tv Bloomberg Markets Americas Bloomberg July 17, 2017 10:00am-11:00am EDT
vonnie: here are the top stories we are covering at bloomberg and around the world. u.s. stocks hovering around records. does the rally still have legs? -- are theyn tech poised for further gains? in politics, president donald trump is mulling a shakeup at the white house as the senate health care bill remains delayed here and we will tell you what changes may be coming. in corporate news, procter & gamble becomes the latest corporate giant. nelson peltz is angling for a seat in the busy jumpstart. all of that is coming in the next two hours. we are 30 minutes into the trading day of the u.s., and we are not moving very far. is moving enough, catching up to the closing
indices that set the records on friday. any gains for the s&p 500 or for may make a record close for today's session. we are in the summer to older us. -- the summer doldrums. if you are looking at global risk, we are seeing it fall to the lowest we have seen for some time. global riskp aversion macro index -- the red line here is the average we have seen over the last decade. so now we have seen this index fall so much that it has met the average from the prior decade. that risk aversion is at relatively low levels. but again, there are pockets of activities where we are seeing risk aversion today, to continuing risk aversion in financials. after the numbers that we got friday and citigroup and wells fargo that sent those stocks lower, they are continuing to trend lower today at the numbers later this week and the likes of
goldman sachs and morgan stanley, each down around a half of 1%. the exception was in the bank of new york, which has paired some of its early gains after the company announced it was replacing its chief executive officer, gerald hassle. he will be chairman of the board through december. the most recent ceo of these a will be his -- of fisa will be his replacement. we are also watching blue apron this morning. the stocks since the ipo. here you have it. the ipo $10 a share, now trading at $6.69. it has lost a third of its value and continues to decline this morning. says it is planning prepared food hits, composed of poultry, and, vegetables.
it sounds familiar, exactly what blue apron does. yet another business amazon might beginning into just -- justof its filed because it filed a trademark application does not mean it is getting to this. it is causing concern for blue apron. looking at metals on the back of the chinese economic data that we got, overall economic data your gross domestic product up 6.9%. industrial output rising 7.6%. you are seeing iron ore rally by 5%. you have copper and zinc higher. bump,etting less of the up .5%. about 19 minutes till the close of trading in europe. metalsd you brought up because we are seeing commodities produced outperforming when you look at the stoxx 600. not quite enough to lift the benchmark today. if you look here at various indistinct -- various is indices, the ftse is up .4%.
the gains in the ftse might be partly due to a weaker sterling. euro pretty much unchanged. it has dropped off the board, but we are looking pretty flat. the fixed income yields are moving lower. metals bid for the most part, as you were just saying, brent crude lower, but .3%. 600, as ie stoxx said, pretty much flat overall. this is the distribution between different countries here in western europe. i talked about the u.k. being hired by .4%. in norway, belgium, denmark, some weakness in germany, down .3%. france down a bit as well as germany and spain. over the past cointreau days,
where still up 1.5%, still above 1.3073. with all that in mind, i wanted to take a look at the tilt bond undeear -- the gilt b 10-year spread. we might narrow more as the peeked -- the peak in british data will expand. particularly in relation to euro sterling because we see the spread narrowing. thank you for that. let's stay on markets. struggling for direction after hitting fresh highs. joining us now is -- vice-chairman of equities at -- talk to us about the was economy
and how we seem to have stalled out in the second quarter. many economists are chagrined they were not expecting that to be so much the case are nevertheless, you're still bullish on u.s. large cap. >> good morning, vonnie. the soft data has been problematic of late, but the earnings numbers we talked about the last time are the best we have seen since 2013. we are about to mend another second quarter of earnings. start the second quarter earnings next week right at the end of a lie and the mad days of summer. you will see further growth there, so even the soft data, though it has been bad, the earnings numbers will support the market going forward. i have to ask you about the individual sectors because you have upgraded information technology in your list of
recommendations. it went from number five favored to number two roughly. the semiconductor index, if you max it out, is not that far off where the highs were in 2001, 2000, before the bubble burst for technology. do you still stand by the fact that i.t. is going to make more gains the act of patrick: i think so -- is going to make more gains you go patrick: i .hink so back then, i remember when stocks were trading at 60 times earnings. they were trading at 25 times, with amazon down on an average basis or you have these wonderful semiconductor companies. the mix is changing dramatically with 3-d entertainment expected. cyclicalto get very trends. --hink there is good reason
barron mind you can buy value to -- bear in mind that you can buy value tech as well as expensive tech. they are not expensive relative to the bubble territory that they used to be in many years ago. we are still very optimistic for i.t., and you have to bear in mind that interest rates are low. with technology stocks keeping, as long as you are getting earnings revisions that are positive, these stocks will continue to perform. as we enter the second quarter earnings, these nubbers will be positive. that's these numbers will be positive. nejra: you think the bullish drop in lower volatility just fuels this. terms of what people are saying and doing with that money -- i have never known a bull market that has been so hated. i think a lot of this volatility is because of enormous qe.
it takes a lot of the volatility out. despite people saying they are concerned and the market -- despite people saying they are concerned, the market is trading at an all-time high. i think we will continue to do well. nejra: that is partly because there is more cash sitting on the sidelines. that in aeway argues world of full employment, study welation, pretty much where are now, the correlation between stocks and bonds is indeterminate. how much attention should equity investors be paying to what is happening in the bond market right now? patrick: good question. i am in equities guy, so i will be optimistic on equities. if you look at the earnings yield of equities, they are at about 5%. if you look at 10-year treasuries, they are at about 2.5%. you are getting have the basis
points to hold bonds. in my mind, the place to be is in equities. it is just a valuation argument. it is not because i am in equities guy. it is because that is where -- it is not because i am a neck woody's guy -- in equities guy. maybe they run higher because of zero inflation possibly. beyond the fundamentals, patrick, what about the potential for m&a? where do you see it, given the better currency between here and the united kingdom, or europe more generally? patrick: that is a great question, too. certainly the energy space has been under pressure. shale energy, you are starting to see some of the smarter hedge funds get into trading in terms of energy spread. more ora lot of these
less shale plays are trading historically at very low levels. that will be good m&a environments. as you talk about -- i think we will see a lot of m&a continued activity from u.s. corporate coming to europe because of the weakness of especially sterling, and the cheapness of the london market. so energy and u.s. companies buying european. nejra: what are the risks to the bull market, then? is it because equities are an inflation hedge, so if we get a inflation, the bond markets have not been buying up until now so that is the risk? mostck: equity markets are affected by interest rates falling. if you have that horrible headwind of falling earnings and a higher interest rate, there has been so much rhetoric about the fed tapering their balance sheet and everybody thinks that
is a major concern. we do not think rising interest rates are a real problem here. the markets are anticipating another 50% rise by december of this year. but if you look at the tapering, it has been well-documented by janet yellen. she says they are going to 10 billion, then maybe to 30 billion, then maybe to 50 billion. interest rates if they go at that level will be back to pre-interest -- back to pre-recession levels by 2023. you still have a long way before we see the higher rate. i think earnings continued to do well. i think you are still in a very good environment for equities. nejra: in europe when we saw bond meals -- bond yields move higher, equities shifted. do you see that continuing? patrick: i do like value stocks. in the final stages of the bull market, which can run for many years because you have no
euphoria, and i think that is where we are -- in the late stages of the bull market, cyclicals will do better, especially if the economy is doing well. things like material stocks, the energy stocks, the industrials. all the cyclical stocks, the value stocks are cheaper. people will move away from growth there you have seen this huge rotation, i think $120 million came out last week from the growth etf in the u.s. into the value trade. that is a good question and i think value should now begin to outperform growth. nejra: thank you so much to patrick spencer. great to have you on the program. vonnie: let's check in on the bloomberg first word news with emma chandra. emma: according to the new bloomberg national poll, americans feel good about the economy but not so good about president trump. 58% of those surveyed say they are close to realizing that 55% of americans
v view the president unfavorably. vote mcconnell has set a on the controversial republican health care bill on hold because john mccain is recovering from unexpected surgery. the second round of brexit talks began today in brussels. brussels secretary david davis is pushing for progress on the rights of citizens living in each other's nations. citizens rights is one of the three issues where there must be progress. moscow is demanding that the u.s. returned the russian embassy's country houses outside washington and new york. obama administration sees
the houses at the end of the year in retaliation for election hacking. russia hopes to resolve the disputed talks today -- the dispute in talks today in washington. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am emma chandra. this is bloomberg. up, oil fluctuates as gold continues to rise. we will navigate the week ahead for commodities and the dollar. that is next. this is bloomberg. ♪
day as data clouds the rate outlook. the dollar is fairly steady. joining us now is joe cusick. great to have you. i want to start with the dollar. if we look at the relative strength index today, looking a little oversold. is it time to buy that? 95 levelve watched the per that is the pivot point we are watching. if it holds there, you could start to see that the dollar is going to start challenging, 96 and some change in that level. i want to see a little bit more of this 95 pivot. that is a critical level. 95.92 on the dollar index now. speaking of the weaker dollar, how it has been feeding into weaker commodities -- do you think that is what is giving oil the upward motion as well? --the weaker dollar has
overnight, you saw that the chinese data came out a little bit better than expected. you saw gdp, you are also seeing steel production a little bit higher. expectation of essentially a healthier economy than people anticipated in china, but that dollar really has given a boost to oil, and has been able to hold that -- been able to hold at 45. the sweet spot and oil will be the 45, 40 four dollars level. rig counts that have increased. we have two more online last week. brent, though -- one thing about brent that you want to watch, nigerian libyan and production numbers. they keep coming out higher than expected. bp -- thatopec -- could put out the opec production freeze a little bit in jeopardy. we are down .3% in the
session. i just want to ask you about gold. it had a good week last week. how much further does that have to run? joe: it has to get well above $12.37. the dollar weakness is helping, but i think we have got to watch the inflation numbers that continue to come out that are a little bit mixed out of europe, and then also in the states. nejra: joe cusick, thank you so much. vonnie: still ahead, china's economy maintained its momentum last quarter. we have the full report from shanghai next. this is bloomberg. ♪
markets." i am nejra cehic, in london, with vonnie quinn in new york. vonnie: now to china's better-than-expected forecast gdp, the economy is continuing as a -- at a robust pace. economic growth beat forecast in the second quarter, matching what the economy did in the first quarter at 6.9%. .e were expecting 6.8% this comes as the government is pushing a deleveraging campaign and reducing systemic risk from the economy. but as we saw a earlier from strong export numbers in june, factories in china are picking up the pace. industrial production in june handily beat forecasts, coming in at 7.6% growth year over year. retail sales also doing really well. consumers doing their part to
prop up the economy, coming in at 11% growth year over year. that was higher than expected. this as we learned over the weekend that chinese authorities have established a cabinet level committee, with the pboc having more power to keep other regulatory bodies and other insurance regulatory agencies in line as they want to coordinate financial oversight. this spooked the markets here in asia today as there is fear that more regulation could be coming down the pipe from chinese authorities. stephen engle, bloomberg news, shanghai. the shanghai composite closing down at 1.4% in the session. a lot of questions over whether better than expected growth will give pboc more leeway for deleveraging. it is time for the bloomberg business flash. procter & gamble faces a proxy fight from nelson peltz's try and -- trian fund management
over what it calls the consumer product company's slow-moving and insular culture. the buyout firm kkr is preparing for the future, promoting two executives in the 40's to the new roles of copresident and co-chief operating officers. henry kravitz and george roberts will remain as co-ceo's and cochairman. credit suisse is working on a new strategic three-year plan that will focus investing on its most operable areas. according to a memo seen by bloomberg, the swiss bank moved up a strategy meeting to june from the usual time of late august. credit suisse says the new plan should drive the back valuation higher after 2018. that is your business flash. really interesting that credit suisse is signaling the euro of
cost cutting and job cuts may soon be over. up 34% overstock is the last 12 months, but if you look at the last 10 years, it is down 18%. it has been very difficult to staff come -- to staff, based on onse waiting for payout stock performance. nejra: still ahead, with health care on hold for now, you was president donald trump is turning his attention back to trade. this is bloomberg. ♪
emma has the bloomberg first word news. emma: trump is preparing to shake up his legal team, and the changes may not stop there as heat up.tions the president is likely to move his longtime attorney to a less prominent role of according to a person familiar with his thinking. tomorrow, british prime minister theresa may will remind her cabinet they need to keep their weekly meetings private after leaks aimed at-- the chancellor of exchequer. the european central bank is likely to drag out the progress its stimulus program. the ecb will probably hold off action this weekend wait until september. is lasting nine months.
in south korea, the new president is following through on campaign promises to dialogue with north korea. that comes after north korea pursued a willingness to the overture. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. vonnie: thank you. with health care on hold for now, what is next for the senate? we have more now from our chief washington correspondent, kevin cirilli, who has a special guest. kevin: we are here with senator chuck grassley, a republican from iowa. is there going to be a vote on health care this week? sen. grassley: according to what i heard, the answer is no. i think i have to take the leader -- he makes the decision of what is coming up, so we are
told it will not come up this week. kevin: do you think senator mccain's health -- obviously, everyone wishing him well -- will it end up playing this vote until after august recess? sen. grassley: i do not think so. i do not exactly know what his condition is, but what i heard over the weekend, it seemed like me it was not anything to keep him from the center for a long time. as long as we are going to be in session until august 12, instead of having a five-week break for summer break, we will have a three-week break. i assume we will get this done before summer break is over. kevin: there are about eight to 12 republicans undecided about this health care legislation. where do you stand on it? sen. grassley: i stand on voting to bring it up. all 100 senators ought to have a chance to consider and debate it . we have the responsibility to make sure it is brought up.
i have definitely a yes vote to bring it up. if you are asking me, like in the iowa press today, it would be a good thing not to do like speaker pelosi said -- we have to pass it to know what is in it. i think people expect us to know what is in a beforehand, and there will be changes now before it is brought up next week, and there will be amendments. i want to wait before we get done with your memos before i decide how to vote. kevin: what are changes you would like to see? i think a lot of changes have been made. number one is, affecting iowa, in two ways. one, we got 72,000 people who cannot get insurance. if we pass a bill, i think those of 72,000 people will be able to get insurance. on the medicaid portions, the used 2016 as a benchmark -- that is bad for
iowa, because iowa privatized its medicaid over the last two years. so we have a better benchmark worked in. kevin: i want to ask about task -- tax reform. do you have to get health care done before you address tax reform? sen. grassley: you do not absolutely have to get it done, but if you get it done, it will make passing tax reform easier. -- i wonder if it has any support in the house of representatives. i think we are going to have to work on a pattern set in the 1986 tax bill, broaden the tax base, and lower marginal tax rates. kevin: let me ask about the senate fiduciary committee. who are you hoping to have testified before this committee with regards to russia and its meddling? sen. grassley: we are trying to get paul manafort and trump.
and since i feel very comfortable inviting trump junior, because he said he wanted to be very transparent, to want to talk about anything you want to talk about. it ought to satisfy everybody that what he has said now on television, people that have some qualms about whether that is the full story, any of the witnesses that come before my committee that are under oath, they ought to be satisfied they are getting answers. as far as i am concerned, based upon -- i do not know him personally, but what i do know about him, he is very willing to tell his side of the story. kevin: you would like the president to testify? sen. grassley: no, trump jr.. grassley,ator chuck an avid runner and push-up master, thank you.
vonnie: thanks to kevin cirilli. let's get more insight on the health care debate with secure a manual, the former -- emmanuel discussed some of the steps he outlined in a new book called "prescription for the future." >> we are spending more than only three other economies in the world. we are spending more than the entire gdp of france or britain. we are actually underperforming on every measure you look at, whether it is infant mortality, longevity, even treatment for heart disease and other things. we are not doing well. we have a system that is rife with waste, inefficiently delivered services, unnecessary services, and high prices. it really needs to be reformed. one of the tragedies is i think
there is bipartisan agreement that we need to bring health care costs down, and yet the republican bill does nothing of the sort. what i tried to do was go to places that are doing a great job and finding out what we can learn from those places knocking it out of the park. those are the 12 transformational practices. >> unfortunately, we will not have time to go through all 12. but what is the overview of the basic factors that could really be changed that would give us that are value for our money? highlight the first one is it really starts at scheduling. how do you schedule an appointment? most doctors start at monday morning and have a full list of patients. doctors start the day and half of the employment -- patient slots are anti-. people who walk in and find out they have the time and need a repetitive service, and that works much more better, because people who have a problem today
are seen today and not seen three or four or five weeks from now, when the problem could have gotten worse, and other things could have intervened. the second thing, and i think this is very important for people to understand -- $.84 of every dollar in the health care system goes to people with chronic illness, like my patients with cancer or with parkinson's or diabetes. if you want to reduce costs, you have to focus on the $.84 and people with chronic illness. places that have knocked it out of the park are places that have created a very good mechanism for dealing with patients with chronic aziz. they get chronic care order new years -- coordinators. if meet patients face-to-face. the educate them about the disease. they do not wait for patients to come in with a complaint, they do proactive outreach and monitoring. one place in california runs a
vonnie quinn. i am nejraondon, cehic. time for the bloomberg business flash, a look at some of the biggest business stories right now. trialdon, a judge set the date for four former barclays executives. former ceo and three others will go on trial in january, 2019. they indicated they will lead not guilty. a italy, unicredit completed bad loan deal. the banks will issue notes backed by the loans and will reduce its holding of its less than 20%. up pressure last year on italian banks to offload bad assets. a growing number of companies in the u.s. have problems recruiting skilled workers, according to the national association of business economics. businesses survey cannot
find the workers they need. there is concern a labor shortage could hurt profits. that is your business flash. time now for our bloomberg quick take, where you find context and background on issues of interest. is your asset manager skilled enough to beat the markets? more and more people are saying no. so is the world's largest asset manager, black rock, which is paring back its active equities group and focusing more on what is known as passive investing. it is an approach endorsed by warren buffett. a little more than one third of all assets in the u.s. are in passive funds. 2017, flowslf of into passive it reached nearly $500 billion. vanguard group created the first
index for retail investors and have seen winners, as has blackrock. for companies that specialize in active management, they are slimming down. others are emerging or even closing passive investments. here is the background. active investing often means putting money into mutual funds as managers make case-by-case decisions. passive investments track investments which are groups that are alike in some ways. funds chargee higher fees, their actual performance will generally be worse than the index counterpart. here are the arguments. a study by the s&p dow jones some actived managers failed to beat sales. in their defense, active managers say the period since
the 2008 financial crisis has been abnormal, with many stocks moving in lockstep. they say this is likely to decline as the economy moves into an environment that will stocks andre off of bonds. you can read all of our quick takes at and i quick -- at niquick at the bloomberg. nejra: procter & gamble are facing a proxy fight from investor nelson peltz. is bloombergw deals reporter scott deveau. what is trian fund looking for? one seat on the board. obviously, there is something behind that. they want an exhilaration of the existing -- and acceleration of
the existing plan to improve performance. >> is a enough to have a seat on the board? scott: what is happening now, we are seeing it at nestle, these top-tier activists are taking a small stake, but there name recognition and the gravitas that comes with their presence is giving them what they need. vonnie: trian just wants to shake things up and get things moving a little bit. why not just write a letter? scott: good question. they could just write a letter. they have had conversations with some saying they want to accelerate this $13 billion cost savings claims. but at one of the meetings, they also asked for a seat. the idea is it is better to have peltz in the fold then outside the full, criticizing your every move. png -up- p&g up
ever so slightly. is there a sense that other investors will agree? scott: i think even the company arteries. eventhey point -- i think the company agrees. there has obviously been an increase in the u.s. dollar relative to foreign currencies. they recognize this themselves and have implemented their own plan. the question they are faced with is peltz says why not put me on the board, and p&g says why would we? nejra: can we take them at face value? there are plenty of parts of p&g that could be spun off. who knows where that goes. honestly, if he gets in there, there is the possibility he may agitate for more change.
but as he says now, that is not part of the plan. >> how successful has this activism been at other companies? scott: we are seeing more of this all the time. nestle has just been targeted. the problem is there has been a fundamental shift in the consumer packaging brand marketing, basically. you get increased competition from online. at the same time, you are getting lower value, lower-priced competition. that is affecting your pricing power. all of these companies are underperforming. the question is there anything you can do to write -- the righ -- to right the ship? scott deveau. to taking a look at shares of tesla, falling to session lows. down almost 4%. yuan musk said over the weekend
the radar issue, but swedish banks are starting to account for the slight risk the governor made by putting cash aside as a buffer. the reason it is controversial is if government bonds are no longer risk free, you essentially have to find a risk weight into it. so they are able to hold them without any capital held against the bonds. obviously, the european debt crisis, particularly what happened in greece, shows it is possible for a government to default, but in the euro area, regulators have been trying and failing to bring this onto the agenda for a good long while. significant, is even outside the euro area.
surprising, given that bonds are no longer a risk-free return but more like a return-free risk. paul: exactly. it has to do with the accounting, but it is important for a lot of governments, particularly italy and spain, that the domestic bank holds a chunk,l -- reasonal which means that the bank can hold liquid assets without having to worry about it too much. is if one starts to wobble. vonnie: the other scandinavian regulators, the danish and norwegian regulators, say they will not follow suit. does that give them a regular advantage over sweden or vice v ersa?
i think the way these -- each jurisdiction will account for this is it will take a long time before there is any monetization. whether it matters that much to these scandinavian countries, which have solid credit ratings, remains to be seen. what is more crucial is how this reflects on perceptions of government bonds in the euro region. for example, greece is coming back to market before too long. this sort of issue raises the premium to be able to hold onto government bonds and will make it less attractive for the government to sell. draghi, speaking of the european central bank, would never allow any country within the euro area to not be considered full faith in credit. he would never let that happen.
paul: at the moment, the european central bank is not buying greek government bonds because they have this perception that the securities -- the countries may not be on a completely sustainable system. the push is to ensure that governments are as devoid of risk as possible. also, just quickly, bloomberg has done its survey ahead of the ecb meeting thursday. it looks like the expectation is that tapering could be slower than previously expected. meeting --nk the ecb mario draghi wanted to be as much of a nonevent as possible. is all about after this summer, and then we will have another look at it. exactly how quick they are, if they said a target on it, then
open so better leave it it is not challenged in the debt market. nejra: you can read more about the on the bloomberg and read all of paul dobson's comments on mlib go. and we will have full coverage thursday.'s decision coming up, we are following stocks. less than 30 minutes before the end of trading. this is bloomberg. ♪
vonnie quinn. this is the "european close" on "bloomberg markets." ♪ nejra: here are the top stories we are covering. even with stocks at record highs, is it time for investors to start taking on more risk? we will talk to a simon smiles of ubs, who say the ultra wealthy are still hoarding too much cash. are we seeing similarities to the year 1998 in stocks? does that mean a repeat of the dot-com bubble is coming? we will speak with doug ramsey. and brexit secretary david davis is back in brussels for more talks with michel barnier. the rights of e.u. citizens are