tv Bloomberg Markets European Close BLOOMBERG July 24, 2017 11:00am-12:00pm EDT
"bloomberg markets." ♪ mark: top stories from the bloomberg and around the world. u.s. president -- is u.s. president donald trump about to poke a hole in equities? is changing and the warning signs are rising. u.k. trade secretary is in the u.s. to push for a quick trade deal once brexit is finalized. however, some big barriers may stand in the way. we will look at what could hamper negotiations. and in banking, checking the bar high for its swiss rival. we will hear from the chief executive. following a big earnings report today.
have a look at where european equities are trading. gaucher function, stocks are mixed down for third consecutive day, worst run in july. we got it today fed meeting -- we got a two -- we got a two fed meeting. rising against the dollar. euro, what a week it had last week finishing at its highest level since the beginning of 2015 on friday. donna fifth of 1% today. -- down the fifth of 1%. let's talk about stock swings. this is the for france's presidential election, sending the number back to january levels. july pending to be calm for the region. they gauge of european stocks swinging, and declining in three
of the last four years despite a rebound last week. stocks from 11% lower. this is our fear index. let's talk about earnings. reporting 55% gain in first-quarter profit. strong summer bookings, but did caution, this is why shares are down. the pricing will be very competitive through the remainder of the fiscal year. overcapacity hurting shares. there's have rose 1% in the quarter -- shares have rose 1% in the quarter. best thursday, shares fell by 6%. -- last thursday, shares fell by 6%. wasbig data highlight eurozone manufacturing pmi services. growth in the euro region economy started the third
quarter at the weakest pace in six months. --s is the income passing this is the income passing -- the gdp is expanding. not bad at 6% in the quarter compared to .7% in the prior three months. 90 minutes into the session in the u.s. how is it looking over there? >> the nasdaq is turning into the red and even though the s&p is down the fifth of 1%, we are seeing stocks declining versus gaining at a ratio of 3-2. seeing downside today. some of its the follow-up to earnings the analysts are commenting like stocks and johnson & johnson and general electric lower. that seems to be what is causing pressure for stocks. we do have big movers that are on m&a that i want to point out. one of them is web m.d.. scherzer higher -- the shares
are higher. cash.per share in its shares oft percent back in 2012. but that effort did not succeed. a lot of relief being felt in his shares today come in addition to the premiums. on the flip side, we are taking a look at money gram today, as well as alibaba. alibaba on the list because remember, they are said to buy money gram. the u.s. is examining a number of china-related bids and backlogs. the committee on foreign investment is concerned about the prospect of giving chinese companies access to u.s. consumer's information. money gram shares down by more than 3%. on the earnings' front, causing
earningsways is an morning. warning. analysts were looking for decline of 1.5%. it says its loss in the second quarter was as much as $.22. analysts had been estimating a profit of $.15, pulling down the other sporting goods chains. if we have time to take a look at a quick chart that compares the earnings outlook in the u.s. versus europe, this is an interesting one given that it is earnings season for both areas. the s&p 500 are earnings-per-share forecast here in white. we got the stoxx 600 in blue. the s&p, and there he, is looking a lot better. it is also looking more expensive, of course. it's price to earnings ratio is
on top -- on the bottom, i should say. it will be interesting to see how that plays out, vonnie. perhaps tooctations high? we will see. vonnie: we are kicking it off with that at least, but there are a lot of companies reporting. let's check in with courtney donohoe. courtney: president trump's son-in-law is denying any -- with russia. in a statement, jared kushner said he had four meetings with russia during or after the election, but they were not -- and a single tweet, president tweeted, myd -- aunt the committees and investigators looking into crooked hillary's crime and
russia relations? petersburg, russia, saudi arabia has emphasized its commitment to ending the global oil glut. the saudi zen other oil producers are meeting to discuss the deal to curb production. the saudi promise deep cuts. in the u.k., the parents of the baby charlie are dropping their legal bid to send him to the united states for spare mental treatment. their lawyer says they are withdrawing their appeal saying charlie's treatment should end. 11-month-old suffers from a rare, genetic disorder. i'm courtney donohoe. vonnie: thank you. the s&p has rallied more than 15% since the election, but president donald trump may be at risk for puncturing the equity bubble.
he joins us from los angeles. restrictions and the procession of strong how they will be in other countries, you say that is a big pillar here when it comes to u.s. economic performance in the puncturing of the equity bubble? >> good morning, vonnie. that is very true. three reasons why the stock since rally took place the november elections. one was the expectation that there would be a lot of stimulus in infrastructure spending by the trump administration. second, some reduction in control and in deregulation and tax reform. those with a second aspect. and third, we had corporate that have done extremely well in the first couple of quarters this year. my point in the bloomberg view column is to say while the
corporate earnings picture still remains good so far, the other two legs, namely the stimulus portion and the deregulation part of it, they are going to suffer because of lack of movement. restrictions,ade that suggests the risk of packing -- of impacting the global growth. is there one positive outcome to all the things you just mentioned? could that be a weaker dollar? if you take a look at chart 5725 and the bloomberg library, ingles back to 2012 -- it goes back to 2012. dollar has been the change in the sentiment.
my concern is that the bigger dollar alone is not going to save u.s. equities. yes, you have some benefit coming to corporate earnings from the weaker dollar. but longer-term, you need economic growth. any consumer demand. but the u.s. economy to do well as well -- you want the u.s. economy to do well. that determines the health of the equity market. you are not going to get enough stimulus, i believe, from just a weaker dollar. the weaker dollar is going to be the result of readjustments rather than a new stimulus for the market. mark: how do we protect ourselves in the eventuality that this trade war does supplement the absence of stimulus? if that plays out, how do we as equity investors best position ourselves for that outcome? >> that is a great question, mark. if a trade war becomes a reality, or looks like it will
become a reality, i think the benefits are going to be in terms of moving to the equity area, which is risk off. --ensive equities, but defensive equities, for example, 1% off. plus, i have said repeatedly that the treasury and fixed income will keep rallying. can you are not going to see yield rising. you will probably see for the 10 year u.s. treasury, to go from below to 2%.o if you have a global trade war and the global growth suffers, the beneficiaries are going to be those carrying high grade paper. highlight is investors believe in the economy is slowing.
what is the implication for the fed? the economy under this scenario cannot withstand three rate hikes in 2017? pointing thator out, mark. i agree with you that the fed cannot -- i agree with you that the fed raising rates three more times would be detrimental. from 135ear spread basis point before christmas because of the trump-inflation euphoria. we have become -- we have gotten under 90 basis points in three days. if you have three more rate hikes, that is not only going to quickly accelerate coming you to easily push the 2% spread negative levels, that is what happened in november, december of 2006. exactly one year before the great recession began. and that is the risk the fed
♪ vonnie: live from bloomberg world headquarters in new york. i'm vonnie quinn. mark: and live from london, i'm mark martin. let's get to market, european equities are lagging the global market the most in nine months. the euro headed for its first decline in three days. data shows the region's economy retooling.
weighing on european markets. komal sri-kumar is with us. on friday, the euro, higher against the dollar since generate 2015. is laggingocks behind the most since october of last year. euro'saging is the dissent for your pain earnings going for it? komal: i think if the euro continues to officiate substantially, we're talking to overing from $1.09 $1.16 in the last couple of days, that is going to be damaging if it is accompanied by the european central bank deciding also to taper its purchases, so that you have one more influence on the exchange rate. but aside, other than the
exchange rate, other than this morning's numbers on the index, you had a stream of good numbers coming on the economy from all the three major countries in the eurozone -- and the from germany, france, and even the italian numbers are looking good. just goes up a maybe of sense more, $1.17 and $1.18, the eurozone can tolerate that. the reason is we were looking at the appreciation. this comes from the good economic numbers. there is an enormous amount of optimism what they emmanuel macron victory in france. they discussed how wonderful it would be if france and germany were to come together, and that tesla merkel -- and angela merkel says they have a common bond, then you will see the euro
officiate further. that would be tolerable by the market because you have it outweighing influences. ask,e: i was going to reducing the possibility of recession in the next couple of years? komal: in the next couple of years, if you give me that long a period of time, i was you that greatest in the united states, not europe. vonnie: when and how? komal: when? half. to a year and a the two to 10of year spread. how does this happen? you had the fed increase rate three to four times. bennett also frightens the market -- then it also frightens the market. it will continue to reduce its balance sheet, and the combination of the two pushes the two continue spread to
negative levels. then you have a recession. most byere to say, the 2018. the fed will continue to lower in the stock market will stay at these levels, clearly it requires the liquidity to be maintained. if that were to change abruptly, vonnie, then you be increasing the chance of a recession. mark: i want to move on to emerging markets. i need to show a chart that tracks emerging markets and it has doubled in size fisher, leading bank of america and deutsche bank in the last week to release research that said emerging-market carey trades, starting to look overcrowded. would you agree with that assessment that emerging market carry trades are overcrowded? komal: i think the emerging-market debt and trade
can go on for a while longer. the reason for that is my expectation that the fed is not going to try to be really hawkish in the near term. so, if you have fed the business, that will help -- if ness thatfed dovish te will help the emerging markets. there are increasingly able to function without depending on u.s. economic growth. there is more diversification. china has become more important to emerging markets the united states alone. and those kinds of changes, mark, also say to me that the emerging-market debt, as well as the equity run may have quiet a way to run. vonnie: if you can get three points percentage on a chinese bond versus say one point two
percent or whatever it is on a u.s. two-year, which one would you be more comfortable buying? --al: if you were looking at in the case of chinese paper, if you were looking at 3%, in the short-term, my concern would be the valuation of they renminbi. want renminbi denominated debt last are, you are doing quite well so far. the 19th people 's congress, for some of the uncertainty to go away with this, and in the chinese paper at the levels you mentioned are going to look very attractive, vonnie, even compared with the 1.2% or so for the two-year in the united states. vonnie: thank you to come all code -- thank you to komal sri-kumar. mark: still ahead, find out what phillips chief executive said
live from bloomberg world headquarters from new york, i'm vonnie quinn. mark: and i'm mark martin. this is "bloomberg markets." help technology company reported second-quarter results. askedief executive, we about the company's m&a strategy and end goal. the results from the second quarter from the sale, obviously, we have a .trong cash position we have a capital allocation
policy that is balanced in shareholder returns through dividends. we're just announced a share buyback for the next two years. i always said we will use some of the proceeds to strengthen the phillips portfolio. the most important acquisition we did in the second quarter was a leader for minimal invasive operations, especially for patients with peripheral artery disease. it sits -- it fits very well with the prior acquisition that we did. and already next year, there will be adjustments. this bodes well for our shareholders, and is fully aligned with the capital allocation strategy. mark: that was phillips chief executive. time for the bloomberg business flash. a look at some of the biggest stories in the news right now. more fall from brexit, deutsche bank considering whether to move about $350 billion in assets
from the balance sheet of its british entities to frankfurt, according to a person familiar with the matter. deutsche bank to the executive's john cryan said the best majority of trade will probably move to germany. be an early source with approval for its $85 billion takeover from time warner. they are focusing on whether at&t can promise not to use its way to give an unfair advantage to its own program. that is the latest bloomberg business flash. european equities, four minutes away from the end of the monday session. this is bloomberg. ♪ these days families want to be connected 24/7.
banks, construction, autos worth mentioning. the european union and germany -- german authorities. they are exploring collusion among producers. the german auto industry faces another major scandal following that diesel emissions scandal that engulfed volkswagen. the stoxx 600 is down. the worst since july. -- worst in july. biggest gains for this market since february 2016. switzerland's third against bank exceeding its target. up 6.1% to 10 billion swiss francs. areas -- wews from will hear from the chief executive in a minute. do not move. ben kaiser, the consumer product
company, warning of softness in the baby formula business. s after itwoe struggles to recover from the cyber attack and operational mishap. it makes cleaners, condoms. johnson may fall as much as 2% y $16.6second half to pa billion acquiring the infant nutrition company. that virus in june disturbed -- disruption manufacturing and distribution. -- threatening to stall trump's economic agenda. investors rushing in fully, lifting future prices above the 50 and 100-day moving averages.
goal jumping last week. the best week in three months. gold futures rising for the seventh day today. 2016.st run since june vonnie: what was it that meatloaf said? you took the words out of my mouth. i was going to say the gold index is at its lowest since june 2016. the yene that, we see continuing to strengthen. 111.05. the 30 year yield we are not seeing much movement. even.s. ten years break we are not going anywhere on inflation. gmm. decided to have a look at the top markets today. where in the red for many equity markets. this has some to do with
currencies. you can see that the canadian dollar is stronger this week at 125.14. the bloomberg commodity index is down 0.5%. wti supported by that opec meeting. a couple dollars difference between wti and brent. you can see gold is continuing to rise back above. lots more to talk about when it comes to markets. let's have a look with abigail. >> you would not know i looking at the five-day chart of goldman sachs, but financials are the only commodities trading higher today. goldman sachs, over the last five days, down. disappointing second-quarter report. trading revenue estimates missing by 20%. a downgrade today.
analysts saying they do not have confidence that trading revenues may return to prior strength. if we happen to the bloomberg and look at this. this chart suggests that a neutral rating may be appropriate. fixed income or commodity trading revenue. when it climbed back in 4016, so did the stock -- in 2016, so to the stock. with the kleins and trading revenue, wiggins -- with the declines in trading revenue, we can see the stock trailing. the negative headwind in the shares in goldman sachs. from a macro standpoint, you have to think about yields. this is another hashtag. something interesting happening over the last nine months. in white, we have a 10 year
yield. since the beginning of may we are seeing a bit of a divergence. the correlation has broken down altogether. reconverteds a entry convergence either yields -- going higher mark: let's get back to european banks. the swiss bank reporting strong earnings. cranny sat down with boris killarney. >> we are thrilled with the results. .t is our best half ever this has exceeded our expectations. it is on the back of theory good last year. hiring all lights on green. manus: is it sustainable, and
you balance it out and say trading income is down. talk me through the balance. hattainability and t acquirement from the clients. bemoney momentum should maintained. we will continue to navigate in our target range. we are not going to come out and say we have a new target range. i have every indication that the environment should continue to be positive on making money. trading clients are back in the market. what we're hearing, bids from central banks, from imf. client-bankingor activities. indication that
clients are getting ready for volatility? >> absolutely. volatility has been historically low. people were worried about the fact that volatility was not there. this is one of the many indicators. the main one is the market sentiment. gettingre, clients are on average more than what we have seen in the past. ralph: -- manus: is that just on the likes of equities? are they looking across asset classes. where is the most prevalent interest? >> equities, equities and equities. traditional and fixed incomes are huge.people are sensitive to that . they're are looking for performance on the fringe of the market. yous: i get together with and you said that the holy grail for me is china. i read the news and i see a billionaire out of the trap.
mau. he wants to create a $3 billion wealth management business from zero. is it getting harder to do the business offshore in china? give me a sense of china in terms of momentum. >> we are getting to a perfect constellation for wealth management storms to go on shore. you have the renminbi that does not go in one direction only. market performance has been patchy over the last two years. people have been invested in relatively liquid products. there will be lots of local players, as well as international, that will want to grab a slice of that. manus: people want to understand the next step for you. you are hiring 166 bankers.
my reading is that they were senior relationship managers. is that what i get more of from your asia strategy? >> your get three things. a, continued geographic expansion. we're going more regional. you can expect us to continue expanding in asia. building on what we have and adding more in the future. second, we will continue to hire senior professionals. one of the best destinations for top talent in the industry. third, continuing to look at the market for inorganic opportunities. manus: what a wonderful phrase for acquisitions. will it be a core part of the strategy? >> it is a core part of our strategy, but also opportunistic. mark: manus cranny speaking with the chief executive officer.
interview.antastic the fund left its forecast for growth unchanged, saying that the world economy will expand 3.5% this year. according to the imf, the world will relight less on the u.s. ., and more a japan and canada. guest -- >> people are thinking about what is going on in think it -- inflation. we don't know if those concerns will be strong enough that the fed will hold off on a rate increase or not. >> policymakers begin a two-day meeting beginning tomorrow. there is hope for a cure for hiv.
a child has rate free of the virus for more than eight years after early treatment. it suggests that it may be controllable in some way other than the use of antiretroviral drugs. bloomberg is powered by more 100 journalists and analysts in more than 120 countries. vonnie: this secretary says working toward a quick trade deal with the u.s. could be signed following brexit. details next. this is bloomberg.
the u.k. is aiming for a quick trade deal with the united states once exit is finalized. -- once brexit is finalized. the secretary spoke about his u.k. and eu ties. >> this will not come at the expense of our partners. britain once the eu to succeed. a new abdication of our responsibilities. >> let's bring in michael mccain, bloomberg international and economic policy correspondent. bloomberg u.k. economy reporter. he did say it would be nice to get to a full trade agreement by 2019, when the u.k. will have it depends on retail agreements. how long will it take? >> it will take some years after
2019. under eu law, britain cannot negotiate its own trade deal until brexit. they'refox's words, hoping to have a commercial continuity agreement. an agreement that we will try to possiblegs as much as as they are. until they get brexit settled, they cannot even negotiate. and don't know if it will have a need for a trade deal because it is possible that great britain will stay in the customs union of the eu. vonnie: i love how our brexit willtin puts it, liam fox meet with his u.s. counterpart in washington, and mexico, and texas. as if texas is a different country. is the u.k. looking for a
free-trade agreement with one of the united states in particular? >> they certainly made the u.k. itself a priority. that has come under some -- that united states itself a priority. that has come under some criticism, singh they should be doing trade deals with economies of its own size, such as australia and new zealand. the u.s. has more experience, whereas the u.k. has started these brexit negotiations with the least amount of civil servantss ince the 1940's. mark: we talked about chlorine-washed chicken from the united states. it is a potential stumbling block. what are others? and tradef economists experts have been saying the same issues that came up in the u.s.-european trade deal will
resurface here. we had liam fox saying this chlorine-washed chicken issue is a detail, and it does not affect the broader agreement, but it speaks to a wider set of issues, such as lowering food standards and the u.k., to put them in line with u.s. ones. allowing hormone-treated beef, g m crops, and the famous chicken. mark: a party leader, jeremy corbyn, says we should not enter into talks because donald trump would like to remove itself with from the paris climate deal. the eu has said they will not enter into talks with people who are not in the accord. are they willing to overlook this? >> it appears they are willing to overlook it because liam fox is here and is trying to prepare
the ground for a future trade agreement. no one knows what will come of the u.s. effort. at this point, donald trump there is the possibility he will change his mind. more important might be the objections of someone like philip hammond who says, we'll , becauseade deal the u.k. is not a services economy, and it will not make a big deal to the economy here if you do or do not have a trade deal. he has to overcome opposition within his own government, let alone the u.s. climate issues. vonnie: then boris johnson, who is on the trail of these free trade diplomatic meetings. we will not call them negotiations yet. he was in japan, now he is in australia and new zealand. what with the u.k. one from australia and new zealand? >> some kind of commercial continuity. they would like to set up deals. they say that there is some push to negotiate at their own level.
the u.k. has not negotiated big deals in many years. there is a fear that they will be taken advantage of. they need to be able to go. once you get to brexit, they have 10 working groups with 15 countries. they are trying to prepare the ground for the future. mark: is a trade deal with the u.s. still away for bank deals to secure easy access to wall street? >> we have not seen much of that today, fox's comments but earlier they did discuss banks getting access to wall street. and they both the u.k. u.s. are large and financial services. there is something to be gained. a lot of the issues that came up with pkip could recirculate here. one of those is rolling back
financial regulations. we will have to see how popular that is? mark: have you tried chlorine-washed chicken? vonnie: i missed the beginning of that. mark: have you tried chlorine-washed chicken? vonnie: after i have cleaned the floor and cooked chicken, it is probably a little bit chlorine-washed. not on purpose, though. thanks to our panelists. mark: time for the bloomberg business flash. a look at some of the biggest business stories in the news right now. shares of pandora rising today. partners have said they have taken a new steak and the company -- stake in the company. the company has had problems coming up with strategies to combat on-demand services like spotify. , greece iso athens
looking to sell five-year bonds with pricing expected tuesday. the company is planning an exit from the bailout program. government is getting good marks in dealing with bad loans that are laying down the financial industry. we spoke with the managing director of acst bank. >> the big borrowers, we have signaled them out, and the banks are required to swap them out or refer them to the bankruptcy court. months, next 12 to 18 this problem should not be that much of an issue. ork: hdfc limited explosion -- exposure to -- led to the growing middle class. that is the latest for the bloomberg business flash. jared kushner will speak to the press following his meeting with senators.
vonnie: time to kick off our battle of the -- these are the big stories of today and what they mean for your investing. on can access these charts bloomberg by running the function at the bottom of your screen. kicking things off his mark barton. mark: this one is flashing red. blackrock etf. the emerging debt is causing jitters among investors. it is called the ishares jpmorgan local bond. it has doubled in size this year. it has mopped up about $3 billion of inflows. the risk is that the trade on happen -- asnd to
the trade unwinds, but does tend to happen. they have been criticized for creating global-like conditions in less liquid markets. mass outflowss to inside and see changes. you could see it potentially toxic situation. 6656 . vonnie: that was pretty serious. abigail, what do you have? >> i have to go big with the bank trade. i'm going up against mark barton and his fierce chart. this is the bank trade over the last year. we had that tech pullback. some would call this a head and shoulders pattern. that is when those who bought well here, trying to sell those who bought less well.
netflix having a stronger-than-expected quarter. alphabet reports today after the bell. this is a broadening situation. it may suggest that alphabet, amazon, or facebook could drop back down. isthe r issi -- if the rsi over but, we could have some t,nk trades -- overbough we could have some bank trades ahead. vonnie: i will award the monday crown to mark barton, because he did terrify me. jared kushner is having a meeting with the house-senate committee. he will make a statement afterward this afternoon. we will bring you that when it happens.
from bloomberg world headquarters in new york here at the top stories on bloomberg and around the world. jared kushner on capitol hill today as concerns grow over a widening probe into possible ties with russia. how will it impact the president's agenda? anat for a -- brace for earnings avalanche. moreook, amazon, and many companies this week. will they continue to outperform this season? bloomberg has learned that at&t is said to be an early talks for a time warner merger. abigail doolittle is here. we're halfway into the trading day already.