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tv   Bloomberg Daybreak Europe  Bloomberg  July 11, 2017 1:00am-2:30am EDT

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anna: the u.s. secretary of state has a bid to end the standoff between qatar and a saudi led bloc. the dispute mustn't impact trade. >> we do not want any fallout when it comes to trade. and i am sure we can manage that. manus: watching over wall street . in an arduous search to fill the post for the fed. anna: brexit uncertainty is draining optimism. suspends, theresa may lawmaking --
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♪ anna: warm welcome everyone to this is bloomberg. ♪ -- "bloomberg daybreak: europe ." a lovely piece on the bloomberg. takeould be watching -- it back to basis. what are you looking at? you are looking at a momentum shift. it is about the short positions. aree funds and speculators the most bearish on the dollar since 2013. this is aggressive positioning. positioning is building. that represents a swing.
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this goes from along the dollar ranges. it is down to trumponomics. the hedge funds are well aware of the hawkishness around the fed. maybe some of the surprise index, related data coming through, or the white house over delivering. their ability to pass through legislation. let's leave the dollar and get through the other asset classes. let's go to the risk radar. equities -- asian equities are up. low volumes through the asian session. chinese stocks bucking the trend. we have lots of earnings to wait for, from the likes of pepsi, j.p. morgan. eye on it. an
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it will come down to whether the bank of canada moves tomorrow. the firstbe substantial -- central-bank to substantially switch? bond yields are at 1.39%. they are rising by the most 008.e 2 stepenersrs had curve on. you have seen the largest shift in nearly nine years in terms of two-year government bond yields. anna: we wait to hear on inflation, keep your eye on nymex. the former algerian minister fromsts if we see outputs libya and nigeria, that would be enough to fix it. manus: you need to sustain inventory draws.
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and evidence that opec non-opec cuts are working. if you do not get that, you will drop $40. novack said it is working. anna: more on the commodities through the program. let's get to the bloomberg first word news. juliette: president donald trump a new banking regulator. he was an official in the george bush administration. inis expected to play a role playing out -- the u.s. secretary of state is in the gulf in a bid to resolve the saudi crisis in qatar. the crisis puts washington in a difficult position.
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buyer ofbia is the top american weapons. they have been able to weather much of the economy being isolated him a that has happened because of turning to turkey for imports. qatar,says they support and say it is trade and prosperity maintained in the region. have strong ties with all of these countries. yes, we think qatar should be treated in a more fair fashion. don't want any fallout when it comes to trade. lawyere: donald trump's acknowledges his client received a letter from a someone is
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saying they had damaging information on hillary clinton. it came through gmail from a former british tabloid journalist linked to trump through the miss universe pageant. the confederation of british industry's say u.k. banks are less -- banks insurers are less optimistic. time infrom the fifth june. theresa may has been a forced to suspend one of her lawmakers from the conservative party after using racist language to describe the possibility of leaving the eu without a trade deal. this reduces theresa may's numbers.
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she lost her majority in last month's election. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg. a bit of a bitter session in asian markets, although volumes are light. 1.2%.e hong kong -- up by trying to regain momentum from last week. we see good games coming through from in. if you look at the tight at, it is -- the tyex, it is well supported. we are talking about the deal yesterday that it will acquire another company. citigroup says the deal is sensible. deutsche bank says it is a preferred buy for them.
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are under a lot of pressure in tokyo. this is on a news report that japanese police are trying to curb gambling. looking at this chart, not only can you buy nearly everything you can think of on the ecomm erce giant -- they have risen more than 30% this year. they are starting to flatten off, but showing that you can buy them on thline. anna: that is an interesting birthday gift. manus: as if i haven't got enough on my own. let's talk about the markets. asian stocks are higher this morning. this is ahead of the federal
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chair -- this will be about the stronger jobs report we had. anna: this keeps the central bank on track to raise rates. earlier this morning, the san francisco fed president spoke about u.s. inflation and interest rates. ifi would argue that inflation gets stuck at 1.5 percent, that would argue for going more gradually and raising interest rates or holding off on doing that for a while. i am not overly concerned about that, because in the u.s. i see a lot of signs for wages, and an economy doing well. clearly, the economy is strong and continuing to move ahead with good momentum. manus: joining us is michala marcussen, global head of economics at societe generale. some called him crocodile
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dundee. he has made the same speech several times. but the debate is all about the testimony from janet yellen, and to what extent do you as an economist will or look for signals from yellen that this inflation is helping. it is aelieve transitory issue or something more sustained? down to theoils real economy and what is happening on the real economy dynamics. if we continue to see the labor see as tighten, you will pickup in wage inflation. i do not think the curve is dead, but there are shifts around the curve. weis not behaving the way thought it was behaving in the past. there is a lot of debate about how you measure slack on the market.
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there are uncertainties, but what you see on the silex curve is not much happens. you get a more sustained pickup in wages. as we talk about wages, it is important to remind ourselves that there has been some pickup in wages in the u.s., it hasn't been as quick as we are used to seeing. what is important is if you look at the share of copper -- compensation, that has gone up relatively steeply. cycle seeing late science, starting with the cycle in the u.s.. anna: how much of your prediction is predicated on fiscal policy from the white house? we have heard conflicting comments from the white house about tax reform. official saying they wanted a tax agreement before the august recess. it looks to be a tight timescale.
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michala: i think this is critical. it is one of the most critical assumptions in the forecast today. as i said, we are coming into the later stages of the cycle. without tax cuts, i think we could be in a situation where the u.s. economy could be slowing down more substantially, as soon as the second half of 2016 -- 2017. think those tax cuts are critical, and we will get more clarity ont -- more that coming in late august, september, when it we will get more visibility on what is being planned on that front. managelet's assume they to get something done this year. they talk about the percent as the achievable -- they talk being the achievable target. what do they need to get 3%? you need sustained
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productivity gains. to get stronger productivity gains, you need stronger investment. it goes to a deeper reform that you need to see. it is not just a one day outcome. investment,e educational attainment. all of these things need to happen. from our perspective, we are fairly hopeful the tax cuts come through, that is our baseline view, i think lifting the u.s. economy up to a sustainable 3% growth level, i do not see the evidence that that is in the pipeline. if we see slowing in the u.s. economy, you say that is not your base, but it we do, any hike from the fed risks looking like a policy misstep. michala: that is the hardest thing when you predicate policy. anna: the fed suggests they
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factored that into their forecast. michala: we have heard slightly mixed messages on how to respond to that. i think the fed is right to continue run a policy on the basis of what it is observing and see the trend in the economy, and not to second-guess too much on the policy front. on the other hand, if the fed does not do something here, and the economy continues to run, that could be a mistake as well. what is interesting is we are seeing an increased focus on the instability risks. we heard that from yellen recently, and i think that is very important. manus: trying to take things out this isinutia of today, the backdrop. priceslking about improving, financial conditions are fairly easy. looking at financial conditions,
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very accommodative. the backdrop to another rise, would it be enough? thed it be enough to unseat growth trajectory of the united states? michala: i don't think they want to unseat the growth sector. manus: but that is the concern. michala: with any economic modeling you do, it depends on the financial market reaction. if the financial markets react in a very aggressive, negative way, then that could be enough to stop the fed in its tracks. 2015 and think about why the fed delivered one rate hike. we had a massive appreciation of the dollar which tightened u.s. -- the u.s. dollar. reacted very
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aggressively to that. at how conditions have been since then, the market has not tightened as of yet. anna: interesting to tie that back to where we started the program. despite what we have heard from the fed. thank you. she stays with us on the program. manus: later in the day, bloomberg speaks with david chilton. isa: the u.k.'s theresa may setting out on her commitment on economic reform. the eu economic affairs council meets. manus: the federal reserve governor gives his speech, a keynote address in new york city ahead of a janet yellen's testimony tomorrow. anna: a new study shows how
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britain's finance ministers are less optimistic about business. we will talk about the latest. this is bloomberg. ♪ manus: welcome back.
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it is 1:20 in the afternoon. seng flying hang high, up by 1.39%. these equity markets are in a risk on kind of mood. stocks are flying high. let's see what juliette saly has to say about the business flash. juliette: thank you. ipoes have fallen below the price at $17 a piece. they drew investors enthusiastic young people sending video messages, now they question the company's ability to grow as
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fast as initially expected and make wider declines in stock -- in tech stock worldwide. amazon introduced a service that threatens its geek squad business. it helps customers install and can bigger in the net -- internet services. --t buy acquired geeks god geek squad a decade ago. on what cracking down its citizens can find on the web. the chinese government has ordered the three major telecom companies to block individual access to virtual private networks. that is according to people familiar with the matter. blocking a vpn's shuts down a major window to the internet. thousands of websites are blocked in china, including "the "bbc" andimes," the twitter.
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anna: juliette, thank you very much. a new study shows the questions surrounding brexit hurts britain's business mood. are less optimistic in their outlook because of the uncertainty in the eu divorce. manus: sentiment about the business situation fell in the three months for the fifth time in the last quarter. retail sales rose more than estimated in june. michala marcussen is societe generale's head of global economics, and she is with us to continue the discussion. if you look at this eta, the gdp is the trending line. what confounds me is the more hawkish rhetoric from the mpci. they talk about our
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credit cards, and our mortgage borrowing, and our car borrowing, but there has been a shift the between data and rhetoric. youala: i would agree with on that, and at the end of the day, i think the likely scenario is the banks cut rates. as we head into next year, i think what you will see is the higher consumer price inflation will eat into people's budgets. you will see a slower consumer. the uncertainty we were talking about, i think that will weigh on business investments. i think next year, the u.k. economy will grow by less than 1%. you have a whitening out -- a widening out. one argues for rate hikes, the other for rate cuts. you will end up seeing the bank cut rates. one month of u.k. sales show rebounds. you are focusing on a weakening
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consumer picture. michala: that's right. what i am focusing on is what happens to people's income. that is a critical factor. anna: what about wages? we will get to wage data this week. the hard bit of data is for the august bank of england's meeting. say augustlysts could be light for the bank of england. we will not get the majority needed to vote for a rate hike. how important is that wage picture? michala: i think at the end of the day -- and this is probably what yellen will tell us in her own testimony -- is that we need to look at a broad asu-- it ties back into income prospects. it is an important factor. i think they will look at a lot of economic indicators and what sterling has been doing, because
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i think that is one of the important drivers here as well. manus: anna and i read the same article this morning. they are talking about the trade surplus, which america says they have with us, and which the u.k. says we have with them. michala: awkward starting points. --anna: awkward starting points. this story ise in the u.k. it must be desperate to demonstrate it is able to get something from the united states. the starting position is rather polemic between the two. with run for a bear hug the united states. this is not the solving of all the evils of trade in the united kingdom, is it? michala: no, but when you look at the u.k. him at the u.s. is one trading partner. the bigger partner is the
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european union. i do not think the u.k. can compensate about brexit deal with the u.s. trade deal. i don't think one ou tweighs another. it is critical to have a good trade deal with its absolute biggest trading partner, the eu. pwc has a forecast for something around 0.3%. at the end ofnk the day when i am looking at the u.k. economy, we will still see a decent 2017. for me, it is a much lackluster 2018 on the horizon. anna: michala marcussen from societe generale. she stays with us. manus: we will be joined by john curtis, professor at the university of stratton. anna: next up, we will talk
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to turkey's deputy prime minister to talk about the qatari crisis. we will get analysis next.
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delivers consistent network performance and speed across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. ♪ manus: tokyo, 2:30 in the afternoon. dollar-yen is risk on in these markets. yen lower, equities higher, dollar-yen is moving lower. bank of japan will be happy with that. they win -- went in last year and cap out the 10 year paper last week. let's get nejra cehic. good morning. nejra: certainly is risk on in the asian equity market for a second day. the pacific index trading near a record high. in fact, this year the chart has normalized. outperforming global equities.
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rally.-based a little softness in shanghai earlier, but the shanghai composite index has recouped those losses. not just across different regions, but across the industry groups. tech stocks leading the rally for a second day. asian equities bid. is the party over for the new zealand dollar? the kiwi dollar weakening after data of an inflation reading and credit card spending data. kiwi dropping the below support in this technical chart, some are asking if it could be the start of a bigger correction, particularly if we do get more rate hikes from the fed and a stronger dollar. kiwi dollar in focus today. worst-performing g10 currencies against the dollar. the dollar is bid across a lot of the g10 currencies in this session. is oneoned the fed, that thing the markets are focusing on this week with janet yellen
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due to speak on wednesday. also earnings, earnings. a lot of charts in the library. check this one out. jpmorgan saying when you look at the second half, weaker produced price growth could spur an eps slowdown. keep an eye on ppi data when looking at earnings. they are pretty closely correlated. anna: thanks very much, nejra cehic in the markets. here is a look at some of the stories that have made it into today's edition. hasld trump junior's lawyer acknowledged his client received and email last year offering a meeting with someone who had potentially damaging information on hillary clinton. this came after reports the younger trump had been told it was part of a russian effort to help his father's campaign. manus: the second story is about markets. at 7:00 a.m., how
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is it weathering the squeezing household finances? analysts seeing the risk for closing amid a market weakness and low consumer confidence. then you have jeffries who say the market share may grow due to better products. -- we're allthe doing some shopping. anna: finally, daybreak focuses on oil, goldman sachs $40 crude as a possibility of efforts to rebalance the market don't mayor fruit. if we don't see the necessary cuts from opec, very set of factors, we could see oil some 40. manus: hsbc may well be in focus. at the highest level since 2015. 1.3% in hong kong trading for the financial. we will see how that comes through in the european trade later on. anna: the session in hong kong has been pretty strong.
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u.s. secretary of state rex tillerson during the gulf in a bid to end the standoff between qatar and other u.s. allies in the region. managed to weather much of the economic impact from being isolated, partly by turning to turkey for support. deputy prime minister says his country supports qatar and highlighted the importance of maintaining trade in the region. synthetic spoke to bloomberg. >> while we believe the treatment of qatar has been -- we, we advocate continue to call on all of our partners to work their peacefules to dialogue. we hope this will work out sooner than later. prevent sucho
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political differences from having a big impact on economic relations, on investments and trade. i think turkey has been successful in that sense. two examples. we had a big spat with russia. there was a big backlash from the russian side, but turkey has been cool and avoided a big fallout. track., we are back on remember, big fallout with russia -- israel, a big crisis with israel. what happened with that? we avoided a big fallout for investment and trade. to these applies countries.
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we have strong ties with all of these countries. yes, we think qatar should be treated anymore fair fashion. fallouton't want any when it comes to trade investments, and i'm sure we can manage that. >> are you concerned that your relationship with qatar will one day have implications on you and turkey? >> i doubt it because first of alone iney is not thinking that qatar should be treated more fairly. grounds, there is no no justification why turkey mean, be treated -- i turkey is a respectable trader. we want peace, stability and prosperity in our region. far, doing the
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biggest combat against isis. in fact, turkey -- if you put aside proxy warriors, turkey is the only country which is on the .round effectively combating we pushed -- from our border. we have liberated 2000 square and works of syria with our international allies in the united states, with our coalition partners, with all of the major players in containing. no question about it. anna: bloomberg's national , rex tillersoner is touring and we are joined from kuwait city. good to have you on the program. tillerson in the region trying to mediate between the saudi block and qatar. what is he hoping he can achieve?
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point, this is very early in the process. and gulf department states are months apart. looking at a sort of the art of the possible. touring the region in kuwait city now, in about an hour, he will go to doha. then back to doha on thursday. just trying to hear the positions of all the sides, see what is possible and look forward to the next few weeks to see if there can be some sort of breakthrough, some moving pads -- past demands that the saudi deadlock has put forth to qatar. tillerson brings a very special capacity to this negotiation. he is the former ceo at exxon, deep relationship in the gulf. if anyone is possibly going to change the dial, it may well be
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him. how realistic is it they will succeed and qatar goes it alone in utter defiance of saudi? this is going to be the real challenge, because rex tillerson does know all of these players from his time at exxon this poses his big first test as secretary of state. the challenges are so far apart and in dispute seems so retractable now, that the state department is really playing down expectations for a solution anytime soon. you had a meeting in cairo last week were the foreign ministers of the saudi coalition basically said no, there had been no progress. in some ways, he is coming into a situation that is getting worse and we can see if he can exploit -- the most interesting issue his he knows these guys language.
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he knows how to speak with them. he will be exploiting that knowledge in the next couple of days. managed bytations what you have been saying as far apart the sides are. how big a test is this for the u.s. administration? trump's pointed to support of saudi as emboldening, some suggest how aware the president is between the u.s. and qatar was at the time he visited saudi. how important is this to the u.s. administration? it is interesting because you state your -- stake your credibility on a big trip like this. if rex tillerson announces he is going to do a bout of shuttles -- diplomacy and if he fails, his credibility gets hit. the challenge here is that the has beenation conflicted on this so long. president trump seems to back saudi arabia, the defense
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department and the back qatar. tillerson is taking a middle approach. if that confuses people to the point of throwing their hands up or drives them further apart, has yet to be seen. it does seem the saudi's have been emboldened. tillerson is both trying to positions different within the groups, but also doing a rearguard action to make sure he's not undermining his own president. manus: thank you very much. how are bloomberg national security reporter traveling with rex tillerson in kuwait city. general's head of economic. rex tillerson has no small job on his plate. as a court economist, when you look at the state of the world, political risks are rising over potential economic slowdown. what should worry the markets the potential for
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political explosion versus a new normal in growth? >> what has been interesting is when you look at metrics like economic uncertainty, you have seen for some time, even looking at europe, there has been high political uncertainty, yet the real economy has continued to perform quite well. one challenge for investors is if you are going in on economic policy uncertainty, it is only get -- when you get close to the event that markets become more volatile around it. point, you need to have very high convictions that whatever political risk you are taking a position on will materialize because otherwise, what we have seen is a pattern that markets go back to normal. -- investing on political risk is very complicated. having said that, we do need to be aware of these risks. we have the risks in the middle east, risks around the situation
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in north korea and maybe further down the year, we will have new election risks in europe. these political risks are important, but they are just very hard to invest upon. anna: as we were hearing, rex tillerson knows how to speak to those in power in the region because he knows how to talk oil. that is his background. we look at the oil price, we got six months ago that we might be gently upwards in the trajectory. that has been undone despite the best efforts of opec. this oil conversation, back to the fore as an economist? michala: there is good and bad inflation. if you are having higher oil prices because of a negative supply stock on oil, that is something that takes away your consumer purchasing power. what you want is oil prices to be going up because there is more demand globally and that is the good inflation.
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demand driven inflation that is good. cutting back on supply is rarely good. that is one analyst -- element. what is interesting is the problem is when you have very low oil prices -- keep in mind, inflation in the euro area was andntially zero in 2015 2016. draghi talked about this backward looking wage negotiation. if you had low inflation because of oil, you get low-wage outcomes. prices normalize and you get low disposable income growth. it is a bit of a double-edged sword. with thehead, we think tax cuts and everything in the u.s., still healthy global economy, some improvement on the inventory side and we should see oil prices heading above 50 coming towards the end of the year. be -- economies should businesses, etc., should be able to deal with $50 oil.
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oil unlessorting $40 a shift in the industry drawdowns, the construction in the crimean base -- but from an economic point of view, the world can function at $50 oil, can't it? yet -- yes, this but too low on oil price becomes a negative and we saw this last in 2016, goingk back, we saw how when oil got level, thatrrel made markets nervous and we saw a deterioration in global financial conditions at that point. i think it is important because financial conditions linked back into the real economy, as well. low oil price helps, but too low, bad news. anna: thank you very much, michala marcussen, societe generale global head of economics stays with us. still ahead on daybreak.
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coming up -- manus: it is burning season. bring that bell. earnings estimates said to be robust so far. there are concerns for the stoxx 600 companies. could that be on the horizon? this is bloomberg. ♪
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♪ it has just gone 1:49 a.m. in the united states of america. equity futures up .1%. equity markets are rising around the world. anna: bloomberg business, let's get to juliette solly. she has a blimp -- bloomberg business flash. juliette: snap chairs have fallen below their ipo price.
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the california-based snap drew investors who weren't as he asked about a company popular with young people for sending photos and video messages. now the question the company possibility to grow as fast as initially expected. best buy fell the most in more than a year after amazon introduced a service that threatened its keep squad business. amazon's smart home services are designed to help customers configure internet connected products. revenue accounted for at best buy. shares came up 30% this year before monday's tumble. down on whatking its citizens can find on the web. the government has ordered its toee major telecom carriers block individual access the virtual private networks. that is according to people
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familiar with the matter. aocking vpn's shuts down window into the global internet. thousands of website -- websites are blocked in china including "the new york times" twitter, googlek, bbc and some sites like youtube. that is your business flash. anna: juliette saly there. european opene and here was what we will be watching at the start of the 7:00 hour. onwill get numbers first-quarter sales. it will show how it is weathering the squeeze on household finances. market weakness and low consumer prices, jeffries says consumerism may grow due to promotions. manus: there is a consensus out there that clothing sales, probably fell 1% to 0.6%.
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but we can expect from the earnings season, we will bring in our european strategist at bloomberg intelligence. tim, welcome to the show. welcome to this section. all about setting us up for what we can expect. is we have taken off with this. typically in the last few years, we have had savage downgrades to the earnings expectations. we are not seeing that come through at this point. optimism. this is 2012, by the way. , it is anwngrade optimistic outlook. kim: indeed. there are several things going on. report, we referenced the best of all possible worlds and in many ways, it has played so far this year. most notably, we had a very broad, maybe even understated
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expansion in activity everywhere. the european pmi across the in uncharted positive territory. has been a, there currency tailwind. you have had, especially with the pound, other factors play through -- oil has dropped from highs and it is not so big of a constituent of the index to a price impact, but it has had a boost for the rest of the economy. things like that. anna: how important is this earnings story to the market? we have seen equities make new highs recently and a lot of people are saying it is now all up to the earnings season to prove they are worth it. withi would tend to agree that. if you look at the last three years, relative earnings for the european market versus global index have the world
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been waning. we hit and inflection earlier this year. we have seen -- x this is your earnings per share in white on the stoxx 600 and your price stoxx 600. and so far this year, we have seen things play into the favor of europe. tos earnings season is going be quite important in the second half. does this sustain or not? manus: you make quite the contrary and call in terms of the bank of england. cut next 1% and a rate year. is the market too aggressive in its presumption of what comes, given the nuances we have had recently? michala: my view on the ecb is come september, we will have another announcement taking down the qe program in size, implementing that is a january. we think it will be a gradual process for the ecb.
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,oing it slowly, very gently this is our call. the euro is very important in this context because too strong would not beast helpful. it would make life more complicated for the ecb. at the same time, echoing what you are saying. it is important to emphasize as far as the euro area, we could end up with growth over 2% this year. the economy is doing very well and it is not something we have been used to. cyclical thing we are seeing come through. it is reasonable the ecb take some of that accommodation. anna: how will euro feel at the start of the year? we are now at 1.14. tim: we think about it in terms of that relationship but more broadly than a trade weighted perspective. it is dramatic and two things are transpiring for european
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earnings and outlook. one, the euro was strong. years of being the sick man to be in the strong men globally. that creates a headwind for european corporate's of revenue to translation back. it gives an opportunity for strategic action overseas and the pound -- big deal -- really big deal, more than 50% of revenue of the ftse 100 companies comes from -- it has a tailwind. -- had a tailwind. now the tailwind is gone if the pound stays at current levels. manus: tim craighead joining us. michala marcussen, societe generale global head of economics, thank you for joining us. anna: 6:56 in london. we will keep an eye out for the earnings. they will break at the top of the hour. up next, we will talk about the fed. chair yellen prepares to
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testifying congress this week. what this could spell for the u.s. rate hike. we will talk about u.s. growth and get an investment strategy for you, as well. this is bloomberg. ♪
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♪ the hot diplomacy. secretary of state tillerson flew to the gulf in a bid to end the standoff between qatar and the block. turkey's prime minister tells bloomberg the dispute mustn't impact trade. >> we don't want any fallout when it comes to trade investments. i'm sure we can manage that. street,tching over wall president trump's nomination as the fed's chief banking regulator. and glass half-empty. u.k. financial firms say brexit uncertainty is draining their optimism. meanwhile, theresa may suspended
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tory lawmaker ahead of her speech in parliament. ♪ manus: welcome to bloomberg: daybreak. our flagship morning show in the city of london. i am manus cranny. anna: i am anna edwards. it has just gone 7:00. raking number from corporate. manus: this is a first quarter in line with forecast. first quarter home and clothing sales fell 1.2%. market estimated a follow up 1%. worse on the hard goods. on the food side, a drop of 0.1 percent. the estimate was for a rise of .6%. these are not a good set of numbers relative to estimates for the ceo.
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despite the fact you have paper coming in, second quarter. the weather has had something to drop inthe recent shopping. these numbers are quite worse than the market had estimated. u.k. retailers have had a fairly tough time. , food is worse than expected and home and clothing also worse than expected. they have been cutting back in terms of promotions. jeffries is saying marks and expenses can begin to win market share in clothing due to better ranges, promotions, food has an extensive offering. but that is not there at the moment. anna: pearson agreeing to sell out a stake in penguin house and recapitalizing the business, $1erating approximately billion. this is in line with their strategy, they say.
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it allows the company to produce , returning 300 million pounds of capital to shareholders amid a buyback and a significant income stream from a 25% -- connie 5% stake in the company. the latest on that one. keep an eye on that. manus: guidance over at marks & spencer's. along with hsbc, we saw a nice rally in the asian trading session. equities are rallying, technology was a facet of markets moving higher in earlier trade. theses reflected in market -- equity markets. r.b.i. colleagues get ready for an earning season where we haven't seen cuts to earnings outlook. huge are trading higher, london, paris and frankfurt. a point higher in europe. risk on vibe coming to the asian
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session, as well. a lot of big u.s. corporate reporting this week. volumes inrgan, low asian trading session, but lots to look for. yellen speaking tomorrow. the fed speaker speaking later. you will keep an eye on u.s. two-year yields. manus: one fact, you've got short positions absolutely aggressively being put on. the dollar.on two-year short as additions hitting the highest level since 2008. the bond traders have had hawkish views from the central bankers. oil better bid this morning. a slightly stronger market, holding above $44. looking for stockpiles today. nationwide inventories expected to fall 2.85 million barrels. to cut supplyment is working, that is a message.
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anna: we have yields a little higher in bond markets. price to little weaker across the bond market. euro featuree there. let's get the first word news with juliette saly. juliette: president donald trump has nominated the federal reserve's top regulator. bushs in the george w. administration and is managing director at a salt lake city-based private equity firm. a pivotalcted to play role in carrying out trump's pledge to ease regulatory restraints after the financial crisis. rex tillerson is in the gulf in a bid to resolve the saudi crisis in qatar. he will shuttle this week attempting to bridge the gap between the two sides. washington is in a difficult position. -- saudi arabia is
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the top buyer of american weapons. ondi alliance severed ties june 5. qatar has been able to weather much of its isolation. tot in part by turning turkey for diplomatic support and food imports. turkey's deputy prime minister says his company supports qatar but says -- prosperity maintained in the region. >> yes, we have strong ties with all of these countries. yes, we think qatar should be treated more fair fashioned. but we don't want any fallout when it comes to trade investments, and i'm sure we can manage that. juliette: donald trump's juniors anyer confirmed he received email last you're offering a meeting with someone who had potentially damaging information on hillary clinton. the skin hours after reports the younger trump was told it was
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part of the russian effort to help his father's campaign. the entreaty came from an email of a former british tablets -- tabloid journalist linked to trump through the miss universe passion. -- pageant. the confederation of british industry's says u.k. banks and life insurers are less optimistic in outlook because of uncertainty over brexit. sentiment fell in a -- the three months to june. this according to a study of 94 firms. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . has manus and anna were talking about, we have seen a rally in thehang seng, particularly last hour. hsbc shares driving this game. on the back for -- best back to backing into months.
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flat on the asx 200 on the close. but we are seeing a rebound in a lot of tech players. apple supply doing well in the taipei session. other stocks we have been watching. for wonder groups. oner deutsche says a buy chinese demand, a preferred brand due to the policy could increase in milk product demand. we're seeing a nikkei news report that is reasons to counter the gambling addiction you have seen and crackdown on the pachinko in japan. this is quite an incredible story on the bloomberg. you have seen an increase in demand for nonperforming loans
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or bad debt in china. one website owned by alibaba is now allowing you to buy chinese bad debt online along with your groceries and other goods. we have seen chinese bad loans, the hottest commodity, up more than 30% this year but are starting to see some signs as reflected by the yellow line of flattening. manus: juliet, thank you. now anna knows what to get me for my birthday. a little bit of corporate debt. as juliette was saying, asian stocks higher this morning ahead policy reportn's to congress tomorrow. her testimony comes after stronger jobs report on friday. this will keep the central bank on track to raise rates once more and begin unwinding that $4.5 trillion balance sheet. spoke inn williams sydney about u.s. inflation and interest rates. john: i would argue if inflation , which i don't%
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expect this to happen, that would argue from going more gradually at raising interest rates or hold off on doing that for a while. i am not overly concerned about that because in the u.s., i do see a lot of signs of an economy doing well. latest employment numbers, clear the economy is strong and moving ahead. joined, welcome to the show. john williams, i saw a note from an analyst saying he is the crocodile dundee. but he reckons you get one more hike done and a little balance sheet reduction on the way. can they do both things, continue to raise rates, reduce the balance sheet without unseating this deferential -- over the u.s. 10 year yield.
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can it go well for markets? >> definitely the hope is for that to go smoothly. we do have the expectation for them to hike one more time this year and also, data does support starting to talk about balance sheet reduction. risk ofink there is the markets in a more exciting -- excited session. we have seen the risk is definitely there. it is not our base case. we think is more to go for equities to fortify. >> what would crystallize that risk? the earnings season not being as strong as expected? the data in the u.s. rolling over a little? what would be the thing that would cause markets to fallout? this is quite relaxed with the hiking cycle. data, we surfs to
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-- see further upside. it is not something we are concerned about. not only coming from the u.s., but europe as well and globally. we are not so concerned about data. earnings is something to watch out for. so far, as opposed to previous cycles where you start the year with high earnings estimate and over the years, it gets downgraded. we have not seen that so far this year. something worth watching as we head into the earnings season for q2. we do think markets this time around are in better positions for rate hikes than higher cycles and as a result, we prefer equities over loans. manus: what happens in the state of the curve. , onet two-year notes in flashing story is the market is so sure of you -- two-year paper, it hasn't been this short since 2008. what happens for you in terms of the curve and what impact that
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has in terms of financials. butve had a cracking run, people are talking about the curve begin to flatten potentially. see term premiums creeping back in over the medium term. in the short-term, markets reprice -- let's say beyond the end of this year, next year and beyond the rate hike cycle. the concept of time also needs to be readjusted given the gradual cycle we are in right now. being in the cycle for some time, maybe we are coming to the end. this in an economy where you do think there is more room for this to prolong and therefore, the upside for risk assets. anna: and further upside to the banking sector. wei: we prefer financials on a selective basis. manus: you talk about rethinking risk. this is a theme that covers a few different guests.
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it was going swimmingly well with his chart -- skip to five years. this is the volatility index in the bond market. this is what you had. a five-year view of that. what unseats that? historically, it doesn't look like a couple of interest rate hikes is going to unseat this. you say today's low volatility regime will persist for longer than many expect. is that in bonds, equities, fx? wei: across assets, because they tend to be correlated. more broadly speaking, the fact we think volatility can stay lower a little longer is backed up by a benign macro environment. if we do have the macro benign backdrop, volatility going from low regime too high regime is not likely and we have stayed in this current environment and
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therefore, this environment is our preferred. -- preferred environment. anna: wei li, blackrock ishares emea head investment strategy for ishares. -- howwhat do the latest is e-commerce shaking up the sector? that is next. this is bloomberg. ♪
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♪ welcome back. it is 8:18 in berlin. 113euro against the dollar, -89. let's get a business flash. snap shares have fallen below ipo price and closed a penny shy of $17 a piece. snap drew investors who were enthusiastic about a company
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popular with young people for sending messages to peers. now the question the company's ability to grow as fast as expected amid wider declines in tech stocks. best buy to fell the most in more than a year after amazon introduced a service that threatened its the squad business. amazon smart home services is designed to help customers install and configure products. ofvices account for about 5% revenue for best buy, which acquired geeks squad more than a decade ago. shares have been up around 30% before monday's tumble. china is cracking down on what its citizens can find on the web read china has ordered its three major telecom providers to block individual access to virtual private networks by february 1. majorng vpns shuts down a window to the global internet bypassedps users
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restrictions. thousands of websites are blocked in china, including facebook, the bbc, twitter and some google sites including youtube. that is your bloomberg business flash. manus: thank you very much. sales.m., first-quarter estimates.es missed .hey fell 1.2% amid an estimate our senior consumer analyst with bloomberg intelligence. take us behind the numbers because when you sat down and said, a miss on both numbers. you said yes, but steve fro is delivering a different type of report. >> one interesting number is sales were up 7% in clothing and home. he is doing what he said he would do. fewer discounts. ms still isn't on sale at the moment. therefore, getting higher margin for price sales through.
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>> this is in comparison to other retailers who have been having to discount more. have, but not the same thing. m&s seems to be doing better than that. anna: what about the food side? sales areame-store down, but and mend us is one of the few food retailers that is going into the space race. lots of store openings, total sales up 4.5%. a little. sales down manus: charles, thank you very much. the very latest on marks and expenses. so just listening to that, in terms of the headline numbers, perhaps look a little
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disappointing, but as charles was pointing out, they are going for the full monty in terms of delivery. when you look at these numbers, this is the pound and the brc. these are the biggest challenges for the bank of england in terms of policy. the pound is getting punched, but we are bucking the trend. how much pressure is there in the system in the u.k.? u.k. economy is starting to show cracks. it has taken a while after the brexit referendum. it is starting to come through. the business side has always been quite soft. consumption has been holding things up. they are starting to tail off and we are seeing that continuing for a while. as the result of that sentiment towards the u.k. economy, has not been constructed at all. how flow since the latest general election has not come back. had a preference for
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eurozone equities rather than you it -- u.k. equities and that continues in light of the numbers coming through. anna: where's the story around the bank of england head? talke midst of all of this about the weakness and u.k. economy, we for have had hawkish talks from the bank of england. they haven't voted to unwind the extra stimulus at the time of the brexit vote. you expect them to? we'll see a rate hike to get rid of? terms of the hawkish repricing lately, it might have been overdone. there is a quite dovish core around carney. we don't see that changing in light of expectations. we do not expect we hiking anytime soon. manus: there is this cracking story we have in terms of broke -- post-brexit u.k. trade deal. , we areting point is
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told over the weekend by donald, get ready for a great trade deal. that will be perhaps a political win for the u.k. if that moves forward. terms of our relationship, the trading relationships for the u.k., would this help the economic story? a new trade deal with the west versus the larger one they want to get them with europe? wei: it is important to pay attention to what gets done rather than what's get -- what gets said. a lot of things are -- >> no truer words were said on this set. wei: we look at what is currently in place which is not a lot. going back to our preference for eurozone equities. anna: you also like japanese equities. is there something that unites the two? supported by both an earnings upgrade that has been strong this year and are geared to global reflation themes, going from an
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acceleration phase two sustained expansion phase. beyond that, for jack whitty -- japanese equities, we see the ecb talking about potentially more pricing and the fed going towards more hawkish fight -- pricing, as well. in a very accommodative stance, that could lead to future weakening that hasn't happened this year, but that could happen and that would be the final catalyst for japanese equities to cut -- catch up. anna: a lot of people know the yen is the place to go as a haven in times of trouble. a lot of geopolitical tension around north korea. thatan sachs did analysis proves it is the workplace to go at times and geopolitical crisis. that unseats that argument a little. wei: that has been the reason why year-to-date, japanese equities are marked down as their global peers. what is changing is the central bank divergence theme
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is more pronounced and you have bouts of volatility that can still beat out the yen and japanese equity performance. investors are increasingly going -- ater exposures such as some point this year and longer-term stories like he sg investing. it is not just the yen as a safe haven destination. manus: thank you very much. wei li, blackrock ishares emea head investment strategy. higherare going to trade into the opening. a couple individual names to keep an eye on. the marks & spencer story. they are selling more at full price. and pearson, as well. 22% stake in penguin random house. keep an eye on that. reiterating the 2017.
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the european open is up next. we will talk about u.k. politics. plenty of that coming up. as is bloomberg. ♪ as
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♪ guy: welcome to bloomberg markets, the european open. s equities about to open here in europe. the first trade of the day. matt miller is back in berlin. what are we watching this morning? is britain heading for cross party cooperation? ideas for the opposition in a speech later today. the view from professor john curtis. the president's oldest son was told

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