tv Bloomberg Markets European Close Bloomberg October 31, 2017 12:00pm-1:00pm EDT
>> please sit down. we have a great group. thank you very much for being here for the incredible work you are doing to help us pass the really historic tax cuts. there has never been anything like this. it's also reform. it's also simplification. we are covering everything, there has never been anything like it. the economy is doing very well. a lot of jobs are going to come from this and a lot of companies
will go back to the united states. back toa big one coming the united states. you are talking to the embers of congress and making a strong case for tax reform. the media is not all fake. to redouble our efforts. your country needs you now more than ever. you are leaders on this subject. we need you to be united and committed and proactive in order to overcome the forces fighting out there. they benefit from the way it is now. that is bad for the country. in a few days, i will be
traveling to asia. i am counting on all of you to be back here working to maintain our momentum on tax reform and tax cuts and that will be a short amount of time. i will be away for 10 days. we are meeting in china and south korea and japan we are going to the philippines, which is an important location where the previous administration was not exactly welcome. the democrats will say our tax dollars for the rich, but they know it's not. it hasn't even been put out yet. they intimately say it's for the rich because that's the right thing to say. it doesn't work and they know it. i think we will have some democrats joining us.
it's a tax cut for the middle tax -- class and jobs. it's going to create jobs. we will bring it down from 85 down to 20. members of my cabinet will be traveling around the country talking to tax ayers and focusing on the regional media which we find to be a more credible media. i find it to be incredible. mnuchin and my economic team will remain focused on tax reform. they will be staying here and continue to work closely with all of you. we need your continued input to make sure that the final bill gets all of the details right and we get that approval. i want the house to pass a bill by thanksgiving and i want the people standing on my side whether -- if we get ready to
sign by christmas. i think we will be able to find a place for you call stand front row center. it will be the biggest tax event in the history of our country. we have a couple of people i would like to say a couple of words. u.s.onohue has been at the chamber of commerce. >> thank you for having this meeting. the business community has been waiting a long time for an administration and resident and a willing congress to do what we haven't on for many decades. to a range are lucky of budget so we have a better opportunity in the senate. there are some members of the democratic legislature that will
come around on some of this, particularly if the numbers are as promised. you hit it right on the head. we are going to have some differences among the business community on what should be the takeaways. we have to work on that. i think you're planning is quite good. you are off to asia. we will see what we have. passedo get the budget it's a big event. passed.t fairly easily there was great spirit for this. the republicans have a tremendous spirit. i think it's going to be very hard to run successfully saying
they want to raise taxes. they want to create obstruction of. the republicans want to lower taxes. we want to get rid of regulations. i have gotten rid of more regulations than any president has for their term in office. that is a big statement. we have just begun. we have at least another 50% we want to do. in some cases, it is statutory. area we to wait 90 days have gone along that process. ofill tell you, i see a lot traditional relief from these horrible regulations. gdp was just announced and despite the hurricanes which could be considered one point, we were at three.
we were at 3.2 last order. to be at three, that would've meant we had four. those are numbers that have not been seen for many years. we are doing well. we will continue to do well. we have companies that want to move into the united states because of regulation. some big wins are going to be announced soon. can i ask you to say a few words? you.ank i appreciate the opportunity to be here. a few of us are old enough to remember being in this same room when resident reagan was working on tax reform. tom glocer. passed. have
the tax bill does not resemble what happened in 86. reform is overdue. of paying the other guys taxes. assume thatt i price of admission for being here today is to support the process going forward. details andee the the might be one thing or another we would like to see different. is broader perspective supporting the process going forward. >> thank you. that's really great. the big thing.
so many other things are happening. that money is going to be put to work in our country for our people. i think the number could be higher for trillion. everyone said 2.5 trillion. i think the number is going to be well over $4 trillion coming back to our country. so many other things. one of the other elements that's we are simple find it greatly. i want to thank my people for being here and working on it. complicated, but the end result will not be that complicated. people will take less tax and
companies will pay less tax by a lot. companies are going to start rebuilding and stay here and they're going to build new plants and they won't be going to other countries like they have for many decades. much.nk you so thank you for your support and leadership on this issue. this is one of the most legal issues for small business. through, wex reform can put capital back into their businesses. it's going to provide higher wages and better than offense. do see theess owners lack of dynamism. they don't see new business the asian in their communities -- creation in their communities. numbers, 3.2our
million businesses, people are not taking risk. we are excited about tax reform. forng the u.s. a haven capital again. we need to get that edge back. people,to encourage particularly millennial's. thank you. >> one of the things we have been talking about and we have seen is the level of enthusiasm for this this and manufacturing. it's the highest level it's ever been. tremendous level now of enthusiasm for manufacturing. no one has ever seen anything like it. the stock market is at an all-time high. it's going up.
i think it's 54 times since i have been elected. i know it's up little bit today. we are going to keep it going up. $5.5 trillion in stock market wealth. we are very honored by that. a very big part of it will be tax cuts and tax reform. thank you all very much. some people have mentioned that, hopefully not. thank you all. thank you very much.
vonnie: you are watching president trump speaking about tax reform. of representative groups, the chamber of commerce and the small business entrepreneurship council. i want to point out a few of the headlines the president made. he said the democrats will say it's or the rich, but they don't know that because it has not been put out. it could come tomorrow. forentioned is not looking the phase-in of the cuts for corporations. he said some people have mentioned hopefully not. it sounds like he is not sure whether that would be needed or not.
i want to bring in the global strategic advisor for pimco. the likelihood of this passing without a phase-in? >> it's hard to tell. i think it would be a terrible idea. we've seen examples in the past, if you tell them they are going to get a big tax cut in five years, they hold off. it's terrible for the economy in general. could a clever person design a program that would work? a phase-in is not a good idea. vonnie: he said he's not for it. it seems like there will be some sticking points on 401k. even the president said we don't have the details yet. what is this going to look like?
he said the democrats say it not or the middle class. richard: we haven't seen the details are in i think it's a classic example, until everything is agreed upon, nothing is agreed upon. there will be a lot of deals cut. there's a reason why we haven't done it in 30 years. it's hard to do. as a result, we don't know where this is going to end up. i am cautiously optimistic that we will get a tax bill through. i think it's in republican interest to pass it. it's not going to be easy. i think we will get there. mark: are you optimistic we won't get a change in the fed rate hikes? even if we do get a new fed chair early next year western mark richard: that's a great question. i prefer to answer this on
friday when we know who that is. candidates, it could be chair yellen. not,lm -- assume that it's this fed has really focused on four providing guidances. think in 2018, the fed is saying the economy evolves and they could hike rates three times in 2018. i think that's more or less what we will get next year. the next fed chairman is going to have a big impact on raising the balance sheet. mark: but some numbers on it. seeecent weeks, we different moves in the 10 year yield. put some numbers on it.
powell or yellen. how does the 10 year yield react? richard: i don't think there could be much of a reaction if it's chair yellen or jerome powell. he is the continuity candidate. eminentlor is an economist. it will be interesting to see if he is the nominee. it will be interesting to see his comments on what he would take rates. i think it's too soon to tell. vonnie: we have had a move in the last few days. of question with a 10 year going to go in general. where do you think it's going next? --hard: we've been a range in a range this year. we got down to two.
it's been a 50 basis point range. we are in the middle of that range right now. regardless of who the next fed chair is, we expect the 10 year yield to trade at a term premium above the federal fund rate. we will continue to hold. the treasury secretary said he is surprised there doesn't seem to be demand for a long bond. richard: that is not something that's been discussed. i'm not privy to the conversations that the committee has. i am not on that committee. treasurytanding is the was told the u.s. is not like other countries like the united
kingdom where they have an incentive to load up on long duration and push those yields lower. i think the message the treasury gives is that may not the case. i don't think they will issue altra long treasuries at higher yield. mark: looking at the german ten-year yields of dropped since thursday. we know why. said, given the pathway of qa through september, what are you advising your clients in it comes to european sovereign debt? we have the understanding that there is an enormous tailwind with various qe programs. i think broadly we think valuations are fair.
not a lot is cheap and the eurozone right now. we look across the globe for opportunities and i think europe is fairly valued. there are other opportunities elsewhere. vonnie: it's an exciting week, that's for sure. world biggest advertising company has cut its sales force. revenue growth is expected to be flat this year. shares are high today. joining us is the chief executive. thank you for joining us. said, this is the second cut in three months. what has changed? has visibility changed? said is we are looking at the revised forecast. we are looking at as you pointed out a flat net sales.
operating margins are flat also. getar, we sausage to pressure for the reasons we discuss with you before. are the challenges coming from social? are the challenges coming from digital consultants? broadly no. are they coming from a focus on cost? the answer is yes. whether it's consultants doing work on a contingency basis to cut costs or if it's activist investors forcing companies they are investing in or potentially threatening with takeovers, whether they are watching them to look at costs we've seen that pressure to a degree we haven't witnessed really since the
recession of 2009. we have seen continuous progress. the final point i make is those package goods that are being put under this pressure are seeing the volume gains eroded. any revenue growth they are getting is primarily price growth increasing prices in inflationary parts of the world like latin america were asia. it's not coming from volume. if you run a package goods company, a warning bell is when you lose volume or it comes under pressure. that's the key point. we feel there is a limit to the course of action that could be made that some of this is secular rather than structural. thancyclical rather central. there will be opportunities in the future.
coming back to your question about whether it goes further, we think it will be broadly flat-ish year. we are looking at next year and we will add some of that's like the olympics and the congressional midterms and the world cup in russia. that may boost advertising a little bit worried we will see what happens and we get into the budget process next year. procter &talk about gamble and unilever cutting costs, did you need to cut costs further to maintain your margin western mark barton: that's what we have indicated. , oneid we were at 1% margin point and 10 basis points up and reported. we were even stephen. we are maintaining margins. we have to keep a close watch on
our investment in people. headcount is down slightly year on year and the average figure is a staff investment. that is 60% of our revenue. that's where we make our investment. when our net sales are under -1%,ure to the extent of that means we have to keep a lid on headcount, not raising it significantly were taking it down a fraction. we are managing staff costs. mentioned, there are four things weird doing. what is integrating our offer more affect ugly which allows us to work more effectively. our clients are asking us to do more for less focus on the fast
growth market geographically and focus on digital where we continue to see fast growth. finally, too late data which is 25% of our business and quantifiable links to the other parts more effectively. mark: i want to talk about amazon. martin: weight. not rapid gains in advertising. they are staffing to know their advertising platform. they are reporting rapid gains in volume. that.tes vary we estimate 2.5 billion. facebook has $40 billion in
advertising. mark: are they an opportunity? is amazon a threat or an opportunity? martin: it gives us an opportunity to work with client to what the build volume with amazon. the biggest threat amazon poses is to google. 55% of product searches in the u.s. m&a from amazon, not google. mark: thanks for joining us today. take a look at where european equities are trading as we had to the close in four minutes. this is bloomberg. ♪ who knew that phones would start doing everything?
led by travel and leisure and media. highest level since may. i want to get back to bnp paribas. it could not avoid a trading slot that is dragging down its european peers. low interest rates, tepid demand. income from trading, bonds, currencies falling 26%. revenue increased from buying and selling stocks. earnings last order did beat estimates benefiting from lower provisions for bad loans as europe's economy picked up. .hares down by 3% inflation out of the eurozone today, gdp as well. the economy growing faster than expect it. .6%. an 18th consecutive quarterly expansion, year on year, 2.5%. facinghts and the limits the ecb, highest confidence level in 17 years, creating more
jobs, sustained price. price growth 1.4% last month. corefurther blow to inflation, fell below 1% for the first time in five months. getting back to the earnings deluge. bp will start buying back shares the year to partially cover its dividend during the price slump. third-quarter profit beating estimates. the resumption of share buybacks a signal of confidence that the worst of the downturn is over. production and cash flow jump. 1.7%, of bp up by mirroring the better-than-expected results we have seen from its peers. bonnie, how's it looking over their? -- there? vonnie: generally, we are seeing some dollars selling.
of course, it is month end. we have not mentioned it's halloween yet. crude oil futures staying above $54 a barrel. the 10-year austell at 2.37%. we are patient looking for a new fed chair. gmm. move to i want to point out something's happening more widely in the g20. the canadian dollar is weaker today, after we learned that the canadian economy shrank. i wanted to point out the ruble as well, back to low 59, a little bit of selling as well. lots of money moving as we head into the new month. inflation area declining despite the strength any economy. data showed weaker than expected inflation highlighting the monetary policy dilemma facing the ecb, reinforcing mario draghi's persistent approach to
exiting qe the puzzle is not just a euro area phenomenon. the boj left its stimulus program unchanged, trimmed its forecast. our bloomberg is gadfly columnist. have a why we dovish-leaning draghi last week? >> i think so. certainly one of many reasons why he has this goldilocks economy. the growth is coming along reasonably but core inflation is surprising, less than expect did. our bloomberg intelligence guys had it right, but it is certainly week, particularly -- weak, particularly in italy. next year, we will have struggles getting close to 2%. that is why draghi believes more
stimulus is required. mark: the boj would love those figures. still below 1%. .> it surprised me that is quite an admission of --lt -- maybe the wrong word but admission they are failing and when they should be achieving. they had one center, an interesting one that was isprising -- this person looking for controlling not just 10 years. the only central bank able to achieve this. technically, 10-year yields should be at zero but they defend the margin. they had done that successfully. this member is saying, look for 15 years. that should be less than 20 basis points. that one of come through but it's clear there is still pressure. essentially the bank of japan is saying we don't care if you are
going up in the rest of the world, they aren't going up in japan. vonnie: that brings me to the question of whether yields in japan, england, ecb, u.s., if we moving in isolation, or if they are looking at other yields? >> europe is very contained here, i think. jumpve seen a very visible in prices for both spanish and italian bonds. for political reasons, but also for refill buying will continue. the securities market program, which is the first bailout in 2010, 2012, will not end because we will be reinvesting these maturities in this program. they were the weaker countries at the time. what draghi is doing is expanding the buying out of those weaker
countries, and that is a skillful way of doing it. vonnie: our thanks to marcus, our bloomberg gadfly columnist. you can read all of the colonists on the bloomberg. the slump in fixed income trading claims another victim. fell by a quarter from last year. the cfo pointed the finger at uncertainty. >> i think in the past quarter there was uncertainty related to the uncertainty in the market. that is why so many institutions waited to see what was unfolding. now we will have to see how that goes forward. it is not impossible with the clarification the ecb has given, that tapers off, and then we get back some more normal evolutions. vonnie: let's go to our bloomberg reporter in paris. she poked to the cfo earlier today. how does bnp get back on track? we had seen bnp paribas
outperforming many european peers over the past few quarters , so of course, investors could choose the success story. but this time around, bnp to trading not go like we saw elsewhere in the u.s. and europe. fixed income revenues falling 26%. equities on the rise about 6%. that was not enough to compensate. overall, the global market division saw the lowest revenues in almost two years, down 17%. that is not as bad as some european peers, like deutsche bank, barclays. to give you a comparison, the second quarter, bnp paribas had only a 2% decline in these global markets. as a result, bnp paribas was the worst performing stock today in the euro stoxx 600 banking index. mark: are things looking better
in the retail banking business? >> if you look at the consumer banking revenues in the three main regions, france, belgium, italy, they were almost let. in france, for example, revenues down 1%, but that is mostly due to the low interest rate environment. they actually saw a pickup in their loans book in france by around 9%. when exactly he expected a turnaround for the french retail. >> it depends on what you look at today. if you look at the pickup in volumes, it is there. we see confidence in individuals and corporations. it has really been a strong pick up in volume. this is not enough to offset the pressure on the interest rate environment, which is leaning toward topline pressure. will pass,over time,
but we will see when that happens, maybe you the end of 2018 when we see that evolution. >> he says he also sees the french president's reforms as encouraging. also if you look at the gdp numbers for france today, it grew by 0.5%. that means we have had five consecutive quarters of growth. they are not only due to macron's reforms but we have also seen the recovery in europe. many analysts see the future as encouraging, at least for the french business of bnp paribas. mark: carillion, thank you. let's check in on the first word news. senate judiciary chairman chuck grassley says an underlying motive behind russia's interference in the u.s. electoral process.
the iowa senator spoke today. not interested in who runs these countries, they are interested in discouraging confidence in the democratic process because they are autocratic and they do not like democracy because democracy might sneak into russia and challenge putin. up -- theyt they are are fighting. >> he also says big tech companies need to take precautions to make sure foreign governments do not take advantage of the plant arms. up -- they are fighting. google, facebook, and twitter testify on the matter today on capitol hill. the white house says president trump will not visit the heavily fortified border between north and south korea during his upcoming trip to asia. a senior administration official says there is not enough time in the president's schedule to accommodate a visit. every president but one since ronald reagan has visited the dmz. several members of the trump administration, including jim
mattis, have recently made the trip. kenya opposition leader is criticizing the country's election rerun process which once again declared the incumbent president the winner. making his first public comments since the results were announced he says opposition protest will continue until the vote is nullified for a second time in less than three months. he boycotted the october 26 vote is gooded that support appeal to the nation's highest court. kushner companies want to tear down a building and replace it with one twice as tall. the plan is not feasible according to the chairman of the realty trust. vornado is a partner in the project. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. vonnie: thank you. coming up tomorrow, i will speak with pershing square's bill
mark: live from london and new york. i'm mark barton. vonnie: i'm vonnie quinn. this is the european close on bloomberg markets. shares of chipmaker qualcomm 7%, one of the worst performers in the s&p 500. let's find out right now with abigail doolittle. >> there is a report out saying that apple may consider not using qualcomm's chips in their
iphones and appetites starting next year. we have had an ongoing legal dispute between these two companies over pavement and this seems to be apple showing its muscle. if you don't do it our way, we will use other chipmakers. it could be anywhere between $.25 and $.60 of earnings next year, depending on what analyst model you look at. what is at stake here, qualcomm trying to reserve its royalty pervy model. if we go into the bloomberg to look at the numbers, this is a margin line for qualcomm. and 2015,from 2013 gaining back, but the estimate for the current year and 2018, look at that. royalty feethat relative to apple moves away. that is a big question. it looks like qualcomm is stuck between a rock and a hard place. what does it mean for the stock? >> great question. to one of our
analysts and he says this dispute with apple is really just a sideshow and it's a bigger question about whether this royalty fee model breaks. if it does, it could be pretty ugly for qualcomm. right now, it is showing, in the mark, you and i know how much i love death crosses. the last one in 2014 thursday big decline. earlier this year there was another cross. today we have this big plunge. it points to the idea that qualcomm could drop to $40 a share, suggesting that this royalty model may break, not just around apple, but also samsung. mark: could be a domino effect. vonnie: thank you. that was our stock of the hour. mark: time for the bloomberg business flash, some of the
biggest stories in the news right now. in an exclusive bloomberg interview, the chief executive responded. >> we are not worried at all. there could be some impact on we areonomy in italy but focusing on the reduction in nonperforming loans and we will accelerate our process. record three machine that is best practiced in italy but also europe. we continue to recover. italy needso said to work on its public debt and reduce its real estate assets to manage the ecb's qe. the world's biggest exchange operated cme group lands on introducing bitcoin futures by the end of the year. additional currencies surged after the announcement to the move could help professional traders and investors get more seriously involved in the cryptocurrency. the chairman of the cme joins
bloomberg at 4:00 new york time, and :00 in london. that is the latest bloomberg business flash. vonnie: coming up, michael de pass is the head of treasury trading at citadel. he will tell us how to play geopolitical uncertainties, as well as more on this burgeoning business at citadel securities. this is bloomberg. ♪
mark: live from london and new york. i'm mark barton. vonnie: i'm vonnie quinn. this is "bloomberg markets: european close." markets have been on edge this week. indictment, central banks, jobs data, potentially a new fed chair. joining us on how to trade on this geopolitical uncertainty as well as someone who knows about the business he is in, michael de pass, head of treasury trading at central securities.
let's start with the evolution of treasury trading at citadel. you launch the business in 2015. it has been quite a ride.ar how are things going at citadel? >> things have been fantastic, we are thrilled with our success. our off thelaunched run curb, and we have made tremendous strides connecting with our accounts. andaturally you ourselves view our accounts as a significant liquidity provider in the treasury market not only in active but also off the runs. vonnie: talk about growth and where you see it going. off to a flying start, but what does that mean in terms of liquidity and your particular business? in the what we have seen market generally is a concentration of liquidity that has occurred at the top. seeael: for us, where we
our role is ensuring customers have a true diversity of liquidity. filling some of the gaps left behind as some traditional providers have pulled back. we have done that exceptionally well in the u.s., and going forward, the plan is how we expand that liquidity into asia and europe. vonnie: how do you start a business like this, what gives you the advantage? michael: what is key is you differentiate yourself in some way. what we are very proud of is we have a firm price for every single bond we trade. that is truly unique to us in the treasury markets. every single off the run bond we have a live firm, street-level two-way market. that has been a key differentiator for us. vonnie: are you looking to become a primary dealer at some point? michael: we are focused on continuing to expand the footprint. when we feel we have developed the franchise to the point where
we are ready to become a primary dealer, that is certainly something we will be looking at. vonnie: earlier on, your colleague was talking about the growth in etf business. i'm wondering about the fixed etn, what isace, that like for you, what kind of growth is there? citadel is focused on a provision of liquidities, treasuries, and swaps. we have clients trading with us on the back of the etf low, or because they are liquidity providers. for us, that is a flow that we continue to see growth and think it is a function of the trend toward passive investing that we are seeing in the markets. can you give us any hard data, what liquidity you are trading on on a daily basis? michael: what i can provide you is the scope in the client base. over the course of the year, we have seen our number of clients we are trading with row by over
300%, average daily volumes have quadrupled. significant growth over the course of the year. move to the actual space in itself, so interesting these days because we just ordered the runoff of the balance sheet for the federal reserve. what were clients concerned about most, what do they call you up about an biggie for answers on? rolloff on the balance sheet is something that has been well telegraphed by the federal reserve. so far, the process has been smooth. we are one month and and there hasn't been much of a hiccup in the markets. we think, over time, the run-up of the balance sheet will result in higher yields and an increase in volatility. what we are doing with our clients is working with them to ensure they are ready and prepared, thinking about what an increase in volatility looks like, thinking about what changes in the market look like. we want clients to be in a position where they are not only positioned defensively, as they
think about changes in the market, increases in volatility, but rather in a position where they can take advantage of the opportunity provided. vonnie: doesn't that just mean cash? michael: in what sense? vonnie: you don't take a position, you have it ready when there is an opportunity. michael: it means having an investment view, being focused on the most likely outcomes, and being prepared or some of the most likely outcomes thomas a when they occur, you are in a position to react. vonnie: what about the foreign buyer? see themwe continue to support the treasury market and i don't see that changing soon. treasuries are one of the most liquid, if not the most liquid market in the world. ofasury forms a cornerstone any fixed income portfolio. vonnie: we have been talking about the 50 basis point range in a 10-year. where do you see it going, maybe 3% by next year? think 2.75, 3% is
reasonable over the coming years over the backdrop of the continued balance sheet unwind, and a continuation of global growth momentum that remains robust. vonnie: our thanks to michael de pass of citadel securities, head of treasuries trading. mark: great interview and take a look at where european markets ended the session. best run six october 3. highest close for the european benchmark since may. it was a day -- i will leave you with a couple of data points. a couple of days before the boe rate decision. this is bloomberg. ♪
these plans can combine your hospital and doctor coverage, with prescription drug coverage and more, all in one plan for a low, or even no, monthly premium. so call now.lan for a low, or even no, monthly premium. so call now. we can answer your questions, even help you enroll. i deserve to get the most out of my plan. we'll make sure your doctors are all connected, you know what your copays are... and you can save on prescriptions; plan members saved an average of over 5000 dollars last year. medicare open enrollment ends december 7th. if you're done with complicated, if you're doso done... complicated, so done... call now to enroll in a plan from unitedhealthcare, like aarp medicarecomplete. [sfx: mnemonic] washington, 1:00 in 5:00 in hong kong. welcome to bloomberg markets, balance of power, with an intersection on politics and
economy. charges against paul manafort yesterday could've been the opening act. papadopoulos could give robert mueller a way of focusing his investigation further. representatives of facebook, twitter, and google are facing tough questions. they will face questions on how pressure user networks to in fear in the 2017 election. congressman will hurd of texas will join us. president wants more attention on tax reform, shooting down the idea of gradually phasing in the corporate tax rate, days before the house is set to unveil their tax bill. tom perez will join us later to give us his take.