tv Bloomberg Markets European Close Bloomberg August 8, 2017 11:00am-12:00pm EDT
♪ mark: hereunder a top stories we are covering around the world. we will cover the latest opportunities in emerging markets including south africa where the parliament is taking a critical vote on whether to remove the president from office. and retail, michael cores gaining, today. the right strategy to deal with north korea. have a look at the european equities right now.
30 minutes into the end of the tuesday session. stocks have rebounded. euro stocks, higher. silver and bond yields gaining. aluminium up 2.34%. let's talk a bit about this chart. this is a wonderful chart showing you euro-dollar volatility. it pinpoints a couple key time periods of the year. volatility taking up and remains below levels seen in the run-up to the french election, i had of that ecb june meeting. that ecb june meeting.
the euro slumped more than 10% against the dollar close to the highest into and half years against the dollar. will draghi give some sort of indication that the beginnings of policy -- policy normalization are near? big things happening in south africa as we speak. the rand could surge. gains would falter if he survives the vote. the currency was the best performer. after the national assembly speaker said the parliament could vote by secret ballot. some say that increases the chances of his ouster. -- of his ousting.
as soon as the result of that vote come out, we will tell you about it. china surplus widening for the fifth month. imports moderating, exports rising 7.2%. that is the blue line right fallingmports up 11%, short of expertise -- of expectations. growth and major trading partner -- problems continue to recover at home, stronger-than-expected. export doeslargest confront more uncertainty as the u.s. president continues sporadic tough talk on trade. that was the big piece of data on china. like over looking there, julie? julie: looking better as we see all of the major averages perk up.
the dow is rising for an 11th straight session. the nasdaq has turned positive although it has not read obtained its record. despite its success, the largest company in all of the respective averages. take a look at the bloomberg. we have a look at apple. this is the heat map for apple. this is up 8% thus far, august, it's best month since -- uary -- sin in terms of the turnaround we saw, it has to do with job jolt datathe latest came out at 2:00 and you saw a turnaround in the u.s. dollar in particular. you have a big leg up, so job openings currently at a record and even though economists say that will not necessarily last, you are still seeing a market reaction.
the jolts data. you can see the record to which it has climbed. down inthe rate ticked the latest data as well. people are not as willing to leave their jobs. economists suggest this might mean upward wage pressures are still relatively muted. we are still seeing that upward move in the dollar. is it going to last? the trend in the dollar has been downward. when we have seen prior downturns in the dollar, they have lasted a decade or more and we have seen drops in something like 40%. even though we've got that little uptick, the trend has been lower and the dollar is still down thus far. unless there is more data, perhaps to support an increase in the dollar, we might be still
continuing on this downtrend. vonnie: we shall be monitoring daily. turning to lecture a retail, michael kors trading higher after its first-quarter earnings beat the forecast. no expectations over its acquisition. shares of other apparel names like coach and ralph lauren are getting a boost following the report. sarah halzak joins us from washington. thank you for joining. it seems like michael kors is trying to get its house in order along with a couple other luxury retailers and the rest of them have no idea how to turn the ship around. sarah: michael kors saw some green shoots. it improved on profitability and you might be saying that does not sound like a number to break out the confetti cannons, but it
is an improvement and it shows they are making progress in the luxury sector. a lot of these brands got overexposed. they were opening stores at two study of a clip and they were in department stores that did not --e the right cachet is cachet. vonnie: if we look at terminal chart in the library. betterrom michael kors last quarter than expected, it was still down. sarah: exactly. they've got a long way to go and they say they have plans for addressing that. they were moving more into the men's business and they have big plans for china. they think they can be a billion-dollar business for them. turnaround can come from a lot of different places. there are still a ways to go. billion toing $1.2
buy the luxury shoe company and had a bit of luxury to the plan -- to the brand. see $275ey expect to million in incremental revenue in the rest of this year and double that in the next fiscal year. we did not get clarity on whether or not we will be able to cheat -- achieve key synergy. they said they want jimmy choo to be its own brand with its own leadership. a distinctive product but i'm sure investors would like to see if there is some supply chain or synergies that can be found. suffered likeuren many others from a loss of prestige. . it has a new chief executive some signs -- it has a new chief executive. a turnaround is happening? sarah: they have also been trying to get out of the off-price channel. that seems to show some
improvement and the new ceo seemed to suggest that he will continue forward with a lot of the operational efficiency measures. it seems like we can expect some continuity on that front. vonnie: the shoe business seems to be in full flight. what are the different segments that will be succeeding over the next few quarters? sarah: handbags are a critically important one to watch for, with kors. they have a lot of innovation going on in that space. we really want to see if they can really rev the engine in that department. obviously shoes are a high-margin purchase. it is good for those companies to see momentum in those categories. -- in that category. has said they are
in a posture and they are not looking for small deals. to beaid it is not going a $10 million or $20 million kind of thing. they want to grow in a big way. they also want to diversify. if they have a bigger stable of brands, if one cools off or a category cools off, they are insulated if they have strength in another area. vonnie: sarah halzak, thank you. let's check in on the "first word news." emma: republicans are discussing a compromise when it comes to cut -- overhauling the tax system. lawmakers are talking about making permanent revisions and temporary or he cuts to individuals and businesses -- temporary we cuts to individuals and businesses. to draft of a new government report finds that climate change has had a dramatic impact on the u.s. the report found that the
average temperature has risen rapidly and drastically since 1980. it directly contradicts claims by president trump and members of his cabinet. the report won't be released until the trump administration gives it's ok. of iran is keeping his top allies in key positions in new cabinets. is begin -- he is beginning his second term as tensions with the u.s. are increasing. they will continue on a path of re-engagement with the rest of the world, but president is threatening to pull a lot of the landmark nuclear deal. in south africa, the parliament is moving on a motion of no-confidence with the president. the ballot will be held in secret. south africa's main opposition filed a no-confidence motion after he fired the finance minister. global news, 24 hours a day hour by more than 2700 journalists and analysts. this is bloomberg.
series of scandals have tarnished his eight year rule. mbatha covers south africa. amo: 239 lawmakers have shown of and that is just about tension i of the 249 seats they hold in parliament. the speaker has made clear is that the threshold for a motion of no-confidence in the president is still 201 lawmakers voting the past that motion. that will mean that the opposition will be quite a significant number of lawmakers to vote in line with them to get this motion passed. whether or not that will happen this afternoon, we will just mp'sto wait and see as the go in alphabetical order. if there isonnie:
confidence expressed in his leadership, there are hints of what he will do, isn't there? not they said they will persecute or punish any lawmakers for any vote that they cast because the constitutional quote did make a ruling saying that mps should not be threatened at all, going into the secret ballot. they will commit to not punishing any lawmakers and also commit to any cap members -- any cabinet members who vote for the motion will not be fired. the outcome of this vote, we will have to wait and see. we know that this vote in particular has put quite a lot of pressure on the president as well as the ruling national congress. vonnie: we saw -- mark: we saw after the ballot was declared
secret. what are analysts saying if zuma is ousted, tell us what could happen if the status quo remains . economists arend not expecting that he will be removed. this is a man who has survived several other motions of no-confidence. if he does lose this particular one, it would show he has lost control of support within his party. this particular motion of no-confidence comes after he -- that tried to oust him just this year. he is going into this particular motion on a weaker note. if the motion does not pass, we may see that the anc rhetoric of fighting corruption will be undermined. it may lose voters in 2019 as south africans see anc may not
as the is -- may not be as committed to fighting corruption as they say they are. vonnie: legal opinions are being called up as well or the threat of seeking legal opinions. zuma has survived eight no-confidence votes up to now. he may survive this one. what would he want as his legacy? will the triad have more of a impact -- will he try and have more of a impact? if he survives this motion of no-confidence, he will remain the anc leader up until the center -- the december conference when a new leader will be elected to the party. chances are, he will not be around to leave much of a legacy. what is being said as if he is voted out in december, a may just be ousted amicably by the
next successor who is elected incident -- in december. but we do know for sure is that his tenure has been marred by scandal. not only of corruption, but also misuse of public funds. it is difficult to see where he can redeem himself. mark: thanks a lot, amo mbatha. laterote is expected today. danish coming up, a jewelry maker is warning of tough times ahead for a key u.s. market. investors public -- polishing up shares of pandora, today.
mark: live from bloomberg world headquarters in new york and london, i am mark barton. vonnie: and i am vonnie quinn. jewelry maker pandora fell as much as 13% as the company warned of a typical retail environment, particularly in the united states. isning us now with more taylor riggs. pandora is a purveyor of all kinds of jewelry at affordable prices. what went wrong? taylor: shares had their biggest drop since april and the ceo
highlighted the u.s. retail market as the problem child. if you go back a year on the price target, you will see it separate a lot in 2017 after what was generally a couple good -- generally a good couple of years. the u.s. is one of the biggest markets measured by sales. traffic.line in mall he highlights this broad-based recovery is not translating into higher sales from the consumer. i also wanted to look at pandora compared to the dutch benchmark equity index it is compared to an you can see that pandora has suffered a lot compared to some of its peers. income fell, also missing estimates. chief executive points
to a structural chunk to -- challenge in the united states. is the united states overmalled? taylor: yes. says in report and it the u.s., there are 48 square foot of retail per person. if you want to take my terminal, you will see that the retail and consumer have not translated into sales like he was saying and we are overmalled in the u.s.. vonnie: this is pretty phenomenal because mark would say over malled. mark: i am turning slowly into a new yorker. vonnie: it only took me a few years longer than you. are thanks to bloomberg's taylor riggs -- our thanks to bloombergs taylor riggs. mark: let's talk bloomberg
business flash. the cofounder and chief executive of double wide capital cities too much of a good thing. junk bonds and emerging markets. he tells bloomberg he is reducing those positions in double wide funds and invest in higher quality assets with less sensitivity to rising interest rates. cbs posted second-quarter profit that beat estimates. the company said its pharmacies saw more drug orders even after losing some of its major customers. the use of high priced specialty drugs helped cbs boost sales -- helped cvs boost sales. the former procter & gamble executive who joined in july. the company struggling with a loss of prestige and heavy reliance on the troubled department store industry.
ralph lauren said revenue will continue shrinking this year at the turnaround continues. -- as the turnaround continues. to get what is happening to european stocks. . inching higher as we approach the close. one of the quieter days for earnings in macroeconomic data. have a look at what is happening on the currency side of things. euros rise against the dollar. let's finish up with the bond board. the close is next. ♪
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utilities. also gassed and health care. the gauge fault before that 21 month high reached on may the 10th which puts it on the 10th most performing european benchmarks. after a brief spell of moving in the same direction earlier this year, euro stocks are once again getting ground down, whenever the currency strengthens. the two are diverging by the most in 15 months of according to the 60 day correlation. euro is blue line, euro stoxx 50 is the white line. the euro within 2% of that 120, what some are calling the pain threshold which strategists are dampening with these long-awaited earnings, reviving europe. line, hashe blue overtaken chrysler.
ferrari is the white line and chrysler is the blue line, currently worth about 1.9 billion euros more. , and out to brokerage cross, all have increased their price targets by about 25% or more after last week's earnings and reports of expansion plans which may include adding a in the sportsater car offering. wonderful shot showing the fiat chrysler blue line, ferrari gap in markets, capitalization. finishing with mining stocks, after two years finding shares -- mining shares have reversed the slump and pushed the gauge of prices back to its lowest in more than a decade. upload by companies to less profitable operations along with a resurgent chinese steel industry and refining demand for industrial chinese steel industries and demand for industrial metals.
the bloomberg world mining index, it doubled since january 2016. that is the white line. the blue line is the commodity index. the measure still about 50% below with commodity prices boom then bust. the difference is between the world mining index and the bloomberg quality index. vonnie: fascinating. out earlier, it is all about trade, the theme for the day. maybe that is why we have the dollar a little stronger at 93.77 but the broader theme is it continues to weaken and that is reflected at 110.77. we see a pickup in the session in the 10 year yield, 2.29%. we are talking about yields later on. battle of the charts, don't miss us. i did want to point out that the onshore, it is 6.70. it it below 6.7 earlier today,
strengthening all the while versus the u.s. dollar, not versus the basket of currencies but the u.s. dollar on the potential for threat to trade. g20 movers, i want to point out that russia and mexico are recovering a little bit in terms of equity markets. not so much currencies although the ruble is stronger at just below 60 and the chinese 6.71.re one, that is at this doesn't show you the south african rand but that is also the idea that zuma might not survive that confidence vote and you see several commodities higher as well. vonnie: let's turn back to emerging markets today and think about them. mark: the rand extending its jump against the dollar. right now in cape town, there is a vote on whether to remove president jacob zuma from office. death of ourw is
nepal and from pinto. it seems unlikely. what sort of market reaction would you expect? >> i would say the markets certainly wouldn't mind seeing the back of jacob zuma right now . but the skeptic in me says he is more likely to survive this no-confidence vote and potential will be returned to december when we have the african national conference and the next re will be ame the next president of candidate. mark: where does that leave south african bonton how appealing they are? news this will be a closed balance, that people would be more inclined to vote against jacob zuma. since then, hopes have faded for his removal so there may be, to
an extent, the motion fails in we will see treatment. to us, we are looking at the south african economy, which is why we already saw the central with theing rates once surprise market. we anticipate there could be more cuts along the way with two more cuts over the next 12 months. vonnie: so are you holding anything in south africa? >> we have been involved on the local bond side. to us, the key issue -- the key threat -- is will local bonds get downgraded in the next few months? it may prompt removal from local bond indices, which may prompt for sales so we are watching that closely. nonetheless, we are seeing a country that doesn't hold onto near-term maturities with emi emerging-market managers attending to favor, so we are seeing a strong country although
there is some deterioration in terms of growth and fiscal policy and now there is concern about zuma threatening independence of the central bank. vonnie: if they don't make any changes other than what you bank, is, the central there a point where you would sell that local debt or would you hold onto it under continued zuma and anc leadership? >> it depends on the reaction functions of the agencies and how likely they will be to downgrade the debt and forced sales so it is careful watching the next few weeks. mark: let's talk about jeffrey gundlach. risky assets, debts are overvalued. what is your message? to investors is that right now, on fixed income, there is scarcity of field. .lobal equities still flush as we look across different countries, investors are looking for yields and looking for yield pickup over the markets.
they still favor em and local debt, where we still anticipate greater returns than other fixed income sectors. mark: what are your preferred em stories now? yacov arnopolin: brazil has rebounded nicely. potentialter a accusation had surfaced, now we are seeing the central bank has resumed cutting rates so we are still favorably disposed towards brazil and we hold positions in places like indonesia and, i think another story that has become compelling is argentina. primaries are this sunday and we have legislative elections in two months time. markets are concerned they may take the upper hand or gain a senate seat. in two months time. which is why we see weakness in the currency. we will see how that plays out
but it could also be interesting as an entry point into argentinian assets because we are still seeing a gradually defined innovation, we are still seeing improvement in terms of cisco and growth has rebalanced. it is one of the more solid stories but like all emerging markets there is never a straight line improvement and this weekend, the next couple of months, massey volatility because of the political backdrop but nonetheless, the current president will be able to proceed with those forms. vonnie: what specific assets are you keeping in ion? sovereign bonds in argentina or other bonds? yacov arnopolin: in the entire complex, we are watching currency, sovereign bonds, we have seen issues from argentinian promises which may subside ahead of the midterm elections. argentina even issued a 100 year bond. has certainly been a lot of attention towards argentina
because they have become a prolific issue. argentinians have been locked out of the bond market for the better part of the last decade because of the ongoing litigation with the holdouts resolved by the administration. it is not altogether surprising that there has been this kind of rush. the country does need funding but it also creates a situation where their frequent issue in the market is focused on their economic trajectory, wants to make sure they will deliver on their problems. >> what are your thoughts on venezuela at the moment? i know you are underweight and watching closely. what does that mean and what youd a valid return be for if you were to invest in these bonds? yacov arnopolin: first and foremost, what we are seeing in venezuela is nothing short of a humanitarian crisis. from the perspective of financial markets, it is difficult to establish what is the value for venezuelan bonds, what is the likelihood of
recovery in the case of default, and every day it becomes more of a when rather than if. investors,ng-market we look at the country and we think of ratios like your classic debt-gdp well. in venezuela, it is not just bonded debt or classic extorting -- external bond issues but contacts with china and russia where it tends to be murky so it is unclear what their security and volume of contracts is. the other part, the denominator, is gdp. the country stop publishing over a year ago and we have been relying on their oil exports as a gauge for their gdp but it is unclear exactly what it is right now. to value the country and assess their ability, assuming there is a change, it becomes really difficult. we see a regime change?
should we see some further transition? first, it is more likely than not that things get worse before they get better, which is quite deplorable, but also it might take quite a while even if the imf comes in. it could take a while to decide what they should do and what the statute would look like. mark: thanks for joining us today. great chat, yacov arnopolin. vonnie: let's check in on the first word news. emma chandra has it. >> president trump says nations must be tough on north korea. the president tweeted that after many years of failure, countries are coming together to address the dangers posed by kim jong-un's regime. u.n.,bassador to the nikki haley, told nbc the new sanctions would force him to rethink his strategy about nuclear weapons. we will have more on this story in a few moments before the u.s. ambassador to the u.n. bill
richardson. trump administration is expanding sanctions against venezuela. according to people familiar, the u.s. has assets of 10 to 20 people tied to the governor. sections may be delayed as the u.s. seeks an international response for undermining democracy. u.k. ismarket in the booming. the question is, how are companies going to find workers? according to the recruitment and employment confederation, the number of permanent jobs rose in july at the fastest rate in more than two years. the availability of workers fell sharply. global 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. vonnie? vonnie: later today, disney chairman and ceo bob iger will join us following their latest quarterly earnings. ,hat interview at 5:30 eastern
mark: live from london and new york, i am mark barton. vonnie: i am vonnie quinn. this is the european close. latest on out the north korea, president trump tweeting "after many years of failure, countries are coming together to address the dangers posed by north korea. we must be tough and decisive." sanctions approved by the security council work? joining us from cape cod is bill richardson, formerly ambassador to the united nations, former presidential candidate as well.
thanks to you for joining. this u.n. resolution that was passed that the president lauded and said it was great to have russia and china on the side of the u.s. -- is it just backing north korea into a corner? >> the sanctions, these sanctions are the toughest that i have ever seen. third of north korea's economy, income that is not going to be coming. 80% of commerce goes through china into north korea, coal exports are diminished, foodstuffs, all kinds of goods. i think this is a sanction that might have some bite and this is the cause -- this could cause the north koreans to react violently, including the foreign minister who i dealt with, who is basically a moderate person. it could be the start of china really making sure that they are
enforcing sanctions. they have to enforce sanctions or they won't work. vonnie: we know that the leader, kim jong-un -- he will do what is necessary to keep power. he is going to test more missiles, i think that much is clear. it doesn't matter how many sanctions or how much suffering his people go through. is this the best approach for a leader like him? yacov arnopolin: i believe that these sanctions combined with some kind of diplomatic initiative. i like the fact that the secretary of state said "we are ready to have a dialogue if north korea stops some of the missile tests and stops going with more missile activity." that is a reasonable discussion. north korea has rejected it but i think if these sanctions have some bite, if china continues with real pressure, unlike in
the past when they have done little, it might have some effect. the north korean economy is rather small and if these sanctions are enforced, they are going to make a difference. oil exports,er which this sanction did not go after, after this, that is really going to, almost, stop the north korean economy. i think the wait and see attitude -- but we've got to move fast with some kind of dramatic efforts. this is an effort that needs to happen. sanctions and diplomacy. we should stop talking about preemptive military strikes. mark: on that point, do you ever see things escalating to such an extent that military action does , as threatened by the trump administration? bill richardson: the worry i have is the president tweets all these threats.
he is tweeting intelligence activity by north korea. my worry is that all this talk about preemptive military strikes, north korea being hotheads, it will cause a miscalculation. you know, the danger is a fishing boat the and south korea. an invasion of north korean airspace, and north korea does something foolish. what you want to avoid is an altercation that affects 25 seoul -- ople in 50,000 people in japan. yes, we can defeat north korea but at enormous collateral and human damage. i think we have to be sensible in approach and see what comes out of kim jong-un. we don't know what he wants. far, hiding.
let's see if these sanctions have an effect. let's construct a diplomatic plan. let's have one voice speak to the administration, the secretary of state, instead of tweeting and talking about preemptive military strikes with the administration's spokesman. mark: how encouraged were you that china backed the u.n. action, given what seems to be a volatile relationship between the u.s. and china in recent weeks. we still have this trade investigation on intellectual property violations. that, for now, has been put on the backseat. how do you expect china-u.s. relations under trump to unfold? >> i was very pleased that china did not veto this resolution. i thought they were going to veto it because it was very tough. orthe past, china has said vetoed any resolution that has any bite. this time, it may be that china has felt north korea has gone
too far. the issue is, will they enforce these sanctions? will china stop this smuggling between the two borders that brings a lot of goods and foodstuffs and all kinds of energy in? that is going to be the key. so i am encouraged because china, not only supported the resolution, but it looks like they are cutting some coal exports, they are gradually putting the squeeze on north korea. since north korea is there only friend, maybe russia also, this is significant. mark: thanks to bill richardson, former u.s. ambassador to the united nations and former governor of new mexico. thank you for joining us from massachusetts. of the charts.le today it concerns the u.s. debt ceiling against the resilience of the euro. this is bloomberg. ♪
mark: time for battle of the charts. we will take a look at some of the most telling chart of the day and what they mean for investors. you can access these on the bloomberg by running the function featured at the bottom of your screen. kicking things off, sophia. >> you love this chart so much we talked about it already on the show, but i think it is so important we need to highlight it. find it on #btv 3011 go. this shows the euro. the euro stoxx, 50, the gauge of the 50 biggest companies in the euro area, you can see at the we had a of the year low where the asset classes were moving the same direction but that has changed since mid-may when the stocks are falling and
the euro is rising because people are extremely worried that this will cut into european earnings. that negative correlation is now the lowest and all the way going early 2016. you can see how the currencies are driving stocks. even though we are in the middle of the earnings season and people are saying they are confident, still, this growth is not enough to support european stocks. mark: i know i have shown it twice already today. vonnie, beat that. vonnie: i'm not that competitive but i will try my best. this is about the debt ceiling. this comes to mind after the recess. the treasury, since march, has been borrowing money and taking extraordinary measures and keeping the government funded. they are not going to be able to do that forever, and they will run out of money without raising the debt ceiling. steven mnuchin has pointed that out.
recently, maybe after washington managed to get nothing done on health care, the premium for holding the notes for november went actually lower than october. investors will pay more to hold november debt than october death because october debt is riskier. we might me in a technical default. see that chart at 5565. mark: great minds think alike and i did not know sophia was going to do that chart and clearly i love it so much i did it twice before she did it. in the spirit of bringing something new to the party, which is not her fault, veronica quinn is the victor today. ♪ ♪
from bloomberg world headquarters in new york, here are the top stories on the bloomberg and around the world that we are following. risky business. capital explains his philosophy to us, telling bloomberg to be cautious now before it is too late. joining a chorus of investors warning about risky assets. ceo rich battista joins us this hour to discuss cost-saving and strategy as more advertisers shift away from print media to digital platforms. lights, camera, earnings. disney releases its third-quarter results after the bell. will it espn continue to be a drag on the bottom line? julie hyman is with