tv Bloomberg Markets Americas Bloomberg July 21, 2017 10:00am-11:00am EDT
vonnie: here are the top stories mario draghi fails to talk the euro down and we will look at what's next for stocks and currencies next. striking the right balance is about to get harder. rising on president donald trump as the robert mueller probe expands. with his legal team followed. what a dear fire has central prosecutor? the burning question of the day. julie hyman is here with more burning questions. why the selloff? julie: its earnings.
it's tracking down the major averages. we have numbers from some big companies today. that's were the drag appears to be coming from is all three major averages selling off. as generalbiggest electric that stock is falling sharply. we are showing a two day chart. the reaction to the earnings numbers, at one point today, the stock had its steepest drop in about two years time. it is still the biggest drop we have seen [no audio] vonnie: we will jump in because your microphone is having problems. will go state to nejra: -- we
will go straight to nejra:. not a great start. as we look at the stoxx 600, we have five days of losses. let me fix my terminal so i will throw it back to you. i've more to tell you about european markets so come back to me. let's have a quick look at where the u.s. indices are trading. as julie was saying, the dow is down about half a percent. investors had to recalibrate their positions after major events on earnings. monetary policy and politics. our next guest says valuations
are not as high as they could be. joining us as the global chief investment officer at ubs world management handling $2 trillion in assets. often say there is no downside in buying equities. it never seems to change. what's the primary reason for your saying that today? >> we have changed our view a little bit. off our u.s. dollar high yield position and we have switched much more to relative trade so we can talk about that. right now thethat picture looks great. it's so great that you have to wonder if it can look better. on optimism is based continued central-bank stimulus, central banks globally have added about $1.8 trillion in
stimulus in the past 12 months. there is global earnings growth and the earnings yield for stocks is still beating things like the 10 year treasury. those are strong reasons for optimism. vonnie: how much depends on the likes of u.s. growth and inflation and growth in other parts of the world? we are not seeing healthy enough growth in europe or china. i think the continued growth in the united states is an important factor. if you look back across the per iod of growth since the financial crisis, this is a pretty strong time because you have growth in china, growth in europe and growth in united states. that's a pretty strong global backdrop got a time when there is earnings growth and monetary stimulus. vonnie: when you look at what might pose a wished to the equity rally, how closely are
you watching wage growth? it's not because of its impact also labor unit cost which could have an impact on corporate earnings. that many the factor academics and market participants continue to watch closely for the reasons you cited. probability of inflation spiking but and inflation spike would be a game changer cause it would impact all of those things i talked about, central-bank policy, earnings, and perhaps global growth. in terms of the bondionship between the and equity market, when you look at the 10 year treasury yield yield and year bund expectations for how high that needs to go to impact equities, what are your expectations? do you look more positively at
u.s. or european equities? we see the 10 year not moving up to much, may be 2.5% on a 12 month view. the benign backdrop in the united states sets the stage for perhaps higher beta markets including europe to do ok. we kind of have moved more out of the united states primarily because of valuation and more into europe. we actually have an overweight on european equities versus u.k. equities. a difference in with the earnings expectations are and how we think they will come in. on the eurozone versus the u.k., how t do you factor the strength of the euro into this? >> for some time, we have thought the euro will strengthen
and that it will continue to strengthen from here. a weaker pound is actually very good for the ftse index. probably isalone not necessarily -- is something we have thought about. for being underweight in the u.k., what we are concerned about is the percentage of the index that is made up of energy stocks and also the fact that the pound has taken quite a beating. we don't really see it weakening much from here. vonnie: where would you be looking for opportunities? >> european equities, global equities. vonnie: specifically in the sectors? typically come a sector that does well in this kind of global growth environment are financials. we also think the energy sector has taken a beating and is starting to recover.
oil has come off its lows. despite the it, talk about tech, if you look at the s&p 500 -- the s&p tech sector, it's not particularly overvalued on a historical basis versus the wider index. you have the earnings growth there in a broad sense. we like that as well. vonnie: what do you say to investors when there is an event , when it seems like the market has a trigger finger. a selloff in tech stocks in a didn't seem like very much led to that. littlefeel there is a bit of trepidation that there might be some kind of correction coming? balancing fear and greed in is a continual process.
volatility is so low so that any volatility perhaps makes eight news story. that's why we try to look through it a bit. we look at the longer-term earnings picture. that tech has caught up to the other sectors that had rallied maybe last year and with the earnings growth there, we think that rally will continue. nejra: i love what you say about reverses and you think fear of missing out should spark investors to jump in but you are citing a potential risk in china. how does that show up in the developed market if that risk comes to pass? where does it hit first? >> i think that's a good question. ways thatobably many it could show up. where it showed up the last time that china risk reared its head
was in the equity market. should we see continued volatility or increased volatility for equity markets on the back of changing news in china, that might be -- that's probably where it would show up. and of course what happens in china very much impact its partners in the region to the largest extent. so asian equities would be the first place it would show up. overall, you are showing more positivity on equities than bonds, you have made some interesting changes in the bond and credit space. tell us about that. overweight in our high-yield dollar -- u.s. dollar bonds. around theyou that world, the hunt for yield has not ended but on a risk reward
basis it at this point in the cycle, we would rather take our ink in our global portfolio the equity space rather than the high-yield space for now. vonnie: talk to us briefly about currencies. >> one of the things that is so interesting this year is the way that so much gets played out in the currency market. it's been an important focus for us. broadly speaking, we are overweight the euro versus the dollar and we are overweight the swedish krona versus the swiss franc an overweight the euro versus the swiss franc. as you know, the swiss franc is a safety currency. with the political risk out of down, we think
that will help the euro and take some of the safety trade away from switzerland. vonnie: thank you and we always appreciate your time. let's check in on first word news. president trump legal team is making headlines again. according to the washington post, some of the president's are trying to undercut special counsel robert mueller who was investigating ties between the trump campaign in russia. the post says the lawyers are building a case that mueller has a conflict of interest. is thele, john doubt lead attorney on the russian probe. he replaces the longtime trump lawyer who is set to be part of the team. the u.s. government will ban citizens traveling to north korea. an american student died after he had been imprisoned there. he was in a coma when he was released from north korean prison.
the imf has ended two years of speculation and agreed to another they'll out for greece. it says it has approved in principle a new loan worth as much as $100 billion. that is contingent on eurozone countries providing debt relief. the u.k. will reportedly accept the free movement of eu citizens up to four years after brexit as part of a transition deal. that's according to the guardian newspaper. that would be a shift in tone from prime minister theresa may who has remaining control over immigration policy. news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. .hank you for that andie: opec will meet
nejra: live from new york and london vonnie: this is bloomberg markets. julie hyman is here to give us an update as we are 46 into this 46 minutes into training. julie: we have our technical issues resolved. all three major indices are selling off. it's about earnings today. general electric is leading the declines among the companies reporting earnings. it's one of the largest companies out with earnings. they are likely to end of the year near the bottom and of the companies predicted range because of its oil and gas
business largely. the shares are now down over two about five .5%. it is the worst reaction to an earnings report we have seen since the third quarter of 2010. on the conference call that the resource market remains challenging and so the company is looking to potentially address that. oil and gasthe market probably remains challenging. we are also watching the auto parts business. autoleave cut its full-year organic revenue forecast and now looking for only a 2% gain. it had been a 4% gain and is pointed to uncertainty in china. partsling down other auto makers. we are also watching the transports. recently, the dow jones
transportation average made a new record high and that was something the theorists were pointing to that confirmed the upturn in the dow jones industrials. so much for that, the average is down for the fifth straight session. here are some of the worst performers. what are you seeing in europe? nejra: it is time for futures in focus. i will bring you updates on the european market later but we are talking oil, trading below $50 wti and brent.ouble t opec is prepared to gather in st. petersburg, russia on supply cuts. scott bauer joins us now. great to see you. we are down about 1.5% at least on wti and brent and oil is heading for a weekly loss, racing that weekly gain it had earlier. do you expect from the opec
meeting? i am so skeptical of these opec meetings but i think the pressure is to the downside. the news coming into the meeting is that saudi arabia is really set to decrease their output. but then you have libya and iraq saying they will increase their output. or a questionable what's going to happen. i don't see much happening, much big news coming out of there and i think the pressure is to the downside. we have seen this reason trading $49.49% -- 44-4 i think we will hit 50. nejra: a different story for gold which is doing pretty good on the back of a weaker dollar. where is the resistance levels? just got through some major resistance around the $1250 area in gold. it has rallied the time on the
dollar drop. $1270 and $1300 would be the next major points but i don't know forget that far. numbers have been expanding. the holdings are down about 5% over the last couple of weeks which tells me that the big institutions are taking money off the table. it's very dollar dependent and we will see if the dollar keeps dropping and goal gives rising but it will be hard to get through that 1270 level and the $1300 level. nejra: thank you so much with futures in focus. vonnie: still ahead, can etf's any lower? about a new etf that kicks off the no ♪ free europe. this is bloomberg. ♪
nejra: this is bloomberg markets. vonnie: in new york, i am vonnie quinn. time for etf friday. can etf's get any lower? a recent filing shows there may be a zero feet etf. here to discuss why this could be a game changer, here is our bloomberg analyst. is what's driving demand now but no fee is another matter. what is this etf and how can they make money? at the filing, it's not out yet. it's the schwab 1000 index fund. what struck me is they already have a large cap etf and a broad market. why would they file a new fund question mark if you look, the
index will track the schwab 1000 index. when you sell index, then illuminates a cost. their other large cap ones charges three basis points. do itly reason they would to compete against themselves is to be the first with zero. it has been going this direction and it would make sense they will do it. 2 or lowerdefinitely but it will definitely happen eventually. how they make money is fascinating. generally, half of their revenue comes from interest income. they are looking to get all the money they can and put it in a short-term treasury and then make money. schwab ande covers he says schwab stock will move with rates. this is an example of what asset managers will have to do in the future which is to forget the
asset management fee and figure out other ways to make money on the money you have. julie: in other words, you think this will be the first of many. >> i think they are kicking open the door to the no fee future. julie: it might be for some but it will certainly not be all of them. which etf's have an edge where they don't have to engage in this type of fee award. overere are 140 that trade $50 million of debt. they are so liquid that the people you'd it -- using them don't even notice the fees. they are used like pseudo-futures, bigger investors and their liquidity gives them pricing power. they will still be affected a little bit but largely, they are immune. if you look at the products that make the most money in etf's, they are these kind of products, ', these are the product set have cheaper competitors but because they are so liquid, people will keep coming back because they love liquidity.
in terms of companies, black rock has 57 of the 144. -- they in good state are good shape and so is state street. this is equated to owning beachfront property in the future. you can charge high rents going forward as every thing else gets depressed. julie: thank you so much. thank you. still ahead, president donald trump is kicking off his legal team as the russia probe expands. could fallout from examining his businesses hit the justice department? this is bloomberg. ♪
between president donald trump and robert mueller, the investigation into his business dealings. it raises speculation that president could consider firing him. oust him would spark a justice department shakeup. cirilli whoin kevin is in new york today. looking at this from the outside, it seems extraordinary. is this a desperate attempt from the president? the exclusive yesterday we had, bloomberg reported the special counsel robert mueller will expand hit the scope of a -- the scope of his investigation into trump's business dealings comes in sharp contrast with what president trump told the times 24 hours earlier where he said he doesn't think a special counsel should do that. sources are telling you that essentially his legal team
supporting the president is crafting a strategy to portray those investigating him as having severe conflicts of interest. this comes as the backdrop for with donaldhearings trump's son-in-law testifying behind closed doors with the senate intelligence committee as manafort and anafi donald trump jr.. spoke with a senior administration official who last night told me that potential he, cci could beabu working in the white house press office. nejra: looking at the latest developments, the ultimate question is -- could any sort of put to ther stop be investigation into president trump's business dealings and how effective are these attempts
to combat that? stories one great this point in particular. it would be very difficult for .he president to fire or pardon the pressure he is facing from , there is clearly signals coming from them. republicans in particular are frustrated about how much attention is being focused in the media but also the president himself tweeting about this. they want this to be behind them so they can move on to tax reform and the d regulatory financial policies. next week, health care is expected to fail. tax reform is still very much being worked on. i spoke with fork treasury department officials who say they are engaged with the different factions trying to correct the mistake made during health care with tax reform.
the plan is expected next -- this august. vonnie: talk about the looming august deadline. >> the house budget committee yesterday passed a markup version of the bill, advancing the budget out of committee. sets the economic indicators to where republicans are at. it also sets the stage for tax reform. rules, the parameters of lawmakers in the senate and house and what they have to work with to address that. i spoke with several analysts inside the beltway and they predict comprehensive tax reform by the end of the year. tax cuts is where things should get interesting. vonnie: you say interesting but they will be a lot of obstructionism. the gop is not even united. they are a very divided party. where will the middle ground be if any? corporate tax reform is
nearly unanimous consent in terms of lowering the corporate tax rate. right, you look at what happened with health care and you look of the divisions in the gop and the governor's getting involved. why wouldn't that happen on tax reform and the debt limit question mark this fall is shaping up to be so much political uncertainty as a result of the failure to pass health care. administration officials in washington officials all say they can correct the course. get ready, it will be crazy. vonnie: thank you so much. kevin will speak with ron wyden in us clues of interview coming up. vonnie: you corporate tax reform, many silicon valle companies have spoken out
against donald trump's agenda but her next guest is not focusing on just corporate tax and health care. he is the chairman and ceo of gsv. why only these issues and can you separate them from immigration and travel bans and so forth? issuessure, those are that affect silicon valley and affect american society. i think the amount of attention that getting becomes more of a circus beyond some of things. positive it's more just the innovation explosion. it's around the global silicon valley around the world. you look at the pace of change and accelerating face of
opportunity. i think that is being overshadowed by these other sideshow issues. vonnie: let's move to the ipo market. we have seen tech companies wait. a few have not done so well going public. what's the appetite like for the rest of the year? >> going into this year, we thought we would see an uptick in terms of ipos. years, we have had an 80% reduction of ipos. the very best companies are waiting until they see an environment where investors will receive them more favorably. we haven't seen that yet and we were hoping snap would be a catalyst. in our portfolio, we have companies in large positions like spotify and lyft. are sizable businesses going fast. i think it's the right time and would be great public offerings.
spotify is another one. there is such an appetite for tech shares and yet you have these companies that were unicorns that were supposed to be the next big thing and they are having doubts. the best companies are not having down rounds. spotify is a music service. subscriber base which is very sticky and it's going fast. the key thing for a public company is its relationship with the record labels which is evolving nicely. i believe spotify will be a public company over the next 6-12 months for sure. vonnie: what about the likes of lyft with more and more scandal
surrounding uber. is this an attempt to oust uber? >> typically, we invest in the leader in a category. the technology about the internet is about a disproportionate leader and obviously uber is the leader in that sector. lyft is a good brand and that's why we got involved. it's in the business of accelerating. they want to support companies that have values and doing things the right way. you are seeing that play out in the marketplace. the market share of lyft is growing and is doing really well and we are excited about it. vonnie: you are famous for writing the book on what would be the next starbucks. what is the next so-called starbucks? >> there are a number of interesting businesses.
in our portfolio, companies like caorsra and they have been already successful. these are businesses that may be in the consumer area the people and not hers much about but they are starting to bubble up. there is a next generation of coffee coming up. they are doing well. would: you said spotify go public and 6-12 months. what about the others? >> again, the companies i have mentioned could. vonnie: will the environment be amenable? what's surprising is you have seen the nasdaq significantly outperform over the last 12 months. typically, when you see a high correlation with the nasdaq and the activity of ipos, that hasn't really happened yet.
we have seen one of these great leaders come out going back 20 years. netscape was behind the new market and ebay was a catalyst and facebook. you are looking for someone -- some leader to step out. that will be likely to occur. the index of companies you put together is up 26%. stocks and i don't particularly well. why is that when tech is roaring? >> it's frustrating, we look at the portfolio. selling at as discount. frankly, the biggest catalyst for the stock to changes dynamics is to have some of these great companies in our portfolio go public and do well. snap will be a good catalyst.
whether it's spotify or dropbox we got a number of companies lined up that we think would be great ways to make that discount go away. let's go to first word news. opec nations are meeting in st. petersburg, russia this weekend. thatwant to clear the oil -- the global oil glut. high butes are still there is chance they will come up with a more aggressive approach. in greece, and earthquake that was 6.5 struck an island killing at least two people, more than 120 others were injured. the island is popular with tourists.
the head of the cia warns that russia and iran both threaten u.s. interests with their presence in syria. in his speech in colorado, mike pompeo made these remarks and he says i run -- iran wants to make a corridor for china. scaramucci is being considered for white house can medication's director. the trump administration has struggled to keep its message focused and he was a fundraiser for president trump several other jobs. day,l news, 24 hours a powered by more than 27 journalists and analysts in more than 120 countries. this is bloomberg ♪. nejra: thank you so much, coming up, football fans are kicking off a big decision. in barcelona president ways on a star players future and
nejra: live from london and new york, this is bloomberg markets. time now for our bloomberg quick take what we provide context and backgrounds on issues of interest and we are looking at corruption in fiffa as we move toward the 2018 world cup in russia. no sporting event is more popular than the world cup. nations vie to host the term that generates billions of dollars in sponsorship rights.
the competition can spell trouble. scandals are dogging. previous countries. faceding the reputation difficulty. the auditing company resign because they did not think fifa was serious about reforming. the scandal came to a head in 2015 when dozens of senior officials were arrested in switzerland and u.s. prosecutors charged 41 people and companies with corruption. disputes over where to hold the event have affected the world cup since it began in 1930. fifa takes bids from continents.
recent history shows there is little financial benefit to holding the world cup. south africa only recouped1/10 of its output for the 2010 event. people say the selection process is led by billions of dollars. critics question whether reforms can be carried out by officials who have been part of the system. among those who pushed for the removal of the former president were some sponsors. to examined fifa bid.ption due to theqatar you can read more about this at niquick on the bloomberg. inra: staying with football the u.k., star power is stealing the spotlight.
scarlet fu sat down with the fc barcelona president to get his take on the decision. we want to continue for him to play with us. no doubt a lot of clubs would like to have him but we want to continue having him in our club. want is not to have --is to have them play with us and coming seasons. scarlet: has the release clause been triggered? >> no, we don't have any information. what we have now is a training session today. we are playing a match on saturday. eymor has said he cannot win as long as he is on the same team as messe. >> to consider
that? he is a free and open decision by journalists and trainers and coaches. all of the players are involved. wonhe last few years, messe it but some of our players have been in the finals. we talked about neymar has agreed to sign with barcelona and you promised big signings this summer and i believe the window is open until end of august? >> yes. scarlet: what is the budget you are working with? it starts with 60 billion euros questio? sell a player, that
money goes into the pot. because everyable year we try to have the best team possible. with this budget we will manage it but it does not mean that other years we need more money and invested more. scarlet: what is likely to be the limit this year? we need to have a good sports team. economically we have our limits. what's more important is the team wins. when we needed, we can put more money into it with better players. scarlet: according to forbes, barcelona posted annual revenue of 708 million euros. the goal is to get to one billion euros by 2021? >> that is the goal. we are moving a little bit closer. becauseutbol -- becausefutbol is becoming a bigger industry all the time.
we are in the u.s. because it's a big market for soccer. we have this objective and we can achieve it. get more ifld you naming rights for the stadium come in bigger than expected? ago, the council of our city give us the initial provision to rebuild the stadium in the area of barcelona and that would allow us to keep -- to increase our efforts on naming rights. not very far away we will have good news that will help us to finance all of the renewal of our projects. if your team doesn't win the ultimate championship, where does the budget stand? >> we always aim to win it every year.
we need to win because we are a club. we have fans all over the world and we are a special club with 145,000 members. the object is to win a championship. if you have championships, you know that incomes are much greater. one thing goes after the other. this is sports. that was an exclusive interview with scarlet fu. wille: still ahead, we look at earnings in the united states. here's a check on some companies that just reported. you can see it's a mixed picture. certainly for the likes of ge which is tumbling. colgate is on the decline and microsoft even though it had a good report, it's giving a little back today. this is bloomberg. ♪.
jonathan: this is bloomberg real yield. whatever grade you look at, leverage has been building up over the last year or so. >> we are seeing a bond bubble because yields are at a low. jonathan: is the fed behind this? >> they are probably somewhere behind the curve. >> the cyclical trade may be getting longer in the two.
nejra: live from london and new york, this is bloomberg markets. vonnie: it is the end of the first big week of the earnings a season. let's get a check on some movers this friday. abigail doolittle joins us. abigail: this is taking a toll on one of the indexes in particular, the dow transports. it's having its worst week, down more than 3% since brexit. the nasdaq and s&p are higher and the dow is down a little bit but the transports are down in a big way, the worst week since brexit. weighing on the transports are some of the disappointing ual.ngs movers includingu ual guidance was disappointing. ch robinson missed by 13%.
looking at the earnings movers, capital one is trading sharply higher. financial companies beat. finally, ebay is down about 3% as their third quarter earnings guidance is disappointing investors and though shares are lower. it's a mixed bag today. nejra: thank you. coming up on the european close, the following equities heading for losses in june, the stocks 600 lower and is down to a stronger euro which continues to gain against the dollar. the dax is getting crushed. this is bloomberg. ♪
bloomberg markets. nejra: here are the top stories we are covering. the top -- stoxx 600 looking to end of the week and the red. we will look to see if undervalued european equities still ring true. diplomatic spat between germany and turkey getting worse, which companies may get hit hard. how damaging will it be the expanded investigation into president trump be to get anything past. we will talk to what is the key senators, oregon senator ron wyden. let us have a look of were european equities are trading now, under 30 minute