tv Bloomberg Markets European Close Bloomberg July 20, 2017 11:00am-12:00pm EDT
reporting. u.s. special counsel investigating possible ties between the donald trump campaign and russia is examining a broad range of transactions involving trumps businesses as well as those of his associates, including jared kushner, all manner of fort and the president himself. investigators are looking at real estate dealings and bank transactions. you can read more online or on bloomberg to read the full details, including trump hotels, the miss universe pageant, and much more. again, bloomberg exclusive reporting. markets are reacting, particular he the dollar. julie: the dollar has been more react to political news than we have seen stocks react to political news. this time was no different. the dollar at 10:00 a.m. taking a leica lower. it had already be turning lower
following the ecb press conference, but the sharp move came out after the robert .6%ler story came out, down and continuing the downtrend for the u.s. dollar as of late. we did see a leica lower in stocks as well. they have largely recovered and now back to the little change line where we did see a bit of reaction in trading volume. trading volume has been low. along with volatility. this is the average volume for the s&p 500. if you look at the bloomberg terminal, we did see a spike. look at whatn to i'm talking about. you have the average fall you for 20 days in the blue bars. the white line is where we are today. at 10:30, we saw that spike in volume. but forome back down,
the first time volume above the 20 day average, 10% for the s&p 500, so a couple of reactions to that story coming out and speculation about what the mother investigation might yield and what that might mean for the further legislative chances of things like tax reforms. vonnie: thank you for that breakdown. for some legal insight on this, is a law professor at george washington university. typical or atypical would it be that something started out as an investigation of a campaign ties to russia during the campaign that that would expand to take and now the president's business transactions and those of his associates? >> the highest risk for the trump administration was always the relatively ambiguous mandate given to the special counsel.
the way it was drafted, it was not particularly narrow and special counsel investigations tended to expand with time. when you begin with something as general as the mandate given to mueller, it is not surprising. with ame inevitable bunch of missteps by the trump administration. they have almost invited the expansion of this investigation. this is not good news obviously. you are talking about a president and his family that have fixed since of holdings around the world. you are also speaking of a president who has been obsessed with not releasing tax returns and other financial data. now that is going to end up being given to robert mueller, so the question again for the trump administration is why they
are constantly three beats behind in terms of anticipating these types of developments. vonnie: robert mueller is used to following the money. he led up the enron investigation, but here we have , lookingtransactions at russian purchases of apartments and trumps buildings, the soho development in new york , the 2013 miss universe pageant , very specific things. lead robert mueller to these particular transactions, or is he investigating all transactions? >> it is very likely that any is going to result in a broader discovery demand of things like tax returns. he is clearly looking at the the trump family has benefited from russian interest, and also as reported today, the possibility that people like paul manafort may have been in debt to russian
interests. that is a very messy situation. most international business transactions of this size involve a great number of different types of investors, banks and other factors. so once you start peeling back appeal an, you tend to lot more as you go deeper into the transactions. what legal random modifications might there be for the president or any of his associates before the investigation is concluded? >> the greatest concern i would have is an over reaction from the white house. the president has been talking about his unhappiness with the attorney general, with robert mueller and others. he wants tong that do is move to fire robert mueller. on a path put this
towards issues like impeachment, themost likely in short-term result in the independent counsel act being reestablished by congress, so it is important for the white house not to overreact. in terms of threat criminal charges would be any type of false statements at this point. you have critical players going before congress in roughly a week. is the highest risk moment for the administration. they will be facing a skeptical group of senators from both parties. comingstions will be with real edges to them. andle like donald trump jr. jared kushner have to be extremely careful to do something that has eluded this administration, and that is to keep a consistent and coherent narrative. vonnie: how much will the public
learned during this investigation? how much will be transparent, and how much will the public have to rely on reporting for example? a so far there have been disturbing level of leaks coming out of this investigation. on that, the president has a valid point of objection. the public will eventually be told, it depends on robert mueller. it is not uncommon for a special counsel to issue a report to congress. it is also possible that someone could end up indicted and you would have an indictment that contains some of the evidence that has been gathered, so my expectation is the public will learn appropriately or inappropriately what is being disclosed. vonnie: our thanks to jonathan turley for reacting so quickly on this bloomberg exclusive that special counsel mueller is
expanding the program to trumps business transactions and his associates. we will continue to follow the story. nejra: great reporting from bloomberg news. turning to markets in central onks, let's get more insight the latest decision from the ecb to keep rates steady. heiota draghi explaining why is keeping his foot on the stimulus pedal. substantial degree of monetary accommodations is still needed for underlying inflation pressures to gradually build up and support headline inflation developments in the medium-term. let's get more insight on how this could affect markets. the managing director of portfolio strategy and asset allocation at goldman sachs. great to have you. you have done some great work on volatility recently. grinde seen the euro higher after mario draghi's press conference, but still basically on the trend of moving
higher since the start of the year. our central banks and the expectation of tightening enough to shake us out of this low volatility? >> we did not think so, even before the meeting. it is too early to expect central banks to be keen to tighten. they are not happy with the low volatility and equity violations at all time highs come a but they also don't want to undo the progress which they have done in recent years. ae low volatility is not target for them. nejra: i have this chart here, stocks and bonds globally keep rallying. this is volatility. i'm looking at the vix, still below 10. you heard that scoop from bloomberg news about investigations into president trump. risk enough to
shake us out of this low volatility environment? it does not look like it is, so what is? >> the reason why the market can shrug off political and geopolitical shocks now is that macro is incredibly strong. global growth is running close to 5%, which means recession risks are incredibly low. the reason why the market is scared a bit from the central bank side is you have that goldilocks scenario or you had growth strong and rates incredibly low, and that draws risk appetite. when you have central banks tightening policy, that could drive a reversal of risk appetite, but this concern in the interim is gone and it feels like political risks can't drive us out of globally them as long as growth is that strong. you want to see growth slowing down, at least for a few months, before political risks can matter.
there is always the potential something can escalate, but from what we heard, that's probably not enough to drive volatility to a higher level. nejra: what do you do, keep risk of the table, equities? >> this is not the first time that volatility is low for a long time. we seen it in the 1960's, 1990's, and we have seen it late cycle when growth is strong and inflation pressures are not material from the central banks are on hold as they have been. always a risk on environment, so low volatility, positive for carry trades and aluations being high, and as result, you need to be risk on. the problem is always an especially this time around, it feels uncomfortable because valuations are so high, and in particular this is different from previous low volatility episodes is rates are so low.
in previous low volatility come you did not have yields as low, which drives a strong search for no businessere is about central banks removing that support. it is a brisk on environment and you have to watch duration risks in your portfolio, and the other thing is to try to selectively hedge. nejra: how do you do that? what's hard is predicting the end of the low volatility environment, so how and when do you position yourself for that? >> what we looked at in the past is buying short dated put spreads. puts even though volatility is low, it is still quite high, and which you find is the cost of puts versus calls is high in the u.s., so you want to look at put spreads that
protect you for a small drawdown , and the reason why that makes sense is because when you transition out of a low into high time volatility, the troll done you get is actually quite small. it is only after you have transitioned that things can get really ugly. you transition to high volatility, six months or so, then you see a bear market drawdown. that is what we would expect right now. with the macro backdrop we have right now, the probability of a large correction seems quite low. nejra: very briefly, any idea of when that bear market might come? >> it is tough to predict volatility and bear markets, but what he would like to see is more growth slowdown, more moreups starting to create
leverage. i think you want to have central banks eating more under pressure to tighten policy, inflation picking up would increase the potential for more volatility, but none of those things are happening as of now. growth is strong, inflation is anchored, and it is difficult to see volatility pickup. nejra: as of now. great to have you. vonnie: great stuff. thank you. let's turn to the railroad industry in the u.s., and shares of union pacific. dropping today after the company top profit estimates. the largest publicly traded railroad getting a boost from cargo rebound led like fall will and consumer goods after traffic fell less quarter. joining us now is the chairman and ceo of union pacific. , operatingions ratios didn't prove and you are on your way to your 60% goal,
but still losing business to company.ffett's had you plan on addressing that? mention on our call with investors and analysts this morning that the market for intermodal product and coal are very competitive. by way we address that is providing our customers the best service product in the marketplace, the best value. that, we are opening other markets to our business so that we can price accordingly and grow the top line accordingly. quarter, we had 5% growth. vonnie: others would say they are providing the best service. or do you differentiate come do you do that in pricing, and does that hurt the bottom line? >> we look at our customer journey and we break that down discreetly two things that are
pain points for our customers adders.l value a adding projects incremental value, and they are telling us as we check in with them that they appreciate that work and it is making a difference. vonnie: you said in the past union as if it won't get into a price war over freight and will walk away from business if it does not meet profit criteria. our their businesses you are looking at walking away from right now? >> our pricing philosophy has not changed over years. we price for the value we represent to our customers and are willing to walk away from business if it does not generate a return that allows us to reinvest in the business. have hadly for us we plenty of business that meets those criteria. it resulted in a 5% growth in the second quarter, and we have
opportunity looking forward. up 1.5% ine pricing q2. what you anticipate for q3? said innk what we second quarter is that overall and weice was 1.5%, expect our price to exceed inflation in a dollar term. other commodities were priced at 2% or 3%, and i suspect as we look forward that we will still see some of the same competitive environment we have had in coal and intermodal, and i'm hoping other environments continue to firm up, specifically the truck market showing some signs of capacity tightening. is off today,tock so you must be saying something right. let me ask you about trade renegotiations. are you concerned about talk of
nafta and other trade negotiations? >> actually, i am not concerned. what i hear from the administration and what we saw from the u.s. trade representative in his note to congress specifically talking about the elements he wants to renegotiate is a reasonable approach. first, do no harm. second, there are a number of elements that canada, united states, and mexico can agree can be modernize, whether ip, labor law, dispute resolution, and the mechanisms enabling trade across the border in a physical sense of a so i think that negotiation will be reasonable, fair. i'm hoping it will be timely so that we can move through it relatively quickly. vonnie: you are close to all things infrastructure. i'm wondering if you know of anything that might be moving forward in terms of an infrastructure plan out of washington. administratione
is working hard to develop an infrastructure plan. it includes i think some unique financing. i think the order of magnitude, what i hear is over i long time $1 trillion injected into the united states, and we are fully supportive. robust the economy to be and healthy, and that requires an excellent highway system, a great electricity transmission and airgreat faa traffic control systems, broadband. the healthier the economy, the healthy our business. thank you for joining us today. the chairman and ceo of union pacific. that ahead, more on bloomberg scoop, robert mueller said to be expanding his probe into president trump's business transactions as well as those of his associates. this is bloomberg. ♪
♪ i am vonnie quinn. counting you down to the european equity market close. it is time for the bloomberg business flash. a reassuring sign for a retailer battered by e-commerce. agreed to sell kenmore appliances on amazon.com. it will integrate it smart appliances with alexa. the only global systemic the important financial institution in the nordic region has put off a decision whether to move its headquarters. ands now based in stockholm wants until september to see how
sweden's plans to possibly joined europe's banking union would have an impact. we have four home markets and they are part of the single market and we need predictable, i regulatory environment where we have that ability. a banking union is an important element here. nejra: they have identified copenhagen in helsinki as potential headquarters. street bankers beware, a new report from mckinsey says new technologies are poised to perform a third of work now at investment banks across trading operations and capital market businesses. that is your business flash for this hour. vonnie: still ahead, much more on that bloomberg scoop, robert mueller said to be expanding his probe into president trump's
♪ atnie: let's take a look where european markets are trading as we head to the close. lower now come off by .4%. gaining, but seeing broad-based losses. the storyuro has been since mario draghi spoke, and that has picked up also on dollar weakness. bond markets, yields coming down, particularly that 10 year yield, germany down one basis point. this is bloomberg. ♪
queckty, you see a bit of mixed picture here. euro grinding higher. above 116. we're up more than one percent euro. sterling down for a fourth day, up by .2 of a percent. below 130. retail sales data gave a brief lift but didn't last long. g10 currency declining against the dollar now. the fixed income space you yields move lower. the ten year bond yield down about one bases points. moves in the periphery. move in spain and italy too. periphery spread tightening the ecb decision and the press conference. higher. keeping close eye on oil. stock 600to the
theory. it's lower. we are seeing gains earlier. we turned into negative territory now. bit of mixed picture when it comes to distribution. commodity producers are under performing. telecom outing. today. open to show what what's euro.ing with the we really have return of long bets.ow bet -- euro speculator turn net loans three years. perhaps vindicated today as we euro.een a stronger up 1.1%. really get a hawkish mario. from didn't really talk down the currency in any way.
116.44. this is fueled by dollar weakness. for that.ank you here in the u.s., let's check out the u.s. dollar. declinear index on the after we broke that story that the specialer counsel is washington is expanding his probe to include business transactions of the his associates. dollar index now down .7 of a percent. look at the major inthey are lower. down.epot ae s&p 500 is down a tenth of percent. joining us now is w. of the exclusivebehind this greg ferrell. this has to do with the special of histor and umbrella investigation. you can tell us now that it actually entails more than just what the campaign was up to in regards to russia.
>> yes. the campaign obviously was 2015 and 2016. part of investigation, special counsel bob mueller team looking at all transactions between russians and the trump and people close to trump going back years. theres a history of russians. reported this before, buying properties in trump buildings. he has a big fan base over there. a lot of -- we've singled profilew of the highest soho is one trump and miss universe package. in 2013.de coverage partly because donald trump went to moscow and played it up. vonnie: it's the 2013 miss took placegeant that in moscow. also looking at the the sale of russiana mansion to a
oligarch back in 2008. >> right now, we're all aware what the president said yesterday about the investigation. russia.rays beyond all these transactions is a direct line. logical line into russian involvement or some connection derivedan business through russia. trump's lawyer just gave a response. ready some of the things we described in our story indicate that the special counsel has gone beyond the mandate that he was given in may was taken on this task. given a vague mandate. >> there will be some gamesmanship on a side. to trump's counsel, they want the narrowest interpretation possible whereas
from this, mueller is not taking the narrowest interpretation. are focused on russia related money. vonnie: what might special for?el mueller be looking what will be a red flag in any of these transactions? >> well, there could be individual red flags that they look for in terms of in it's a politically connected person, trump property. or evaluation. that would be an interesting thing. it will be worth finding out. the sale of the palm attractedion attention. he paid $95 million for it. it could be that he really
wanted this mansion. that's something that has attracted their attention. a good indication of what they're interested in. waiting an cbo score of the senate health bill. the clock for any kind of major legislative action of presidentyear trump's office. -- does thislearly further cost the white house and president win it comes to trying to get some kind of legislation enacted? >> i don't know. everyone on capitol hill is aware who bob mueller is and his professionalism. i guess the fact that he's will causethese certain elected officials to start doing their calculations want to be to the president or not. i think we've seen the president
the middle of a media storm. he seems to enjoy himself or be his feet than most usual politicians are in like that.hurricane vonnie: your story also tells us transactionsolves related some of trump's associates including jared for and wilbur ross. >> interest is more in the bank cypress. bank ofions through the interesting. vonnie: greg farrell thank you for that. we'll continue to follow this bloomberg the day on television. nejra: let's turn to the markets with our guest for this hour. speaking about the economy and marketkbone of the bull in the last few years. also an investment opportunity for many.
next guest isn't as optimistic. be more investors to cautious. me now is cia guy monson. i want to get into the possible tie between the donald trump campaign and russia. broadening that to president trump's transactions business tie as well. in your world, what impact does have? >> i think it raises a question the trumpether -- if trump right aggressiveto be an
rate. all three of those would appear to be threatened in enormous of time concentration distraction taken up by this battle. it's really a question for the u.s. growth agenda. nejra: how did that affect your allocation. you recently actually sort of brought down your waiting example.for your advising investors to be more cautious. >> we certainly are. numbers the last five years of the terms for global been the best combination of risk and return the 1960's. we're coming out a truly golden era. what we'll need to see higher yetits in the u.s. or need toes.enerous
begin to draw the can you taken -- curtain. worried a lovely combination where you win either tells youu win this it's more profits starting to break down. fora: you said to look out the three bears. interest rate risk shrinking. competitive amazon economy. any of those take precedence? mario, the fact in some ways his press conference was not as hawkish. euro is rallying. he really did put emphasis on that fact. installation is remaining well target. >> may 2013, still holds central bankers. backpedaling from the central in came out it'ss visible. very delicate structure.
tiptoe.he's going to probably that means indicated, reducing hughie before removing rates there'sest around there. nejra: interesting. to take to this chart. advanceseen the euro today. this is showing how really out of sync that has been what doing.are the bond yield over the u.s. treasury two year yield. earlier about the fact that hedge funds net bullish on the euro. is that a position that you think will be indicate -- vindicated. >> i think it will be. economics look good. it's about the time and cycle the euro to take up the growth battle from the u.s. there are political risks still there.
we got a spat with turkey. on.ot brexit going it's too early to call. so reason trump is interesting, reason that white low, negative so interest rates are amazing cool down on the short end of the curve. that will remain. we get thate case interest rate risk, how are you hedging against that? financials? >> it looks obvious. wonderful.s -- banka chance to use lovely its capital is robust. post of all, profits rise when yields rise. the ability to deploy a really effective interest rate
hedge. which is very unusual. we are heavily with financials with a preference moment for u.s. over europe. positions in the u.k. we love to see the interest rates move. the preference u.s. over european financials? control, excellent on credit but still interest rate hanging. you don't give effect to the u.s. there isn't huge evaluation difference. the u.k., brexit still not closed. of domesticination exposure for global banking combination. price to book, rate combo for an interest hedge. nejra: what about alternatives? over.y have turned
any yield will be pounced on and beaten down around the world. there's still opportunity in infrastructure. slightly worrying. most other alternatives have beaten down to derivative of corporate credit spread. i'm afraid equities and cash away.o nejra: thank you so much cia guy monson. great to have you on. coming up, profitability pressure. activist investors step up their drive for efficiency. company ceo next. ♪
vonnie: this is the european close on bloomberg market. look at some of the biggest the news.tories in int of investors interested buying from volkswagen. according to people the matter.h ducati in 2011. needs fewh government more weeks to decide if they can take over sky. that's according to karen bradley. she may still refer the deal to competition for an investigation of murdoch's media influence. treasury department ford exxon-mobil $2 million
violating sanctions against russia. place whentook secretary of state rex tillerson was exxon ceo. latest bloomberg business flash. nejra: let's move over to the shares're seeing gain today. unilever sharpening focus on profitability by lifting price and cutting spending. investors take aim wrestling with slow growth. maker of dove soap what we're talking about. the ceoi spoke with paul polman. discussed shareholder activ activism and m&a strategy after attempted take over earlier this year. focused on shareholder, long term
compounding retailer investment model. this shows what enormous value created as unilever. year, continuous total shareholder return. compounded model like a good model. new mexic nejra: you said you were looking record banks business. it's since been sold to mccormick. >> it's obviously a very quality asset. look at the price, we look at many of these things come on the market. you learn something. we have a very disciplined m&a process. glad this first six toes our stable to add to brand. a partnership was the biggest
company. continue to strengthen our portfolio. neutron nejra: what do you think you can achieve for that? bit early.ittle it's tremendously complex process. we're in the process now where we're working with testing parties to see what the possibilities are. we think we will complete that by end of thisy year early next year. nejra: we talking about cab out or a sale? >> we have different options a we are looking at. a sale, it could be a carve out. we have different options to see can maximize the value and guarantee the success of the business. it's a big successful business. all on theidea at enterprise value. go into that now.
nejra: last time we spoke as well, during this strategic weiew, we talked about m&a, talked about continuous m&a. i'm wondering are you thinking making a big purchases or just more acquisitions. had a very good strategy over the last seven or nine years. .e've made study we're extending these businesses in different countries. we talk.a as we have enormous opportunities expand our portfolio and them into space. andake these acquisitions put unilever scale and global reach behind that and create the result ofr value as a
vonnie: it's time for battle of .he charts you can access those charteds on the bloomberg by running function features at the bottom of your screen as always. kicking things off is caroline hyde in london. you.eat to be with what i got headline you've been reading. the "wall street journal," the back to the dot-com era. stock praises. s&p 500 is major technology chart. out in the white line. we're now 992. we are not seen that level since back in march of 2000. does this mean we're at the
heights of that dot-com era? fear not, check out the evaluation. we are currently on the blue line. nowhere near the heavy height back in the year of 2000. we saw evaluation to the tune of price earning 73. are still just 19. high.x is pretty expectation.nings vonnie: you can see her chart on bloomberg. is a great chart. mine isn't too bad either. it's a simple chart. the yellow line is the price of wti per barrel. theblue line, that's supplies of wti. you can see as the supply is coming down as we've been noticing. the price is going up. it's very simple. what will saudi arabia do what will ecuador do. revealed.e 13.can see the chart 60 and
nejra: i like simple. your chart is great. time i'm going to go with caroline. i was surprised by what her showed. we've been talking so much where go from here. reiteratedo want to here here in the united states. we had breaking news. that probe of the donald trump campaign and it's eits ties with russia during the campaign. according toded people familiar with the matter. we'll be continuing to cover news with perspective and mark reactions. dropping. ♪
from bloomberg world headquarters in new york, here stories on the bloomberg that we're following. president donald trump are under scrutiny now as u.s. special counsel expands hiser russia probe. formeriscuss this with director bill gavin. bill.oring the health gop said cbo repeal of obamacare to 32 million more uninsured. run with mlb commissioner toert manfred what he has .ay julie hyman is with us. we can