tv Bloomberg Markets Americas Bloomberg November 16, 2017 10:00am-11:00am EST
welcome to bloomberg markets. ♪ julie: here at the top stories we are covering from the bloomberg and around the world. are back in rally mode today snapping recent declines. we will speak to deutsche bank's binky charter. choddha. walmart delivering its strongest u.s. sales increase in more than eight years. should amazon be worried. in politics tax reform faces a key test. president trump will be on the hill to rally the troops and about 90 minutes. -- in about 90 minutes. a rally going on. all the major averages trading
higher after several days of declines and following the string of declines we have seen around the world. also strong because of technology earnings. take a look at what's going on. walmart is up 7%. comparable sales of 2.7%. the strongest it has seen in eight years. it's having its best single session in a year and half and trading at a record high. cisco shares are also rising expressedcompany optimism that its transition to more software services is going well. its current quarter will have twofirst sales gain in years. that's helping propel those shares higher. we've got walmart again. rockwell automation.
rockwell shares have been rising. also taking a look at paypal and synchrony financial. it is buying a loan portfolio of 6.8 billion dollars from paypal. it's also getting an exclusive contract for paypal consumer lending and paypal is also at a new high today. mark: getting some breaking news on siemens planning to cut jobs. it is closing at least two sites . europe's biggest engineering company attempts to turn around its struggling power after a sharprop in orders -- drop in orders. half of the 6900 jobs being eliminated will be in germany. will be cut in the power and gas division. the rest coming in the process industries and drives and power generation division.
if sites are stated to be closed with a solutions business. forons still on the table location including a sale. a sites will be cut at and another 300 in berlin. sweeping cuts. pushes ahead with broader changes in the structure of the company. sameeduction falls the week as rival general electric unveiled its own turnaround plan to focus on three businesses and exit others. are facingmerates global shifts in energy demand largeng renewables over fossil fuel plans powered by types of turbines. shares were already higher. little bit up on that news. i want to talk about some of the big news elsewhere today. we had retail sales in the u.k.
barely rising in october. aod stores saw declines for second month. clothing dropped the most in a year. just .1%.les jumped they plunged .6% in september. they fell by .3%. the little red box right there. that is the first decline in more than four years. there was a 1.4% annual gain in sales. that was still the weakest since june 2013. to sterling markets looking beyond the boe rate hike earlier this month. sterling vulnerable to data, to brexit and consequently risk reversals in sterling are now near the most bearish and more than a month. the three month risk reversals theh takes into account december eu summit and it looks
increasingly unlikely the eu will be ready to discuss trade with the u.k.. the two sides remain miles apart on contentious issues such as the brexit bill. prudentialy, reporting a 17% jump in new business profit. such climbing in key areas as its asian business. in asia the gain was 15% driven by growing demand from arising population. double-digitosted growth in seven countries in the region including china, hong kong and singapore. on asiaany is betting as it pursues an international expansion strategy. let's broaden it out and talk about forecast. some of wall street's biggest bulls are publishing their new year predictions as 2017 draws to a close.
among those who see further gains in stocks is binky chadha. s&p could rise to 2850 -- predicts the s&p could rise to 28 50. a lot has been made of the length of the bull market we have seen. i want to look at a chart on the bloomberg that looks at the streak we have been on. the streak of days without 5% drawdown which now i believe we are 258. it has been quite a streak of time here. fundamentals support the gains that we have seen? >> i would say absolutely. there's two separate questions in what you said. one is the magnitude, the size and the speed of the rally. all beenuld argue has about earnings. s&p 500 up 15% year to date.
through the third-quarter earnings we were up in terms of 10%, maybe 11%. we are now well into the fourth quarter. the year to date rally is mostly just coming from earnings. the movement in the multiple is a couple of percent. it depends on whether you count last monday or two weeks ago. the multiple is going to move around. it has been remarkably stable through the course of the year. the one sentence description of the last 12 months has been that it's just really all about earnings. in terms of forecast what's going to happen to earnings next year. in thinking about what's going to happen to earnings you have to think about pretty robust u.s. growth. a big pickup and global growth. i would argue the risks to global growth are to the upside
next year. then there's the question for u.s. earnings of what happens to the dollar. if you keep the dollar where it's at as one possible baseline 12%re talking about 11% to earnings growth for next year and that's essentially our forecast which is that the multiples stay flat rate it's mostly driven by earnings. it's mostly just like this year. there is a separate question which you brought up. i think the thing you have to keep in mind is that the normal behavior of the s&p 500 is 3% to 5% pullbacks every two to three months. 12th month ofthe the rally after the election. probability one event that we will eventually get what i would term a normal pullback. why haven't we gotten them over
the last year? i think you have to keep this rally in perspective which is oft it follows a long period range bound behavior in the s&p 500 after we had the u.s. dollar and oil shocks. there were clearly recession fears. what you see is fund managers who tend to adjust their positioning with the growth pulse of the economy. at very under rate levels. our measures indicate that positioning in late 2015 early 2016 was really lows for the entire recovery cycle. as the impacts of the dollar and oil shocks come out of the system, you have seen them move .oore -- more and more with growth indicators
that positioning is definitely long. mark: who isn't buying the dips? it's important to also keep in mind there have been two elements of the investor base that have not participated in the 12 month rally and number is to my mind absolutely remarkable absence of inflows into u.s. equities despite the 15% run. our measures of positioning indicate that the asset allocation funds which have been growing are very underweight equities. whenalso goes to say that two segments haven't participated the pullback that everybody's waiting for may not come for a little while. europeou have upgraded to overweight from underweight.
just explain the shift and what are going to be the driving forces of that move upwards. to anupgraded europe overweight back at the end of march. if you look at europe and relative valuation and earnings what you will see is that for the eurozone part of europe earnings have been growing in slightly better than earnings in the u.s. and if you look at relative valuations they tend to be in a very tight band. the bottom to the top is 12% to 14%. europe has gotten stuck in terms of relative valuation at the bottom of the band. if earnings growth is the same we are at the bottom of the band, i would argue being long europe is a free option on which we remain very constructive.
from a portfolio point of view i am neutral. mark: europe has weathered the currency. it has come back since the ecb meeting a few weeks ago. will it continue to whether the currency? what impact will the currency play in 2018? i would argue is if you look back at the rally in global equities over the last 12 to 14 months we have had what i would call happy rallies and not so happy rallies and the not so happy release -- rallies have been when the 10 year has gone up. for a variety of reasons that have to do with the perception of what the fed is going to do and how it thinks about what's happening to inflation. you have these asymmetries whether you look at value versus
growth. small caps versus large caps at the bottom of a band. it's all part of the same disconnect. versus growth tells the story best. sitting at the bottom of the 15% band and you look at the last seven years, each time we sat at the bottom the market had sold off by 10% to 15% and we had a massive growth scare. this time around the market is up 15%. at the end of the day it does depend on your view and what's going to happen to growth and inflation. i think inflation is pretty normal and going to become a little bit norm -- more normal and rise a little bit. i remain constructive and i think all the trades that i mentioned have moved around. you haven't really lost money except in the very short term. think that you
need to be more discerning as you move into the next year? geographically, but sector wise. as we get into the latest phase of the rally we have seen more frequent rotation. it hasn't been as clear month-to-month quarter to quarter who is leading the rally. it hasn't been as consistent. been two orally three major drivers of the rotations. number one is rates which i already spoke about. number two is the upside surprise to market expectations on global growth. driver in was a big the first half of the year. how we suggest positioning is around what i would argue the biggest mispricing. number one candidate for us really remains financials. i would argue that financials
it's underappreciated that for the last five years earnings have been growing at 9% which is above the s&p 500. julie: even with the flattening curve? >> rates haven't really gone anywhere. they have essentially been in a big range. earnings trending up 9% is underappreciated. theur valuation metrics financials look on the basis of current and past cur earnings ad even a continuation of the not building in any upside to earnings. rates are missed priced for what the fed will eventually do. so that's number one. i would argue the upside to global growth is underappreciated. we will have you back on.
binky chadha's chief global strategist at deutsche bank. president trump heads to capitol hill in the next hour to give up have talked to house republicans. and they are expected to vote on their tax reform bill. republican leaders say they are tofident they have the vote pass the measures. senator ron johnson is the first amount against the senate version of the tax bill. he says he doesn't do enough to help businesses. in puerto rico an indication of how much that hurricane devastation will affect debt restructuring. it's unclear if that would apply to all of the government $74 billion of debt. germany's chancellor angela merkel is facing her first big test since being reelected in
september. she is facing a self-imposed end of the week deadline to get coalition talks going. she's trying to seven up an unprecedented for party government. disagreements on immigration and carbon emissions have slowed things down. norway's trillion dollars sovereign wealth fund wants to dump billions of dollars in oil and gas stocks to protect the economy of western europe's biggest oil producer. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. julie: speaking of oil, wti crude is trying to make a comeback today. it's taking a little bit of a leg up. we will dig into it. futures in focus is next. from new york, this is bloomberg. ♪
mark: live from london, i'm mark barton. julie: i'm julie hyman. this is bloomberg markets. time for futures in focus. oil is trying to make a little bit of a comeback. a hit after taking the u.s. day said that sales of corn exports fell last week. joining us from the cme is ted seifreid. thank you for talking to us. let's start with oil. it seems as though there is now some question as to whether russia and opec are going to indeed extend their production cut. what scenario do you think is priced in right now? >> it's a funny thing what happens when prices rise. i think the part market still has priced in that
opec is going to extend freezes through the end of 2018. that's really what everybody has been leaning towards. there's always going to be some questions because opec is very volatile by nature. that's what the market has priced in at this point especially with the higher prices that we have seen. crude has been on the defense lately. sort of a risk off commodity climate at the moment. production is really keeping a lid on things at the moment. we are approaching the 10 million barrels a day mark. that would really keep it cap on things. eia yesterday showed a modest increase. the drop wasn't -- the increase wasn't as much as api. specs are at record longs right now. that is a bit of a concern
because long liquidation break could be fairly deep. however exports do seem to be on the rise. we were talking about china processing to increase. december crude needs to hold the trend line. if we fail we are looking at 5250 to 5060. i am looking for crude to hold the trendline and bounce a little bit back to 5640. .e could head to the 58 level i would be a seller in that neighborhood. julie: let's quickly get to corn . talk to me about this usda report. usda gave us a shocker last week by giving us the bigger national average yield we have ever seen in corn. we did not have a perfect growing season. we had the worst looking drought monitor since the major drought in 2012. the trade took that poorly. we broke out new lows. we are at the sort of timeframe in the year where we are done
with corn harvests. the u.s. producers are not going to be selling aggressively. they don't know what sort of crops they have yet. read -- you have the speculative crowd. i'm looking for corn to find a bit of a base here. i'm looking for a target of about 376. we have a hole between here and 342. seifreidank you, ted with today's futures in focus. mark: still ahead, what walmart is keeping pace with amazon. this is bloomberg. ♪
rockwell automation at $29 billion. tot represents a 30% premium rockwell's weighted average share price as of october 30. rockwell is the leading supplier control forand assembly-line operation. walmart is keeping pace with amazon as retailers headed to the crucial holiday shopping season. the world's biggest retailer delivered its best u.s. sales growth in more than eight years. same-store sales rose 2.7% in the third quarter. trumpahead, president will be heading to capitol hill to rally house republicans. ♪
this is bloomberg markets. emma chandra has more from new york. first time applications for employment benefits in the u.s. rose to a six-week high. that may have to do with volatility around the veterans day holiday. claims rose to 249,000. continuing claims fell by 44,000 through the lowest level since december of 1973. in zimbabwe president robert mugabe refusal to resign publicly is presenting -- preventing the military from installing a transitional government. they say mugabe is being urged to quit so the military can claimants takeover is not a coup. they rediscovered painting by leonardo da vinci has become the most expensive artwork ever sold. went for $450
million. it wants changed chance for less than $60. -- it wants changed hands for less than 50 -- $60. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm emma chandra. this is bloomberg. look at the major averages in the u.s. today. we are seeing a bounce back after what has been a rocky few days here. are seeing in the s&p 500 is the biggest since october 27. we have not seen games of this size. up by about 12%. as i take a look at the bloomberg and what is driving the gains consumer staple shares are leading the gains in the s&p 500. only energy and utilities are in the red.
the best performer in the s&p 500 followed by walmart. we talked about the big report from that company and its best sales game in quite a while. check out what's happening to european stocks. of declines wes finally got an increase in european stocks. the stoxx 600 is up 5.8%. rising for the first day in a worst losing run since november last year. lowest close yesterday in a couple of months as well. we have rebounded today onto the currency board. what's happening to sterling. sterling is up against the dollar today. we had some retail sales data. food stores saw declines for a second months. clothing dropped the most in this year as well. euro is slightly down against the pound.
talks could less late into the night friday which is the deadline markets set. they will begin formal coalition talks if they don't. germany fixes a minority government or another election. let's bring in bloomberg's german government editor in berlin. are we close to the point where these talks could move to a formal stage? that is the odds on expectation that since this is only a preliminary step or one of several steps in this procedure that merkel and the somehowree parties will come out and say we are all committed to the future of the country and we want to at least try and make this work in a
formal set of negotiations which would of course take another couple of weeks at least if things go well. mark: where are the main areas of discord and where would you say there is compromise between the many sides? the senior negotiators have been saying for some days now that there's actually a lot of agreement on a variety of points. welfare state issues. onre's also broad agreement a pro-european government. the sticking points seem to be a lot about climate. the reason for that is that the green party would be coming back into government after a hiatus of about 12 years if this coalition comes together and they have very pro-environmentalist stances that don't always jive very well with the others.
there's the issue of migration which has dogged merkel for the past two years and there is a range of views that will have to somehow be meshed to make this work. are people even contemplating the possibility that we might not even progress to the next stage? talks could fall apart. the social democrats wouldn't enter into discussions with merkel's live party. what could happen next? is it realistic another election could be called? i think that is considered the least likely possibility for a host of reasons. , the parties could reasonably worry they would lose more support. democraticrkel's
block already lost quite a bit of support in the election in september. i think there is a sense that all of these parties would like to avoid a new election. whether this will actually succeed at the end like around christmas and you will get a moment where they say actually the differences are just too great to form what all of us feel would be a stable government which is after all what merkel wants and needs than you might be a against another crunch. right now that's not really part of the conversation. the idea of a collapse and new elections because of all of these additional uncertainties would surround that. mark: great job. thanks for joining us. time for our stock of the hour. shares are storing.
restoration hardware. abigail doolittle is here to explain this big gain. what's going on here? >> it's a pretty bullish day for rh. they gave preliminary revenue guidance that is positive relative to the upcoming quarter they will be reporting in december they raised guidance and huge way. 32% above consensus of $.79. sales also up 8% despite a 1% hit from the hurricane. to a strongpoints product and success with these large design galleries they have. have more information today. they have an investor day starting at 2:00 p.m. let's really dig into this. this is very bullish. it is a huge raise. there's also a huge short interest on this stock.
back in july it was as high as 64%. it is now down closer to 50%. it is still very high. i imagine the next time we take a look at this it is going to go up even more. that stock is up 229%. it's incredible. julie: what has been the analyst reaction? >> it seems pretty bullish. one analyst upgrading at citigroup. as --ice was also raised at buckingham. it's incredible. julie:let's take a look at the d function that gives us an overall look at what's happening here. i am amazed by that. that really does suggest there is a turnaround underway. this is the consensus rating. price.the average volume. lots of good information.
in terms of the analyst ratings 50% neutral. mainly on the sidelines. represent toes some degree what we had going on relative to the big move. if we take another look at this function this is pretty important valuation. 26 times. that is a 60% premium. even alan kumal williams-sonoma. even though the evaluation is it is below the russell 2000. valuation is always relative. julie: it certainly helps to explain why a lot of folks are holds on that stock. thank you, abigail. there's a lot of news on this front today. walmart among those news items. shares are soaring after the retail giant beat expectations for the ninth straight quarter.
delivered its strongest u.s. sales gain in more than eight years. shares of best buy are falling after fourth-quarter profits missed estimates. here to walk us through today's retail numbers is sarah halzack. definitely these various reports really do illustrate to us that the retail landscape more than ever is not monolithic. there are very clear winners and losers. taking the sky view, what characterizes -- what differentiates them at this point. >> the most important thing is whether they are really building themselves into on the channel retailers who had to they have a strong physical store strategy? some of these laggards really don't have a compelling e-commerce strategy. has's sporting goods who
lousy earnings earlier this week is a good example to all of that. even target, their e-commerce is growing but not quite as fast as you would like and the strategy isn't as clear. the retailers that are succeeding are firing on both cylinders. mark: is walmart's resurgence here to stay? i do think walmart is on a very good trajectory right now. one thing that hasn't been talked about a lot of is was really encouraging for them in this report was the strong grocery comps. this was their best in six years. that's a really important category for them. we all hear amazon's footsteps when it comes to grocery. they really want a bigger slice of the five. of their than 50% sales. seeing strength in that category is a really good sign. julie: walmart's identity has always been low prices.
that has been the value proposition. now it's going to be selling some lord and taylor clothesling -- clothing. it's going more online. is there any risk that its identity becomes muddled to some degree? >> i think for now they are doing a pretty good job of keeping it right for kate it. are emphasizing that everyday low price and trying to wring as much cost as they can out of their supply chain to keep costs down and really trying to preserve the brand identity or something like jet or bonobos. the average shopper probably doesn't even know that walmart owns bonobos at this point. if they can keep that bifurcation i think they will be ok. , thank youh halzack for giving us some retail perspective. we are going to stay in washington but go to a different part and get to the latest on the tax debate.
trump will speak with house republicans before their long-awaited vote on tax legislation. republicans have come out against the plan because it eliminates to duction's for state and local taxes. republicans can spare 22 votes and still get the bill passed. sahil kapur is here now. what role can the president play? his success in lobbying his base of republicans on the hill has been mixed in the past. >> it has been. i think he is just going to offer a pep talk to the house republicans before the vote. they seem to be in good shape to pass this bill. they can lose 22 of their members and still pass it. there are only about nine definitive no's. the 10th one that may be leaning that way. there are a few others that are
undecided or undeclared. i spoke to congresswoman comstock of virginia and castillo. both represent districts targeted by democrats in 28 seen. these are very closely divided districts. there may be a few others who end up voting no. he has not been steeped in the weeds of it. they seem in good shape. both house and senate sides are moving on this with unusual speed especially given other efforts we have seen this year. is there still the general feeling in washington that this is going to get done before the end of the year? a 1.5 trillion dollar question. it seems to be in good shape to pass the house. is in morebill tenuous shape with senator ron johnson coming out against it. the pass-through
provisions disadvantage those type of businesses in contrast to corporations. senator susan collins is concerned about the mixing of health care and taxes by including the individual mandate. nobody really knows where this is going. we mentioned the house can spare 22 republican votes. on the senate side what does the wiggle room look like? >> two votes. afford to lose more than two republican senators before this thing goes down this and it. that is where the real battle will be. julie: what about the aca role in this? it looks like that could be part of the final bill. is that going to jeopardize it? >> it makes the politics a lot messier. you have three republican senator segment of voting with democrats to kill the aca repeal bill in july and they have
blocked subsequent efforts ever since then. it is dangerous to mix these things because the democratic race is much more energized on health care than they have been on taxes. they are coming to life in a way we haven't seen. senator collins has been sounding the alarm on this. she told me it was a mistake to mix these debates. taxtor murkowski has said reform is difficult enough without mixing in health care. it's a complicated proposition but they need the revenues from it. what's the latest setting of the sun certain tax cuts and not others? where do we stand on that issue? senate bill essentially sunsets all the individual income tax breaks at the end of
2025. come january 1, 2026 pretty much everyone who makes income is going to see a tax hike if the sun sets happen. republican leaders are probably going to angle in the direction of saying they won't happen. in which case the deficit would be larger in the long-term. we do know the corporate tax cut is going to be permanent and some of the international changes are also going to be permanent. julie: sahil kapur, thank you. the: still ahead, cracking da vinci code. why this painting shattered records and left the art world completely stunned. this is bloomberg. ♪
julie: i'm julie hyman in new york and this is bloomberg markets. going once, going twice. a 19for $450 million after minute bidding war. leonardo da vinci's salvator mundi came the most expensive work of art ever sold. the price eclipse is the previous record for a picasso sold in 2015. some are critics have pointed to the paintings damaged condition and questionable authenticity. spoke onmpley bloomberg surveillance and explained why a 500-year-old weathered da vinci piece can command such a high market value. >> there are restoration issues and the market tolerance for a da vinci is quite different from the market tolerance for a van gogh. is scarceh a van gogh and someone will pay $81 million for a great one, there are still
more to be had been da vinci for whom there are fewer than 20 paintings in the world. people have a much higher threshold for what kind of over painting or condition problems there could be with the painting. julie: joining us with more on this story is bloomberg news's art market reporter. in.k you for coming has been talking about this story today. what is the deal? generally we have seen art prices going higher. what is driving all of this? >> has been talking about this story today. what is the deal? we have seen art prices going higher but never anything like what we saw yesterday. it was really a whole other dimension. the record for an artwork is $179 million for picasso. it never went through $200 million. $300 million. $400 million. those numbers were never
pronounced in the context of an auction room or any private sale. the most expensive work of art. what is driving it is expanding wealth globally. there's just a lot of very as a trophy,e and as a great store of value. this painting has something else going for it. brooke was talking about the condition. market jokedn the that of course it belonged to a contemporary sale because it was painted so recently. it was a leonardo and it was the last one. it's not the best one but it is the last. mark: who likely spend that much money on it? >> there's a group of people. there's a lot of speculation. we don't know who bought it. we know there are a lot of billionaires in asia and america. there are people building private museums. this work will command huge audiences.
christie's took it on its world tour. 30,000 people lined up in new york in the rain waiting to see it. whoever puts it in their museum will really -- it will be a star. julie: thank you for walking us through that sale. on thehe most read story bloomberg today. what a fantastic story. number two now. coming up, we are following stocks. we are less than 35 minutes away from the end of the third day session after seven days of decline. the longest losing run in over a year. stocks are up today. the close is next. this is bloomberg. ♪ is this a phone?
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♪ mark: here are the top stories we are covering from the bloomberg and around the world. president trump heads to capitol hill to sell house republicans on his tax reform plan before they cast the crucial vote. and he sealed the deal? $1 trillion sovereign wealth dumping $35idering billion in oil and gas stocks and the oil and gas are reacting. can prime minister theresa may get brexit negotiations on track? what could be the potential fallout in the markets? we will speak to rupert harrison of black rock.