tv Bloomberg Markets Americas Bloomberg October 23, 2017 10:00am-11:00am EDT
vonnie: here at the top stories from the bloomberg and around the world. the race to head up the federal reserve is entering its final lap. why one money manager says the central bank needs to think about the u.s. as two economies. may prime minister theresa address is a deeply -- addresses a deeply divided parliament. kindler shares his view on where the biggest cash grab is right now. are 30 minutes into the u.s. trading session. julie hyman is here to explain why it doesn't seem like there is much happening. julie: there's a lot happening below the surface. there are records for the major
averages. of records last week. we keep seeing the record count climb for the major averages. the nasdaq has dipped into the red. earlier it touched a record. the focus continues to be on earnings as well as the fed raised. moversainly have some that are pretty significant weighing down any gains in the s&p 500 is hasbro. to do with the ripple effect from the bankruptcy filing of toys "r" us. state street shares are down even after the company numbers beat estimates. analysts are questioning individual components of that anduding etf net outflows servicing fees not rising as much as estimated according to hore.ore isi's glenn s
v.f. corporation the apparel company coming out and beating estimates as well. it says strength was driven by broad-based strength across international and director consumer platforms. we are also watching the u.s. dollar as we continue to talk about who could be the next head of the federal reserve. over the past week we have seen the dollar climbing for four of the past five sessions. we have also seen declining on the dollar. take a look at the bloomberg. the net long short position on the u.s. dollar and we have been seeing here as the dollar has been bouncing that the short interest has been declining. that short interest is going down as we await the big announcement on the new head of the fed. for the thirdp
day. we did fall last week for the first week in six after the best run since march 2015. utilities and basic resources leading the advance. let's get to spain. this is the ibex over the last month. changedod that barely down by two percent since the referendum. stocks underperforming. both lower during that period. the low for this was the wednesday after the referendum when the index was down by 4%. they have moved their legal days from the region from catalunya elsewhere. the ibex is actually outperforming the stoxx 600 on for its best year since 2013.
this is the bond market. the spread between the 10 year spanish, tenure german narrowing down by a couple of basis points. 1.18% today. barely moved. the big move in the yield was the week after the referendum. over the three weeks the spread has widened by a mere five basis points. the bulk of that happened in the first week. taddeo ineak to maria barcelona. -- catland separatists separatists -- according to our survey of economists.
the euro has fallen 1.3 against it -- the dollar. bring on the ecb. vonnie: it could very well be the next catalyst. let's turn to the week in washington and the race for the next fed chair. janet yellen defended her legacy in a speech friday and highlighted some of her achievements. president trump weighing his options. he tells fox news yellen is still under consideration. >> most people are saying it's down to mr. taylor and mr. powell. i also met with janet yellen why like a lot. i really like her a lot. i have three people i am looking at and a couple of others. i will make my decision very shortly. vonnie: tax reform in the house this week. kim wallace joins now. he's head of washington policy research at renaissance macro.
what are the odds of a janet yellen term next year? >> and there. she is certainly in the running. -- there is no reliable predictive value there. she is certainly in the running. i think the president and any of the three people he picks is going to have infrastructure in place at the federal reserve to begin to tackle the issue of deregulation. vonnie: does that make a powell more obvious of a choice even as vice chair? powell is a very strong force at the fed now and he's got a lot of backers in washington, d.c.
to be a force at the federal reserve for some time to come. in deregulation he certainly has jobs. about raywe talk dalio? statistics camouflaged what's happening in the economy which could lead to dangerous miscalculations. most importantly by policymakers. would you agree with that tone from ray dalio? >> i think it's obvious in policy. we have spent a lot of time the last two years talking about populism not just in the transatlantic region but across the world. populism is driven in large part by economics. populism right now feels the fragmentation that he is talking about. i was surprised that he didn't policy asabout tax
well because i think it will apply as the house moves toward adopting the senate resolution later this week. my sense is that this is the end of the easy part of the process. putembers sit down to together a proposal they're going to be struck by how harsh the politics around economic fragmentation and the issues that mr. dalia are talking about. i believe it's going to continue to be a driving force in whatever can come out later this year in terms of tax policy. mark: where do you see a compromise? you see the stage after that progressing and over what sort of time window -- period? and next month, senate republican leaders will have a stronger sense of whether or not they can pass something with 51 votes on the republican side. if they conclude they can use
reconciliation to move through $3 trillion of debt over 10 years for tax cut they will do that and they could get it done by the end of this year. see timing under 50% likelihood. it is rising especially if they can get a bill through reconciliation in the senate. timing will spread to next year and the package will have to be more appealing to more people in the house and the senate for it pass. look aty difficult to the five or six major principles of the blueprint and argue anything other than the top 1% does very very very well and to not welle do ok at all. vonnie: the latest sticking point is the 401k. thereesident tweeted, will be no change to your 401(k).
is that another difficult maneuver for republicans now given that there is already other sticking points like state and local deductions? >> you have hit on a big point. falling by the wayside. i do not expect there to be a significant offset portion of whatever tax bill comes out. budget resolution doesn't have the $200 billion over 10 years of entitlement spending reductions. the president's comment over the week and interesting. he said the middle-class tax cut should be protected. does that leave open a window of phasing out the economic value of those taxa vantage savings at some level? is still open.
the president's underscores what we heard from house managers last week that they would take the senate resolution. offsets are putting much off the table which is only going to complicate what they can do. will the argument that economic growth is going to pay for all of this hold water at some point? unless we get serious economic growth we are still seeing a non-revenue neutral tax reform package. my sense is the politics around this package will be very different from the politics around any tax package this century. big ones that happened in 13 and 15 were all deals that were concocted inside washington, sold to members of congress to get the votes and the marketing went outside the beltway. i think what's doable in tax legislation will begin with what's doable in the politics outside the beltway and an
inward looking process. they will gete through this process entirely without addressing distributional issues and other things such as debt and the impact of debt on households and how that varies. vonnie: thank you, kim wallace ie. in spain separatists are are bowing to use human shields to keep spanish authorities from taking over regional government buildings. the prime minister has declared he will use unprecedented measures to reassert control over the region. lawmakers meet thursday and they could vote to declare independence. shinzo abe gambled on calling early elections and won. his coalition has retained its majority in the lower house, boosting his chances of winning another term as leader of the
democratic party. it could make him japan's longest-serving leader. rose for a record 15th day in a row. u.k. prime minister theresa may wants an all-in-one brexit package. businesses have said they want to know as soon as possible if current trading rules will stay unchanged for two years after brexit day in march of 2019. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. mark: coming up on bloomberg markets, oil climbing after opec says it achieved record compliance with output cuts. futures in focus is next. this is bloomberg. ♪
vonnie: live from new york and london, i'm vonnie quinn. mark: i'm mark barton. futures in focus. oil trading above $52 a barrel. opec reporting record compliance with pledged production cuts. gold sinking to a two-week low. the dollar gaining. lots to talk about. joining us is chief market option.st at bullseye the dollar index earlier highest level since july. has the retracement since the back end of last year ended or is this just a little bit of a bounce on a longer downward trend? to think theke
dollar's slide has stalled. we have been trading between 92 and $.94 august for three months. if you look at the interest rates there's a 90% chance we are going to raise rates in december. you don't get to a 50% chance they are going to raise rates until we get out until june again. i think this is a temporary stall in the dollar. that is really what hurt gold in the last couple of weeks. the dollar stopping going down and drifting higher. how much of gold moves can be attributed to bitcoins never-ending move higher? >> i wasn't going to bring it up. it's a nonexchange traded product that has gotten a lot of the shine that money used to move into gold as kind of a andulative play and a hedge many other reasons. i think that's taken away from some of the action in gold recently. 1300 is an important pivot in gold.
broke downhen we below 1300 giving back to gains from the week before. gold has been trading between 12 and 1300 for most of this year. i think there is more upside potential. significant bottom october 6. let's see how the markets react. mark: what about crude? what did you make of the opec compliance? >> i like their wording. they said there was a 120% compliant. int's like me saying i put 110% every day. you can't go above 100%. last week we had a wall. monday through thursday in crude oil. then we are talking 56. do not give up on crude yet. it has been on a four-month uptrend and the underlying current of support being the
iraq situation and opec working to keep prices supported will give crude a push above 53 eventually. great to see you. vonnie: time for the latest bloomberg's nest flash. agreed to buy software maker broadsoft for $55 a share. provides communication services to businesses in about 80 countries. up onle is not easing competitors. raising the low end of its forecast for new subscribers this year to 3.3 million and raising its profit outlook. the wireless provider still in talks to combine with sprint. shares of general electric are falling today. morgan stanley and jpmorgan were among those cutting price
targets for ge. the company may cut its dividend. the new ceo faces bigger than expected challenges in turning the company around. that is your latest bloomberg business flash. mark: still ahead, spain's prime minister announcing plans to squash catalonia's independence bid with barcelona not backing down what comes next? this is bloomberg. ♪
over police. the catalan government is vowing resistance. for the latest let's bring in maria taddeo, spanish economy reporter in madrid. are the everyday catalonian's very invested in what happens or are they quite happy to listen to rajoy at this point? invested.e very i do want to point out some development we've gotten over the past hour. we are seeing the regional president saying he happy and would be considering to appear before the senate in madrid. this is relevant because he has never done this before and it's not really a sign of de-escalation. you could even read it as the opposite. we've gotten over the weekend provided ainister number of measures stripping the catalan government of its autonomy. now we have the deputy prime
ministers saying it's not really up to us. if spanish can make changes the wider scenario changes. a clear reference to the idea of elections taking place this week. if that happens maybe there's a way to de-escalate the situation. go from thisoes it character potentially going to jail to addressing the parliament? that's a great question. it basically happened over the past hour. he has gone from acting on the mandate -- it is very unclear when he says act on the mandate because it is not clear whether the law has been voted or they are proceeding to vote. it is very unclear. now they are saying actually he might be considering appearing before the senate after the article fiven says
is completely constitutional. maybe we can interpret this as perhaps tensions de-escalating. we have been reporting this throughout. thisveryone wants to take to the very final bitter end if it means a unilateral declaration of independence. things have and moving which could potentially mean there might he a different way forward. mark: they have certainly been moving on when it comes to this. plans for a human shield the blood efforts by spanish authorities to take control of the breakaway region. does that tell us we could be approaching more aggro between the sides as we saw just after the referendum? >> we could. if we go back to the measures presented by the government on saturday essentially madrid would take over the regional government. everyone would get dismissed. seeing in that story
is that some are calling for the human shield to stop the spanish from entering the local government and the regional government in catalonia. we need to go back to the tensions we are seeing. not everyone wants to head the same way. he is saying he might be willing to engage on the other side. thes also being pulled by more radical elements who have really been carrying this thing. things have been changing today. it is not clear if things are escalating or de-escalating. maria taddeo.u, we will head to parliament next. theresa may is due to update parliament on brexit. ♪ is this a phone?
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news. >> president trump will speak with controversial looking president -- with the controversial philippine president next month. he has threatened to cut ties with both the u.s. and european union win in the acid or's complaint about his actions. coalition retained its majority in the lower house. run in the longest record. abe's win means he is likely to continue his policies of monetary easing and fiscal spending. ,ccording to the new york times the u.s. conducted secret operations in afghanistan. u.s. contractors are working with afghan forces to hunt and
kill the telegram should u.s. secretary of state rex tillerson oversaw the meeting of a new alliance aimed at countering iran. because the relationship between aq as vital to ir peace and security. there are less investments in british manufacturing due to brexit. less on new plant and machinery in the past few years. one third of companies say that brexit has not affected their plans. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. this is bloomberg. back to you, mark. prime minister theresa may is due to speak to parliament in just a couple hours time should .he is expected -- hours time
she is expected to update them on the brexit efforts. talking this morning about brexit and european politics. how did she do this balancing act? anddoes she satisfy the eu satisfy the hard brexiters in her own party? it will be a very interesting speech she makes this month, because, in a way, this was a very unusual summit for her last week in that she came across rather weak and rather in support of the eu leaders. however, that seemed to help her , because the eu leaders are saying that they want to help her. they see her as the type of prime minister they can do a deal with. had -- she now has
to sell that to the rest of the party. if she can sell the deal to the conservative party is the question. what needs to be done by december to make sure that this process moves on? what is the meeting ground between the brexiteers and the eu? do you see a compromise? >> i think it is very difficult to see where the compromise could be made on the u.k. side. i believe theresa may and the eu are ready to do a deal. the eu's bottom line is that to say thate u.k. they will pay the money they are being asked to pay. theresa may might say, fair enough, we can start doing a deal, and we can start talking about trade in december. she has to go back to london and tell them that she is prepared
to pay that money, and if she can sell that plan to the hard eers is the real question. vonnie: if she could just convince them to pay the $16 million, then they could just move right onto the trade negotiations. is there any way she could negotiate a bundling of both? >> the eu has been very clear that they will not accept any type of bundling. they have been very clear that there are two parts to the brexit negotiations. first part is the separation issues, and the second part is the future relationship. the eu is saying that unless you sort out the first half, then we will not even think about the second half. that is why it is so difficult. that is why they need theresa may to say that yes, they will
pay the money. that is why they cannot yet talk about trade. cannot seemxiteers to go along with this. it actually makes it very difficult for theresa may. vonnie: the longer she leaves it, the more uncertainty there are four british -- are for british businesses. , beingbeing written to asked to come up to some kind of compromise. that is why, at the end of the day, all of the analysts we speak to in brussels say that she will have to crack and agree to these financial obligations, these financial commitments which have built up over the
past 10 years or so. before we even talk about trade or transition, they have to pay the money. they see what the businesses are saying, what the newspapers are saying that this uncertainty is going to harm our economy and politics. and they say, well, it was your choice to leave in the first place. vonnie: let's have a quick listen in now to the u.k. prime minister theresa may. minister may: this counsel provided a further opportunity to demonstrate that ongoing commitment through discussions involving migration and a single market. important progress in moving towards the special partnership with the european union that we want to see.
payt, on migration, the you -- the u.k. will play its full part. several has intercepted hundred smuggling boats and it saved several laws. the national crime agency is working with libyan law enforcement to enhance their capability to stop the people smuggling and trafficking. at the council, we welcomed the reduction in migrant cropping. addressalso continue to the root causes driving people across the mediterranean, so the u.k. is continuing to invest in the long-term in education and job services in both come -- in both countries of origin and transit. in a single market, we are trying to keep up the pressure of completing its implementation by the end of 2018. this will continue to benefit us even after we leave the european union.
at the council, i argued that the free flow of data is essential to unlocking the free-trade deal. as the government said out in the paper over the summer, such a relationship is crucial for the u.k. and eu. turning to the discussion on this is something i raised personally with the president during the general assembly. we are publicly calling on turkey to protect freedom of expression and release those defending human rights. at the same time, i believe we must take a long-term view of the enduring importance of our relationship with turkey. we must secure a prosperous european neighborhood. we must also continue to recognize the challenges they are responding to. they faced a military coup only 16 months ago. mark: that is theresa may m --ing and the -- reefing
that is theresa may briefing brexit progress. she highlighted migration and the led to the -- in the libyan political process. she also -- she highlighted migration and the libyan political process. she also highlighted turkey. we will continue to listen to speech.e minister's you can always monitor it live on livego. vonnie: coming up, will there be any further megadeals this year? robert kindler will weigh in. this is bloomberg. ♪
♪ mark: live from london, i am mark barton. vonnie: and i and vonnie quinn. let's zero in on the m&a business through insider analysis on the biggest deals. ofx joins us now with one the biggest dealmakers on wall street. alex: it is my pleasure to be joined by robert kindler. it has been a good year for you guys. let's jump right into it. you are number one on the top of goldman sachs. jockeys like you always for one and two. >> i think it is clear that we have the dominant franchise of the two of us. u.s.re number one in the
by a pretty large measure, and we have become number one globally. it is always a battle back and forth between us. alex: as we look at the year as a whole, i think one of the big takeaway points is that while , we have somewhat down not seen any big deals. as you look at your pipeline moving forward, will that change over the next three months or so? >> who knows? you are right so that what happened this year is that the number of deals is not exactly down, but large deals are absolutely down. looking forward, we do have some things in the pipeline. i must say, i have been surprised by the overall level of activity. toshiba, itn with has been a lot busier than i thought it was going to be. alex: what made you think it was not going to be as busy?
looking at a year weather was so much uncertainty, especially with taxes. if you do not know what the corporate tax rate is then it is very hard to do deals, and yet people are still doing deals. it does not really matter how it ends up, because if the rate is it is just the uncertainty when figuring out the galatians. the other surprising thing is that the market is so -- when figuring out valuations. the other surprising thing is that the market is so high right now i did not think the eeo'-- think that ceo's would be so compelled to do deals right now. you do have some that fell flat on the market. saying should i do this, i do not know the market reaction? the fact it has been busier is
surprising to me. alex: we will possibly see sprint and t-mobile this year. it is a deal which has been speculated over four years. it looks like the companies would do it a few years ago, but they backed off when regulators told them, sort of behind the not to even bother to try. what changed now? >> the regulatory environment is clearly better even though there is some uncertainty. the big area where it works better is the fcc. we have had some changes in the fcc. when tom warner was blocked, there really was not any antitrust issue on it. it was locked by the sec. they just chose to block it. there was not any particular basis for it. mandate, sobroad and if they do not like it --
alex: it needs to be in the public interest, that is there mandate. >> exactly. before, i think it was too politicized, so if the deal gets announced now, then it will be in a better sec and regulatory environment. sec and --tter better fcc and regulatory environment. alex: are there some sectors where you are still not seeing activity where you thought you would? >> the last few years have been a rather broad based. i think there will continue to be a couple of more tech deals announced. cross-border tech could be difficult, but i think it is broad. alex: and volume is down compared to what we have seen in recent years. one area where you guys have been active, particularly morgan stanley, is activism.
isi right to say that that the successful defense of pg&e? do you see that as a win? >> sure, the rules are that whoever wins is the higher vote. looking at it from a different perspective, the actual percentage that voted for the assident was 37%, so about third of the shareholders were in favor of the dissident and two thirds were not. from it much bigger win -- win, you arebigger now the ceo against bill ackman. do you believe that activists are running out of ideas to generate shareholder returns? >> as an asset class, it has not performed very well. if you look at green light with gm, that was an example of doinge doing shore --
sure financial engineering, and he just ran out of ideas. i think the case for the activists is that they are becoming more stock tickers that having a real platform. they can have a place, that it is not a strategy. there are not a lot of conglomerates left, so i think they are running out of place in the playbook. alex: looking into 2018, you mentioned tax reform a little bit, but what do you think will be different this year compared to next year in and in a land -- in m&a land? >> i think we will get that certainty in tax reform. that will generate an enormous amount of tax. -- of cash. alex: we did not actually see a kick up in m&a last holiday season.
>> what has happened now is that ceos are realizing more than ever is that they are not going tousiness. the only way to really get growth is through eminent -- through m&a. havether thing that ceo's recognized is that margins are going up. 500, theok at the s&p actual margins of the companies is going up. they have cut out the cost, they cannot get organic growth, and so i think m&a will be quite active. once we get tax reform, i believe next year will be a much better year. alex: is this coming up as the main issue when you are in meetings with the board? telling you that they would do this if we had tax reform? >> absolutely. it is too big of a gamble right
now. unless you know what the tax rates are going to be on each side, there is an issue and how that will play out. alex: there have been more deals that you have worked on the have actually failed. in other words, they were not reported on orchid over the finish line in years past. >> probably not. i think there have just been fewer larger deals started. not as many people going down the path and signing up for the deals. there is uncertainty all around. i think we are in a more favorable regulatory environment , but the fact is that no one knows for certain. you really do not know how things will play out, so it will take time for that to sort out. of morganrt kindler stanley, thank you for being here. alex forhank you to his interview of robert kindler. mark: we want to bring you up to
speed on it prime minister's=- -- prime minister theresa may's comments to parliament. she said that the two sides are within touching distance of brexit. they have made significant progress on northern ireland. she also said that she is ambitious and positive about brexit negotiations. the u.k. is preparing for every eventuality. to get -- live on the bloomberg to get the latest on the response. this is bloomberg. ♪
talk about marriage trading action once again today. abigail: a bit of a delayed reaction to that horrible report that put up last week with a missed earnings by 42%. friday was a roller coaster in a big way. if we go to the bloomberg, we can take a look at this. shares are down by as much as percent -- as 6%. ceo david investors a lot of comfort around going forward. we are seeing now their worst day since the brexit announcement in 2016. what is happening here is that investors are taking a look at the earnings and saying that a reset could be a real challenge for the company. that all-important dividend could perhaps be cut. investors not liking the multiple downgrades. the question is whether or not
this is an actual reset. it could come down to a bad investor day on november 13. mark: that is clearly the key. beyond the dividend, what else will be discussed? abigail: the dividend will be key. updatesexpect some before november 13, but he on the dividend we are looking at other factors including the power and oil and gas segments. that was the reason for the real weakness in the quarter. the ceo, john flannery, also identified the fact that the company has found asset to cut over the next few years. investors will be curious about that. plus, the board. said that the board is too big at 18 members, so we could see some cuts there. finally, there was one analyst
who spoke about elephants in the accounts.tract asset the question is whether or not it will be a reset. there are some analysts who are constructive on this including this is aair who says big corporate transformation. mark: we will see, abigail. abigail doolittle, thank you so much. we are less than a few minutes away from the end of the monday session in europe. let's take a look at european stocks today. this is bloomberg. ♪
i am vonnie quinn. this is "european close on bloomberg markets." ♪ mark: here are the top stories we are covering from the bloomberg and around the world. the central banks are looming large with a possible unveiling of president trump's pick for fed chair. in asia, japanese prime minister shinzo abe and what his election the three means. -- election victory means. trump's tax plan building up momentum. plan i december possible? stocks are marginally higher for european stoxx