we feel has affected the business in france is there is optimism.
business, it for our because we see for this summer overseasle coming from coming to france, and more french people going abroad and using our airline. that from seeing also the beginning of the year, a more optimistic view in the business and more business travelers from different countries of europe, netherlands, because we are quite strong in netherlands, but also france, since the beginning of the year. an increase of the business travel from europe to other parts of the world. we think that this optimism favors travel. this due to the political environment? is it due to the fact that, for the past few years, you are seeing the impact of terrorist
attacks? jean-marc: we suffered from terrorist attacks in 2016, but we have recovered this year, especially visitors from the states, from china and japan, are coming back. they are now in different parts of france. reporter: how much is the growth rate from these american tourism -- this american tourism and asian tourism compared to deed of years ago? two years ago? jean-marc: we are quite hopeful that during the next year we are going to keep on increasing the number of our visitors from overseas. reporter: it seems we are already looking better in the first quarter of this year. things have continued to improve in the second quarter. are you satisfied with the second quarter? jean-marc: the second quarter is
things for the summer are also quite positive. reporter: is it increase to last year? jean-marc: yes, of course. reporter: is it a significant increase? jean-marc: it is an increase. vonnie: time to check in on the "first word news." reporter: the next few weeks may be crucial on whether president trump and -- can deliver on his promised tax cuts. several obstacles await lawmakers, including divisions among republicans on the basic parameters of the tax bill and deadlines to avert a u.s. default on debt. secretary of state tillerson left turkey following along meeting with president erdogan. the relationship has been under stress for some time now. he hopes things are beginning to mend. tillerson has met with erdogan
three times since becoming secretary of state. u.k. prime minister may will call on lawmakers to help steer britain out of the eu. she says social and economic reform is needed to make a successful brexit, but she will call for cross-party cooperation to deliver it. the early morning commute into new york city got off to a smooth start as amtrak began extensive repairs to signals and tracks at penn station. that will curtail operations for amtrak and its tenants, long island rail road new jersey transit commuter line. new york governor cuomo has called the upcoming delays and cancellations "a summer of hell for riders." global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. vonnie: thank you. coming up, the battle of the bullion.
live from london and new york, i'm mark barton. vonnie: and i'm vonnie quinn. this is the european close on "bloomberg markets." mark: taking on the most powerful players in the gold market today. the london metal exchange and its partners launched its first futures contracts for gold and silver since the mid-1980's. but what exactly does the new gold contract entail? what is at stake for investors?
for more, let's bring in eddie van der walt. why do we care about another gold futures contract? eddie: i know it's not an easy environment to launch gold contracts. we have seen a few of these come and go over the last few years. even here in london, there's been some challenges. really, there is pressure from the regulators. the way that gold is traded in london, which is over-the-counter and bilateral exchange between counterparties, it just doesn't seem viable toward the future, or many think so. while the otc market is busy overall in a way that it does business, at the same time, we've got people like the london metal exchange and partners like goldman sachs and the world gold council, significant players, getting together to launch this gold contract. we will see how it goes. vonnie: it is really fascinating. it's a 350-year-old market in
london. you put together a great timeline. we have some of it, not all 350 years of it, but back to the beginning when isaac newton debuted the trading of gold. how did it take so long for this to happen for london? eddie: right. vonnie, as you say, first of all, i had a lot of help from my friends getting that up. the london metal exchange in particular has been after the gold market for a long, long time. somebody said to me when i was doing my research that it has been like the gestation period of an elephant. they have worked hard, tried for a long time to get this together, so there seems to be a lot of will. whether they can make it work, that remains to be seen. mark: why will the lme make a success of it, which is secondary to what you were just saying, eddie, whereas intercontinental exchange and cme group, they have had mixed
results luring business to futures? eddie: in london, gold has always been done one way and that's between counterparties. being in exchange imposes costs, but in the current environment, it may be more efficient. you mentioned cme. the biggest challenge to this ifld be whether people -- people want futures, they could just trade in new york. that's the biggest question mark, is whether they want this. still, looking at the numbers coming through this morning, it was a slow start. they said they had a staged rollout. but in the last hour or so, it has really picked up. we've now had 500 lots traded, which is about 50,000 ounces of gold. compare that with 19 million ounces so far today on coal max -- comex. it's not huge, but it is starting to pick up. vonnie: what would the london metal exchange be happy with?
what would be considered a liquid, deep market? eddie: good question. note rise, they have pared back expectations -- no surprise, they have pared back expectations. we are not expected to see a lot of trade. they told me on friday they didn't necessarily expect trade on monday. what they did want to see is a deep order book. thing that i noticed today is the spreads were quite thin. the spreads on the contract came down to about $.20 between the bid and offer. once a bid was taken, the spread quickly, you know, jumped out to, sort of, $5. i think the hope is that this order book will fill in, but i don't think they are quite there yet. first day, so we probably can't expect too much. mark: eddie van der walt. time now for the "bloomberg business flash," a look at some of the busiest -- business stories in the news today.
cincinnati bell has acquired a hawaiian telecom. the price tag, $851 million. u.s. landline phone companies have been losing customers to wireless providers and cable companies. this is a rush to consolidate with an eye to amassing greater fiber-optic network capacity. executiveco's chief says the outlook for oil supply is, quote, "increasingly worrying." he says his company will invest more than $300 billion over the next decade to maintain its fair oil production capacity and explore for more natural gas. that's the latest "bloomberg business flash." it's be otc -- it's botc, battle of the charts, time. this is bloomberg. ♪
mark: time for the global battle of the charts, botc, where we take a look at some of the most telling charts of the day, what they mean for investors. you can access these charts on the bloomberg by running the function featured at the bottom of your screen. kicking things off today, alexandra. >> i'm focusing on earnings as we prepare to kick off the profit season, the q2 earnings season in europe as well as the u.s. we can see that analysts have started to trim their expectations for profit growth as shown by this citigroup index for the eurozone. that's after a stellar quarter in q1. the question on everyone's minds is whether we are going to see a repeat performance of the great profit growth that we saw in europe in the second quarter. it remains to be seen whether
these -- this trimming of expectations will be reflected in the results that are expected to start trickling in as soon as this week. mark: where can we find the chart? >> g #btv 2007. mark: big chart. as the earnings season kicks off, can you match it or beat it ? vonnie: we got a little taster on friday of the monetary policy reports for congress. caroline: we got a little taster on friday of the monetary policy reports for congress. in premiums to more normal levels is one of the risks. that would see this line come right back up to the blue line. look at the huge difference there. the term premium, which is the extra and compensation that investors demand for holding a 10-year treasury rather than rolling over shorter term treasuries and so forth, that is
what investors have been demanding. they have been demanding less than zero. if that were to rise above the average for the last 30 years, that would be a risk to financial stability. clearly, the fed chair is thinking about it. you can see that at btv 2058. mark: brilliantly presented. both topical, both wonderfully presented. by a whisker, aleksandra. well done. do come back for another battle. federal reserve chair janet yellen will deliver the semi --ual monetary management monetary policy management report. this is bloomberg. ♪
vonnie: from world headquarters in new york, here are the top stories around the world that we are following. back to work, congress returns from recess with two weeks before august recess and health care and budget deadlines to deal with. it is a crucial stretch for the gop and for the president. and up to par? apollo making a $1 billion wager on the golf industry. snapping up holdings. betting on a struggling industry, will it pay off? and mystery millions, the unknown crypto currency trader that turned $55 million into nearly $300 million in one month. how he or she did it. first, the regular markets, halfway into the trading day and abigail doolittle ha