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tv   Bloomberg Markets Americas  Bloomberg  July 28, 2017 10:00am-11:00am EDT

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♪ vonnie: we are following the collapse of the gop's effort to repeal the affordable care act. some breaking economic data. here is julie hyman. >> it is the university of michigan's consumer confidence index. coming in at 9.34, in line with the initial reading. index hast conditions been consistently higher than the expectations index. this follows on the heels of the other, bigger economic report 2.6%.g that gdp -- that came out earlier this morning.
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we are seeing a downturn just as we saw yesterday. amazon is one of the prime contenders to stop the blame. it is accounting for 1.7 points inthe 6.7 point pull down the s&p 500. looking at the potential quarterly loss for the first time in two years time. you have starbucks his latest quarterly sales missed analyst estimates. we will dig more into both of these companies later on and you have exxon mobil as well. that company's earnings are missing estimates in the company reporting that oil and gas production fell for the fifth straight quarter. bad, and you have some some good.
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on the upside you have intel. that company reporting the server chip unit boosted sales of$444 billion with a gain 9%. meeton, their earnings did estimates but it boosted oil and gas estimates by 10%. the chemical company operating revenue missing estimates. as we see this downturn over the last couple of days take a look at the bloomberg here. in white,0 is here the semiconducting industry index is in blue. we talked yesterday about how transports have turned down.
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when transports and semiconductors have done that in the past it staged a pullback in the s&p 500. we could potentially see a warning sign in the fact that these groups are underperforming. a quick mention of the news that broke in the past 10 minutes. fiat chrysler has won the approval to continue selling diesel in the u.s.. the fiat chrysler is winning approval to resume selling diesel in the u.s.. it does sell a suit on the -- settle a suit on the clean air -- violationion and modified software that the u.s. says was illegal. mark: these industry groups are declining on the stoxx 600 group. it is all about banks. ubs shares falling as much as
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4%. -- er reporters 13.5% in the second quarter. it fell from the first quarter's 14.1%. investors are worried that drop in the ratio could mean less cash available. net income did rise. ubs is down by 3%. credit suisse up by 3%. switzerland's second-largest lender. 78% rise in second quarter profit. lower expenses lifting profit at the global markets trading business. the biggest contributor to the top line, even as revenue did contribute. chief second of jobs in selling down bad assets to
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reduce reliance on volatile that trading in favor of more stable businesses. b.n.p. paribas is unchanged today. it is still possible to make a big investment banking franchise. of wall street for another quarter posting a standout performance to drive better than expected rough it. equity and prime services revenue jumping 26% amid surging demand for derivative products. b.n.p. paribas showing you how it's done. >> i love how france is putting it up to the swiss. let's continue with the markets now as investors failed legislation on capitol hill and keep their eye on some disappointing earnings. oliver renick joins us with the
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latest. quarter but we can say it is disappointing. if there is a pullback it cannot be blamed on corporate health. t-rex the overall picture for corporate health has been pretty good. we saw the in true here looking at companies like amazon. money going to see some come off the table. even a significant drop like that for amazon, people to not scratch their heads because it is amazon. there are sensitivities about value market. the company that missed the earnings are getting sold off quite a bit. they keep trucking along without a big reward or pat on the back. that is one sign that investors want to see good numbers from
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highly valued companies and we have numbers like yesterday have a little bit of a dip. have been a deal that broke down in the tech sector that spurred some lower prices on companies. i think that there are sensitivities to valuations at this level. this morning we have a gdp number that is not exactly where it could be. at the end of the day i don't think you blame the equity losses on the fundamental side. tech, we haveout to go through it. facebook, different rates for all of them. >> i think the reads on tech is that they are posting very good numbers in terms of the earnings.
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i think there are questions about the valuations and how much they are willing to pray -- pay for these profits. we have seen more notes of people lamenting the idea that the market is driven by some of these big tech companies. there is a great story on the terminal about the historical precedent for the concentration of gains within big stocks. has pioneered this revelation about a year ago when he wrote a post about this. essentially it is not something to be terribly worried about but i think there are a lot of people in the market to see those numbers and even if there are earnings to support it they are hesitant to put all of those chips in their basket. there is interesting stuff i
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have been seeing about how the low dollar has been ready good for the stock market given that post election we're looking for the higher dollar to fit the narrative. what is interesting about the market now is that no matter what the macroeconomic backdrop is there is a way for investors to fit the stock positive into whatever happens. -- ifis bad for stocks the trump agenda might stall, that will go more into true death growth trade and tech companies. it seems like the market is not defeat of. but we are down today. >> not exactly anything to write home about. that is oliver renick at bloomberg news. >> let's get to european banks. ubs reportingd
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second-quarter results today. we spoke to the chief executives posting a loss credit. for more on what is weighing on ubs let's get to matt miller. mean that investors are going to see less money return to them or not? thehat might be one of nuances and one of the reasons that investors sold shares of ubs. the capital ratio was 13.5%. investors have been waiting to hear more about whether or not he plans to raise the dividend or by back tears. the shares have run up over the past week or so. maybe it is a bit of a disappointment with the capital
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ratio. on the other hand, we learned something different -- interesting from credit suisse and barclays. listen to what he had to say about private wealth clients engaging. family offices have been catching up in the second quarter compared to the first quarter. across the border if you look at our aipac business and elsewhere in europe, use a pick up in transaction volumes in general in all kinds of activities related to deploying cash in a more constructive way. >> that is interesting because yesterday we heard from deutsche bank that client activity was muted. but those banks are talking about hedge fund trading.
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individuals and family businesses are in the market trading. they have been coming back to investments especially here in europe. >> here in the u.s. there is a massive cycle paid out over fixed income. are we seeing any of that or is it all a grab for the wealthier families and institutions question are >> one of the things that we saw that was a negative for ubs was a drop in their investment bank business because of fixed income and credit currencies trading. that makes up a huge part of their investment bank. they have shrank that business as they focus on being the biggest wealth manager in the world. even at 6% drop did not really hurt and they have a bake return on equity in that banking
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business. >> matt miller is reporting from zurich. vonnie: let's check in on the first word news. emma chandra is here. >> senate republicans have promised to repeal obamacare for seven years and their latest attempt has fallen apart in a dramatic early morning boat. john joined senate republicans and all the democrats in the stripped down plan to overhaul the affordable care act. >> this is a disappointment. the disappointment in the two. our friends in the house we think them as well. i regret that our efforts were .imply not enough >> mitch mcconnell has pulled the bill from the floor and has said it is time to move on.
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the u.s. has been ordered to reduce the number of diplomatic and other personnel in the country. the news agency says hundreds of u.s. personnel will have to leave. the foreign ministry says that relations between the countries have become hostage to the political battle in the u.s.. i public feud between white house officials has turned toxic. anthony scaramucci has tagged rivals percent steve bannon. he called reince priebus a paranoid schizophrenic and said that steve bannon seeks media attention at the president's expense. the prime minister has does -- has resigned after a landmark corruption ruling. hisited a disparity between wealth and known sources of income. he was tripped up by the panama papers, documents that showed
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children controlled four of his countries. >> coming up we are tracking some of the big movers after expanding ate u.s. a slower pace. this is bloomberg.
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vonnie: you are watching "bloomberg markets. it is time for futures in focus. the first three months of the year showed the economy as slightly more tepid gdp growth than previously reported. joining us to discuss what the
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cme means for the dollar is company.m a capital much of the moving on gdp data, and how much on washington and general trends around the world? >> we saw some great dollar volatility. expectation if someone what they were thinking but they're releasing a continued weakness in the u.s. dollar. it a huge move in the canadian u.s. dollar. what is really concerning for a lot of the bulls as far as the dollar is concerned is that the continued weakness in fresh highs, going into a pivot swing level.118 >> are you seeing the bulls change their minds very rapidly?
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>> i think it is continuation momentum. in major breakout early march set this tone. this news on the tepid growth and the low inflation will continue that momentum, especially with the lighter volume we would expect on a gdp announcement. i don't believe we will see a reversal today or over the weekend. >> oil and wti trading at $50 per barrel. are uphing, i guess we against resistance. what happens from here after the summer driving period and if 70 does ramp up production? >> you hit the nail on the head.
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reallyentory numbers carried us up to that amount. andrew torrey being lower by seven barrels -- 83 million barrels globally since march. if people thought cutting back was not going to affect those things, that concern is no longer there. the real question is that 52 level. weeke could be a volatile next week as well. >> great chance still ahead. worried?vestors the we look at the numbers. this is bloomberg. parent ♪
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mark: is "numbered markets." -- "bloomberg markets."
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vonnie: let's go to julie hyman. julie: howard marks reiterated his concern about junk bond etf's and how they are not as liquid as they look. here to break down the biggest junk-bond etf's are senior etf analysts at bloomberg intelligence. let's take a step back and talk about howard marks and others. he is not the only one that is concerned. what's the validity that they have? >> there is logic in the criticism. how can something be more liquid than underlying assets. ? i refer to it as the dressing arc dilemma. you're trying to bring ancient beasts. are they going to eat the patrons and have a huge crisis were no one can get out question mismatche is liquidity
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that he is identifying. interesting. this is the charge of the debt market relative to hyg. they only own 3.5% of the total junk debt market. mutual funds own 25%. chat -- are's are a a tiny owner of the market. when you think about the liquidity mismatch the hyg holds the debt and the only trade 20% of the debt trades every day and really 15% trades on any given day. that is the worry that they have. it has been around for 10 years. it only makes up 2% or 3% of the market it makes up
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13 to 15% of the trading every day. people trade the heck out of it that it is not that big of an owner. >>, looking at hyg's specifically, you have another chart that encapsulates the risks and benefits. >> if you look at the preempt discount chart, it's because rates are low. the other chart we wanted to bring up was the discount of hyg. agoe it came out 10 years you can see how it has narrowed. that was a rough patch. you can see how it has come down because more and more market makers trade this thing. this is going to be a big benefit in a crisis. as soon as there is a buyer for bonds, there is a profit incentive to pocket the
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difference. hyg asill be a buyer for soon as the prophet can be sold. it also shows that there will be the occasional hurricane. it's not that safe. there has been a dozen days where it has lost more than 3% in one day. vonnie: breaking news, the food and drug ministration is pursuing lowering nicotine levels in cigarettes to nonaddictive levels. tobacco stocks are moving. you can see some of them quite substantially on the news. this is bloomberg. ♪
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♪ live from bloomberg's world headquarters in new york and london, i am mark barton. vonnie: i am vonnie quinn.
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a crushing defeat to repeal and replace the affordable care act with three republican senators voting against the so-called skinny repeal which would have left much of obamacare in place. mitch mcconnell spoke after the late-night collapse of the gop's agenda. senator mcconnell: this is a disappointment, disappointment indeed. our friends in the house, we thank them. i regret that our efforts were simply not enough. vonnie: let's bring in our chief washington correspondent kevin cirilli. what was he anticipating that john mccain would save the day? >> a disappointment to say the least that john mccain catching his colleagues offguard during the vote. it comes after senator mccain had arrived on capitol hill,
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days after he was diagnosed with brain cancer. the president in a situation he does not want to find himself in , crushing policy defeat for republican-controlled congress and a republican-controlled white house. the president said, if republicans are going to pass great future legislation in the senate, they must immediately go to a 51 vote majority, not senseless 60. even though parts of health care could pass at 51, some good things need 60, so many great future bills and budgets need 60 votes, he is advocating for bipartisanship in the sense that he would need to change the senate rules in order to pass some type of health care reform. already they are moving on to tax reform. --k: can the repeal effort it has appeared to collapse many times and have been revised, kennedy revised this time or not? >> it is done. if they want to have a
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bipartisan type of fix it level -- legislation, that would take some time as they would need more moderate democrats. would need overhaul to navigate the political battle lines against republicans and any significant reform is not going to -- it is off the table at this point. we heard from mitch mcconnell and he said it was time to move on but publicly they're transducing to tax reform with the treasury secretary leading the charge with congressional leadership. they are trying to work behind the scenes to correct some of the strategic mistakes that were made
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inside, themps established republican wing and the more nationalist wing with the rise in wall street wing. is now onof interplay display for the public. mark: when it comes to the three factions, talk me through the pecking order, who has the president year, who has the president favor and in what order? >> it is important to look at what the issue is and how it plays out. for example, tax policy, to some
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extent this has to be determined and we see steve bannon push for raising taxes on the wealthiest americans as part of a play to the base and a part of a way to alleviate some of the burden on middle-class taxpayers. on issues like climate change, you have not seen a winner but on some of the broader issues about the economy, and the way to appeal, you do see some of that and you see jared kushner and of our control -- ivanka tru mp when rising in terms of women's issues or in terms of the middle east or the u.s. relationships with other countries. i would say, so far the established republican wing seems to have suffered the most weight reince priebus and paul ryan represents with the
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president pressing congress, the leadership in congress to continue to the nuclear option and apply it to legislation so they do not need 60 votes to move forward. . , the the president conference is the president did not get involved in the health care about, will he be told he will get more involved? what theestion now is administration does, policy wise, limitation wise in terms of going forward. that is a big question in terms how the rhetoric and terms of obamacare is already dead -- he will just let it go. his responsibility to govern and whether the administration takes active steps to cross or minimize the affordable care act, or just the back. -- step aback. playwill be the biggest
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power wise. the advocacy and health insurance and community about what steps the ministries and takes. -- administration takes. mark: we will reiterate this fda said tos, the be seeking cutting cigarette, nicotine to nonaddictive levels. stocks are moving lower as a reaction and british american tobacco is 9% down, the biggest decline since 200. out. down 13% and philip morris down 5%. we will monitor this as tobacco stocks getting hammered on this news the fda is to seek cutting cigarette nicotine to nonaddictive levels. ♪
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we are going to take a get a look at the breaking news from the fda proposing cutting nicotine levels in cigarettes to nonaddictive levels. tobacco stocks are plummeting and we have julie hyman. there was a quick and fast reaction, talk about no reaction in health care but a reaction to the tobacco announcement. julie: it goes to the heart of their business, if nicotine is the reason that a lot of people smoke, they become addicted to it and if the fda mandates a reduction in nicotine, that could mean the biggest threat since the last big regulatory change we saw on tobacco. the fda says it plans to begin a public dialogue about this. it is not as though they're
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coming out with rules today. it is the beginning of a discussion, is how they are talking about it and they will take public input on the proposal. ken jup the phone with who covers the stocks of bloomberg intelligence and says it is a net negative for tobacco, particularly traditional tobacco and could affect a lot of the newer moke was roddick's. products.ss he pointed out that there is some discussion about flavored cigarettes. flavored e-cigarettes and other types of non-smoke products the fbi is discussing. that that would be an issue because it is one of the appeals of some of the new products, if you take away flavors. this is affecting some of these stocks, even philip morris international, which does not get business from the united states, the fda coming up and
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making a statement like this is still affecting the stock. mark: stocks on both sides of the atlantic, imperial brands and british-american tobacco, big exposure to the united states. both sides of the electric are getting hammered. julie: british-american just but reynolds american and it was preparing -- we ran a story yesterday that it was preparing to sell its heated tobacco device in the united states. you have the vapor devices and the heated tobacco devices and now there are different types of technology in if we are able to take the bloomberg, i just made a quick chart before i ran in here. looking at the long-term stock performance of all three of philip morris and british altria hasustria -- been around the longest and is a spinoff. they have done quite well. vonnie: when i figured i had to
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bring in more people with smokeless and flavored tobacco. vonnie: exactly, so we have seen the stocks, despite climbing rates of smoking in the u.s., they found new markets around the globe and was a combination of a developing market demand -- differentogy ways to consume tobacco. you can see these stocks taking a big hit on this latest threat to the very existence of the industry. vonnie: thank you. to talk aboutve amazon paying the price for luring shoppers away from the stores with shares of the e-commerce giant continuing to slide. forecasting potential quarterly losses for the first time in two years and the ramp-up in spending since core growth is weighing on its bottom line. let's bring in at the research analysts at consumer tech and e-commerce. the margin disappointment stands
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out. does it provide a buying opportunity? >> i think so. every so often we get gift from the market related to amazon and it seems to be related to a margin degradation. you get a short-term market -- margin degradation and ultimately, in this case, it is driven higher growth. a good headline this morning that amazon sold more stuff but spend more money, that summarizes it well. the street will focus on them selling more stuff to put it simply. eventually, they will get leverage on the costs. and the investment they are making will drive expansion of total market and distancing them from their competitors. ink: can the growth we see amazon web services, revenue up 42%, is that sustainable? is, the numbers
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are catching up to them to some degree but they can maintain a low 40's growth rate, which is quite impressive. they are still the leader in cloud. we believe microsoft is getting some share with some of the things they have done to get their ducks in a row as far as product alignment. ultimately, we think getting microsoft more in line with the market for cloud will essentially drive growth of the overall market. aazon may not have as big of greenfield as they did in cloud but the overall highest bigger than we thought it was. vonnie: a 20 year streak of revenue growth from amazon, in spite of this -- does this continue? even as amazon spends capital like nobody's business in order to integrate whole foods and those distribution centers? >> you do have to believe that
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there will be some additional fulfillment they have to do. get wholey once they foods on board with amazon. i think that eventually we will see margin leverage. there likely will be some increased in the first-ever 2018 after we see whole foods close later this year. it is important for investors to keep in mind that margins are over time likely to expand, but in the near term, whole foods spending on fulfillment and spending on other fulfillment for prime, same day, same hour delivery, video content, salesforce for amazon web services and for advertising, will pressure margins to some degree. vonnie: retail revenue growth has been 22% in that area, does it continue at that pace? how long can that happen for? >> the good news is that, from overall retail buying perspective, online is still a
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very small component of global retail sales. even in the u.s., online sales desk0%-50% of u.s. retail 10%-15% of u.s. retail sale and their scale when opportunity for growth amazon has is a continues to expand into international markets and continues to expand its operating's in terms of having more inventory and better fulfillment profits within development it's like the u.s. and western europe. we do think there is an opportunity for the growth to continue in that low 20's range. mark: you have a $1200 price target and an overweight rating, what are the risks to the price target in that recommendation? >> i think we are seeing it today, essentially, some investors may get fed up with the idea that we will never see any sort of margin expansion, and there will always be the next layer of spending.
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we will see increased spin related to grocery as they bring in whole foods. there is a point at which some investors may become frustrated. from a competitive standpoint, hard to imagine anyone catching them, they have reached an escape velocity in a lot of markets. in general, it would have to almost be something outside of their control like any sort of department of justice looking to -- having issues with their monopolistic position in certain markets. generally speaking, things that are under their control, they are in a good spot. mark: great to see you and thank you for joining us. still ahead, the french president may have made his first faux pas, breaking a campaign promise less than four months into his term. details next. this is bloomberg. ♪
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♪ vonnie: live from london and new york, i am vonnie quinn. mark: i am mark barton. the french president may have made his first faux pas since taking office, his victory was opennessn big report but his decision to block an italian takeover from a shipyard goes against his campaign promises. is marketing. -- mark dean. traditionally, this is very french behavior, nationalizing a shipyard, but the president promised different, did not the -- he? >> it fits into the cliché of france and in the thinking, the french thinking of what
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government should do. it is slightly jarring to the outside world because we have heard about emmanuel macron is a reformer and a free-market thinker, a modernizer. but, for those things any of us who have been following him for a number of years, he is always also said that he believes in defending french industrial interests. and that we should not be naïve when it comes to national champions and industry. he is doing this, this is not quite that surprising to me. on the other hand, it is a problem, a difficulty because people in italy are very upset. italy and france are close allies. that is not something -- this tension between these two large european countries will not disappear overnight. mark: how much is down to the
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fact that he has a big reform filled month in september, how much is it down to be bickering you had with his former army chief and the ensuing slide in the polls? >> i think that the labor market reform and the budget cut that are in the pipeline are part of this. the president has to succeed politically in what he is doing and he cannot be asking for sacrifices. it was difficult to the asking for sacrifices on all fronts, but at least he can say come he can turn around to the nation and say i am defending our interests, standing up for the french people. to ask for sacrifices in terms of labor market reform and in terms of budget cuts because this is the way forward. i do not think they are directly linked but i think emmanuel macron does believe in the government believes that they
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are doing the right thing in terms of political economy. mark: thank you for joining us. giving us an update on the emmanuel macron nationalization. coming up, following european stocks. for the thirder day in five and the second weekly drop. that big news in the u.s., tobacco stocks getting hammered, one of the reason the ftse is shares lower with the biggest decline since 2000. all about the earnings today, all about bank earnings. this is bloomberg. ♪
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mark: it is 11:00 a.m. in new york at 11:00 p.m. in hong kong. 30 minutes left in the trading day in europe. from london, i am mark barton. andie: i am vonnie quinn
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this is the european close on bloomberg markets. ♪ mark: big top stories we're covering from the bloomberg and around the world. european bank orderings, credit suisse feeling good, ubs shares getting pummeled. we will hear from the chief executives of both banks in this hour. tobacco shares are getting pounded on both sides of the atlantic on where the fda is trying to cut the amount of nicotine in cigarettes to nonaddictive levels. 2.6% in economy grows the second quarter, showing a tiny resilience but will washington's inability to get anything done eventually come back to heart the nation -- heart the nation -- haunt the na

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