tv Bloomberg Markets European Close Bloomberg October 19, 2017 11:00am-12:00pm EDT
bloomberg markets. ♪ mark: here are the top stories we are covering. in europeing earnings weighing on stocks on the 30th anniversary of black monday. talks between spain and catalonia take a turn after the prime minister suspends catalonia's autonomy. the tug-of-war between spain and catalonia having a ripple effect in europe. fiona frick joins us from the robin hood conference in new york. we are under 30 minutes away from the end of the third base that -- thursday session. red across equity
boards led by greece and austria. all of these currencies are rising against the dollar. yields declining. a busy earnings day. nestle almost doubling its forecast for restructuring costs. chief executive mark schneider trying to revive growth after the weakest nine-month sales since 1999, spending a billion swiss francs on the organization . shares are down by two thirds. ap has groundout gains, up third of 1%. up forstomers signing the company flagship business software. third-quarter sales climbed to 6
billion, narrowly missing estimates. the chief executive seeking to win new customers with a major update. shares are up by a third of 1%. biggest loser by a country mile, 8 -- ig shares, down by 30%. said fullyrvice operating profit will be below analyst estimates because of weakness in london, disruptions to other markets caused by , leasing moreters space in the u.k. capital, betting demand for shortly worse -- short lease workspace will continue. what i hammering in iwg shares.
julie: the relative hammering here is a fading. she is abating -- here is abating. take a look at the bloomberg. as theot consumer worst-performing group. information-technology selling off financials as well as we see lower rates in the bond market. thehe plus side, some of interest rate sensitive's are going up. health care continuing at a record as the rest of the markets told off. technology is weak. we were talking about apple on that report that apple is cutting its november and december orders of the iphone eight and plus by about 50%. a lot of other tech shares are also selling off, but apples slide is the steepest.
these stocks are definitely dragging. brian white coming in and saying you should buy apple shares on weakness. we will see if there is any kind of a bounce. on the earnings front, there is always some good and bad. auto-parts retailer coming off year after the company's third-quarter earnings missed estimates. a key gauge of pricing power is going to slide again, in the last quarter of the year, dropping one to 3%. adobe systems is higher after the close. its guidance for 2018 giving the providert and of testing instruments across a variety of industries also coming out with numbers that beat estimates. as we are on the anniversary of black monday, i was flagged a note over oppenheimer and the
oppenheimer folks pointing out that the breath today looks better. there is the percentage of stocks in the s&p trading above their 50 day moving averages and on the bottom, we have the cumulative advanced decline line. mark: the spanish government has announced an unprecedented decision to move forward with the secession of the catalonian government powers. this as the president refused to drop his claim for independence. let's bring in bloomberg economic reporters in barcelona. what happens now? maria: we know the spanish government is going to meet. this is a very unusual day. staff says the president will make the announcement official.
we are keeping an eye for the message that will be included as far as the document. it is not just about removing him from office, but we need to know who is going to be replacing him, and for how long. mark ons a question whether he would attend the meeting, he is. the french president says we will always back spain on this and also the german -- german chancellor says we hope that we can get a resolution. president getting some support from european leaders. vonnie: we have some investor reaction. stocks are lower around the world, today. have a look at the spanish to your yield. our regular catalonian's angry about this, confused?
what are they saying? maria: i would say it is a mix of both. we need to go back october 1 when the referendum took place obviously reacted -- ignited a reaction in catalonia. sector of thea catalonian population. the courts and the government will say that they don't have a mandate. it has created a lot of tension and frustration and a lot of people want to see this republic. get a very -- very unusual situation where the government says your autonomy has been suspended but the catalonian government refuses to leave office. the article might be triggered, but it might not be a secession,
it will depend on the kind of resistance we get here. the catalonian president says his request for a face-to-face meeting has been ignored. is dialogue possible? maria: that is a good question. possible, but he needs to return to the constitutional framework and that means dropping the referendum. for him, that is difficult because his core is weak and fragile. the moment he drops it, you could see it implode and there is a lot of pressure on both sides. it would take him to say dropping the referendum and that is something that he cannot afford. at the same time, the spanish president cannot be seen as weak by the conservative party.
we are both very grateful. york, let's bring in is thisin ghana -- something little more serious than just a local reaction at the moment? azad: what happens when the government decides not to suspend power? ugly we end up seeing scenes were the police are forced to come in and remove politicians? those type of scenes would be for confidence, and especially for the tourism industry which is quite worried about this. vonnie: what happens now?
does uncertainty migrate to the rest of europe and beyond? azad: i don't think it does at this stage. if we were moving to actual independence, we would be talking about real economic disruption. at the moment, it is some uncertainty, but the best majority of investors in europe believe that spain will hold together. is -- will what is happening in spain have any effect on what the ecb is going to do, next week? azad: i don't believe so. spain has been one of the best-performing economies amongst the big eurozone countries, but the momentum must remain generally strong. the ecb is looking beyond near-term data and focusing more for next year growth and
to easen and may start off of opportunity thing. it will be a reduction in the monthly purchases, we are assuming 40 billion per young -- per month, but we think that times,ll extend to more taking qe right through the end of the year, i'll be at with smaller purchases -- albeit with smaller purchases. mark: a data rich week in the u.k., retail sales data showing a bigger slump in the third quarter. we've had inflation, wages. given everything we have seen, you still consider it would be a mistake if the bank of england hikes rates in november. azad: i think people out there can really make a strong argument for the bank to raise
rates. we have seen a change in their reaction function and most economists are struggling to explain it. the data continues to come in weak. at what point do they pull back from this now hawkish turn they have decided to take? vonnie: when do we get over the hump of not knowing who the next federal reserve chair is an start wondering about who the next mark carney is? azad: quite some time. there are some strong internal candidates the could take over, but we still have some time. vonnie: what happens with the fed chair here in the u.s.? we are assuming chair yellen decides not to continue, but we could hear about this in the near term. all of the candidates that have been put forward a very sensible sound individuals who will do a good job, regardless. vonnie: azad zangana, thank you for joining us and thank you for
corporate debt fairly prides? -- price? erik schatzker in london with an exclusive interview. erik: i am here with ted goldthorpe. --is the managing partner managing partner with bc partners. are we in a credit bubble? ted: i don't think we are in a credit bubble, but i do think there are areas of credit that are very stressed. i think the default rate and a lot of things you read would indicate we are in a pretty benign environment, but there are factors that are stressed, right now. sectors areher showing signs of stress. telecom is now one of the largest stress factors by volume in terms of a high-yield market.
there are a number of sectors that are becoming very stressed. erik: those sectors are becoming fundamentalause of deterioration in the industry like we have seen in retail or just an excess of leverage? ted: it is both, but a lot of it is secular change. energy went from a very small part of the high-yield market to one of the largest. years.the index over 10 retail, it seems very obvious. i think the thing people got wrong is that e-commerce is good for retail. people miss the fact that people are going to price e-commerce to a zero net margin. it is really hurting retail.
erik: so retail credit is pretty cheap on a dollar basis. there have been times where energy was exceedingly cheap. my question is this. the people fully priced in secular change in these industries, or if you are looking at them as a long short, are they still quality shorts? -- someon't think the other areas continue to be right for opportunity. retail is not going away. you will still need to go to do excluding sport -- six good -- dick's sporting goods. it is a little bit of the baby thrown out with the bathwater in circumstances.
some sectors are going to continue to move within retail. some sectors are going to continue to be heard. the index is down 1%. despite amazon whole foods, despite all of these bankruptcies, toys are the biggest, the index is only down the biggest, us the index is only down 1%. there is a real debate within our market. one side of the argument is, without covenants, you cannot have a full cycle and once i would say the lack of a default cycle is going to help return say credit -- some would the lack of a default cycle is going to help return some credit. anyeally don't have
near-term maturities coming up. of nove a period covenants and no material loss, but on the fema retail, the thing is, people misjudge liquidity. people so you cannot have a bankruptcy cycle without those if you're a be begin to pull back, it can cause -- if you're -- if your a bl lenders pulled back, it can cause stress. erik: as you point out, it seems like we are in a incredibly benign favorable environment for credit. the you think we will pass all-time heights? ,ed: if you think about macro it is a very good environment. it is growth, not high-growth.
it is low inflation. companies are doing fine. all of those things are good for credit. i think spreads can go tighter. i am a perpetual bear. i do think that spreads have room to go tighter. erik: the one thing people miss market has doubled in the united states since the financial crisis and tripled in europe. when you talk about all of the stress sectors, there is a lot of distress opportunities. one area that has seen a massive influx of private capital, with the increase in bank like -- bank regulations. is private credit getting to competitive? -- too competitive? ted: that is the number one
question we get from investors. if you look at risk/reward, you can still get secured returns that are 6% to 8%, which does not sound amazing but when you compare it to high-yield which is subordinated credit, no covenants, it still comps extremely well. people talk about new entrants. there are a number of people who have not been able to raise capital. as well as there has -- have been some pretty high-profile people who have withdrawn from the market. ever since i have been in the middle market credit business, people complain it is to competitive. -- too competitive. it is one of those markets where people constantly complain. it is competitive, but i think there are just good risk/reward
their. erik: that is ted goldthorpe, managing partner and head of credit of bc partners. schatzker, a fantastic chat in toronto. vonnie: still ahead, another fantastic chat. fiona frick, unigestion ceo joins us exclusively from the robin hood foundation conference with her thoughts on the investment climate in europe. this is bloomberg. ♪
cash infusion is to compete with uber and now, the valuation makes it a unicorn, the valuation would be $11 billion with base -- with this funding .ound backing from alphabet's capitalg giving lyft a cash infusion to compete with uber. mark: four minutes away from the end of the third stay session -- thursday session. stocks are down on this 30th anniversary of black monday.
three are down, down by two thirds of 1%, the biggest drop since august. spain, a big day in spain. with thel move forward process of suspending the powers of the catalan government after the president's refusal to drop its claim to independence. that is the stoxx 600. strong first-quarter performance, second-largest -- maker in the world says it's chinese sales jumped. jumped.hinese sales itssing -- focusing more on more affluent. reporting third-quarter sales fell well short of estimates. poor weather in europe and the hurricanes in the americas cut demand.
volume decelerated for the fourth straight quarter, the biggest decline in shares since february. we finish with u.k. retail sales, hauling more than forecast in september, leaving growth in the third quarter at the lowest level -- weakest level in years. growth slowed to 1.5%, the weakest in october, 2000 and 13. -- 2013. vonnie: we are coming back from those lows which preached about 4/10 of a percent down for the dow. at 23,000 -- 23,105. the nasdaq things to a drop in apple shares, down more than half a percent. mark: spain's government is
moving forward in the decision to suspend the catalan government's power. the constitutional crisis led to a dip in spain's benchmark index. the situation continues to be monitored by european alternative asset managers. alix steel is with us. alix: i am here with the unafraid, ceo of unigestion as billions of dollars -- spain, what is your case? what do you make of what is happening? fiona: spain is a different peoplehan brexit and saying they don't want to be in the european union and in spain, people are saying they don't want to be in spain, but they want to be in the european union and a carry some risk in the market because the european union has not come out and said
what do they do if they want to be independent. tensionwe will see some between the extremes of the catalonian part me -- party and europe and how the markets react to that. alix: do you buy it? when the story went out, with people in the street getting -- the funny thing which strikes me is that the markets did not have any reaction. at one point, the market will wake up and see that this creates populous problems and can become a big deal, so i would rather not go to spain for the moment. alix: the risk was will he felt in italy. you are seeing a lot more widening in italy that in spain, that a few months ago, you said italy was a unexploited market
in southern europe. do you still say that? spain has a more reform banking system that italy. importanta very growth compared to the rest of the countries in europe, but you can see that italy -- you could say that italy has not done everything that spain has done yet, but they are used to living spain, perhaps this is more commonplace. alix: where would you want to be investing? fiona: i would spread my bets because it is two different situations. the beauty of spain is that they have managed to build growth and it was one of the reasons they suffer the most in the crisis. they managed to transform the now, it could and
be very confrontational. alix: with italy, do you want to buy banks? fiona: i would rather be in equity that in the bond space. the bank system has not been sold yet and the bonds are very expensive and you see it move more toestors, going asset management services, so they will be pressure on italy. alix: lloyd blankfein tweeted he is more -- willing to spend more in frankfurt. after that happened, you opened a new headquarters in the u.k.. what is your take on the disaster of negotiations that we have seen? expanded and the idea it is one of the markets
were you have the most diversity in terms of nationalities. alix: but they all leave. fiona: not necessarily. it becomes a problem if the u.k. does not have the rights to trade in europe as it did in the past. for us, it is fine because we have other places in europe. it is going to be a complex situation. the more the brexit negotiations happen in the way it is happening now, the more people in the financial sectors will make the decision to leave because it will be impossible to manage. even if they reach it in 12 months, it will be perhaps, too late. jpmorgan,e that with
saying they are going to frankfurt, dublin. alix: do you like messing in the u.k.? opportunity an because the stock market has not reacted. it is a diversification. the sterling has been hit hard. the market is stressing a lot of bad news about the negotiation. alix: let's take a look at broad strategies. macro hedge funds have been having volatility. what do you think? fiona: i think the upward trends are very interesting in currency. sometimes, the result is more binary. the problem is typically with brexit, -- you have to do macro bets but in a much more diversified risk managed way then you would do in
the past and it becomes more important today, the sizing of your position, rather than just giving the opinion right. it is more like making sure that you are flexible to know these markets. alix: what area are you increasing exposure to, next? there has been a very strong -- in asset management. passivea cycle where management has outperformed active for a long period. returns, i think there has been underperformance and at one point, correlation between stocks going down again which is a good sign that shows that fundamentals are becoming more important than in the past
and perhaps in a period of market valuation, there is more to study. i would be positive on value investing, typically. we are still positive on equity because we believe that growth is good in the world and the most interesting thing about growth is it synchronizes between the market and the u.s.. inflation, and this type of environment, equity makes sense and value make sense because it is a good inflationary environment. alix: does bitcoin make sense? fiona: good question. i see it as a asset class and i it has a lot of volatility, so i can imagine that asset managers can use it to speculate and have a potential for return. because it hase
a volatility that is very difficult to know how rich you -- how rich or poor you are. i think it is becoming a asset class. i could imagine that going forward, it will mature like other asset classes have matured. alix: you called it currency, i think that is news. the unafraid, ceo of unigestion, frick, ceo ofiona unigestion, thank you. mark: let's check in on the "first word news." >> spain will trigger the process to suspend the powers of headlines power -- government. refused toesident drop his claim of independence. the spanish president has called a special session of his cabinet for saturday. his advisers are finalizing the measures he plans to take. in brussels, a showdown over
brexit. theresa may will use tonight's dinner to demand that the eu move brexit talks on to trade, but eu officials see a breakthrough as next to impossible, the two sides deadlocked over citizens rights and the irish border. opec is sending its largest signal yet that production cuts may be extended until next year, taking the lead from russia's president. >> i was pleased to hear from andident bruton, and moscow i think we are all taking cues from -- president bruton -- putin, and moscow and i think we are all taking cues from russia. bruton has come out in favor hasine more months -- putin
come out in favor of nine more months of cutbacks. 22,000,claims fell by last week the lowest since march of 1973. workers affected by hurricane harvey and irma continue to return to their jobs. day innews, 24 hours a more than 120 countries. this is bloomberg. vonnie: coming up, the search for the next fed chair could come to an end soon. what to expect from each of the candidates, next. this is bloomberg. ♪
adobe shares soaring and extending to a record. let's bring in abigail doolittle to find out why. abigail: the stock is now up 64%, up more than netflix. they give guidance for the fiscal year 18 that was well received, strong revenue growth, earnings, profits. analysts are pretty positive and it establishes the company's dominance as a solutions provider for digital content. is the fact that they are planning for price increases in 2018. we are looking at peak margins. if we take a look at the rental analysis function on adobe systems, we are going to see that the margins had been in the 34% range, but now we are closer to 42%, that is a monster move
higher, investors liking it. interest,hort positive story. vonnie: abigail, thank you. now onto the fed. president and fed chair janet yellen are set to meet at the president includes his interviews of candidates he is considering to be the next fed chair. scoop, we learned house conservatives have mounted a campaign urging the president not to reappoint chair yellen. let's get the latest with bloomberg's alex wayne in washington. fed chair janet yellen supposedly visiting the white house today at some point. that will complete the interview period, correct? alex: we believe so. vonnie: will the president's
interview of janet yellen be colored by what people are saying is a campaign not to or does it --and does it mean he is warming to her? think he has decided, so this interview could be a formality. he could say i'm sorry to inform you that i'm going to be replacing you or he might be telling her that she is keeping the job. we don't know. do houset issues conservatives have over gl and -- over yellen? alex: house conservatives have been trying to rein in the fed for years. there is the audit the fed movement personified by rand paul. some people on the far right would get rid of the bank altogether. they have long been hostile to the fed and janet yellen as the
obama appointee, leading the fed. powell, also issues with him from house conservatives. not houset -- alex: conservatives, more the steve bannon wing of the publican party. a guy who works with bannon said powell is no better than yellen. ,hey were both obama appointees but i think powell is acceptable to a lot more republicans than yellen would be. vonnie: it is difficult to know what the criteria are going to be, in the mind of the president. he wants low interest rates and he wants somebody we can trust and most of these candidates will likely carry that out, they are not supposed to be political in any way once they get the job. alex: they are not. it is a academic job, it is supposed to be a phd economist who acts in the best interest of the u.s. economy and tries to
keep inflation low and employment high, those are the mandates. if trump's industry -- interested -- we see him talk a lot about the stock market. if he is interested in keeping the stock market high, it is hard to argue against janet yellen. if you want to point to one person who has been responsible for this boom, janet yellen would probably be that person. mark: john taylor seems to be sort of the favorite, this week. i suppose that can change. is that how you would read the situation? we hesitate to call anybody a favorite because nobody in the white house are in -- or involved in this process is telling us there is a favorite. we dude -- we do know that the president was impressed by taylor and liked him a lot. i would put him up there among the front-runners. for bringinghanks
us up to speed on this story. vonnie: today marks 30 years since so-called, black monday where wall street saw the just one day market drop in history. paul jones successfully predicted black monday and a year later, he founded the robin hood foundation. with more on the foundation, its origin and its goals, we go to alix steel who is at the investors conference in downtown new york. alix: i am here with wes moore, the former ceo of the robin hood foundation. crash, sot in the 87 i remember my friends' parents on wall street and how it hurt them. talk about what you have heard. many of the communities that robin hood serves, 87 and 88 were a hard
year, but they were having hard years prior to that. the fascinating thing about that being such an important year is that is when paul jones and peter borge and a group of others said we know this is going to be a tough year for asset managers and the markets, but who would is really going to be hard for his poor people. it is going to be hard for poor people who were already living in this chronic state of poverty and it is about to get even harder. i thought about my own family. i was living up in the bronx, one of the first communities that robin hood ended up investing in. andecomes very full circle why i am so humbled to be the ceo. this leadership team got together and said we have got to be able to do more and specifically, if we are going to
have conversations that are going to involve the future of new york, it must involve all new yorkers. alix: when you take a look at the town, there is so much noise in washington. isiously, president trump front and center, but there is so much noise. tax reform, health care, the budget. what is the tone with that? how do investors look at that issue? wes: one thing we know is that there is going to be opinions across the board and whether that is the future of health care, tax reform. the things we know about it is that we have to think about what are going to be the consequences on all people that are going to be served and what are we doing to make sure that the people who already are having a difficult time making it are making sure their voices are still heard and they are still so supportive? robin hood currently supports 200 of new york's most effective
poverty fighting organizations in the city. everything from housing to health to criminal justice reform. is are issues that people are dealing with every day. as these policy conversations are happening, they are still important because they will have direct and distinct consequences on the people we serve, but that making sure no matter what, they are served. alix: you made a distinction between what d.c. can do and what foundations can do or private public partnerships. to you feel like the future is going to have to rely more on areas like pot -- private public partnerships than d.c.? you could argue inequality is worse now than 30 years ago. wes: there has to be a collaboration. there is capital we can put to bear that is going to be riskier than what a lot of governments are going to be able to do. to make sureob is we can invest in things and we
can try things, we can experiment and essentially de risk them for our partners to come on board and bring them to scale. robin hood was the first group to invest in needle exchanges. no one would touch it. now robin hood is not invest in needle exchanges, nobody does. the reason is because the federal government does it but they were never going to be the first money in. alix: where are you, now? wes: looking at the way we can manage benefits. robin hood has a platform where we are working on technology, something where a person who founded facebook groups did really well and said i want to announce -- i want to fight poverty. they created something which is the technology that can help sople manage their benefits you can have a monetary understanding of how your benefits are being processed and
help you eat better and create an entire algorithm around it. there is another platform that robin hood is supporting called good call which is helping reform the way the criminal justice process is taking place. when someone is arrested, their family is immediately notified and eventually, they can then put them in touch with the public defender. if robin hood continues to be at the cutting edge of innovation, we think it will have a direct and distinct impact on the poverty line. much.thanks so wes moore, the ceo of the robin hood foundation. back to you. our thanks to alix steel. mark: take a look at european equities.
down by almost a percent, earlier in the day. finishing two thirds of 1% lower. corporate earnings, events in spain weighing on the market, today. it was 30 years ago today that the stoxx 600 plunged by 8.5%. biggest decline on record in london. the ftse that day, back on this day sank 10.8%. it was the next day where we saw the record decline for the ftse, a drop of 12.2%. that's it for bloomberg markets. this is bloomberg. ♪ . . .