tv Bloomberg Markets Americas Bloomberg August 14, 2017 10:00am-11:00am EDT
markets. ♪ vonnie: your the top stories. from around the world. follow hitting president trump over his failure to strongly personally denounced the rally in virginia. ken frazier just resigning from the manufacturing counsel. speaking out on twitter. meanwhile the president is expected to announce a new investigation into china's trade practices. will the chinese retaliate and what about the growing north korean nuclear threat? company preparing to go public. we are 30 minutes into this monday trading day in the u.s. abigail doolittle is with us.
tensions easing a little bit. >> big gains for the major averages. thedow and the s&p 500 and nasdaq all climbing higher. selloff forhe worst the s&p, on pace now for its best day since the end of june. a bit of a seesaw there. partners, they are saying they are cautious. despite the fact that there are signals out there that may suggest more declines are ahead. caution to the near term. leading gains, the tech heavy nasdaq is up most. of the s&p 500 relative, we are looking at facebook, apple, amazon along with google. big gains as you can see.
this represents a rebound from last week. outside of apple which was up last week, these three stocks down more than 1% since last week. a relief rally, nothing new. it is worth noting that 68 of the technology stocks in the s&p 500 are all higher. the financial sector, that is the top sector in the s&p 500 today, all financial sector stocks are trading higher as well. a strong rally. as we go across asset classes, we take a look at gold, safe haven is down a half a percent, oil up about half a percent. both of these commodities trading inverse directions as the dollar climbs higher. typical dollar climbing hurts oil, it is confirming the risk on picture, and then look at the vix. down 20%. let's hop on the bloomberg.
-- out of thet election, showing weekly gains were declines for the mix. for the most part, not a lot happening. small moves. speaking to complacency and calm we have been talking about this year. out of the election, we see a big gain and then a big spike down. you see a similar pattern here in january, another one recently, than last week, on thursday, the vix had been up 44%, stunning, but fell on friday after that. we now have it down 20% this week. the week is young. volatility seems to be returning. to the financial markets in the u.s. nejra: if we look at europe as well we have seen volatility declining on the euro stocks, we are 90 minutes to the close here in europe. in terms of how equities are trading, we're seeing a rebound in europe. by the most in
more than four weeks at 1.3%. it is broad-based gains we are seeing across a number of indices. markets, youe fx talked about broad-based dollar gains, dollar against the yen there. against the yen there -- euro. sterling lower, down for tense a percent. income rate is interesting. we are seeing yields move higher in the core. bond yields, o.a.t. yields moving higher but you are seeing them come down at least on the 10 year in the periphery. spain's two-year yield has dropped to a record low. gold, we will take a check on that later. talking about european equities, i said they were rebounding. from a five-month low. after, it had its worst week since november. we're now up with than 1% on the benchmark. every industry group going higher.
financial leading gains. looking at euro-dollar here. we are seeing a weaker euro. two-week volatility on euro-dollar has hit a three month high. ais could be partly down to risk because that is capturing that meeting. on thoseaps building geopolitical risks. finally taking a look at the 10 year bond yields here, drifting lower sense we were 60 basis points in mid july. moving three or four basis points higher here as we get money moving out of those safest havens. 41 basis points on the 10 year bond yield. vonnie: thank you. president donald trump is en route to the white house from new jersey. questions loom about the president's reaction to the violence in charlottesville, virginia. as the ceo of merck
resigns from the manufacturing counsel. he tweeted. now fromilli joins us our d.c. bureau. do thesew much activities change the terms of engagement for trump's base here in the u.s.? kevin: significantly. earlier this morning kenneth frazier resigning from the president posner manufacturing council in a public statement. he said "i am resigning from the council, our country's strength stems from its diversity and the contribution made by men and women of different dates, races, sexual orientation, and beliefs. reject expressions of hatred."
merck -- we should note that vice president mike pence speaking yesterday on his south american tour announced white supremacy and neo-nazi is him. jeff sessions said publicly earlier this morning that the administration will be investigating the incident in charlottesville perpetuated by neo-nazis and white supremacists as an incident of domestic terror. the president responded to kenneth frazier's tweet. he accused him of lowering ripoff drug prices. the president has not denounced white supremacy or neo-nazi is him since the events in charlottesville. he will be meeting with jeff sessions and chris ray later this morning. gota: we have also
something else we are looking ahead to on president trump today. china and trade? kevin: i can tell you that president trump is expected to instruct authorities to begin investigations into whether or not china steals intellectual property from u.s. businesses that want to do business in china. conclude that china is doing that it could lead to more tariffs. i want to pull up a chart. about what measures have been taken by the united states against china this year alone. the globalta from trailer, in 2000 seen, the united states has implemented 40 measures that are harmful to china. 2017, the last bar on that chart, that is down from 57 in the same time. last year. which totaled at about 70.
why this matters? as we start to talk about north korea and the growing threat, this according to the administration, could be a point of leverage. because of the economic relationship between north korea and the chinese. the administration feels they might be able to impose tariffs on china to get them to play ball to deter north korea's nuclear ambitions. vonnie: thank you, kevin. as president trump renews this, two top officials helped ease concern over a possible conflict with north korea aired here is general h.r. mcmaster. >> we are not closer to war than a week ago. but closer than a decade ago. dr. kissinger made clear in a great op-ed this weekend, this has been a problem that we have progressed the naked on for a long. progressed for a
long. g span of time. demands a concerted effort with our allies and all responsible nations. now, anjoining us author of a book about north korea taking on the world. gordon, thank you for joining us. we get the opening in this today. a little bit scaling back with talk of ip negotiations. china has said this morning that it will start blocking exports from north korea and it has a concrete day. handthis give an upper when talking trade with the u.s.? >> i don't think so. everyone is concerned with long-term enforcement of u.s. resolutions. we saw in the beginning of this year, february 18, the chinese announced they would not by coal
from north korea for the rest of the year to him lament sanctions -- to implement sanctions. but blocking call, in april, may, june, now it appears they are buying coal from third countries. north korean coal. there is a concern. they have always enforced sanctions immediately after neck and and then when we -- after enactment and then they go back to the old way which is busting sanctions. vonnie: i want to read something that the secretary of state and the secretary of defense wrote today. " the object of our campaign is the denuclearization of the korean peninsula." if we can move to the next screen. --y also say this
is this clarifying the president's position? >> this op-ed codifies issues. the trump administration policy during north korea lays it out all in one place. read, whatnt you they are saying is, countries like south korea and japan and taiwan are going to get their own nuclear deterrent if china doesn't rain in north korea. to restrain nuclear programs in those countries and the chinese have not restrained the north koreans. this is sort of a threat. this is terminal high altitude defense, the antimissile system, , this is another point of leverage for the united states. nejra: gordon, where do you think the tipping point is where china starts to lose patience with north korea?
>> you have the united states thating tariffs on china are so severe that beijing has no choice but to comply. for instance, if trump were to say to the chinese, you can support north korea, you can do business with the united hates but you cannot do both. if the chinese thought we meant it, that would be the 10 -- the tipping point. nejra: where with things go from then -- from there. ? with a have to denuclearize? >> i think so. important thing they supplies confidence to regime members that they are safe from the international community. to say we don't support those things, we will make sure the south koreans take you over, the north korean regime would change.
they would probably drop their weapons and mike it rid of kim jong-un and we would be on the road to a solution. not a guarantee. i think china has this in their power to do if it wants to. vonnie: bringing trade into this whole dialogue, if china wanted to play a greater role in the geopolitical environment, how does it react to this salvo from the trump administration on trade? first by saying these intellectual property investigations won't mean anything. that was a china daily editorial. backing from the official news agency. just a few hours ago they came out with a new thing, that said this would poison relations with the united states. a different and darker tone. i think it will get worse. what president trump is going to do be to ask the ustr, to think about opening an investigation. this is an investigation to investigate whether something is
necessary. that is pretty mild. what the president could have done is gone straight to a section 301 investigation under the trade act of 1974, that could lead to extraordinary remedies -- the chinese would hate that. but that is not what he did. what he is trying to do is signal to them, look, you better play ball otherwise i can amp up the pressure. jinping issident xi focused on the congress in the fall -- he is not in beijing at the moment. he is in a conclave with party leaders. how much will its relations with the u.s. play into who he chooses for the next party congress? >> i don't think that would have an effect. he is looking for loyalists. what the united states can do in the run-up is to make it clear xi jinpingese and to that we can disrupt relations with china and if we do that he
is particularly vulnerable. although he is strong now, there are a lot of people in the chinese political system at the top who have been disadvantaged by him and they want to get back. we saw that last march where there was a lot of actual opposition to his using thing that came out of nowhere, we thought. it is still there. things are call now. trump has the capability of disrupting and making life ethical for him. the question is whether -- difficult for him. the question is whether or not he will do that. could we see anything imminent from north korea this week? >> possible. they recall their ambassador from moscow, beijing and the new u.n. that is not extraordinary but it could be assigned they are repositioning. that comes on the heels of the missiles offd four the waters of kuan which the united states -- off the waters
focus.w for futures in oil trading near $49 a barrel as libyan crude supply is disrupted while the gold rally faltering near $1300 as the dollar has been climbing. todd:, great to see you. let's start with oil. slightly higher but we are not managing to push up to $49. what is driving prices today? >> everyone is taking a deep breath from the weekend. at the real numbers which matter to oil, the supply and demand numbers, we are seeing small upticks in expectations for demand. supply may be leveling out. the non-opec members have to be more compliant and expectations for whether they will maintain these cuts beyond their predetermined have yet to be heard. ultimately you have this little skirmish going in venezuela but
that will also have an effect especially if the u.s. ups sanctions as far as supplies. a lot of things up in the air for oil. it is waiting for resolution. for it toare waiting fall toward the hundred day moving average on wti. does it get there? >> we saw the big move up when we got the supply numbers in late july. that is what spurred a lot of this oil talk -- near $50. a modeste will get pullback if the economics don't back it up in the states. i would like to see greater global demand. we are hearing it could be coming out of china and i could happen but ultimately the supply levels aren't going down fast enough so demand has to pick up for oil to increase north of the $50 mark which has been elusive rid since opec -- since opec put their cuts in place. nejra: that 1300 level for gold.
we have seen gold approach that in april and june and didn't manage it. same here this time. itn you have people saying could climb to 1360 in the next couple months? >> gold has a lot of upside. the main issue with gold is you have these geopolitical moments, with the build up a head of north korea this weekend, gold doesn't pay you to hold it. when you get past the event it sees fall back typically with the idea that we can go back to buying stocks or longer-term gourance policy, we can other where and get paid. it comes when the moment passes. looking longer-term if the dollar continues to go back to its trend of weaker dollar versus the rest of global currencies that will aid gold. so is the uncertainty with the fed. as highen expectations
as 75% that they will raise rates this year and now it is 35%. $1300, as weabove had been there a few times this year it will exaggerate the move a bit. and get a settlement there. nejra: we will see what happens as we get the fed this week. todd, thank you so much. vonnie: air force one has landed at joint base andrews and the president headed to the white house for a brief stop to talk trade this afternoon. is expected to sign a memorandum at about 3 p.m. president trump has landed. this is bloomberg. ♪
he landed just a few moments ago. he is on his way for a few hours to the white house in washington dc from moorestown, new jersey. he has a meeting at 11:30 a.m. with jess -- jeff sessions and chris ray. later on expected to announce a memorandum on china. nejra: indeed. at 1500xpecting that eastern time. actions related specifically to intellectual property. shares of tesla are higher today. we will talk more about that. this is bloomberg. ♪
emma chandra has more from new york. president trump breaks up his vacation today with a trip back to washington. he will discuss the violence in charlottesville with jeff sessions and fbi director christopher wray. he has been criticized for his response. in seoul, joint chiefsof the of staff assured moon that protection is priority. u.s. officials trying to tamp down fears of nuclear war. the trump administration will go ahead with plans to investigate china and a growing trade dispute. the u.s. has accused china has violated rules on intellectual property. trying to force companies working there to transfer
technological information. big ben will go silent for four years. that is how long it will take to .enovate the clock it will stop ringing to ensure the safety of workers. it has run uninterrupted for 157 years. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm emma chandra, this is bloomberg. bondt's turn to the markets and whether we are overleveraged in the high-yield space. earlier on bloomberg americas. >> spreads are tight but when you think about it relatively it seems like a good deal today. with bonds, it always comes down to bond math. , when ratestion of
eventually do start going up, there will be an adjustment in the market. to compensate for credit risk and for rate risk. that clearly is not being priced in today. >> where do you investing corporate credit? >> that is a great question. that is been a challenge this year for a lot of investors. i think there is a fair amount of opportunity selectively if you look beyond the u.s. and even the developed world. hold, i markets do think, a lot of good value in the market today and long-term as well. fundamentals for certain countries are far better than what we are seeing in the developed world. >> people going to em and buying the index, what are they actually buying exposure to? >> that is a good point, jonathan. for the dedicated investors that
have to buy benchmark issues, you not seeing as much value there. deal last week, it was oversold -- it was oversubscribed. debt, ifhe sovereign you're looking at local currency you will get much better total return potential. kathleen earlier on bloomberg. let's stay with credit markets and the boom of new issuance. demonstrated by tesla's deals. -- a recordr that for that kind of credit. now, there is a lot of chatter these days about how low yields are for risky debt bonds. isn't that the point when we are close to the change in the cycle? of course companies will be
shipping out that that as fast as possible? bit andrates rising a certainly in the next couple of years the companies are in a frenzy to try and get debt out the door. they are already highly leveraged. levels are the highest since the they're tryingw to sell as much as they can and they have a captive audience. we keep talking about whether we have reached a peak in credit markets. i want to take you to this chart. looking at high-yield spreads. the option of adjusted spread showing that where we are right now, basis points, not percentage points, we are still below the five-year average. what is that tell us? -- what does that tell us? >> investors are prepared to overlook that in their search for yield. they don't have a lot of places they can put their money. even though the yields are not that high that is something.
is that it isint something, when the interest rate rises you are stuck and that coupon, it is not as much of something anymore. the question is, do we see a huge turn in the credit cycle as some major managers are morning -- are warning or will this just be lower prices? >> the thing about this market is it is resilient. in the past weeks we have at all the drama of north korea, political contentions rising and people have ignored that to buy into tesla. it is not making any money. it is burning through cash at a rapid rate. up to lendlining money. it has been incredible. we were talking about flows earlier. within the last does go weeks even with all the tensions we have seen inflows into the high-yield sector. nejra: what is it that will
break this market? moving higher treasury yields or is it more complex? >> certain layers. we didn't think it would go this long. even last year we had the oil issue and we were down a little bit. high yields were down. it bounced right back. centralas you have banks around the world keeping rates as low as they are, it is the story of the entire market. nejra: what are the signs then that we really need to watch for that could show this market turning around? is it the oas chart. what is it? >> it is both of those. orn tesla comes to market iraq sold their bonds and they were oversubscribed, the experts
are saying those are the signs that we have hit the peak. vonnie: on the other hand, something like tesla is very unique. people will buy it for different reasons. quite apart from the price of the coupon. you could say the same for iraq. you have more developed markets than some of the frontier countries. what are the other types of credits out there -- are they in as much demand? >> absolutely. we will see amazon come to market this week. to fund their deal for whole foods. people are expecting that people will go crazy for that credit as well. we will see 20 billion to $30 billion of that for august. vonnie: what does japan tell us about investor appetite? >> what is really driving u.s. credit is all the inflows from overseas. japan, europe, and the middle
joining us is abigail doolittle to break it down. why are stocks reacting favorably? >> it is in play. bloomberg intelligence analysts told me that where there is smoke there is fire. we don't know who the chinese automaker is but it is a matter of pricing. he also said it is nothing new. we look to the past. he is been shopping -- they have been shopping out and doing all the right things. if we take a look at what is happening here on the bloomberg -- this is a look at truckhrysler's production. it is going in the right direction, going up over the last several years. this is something that makes them attractive to a chinese automaker. plus, their footprint in the u.s. putting all this together, it looks like fee at-chrysler is again in play.
fiat-chrysler. >> how does this compare to gm? >> when we look at ford and gm they have solid truck production but they are not all in the way chrysler is. for not being dinged being electrically minded. if we hopped back into the bloomberg and take a look at this great chart, it shows that we have huge performance over the last 12 months for fiat -chrysler up 80%. today but some of these gains reflect the fact that investors have been
thinking that this could be happening anytime. something tells me that they would be happy to entertain a deal with the chinese. would there be a regulatory issue? >> that is a great question. that is probably something that could perhaps hold it up. i will have to look into that more. vonnie: i will talk you about it again. abigail, thank you for that. nejra: let's turn to japan where the economy grew for a six straight quarter extending the longest expansion and more than a decade. here is the latest from hong kong. >> a positive surprise out of japan this monday in the form of a luminary second-quarter gdp report. the headline figure was the annual gdp growth of 4%. low and even the most bullish investors. this places japan at the top of
the g7 group when it comes to grow. th. growth goes into context more importantly in terms of inflation. we went from negative 1.8% in the first quarter two -.4%. , it isthat into context the highest level this year. it puts us closer to breaking even. stretch of growth and expansion in japan 26 straight quarters. when you look beneath the numbers, what is more encouraging here, is the outsize contribution from domestic-private consumption that went and to offset the drop in exports. economistth the chief , on consumption, he doesn't think this will be a recurring theme.
this drawdown in savings that we have seen in japan might just be a one-off. more importantly on the inflation outlook, we know japan potentialabove its for several quarters. if you assume the potential growth rate of .8%, that puts that at four times that potential. how much further does the outlook gap have to widen and how long does it do so before we reach the 2% inflation target? he thinks it will take several more years of this and the doj doing what they are doing for us to get to that target. it was a very good report but we will need a lot more of these good reports in the years ahead. bloomberg news, hong kong. vonnie: it is time now for the latest business flash. we are sticking with japan. toshiba's efforts have hit a
snag. familiar,to people the problem is with the timing of payments. offered $19en billion. cathay pacific my start focusing -- may start focusing on losses coming out this week. carriers, it is most likely going to start wooing mainland travelers. looking at new york and los angeles as the main basis for the new jetliner. that according to a memo. delta is the first major u.s. eries.r to buy the c-sw the oil trader whose nickname was god says opec's talk about
extending is not weakness but strength. confirming that he is closing his firm's like ship commodity fund. he also said that oil market fundamentals for next year have deteriorated. that is your latest bloomberg business flash. still ahead, the company behind angry birds is said to be planning an ipo. is it ready to lay golden export investors? that is next. as we head to the close of equity trading in europe let's take a look at rebounding from a five-month low -- worst week since november. you can see the stoxx 600 up 1.2%. the dax rising the most in more than four weeks. gains.also seeing every industry group heading higher as well. broad-based dollar gains as well. a bit of a weaker euro. that's look at the fx, seeing a
the valuation. is this justified? >> $2 billion would look like the offer that they rebuffed five years ago. the valuation right now as you said, is about 10 times revenue -- you have to ask yourself, what do they use the money for? what are investors buying into? right now it looks like angry birds. that has been a volatile history. nejra: what might they use the money for? >> they have a second angry birds movie. you can be encouraged that they are looking at non-angry birds gains. -- we area new studio not expecting to see a game soon. but will look to expansion it is very angry birds centric. vonnie: if we compare it to zing
a, it relied on candy crush. io there a danger that rob will go the same way? >> this is a tough and volatile industry. over the past years we have seen the one-hit wonders come and go. zinga looks promising now but like its rivals it had an unprecedented market rise. robio has proved that it can get more money than was previously thought from a one-hit wonder which is a decade old. i think it is uncertain how this can continue. vonnie: the thermometer for the tech market? the industry is not doing that well in terms of stock market performance. i know there is appetite for ipo's and lots of competition
but i'm not sure this will be a barometer for the whole sector. nejra: let's talk about bitcoin. you wrote a few days ago about the fact that coin has hit a new $3300.of more than we are above $4000. where is the surge coming from? >> there is a continued relief rally from upgrades and spinoffs to the bitcoin technology. there is a lot of angst and debate within the community about how to allow bitcoin to scale the backlog of transactions. --has become more proper popular than the original technology could handle. it is getting through the speed bumps quite well. there is a rally of relief and everyoned to ignore, is going to have the fear of missing out. >> what about volatility? >> it is going up. it is higher.
for a good couple of years. cantile, risky, but people stay away. -- can't stay away. vonnie: there are a lot of platforms coming out that use bitcoin and peripheral products. this that give it more half as a currency? >> i don't think we can yet call it a currency. i think it has aspects of a currency. i think it's main appeal is as gold,et, a digital sticking money under the mattress in case of apocalypse. ands gaining an acceptance regulators are warming to it in some countries but a lot of this is not based on some real world adoption yet. it is just too volatile. nejra: i want to quickly show this chart. as you brought up gold.
double the price of gold -- it is even more now but it is appealing relative to that safe haven? >> what can you compare bitcoin to? you could put it against any traditional asset and it would knock it out of the park. it said a gold has been around for centuries and bitcoin hasn't but it could be generational. millennials have created a new asset that strikes their fancy. they are buying it. nejra: there certainly buying. thank you so much. time for our latest is this flash. looking at the latest stories in the news. help plan over the takeover of charter communications. partners.g
target is taking another step toward improving its online business. junction, a software company that manages same day deliveries, terms are undergoing. that is your latest bloomberg business flash. coming up, following equities on the european close. 35 minutes until the end of trading. european stocks rebounding from a five-month low. is it time for a correction? i will show you a chart next in the european close. this is bloomberg. ♪ . .
this is the european close on "bloomberg markets." ♪ nejra: here of the top stories we are covering from the bloomberg and around the world. the fallout from the virginia white supremacist protest rocks washington and the business world. resigned ken frazier from president trump's manufacturing council over the incident. president trump fired back with a tweet about drug fighters. in markets, one of the top equity sectors for the rest of helenar, we will talk to driver, who says there are opportunities in u.s. banks as well as retail. and why is mario draghi being quiet about the resilient euro? we look into how it currencies strength may impact the future of qe, especially as meetings get started . -- next month.