tv Bloomberg Markets Americas Bloomberg November 20, 2017 10:00am-11:00am EST
vonnie: here are the top stories we are covering from the bloomberg and around the world. u.s. stocks are opening slightly higher as the holiday week kicks off. will questions about tax reform, brexit, germany and more eventually derail markets? we will ask the chairman of -- research. is tellingresident chancellor angela merkel to go back to the drawing board as coalition talks collapse. we will talk to a key lawmaker from one of the parties involved. in commodities, we think one of the leading executives at , how theining giant recent runs for copper and metals change the company strategy. next twoll ahead of hours. we are 30 minutes into the monday session.
julie hyman is in -- is in. julie: we are seeing a little in today, really a pause market of the moments. the dow is doing the best of the three-day averages. things may heed up over the course of the week as we get more economic data and a dozen s&p properties are still scheduled to report their earnings tomorrow. we'll be watching those. in today's session we are watching some of the last companies. quest diagnostics and lab corporation of the americas. late on friday, we got new information posted, final rates for medicare. they were posted late on friday and so they have implications for these companies. the final rates still suggested 8%. cut to the revenue in 2018. we are seeing a minute drop today. we are watching a big deal in the retail industry, or at least
an investment. alibaba, $2.9 million is how much it is paying to buy -- $2.9 billion is how much is paying. walmart is down. it operatesbed, about 400 hypermarkets. are seeing those companies trade accordingly. also checking on home depot and lowe's. finally we could be seeing some signs of a complacency bubble, so says edwards, a global strategist at --. he did say in a report that if you look at figures from one point of the university of michigan consumer confidence survey that it shows we are seeing some complacency. it is the likelihood of higher stock prices in the next year,
whether those people are seeing that. that is the blue line. the s&p is in white. you can see we are at a high level of folks who think stocks are going to keep going up. mark: 90 minutes left of the monday session. -- theoes down for the gauge has fallen eight days of the past 7 -- germany the next government have collapsed, which is why i'm showing you the euro. the final column is the one you want to look at. initially we saw the decline in asian trade. the euro fell about 6/10 of 1% against the dollar and then rebounded. euro wills as the fall to the lower end of that range if elections. option gauges pointed to long-lasting effects of the german news. .his is the 10 year spread
the difference between france and germany. it comes down to the narrowest since november 8. both 10 year bonds in france and germany are rising today. yields falling in both of those places. look how far we've come since just ahead of the french election when the yield shot up to five-year high. we are down below 28 basis points today. corporate news to tell you about , ross shares -- two departmental medicines extend -- succeeded in much anticipated patient trials. both trials, key metrics of whether the world's biggest maker of cancer drugs can rebuild its portfolio as it is -- as copycat rivals for the first time. the company is entering a three-year transition as it tries to push forward new treatments. shares in roche up 6.4%.
vonnie: it is so good to be back. it is a shortened trading week in the u.s., but still plenty looming. we may see action on taxes this week. congress in recess for thanksgiving. but the fed chairs scheduled to speak and they may give clues about the debate about rates in 2018. we know the policy of a hike in december. then there is this massive equity bowl run. joining us is jason. let's start with washington. how disappointed are you. will something happen? ways a not that disappointed given the enormity of some legislation -- of the legislative agenda items they had. if you look at history, it takes quite a bit of time to get something of this magnitude
through. i will be disappointed if it does not happen. think they will get tax cut through by the end of the first quarter of 2018. there are other parts of the agenda that are very much in place. typically deregulation of the financial sector. has risenonfidence accordingly. what survives the tax reform bill in the end? three point -- 3.5 million words in the tax anyone can really tell you with certainty what is going to be in the tax code, they are either overly optimistic or line. the things we think will be in their will be a cut in the statutory corporate rate, a tax
cut on repatriated profits and full expensing of capital expenditures. we think those three will be in the final bill. there are a lot of things in their that are in there almost to be traded away at some other point and i think a tax reform package is very difficult. the last time we had that was 1986, 30 years ago. ronald reagan 149 of 50 states and the economy was booming -- booming, so the president had a lot of political capital. would be somewhat more modest or hopeful in our expectations in terms of what is in the bill. a corporate tax cut will be good. mark: so much to chat about. five non-consecutive ideas. closer to the beginning of the business cycle than the end. explain. jason: in a classic business cycle, there are three ways you
get a recession. the first is normally through inflation. eventually the central bank titans too much a menu of monetary policy mistake. the second way is through other policy mistake error, fiscal regulatory trade. the third is a bold from the blue -- bolt from the blue. the interesting thing about this cycle has been the fed and other large banks have shorted the cycle. you had very low inflation and gdp growth for several years. it was never happens. i think until inflation picks up meaningfully, you are probably -- this expansion is going to continue. normally what we look for is average earnings of about 4%. that is generally when the fed gets more aggressive and closer to the end of the business cycle. mark: this -- if it continues, the stock market has legs?
jason: i think it does. one of the curious things about this is in some ways i would argue is the bull market nobody loved. if you look at net inflows in etf's into mutual funds, you have seen net outflows since 2009. individual investors have not anticipated. a lot of the signs of euphoria that you saw when i was -- in the late 90's are not apparent. i think eventually you will get there. i have a feeling it might get crazier before it is all over. japan, you also like where people say it is very richly valued and the strong yen. jason: i'm very bullish on japan. you have to be only to the extent which your bearish on the currency. i think it is hard few to work
with the yen weakening. it has done that this year. japan is very interesting because the valuations are not particular, but they are much cheaper than they were when i got started in the business 30 years ago. there is a lot of money on the sidelines. companies are very cash-rich. they are starting to become more western in terms of their attitude towards minority shareholders and making increasing shareholder values as far as dividends. there is a lot of potential there and have also noticed on my travels that a lot of people are underweight in japan, a lot of people are more enamored in europe and have been ignoring japanese equity and that presents the opportunity. vonnie: i know we've had seven quarters in a row of growth, but still it feels like if you are a japanese fixed income investor, you would still be waiting. jason: i think one of the meaningful changes are there are signs of inflation in japan, although they are barely
perceptible. in japan, a little goes a long way. in my opinion you had a sec -- secular change in direction as far as japan is concerned in terms of inflation and growth. vonnie: jason trennert, sticking with us. we will back to that -- we will be back to ask you more. that's check in with first word news. emma: the president in germany is asking parties to reconsider their positions after talks broke down. angela merkel said she will stay on as defective chancellor. -- de facto chancellor. if they cannot form a government, germany may have to hold another election. it would not enough for the british government to come up with an answer on the brexit bell. brexit negotiator had told the nation to come up with a solution with issues of the border between the republic of ireland and northern ireland.
the border is one of three issues that have to be resolved before talks move on to trade. in the u.s., mass murder and called leader charles manson has died. in 1969, manson followers killed actress sharon tate and six others. manson was serving a life sentence in california and died at a hospital in bakersfield. the special counsel in the russia investigation has told the justice department to hand over a wide array of documents. robert mueller's prosecutors want emails regarding the firing of fbi director james comey. they want documents related to jeff sessions and his effort to recuse himself from the matter. 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. mark: crude flipping after friday. what is shaping the oil market today?
♪ mark: live from london, i'm mark barton. vonnie: it is time never futures in focus. oil-rich reading slightly after a boost on friday. this as the saudi's hinting at an opec cut extension. i feel it we've heard this so many times. is this story not baked in at this point? we are not hearing you come we will see if we can get your desk
back to futures in focus. oil markets we can chat about ourselves because we have not .een it affects the oil markets no major moves yet. mark: the talk of the town last week was maybe russia getting cold feet about extending those production cuts in that meeting at the end of the month. energye to the saudi oil minister on friday. he seems to be confident those cuts would be extended at the end of the month. it is all leading up to that opec meeting. vonnie: we will return to iraq epstein at some point -- ira epstein. let's finish that discussion on oil, jason. i know you can speak to anything. as oil make any kind of material difference to companies
earnings? jason: i don't think so. not materially. problem with oil now, there is so much going on as far as what is going on geopolitical he we're not quite sure whether the next stop is 70 or 45. that is one of the things i think at least as far as companies thoughts about whether the edge -- to hedge oil or not, i think that is one of the bigger concerns. vonnie: how do you plan if you're a corporation? particularly when it comes to hiring. jason: i think it is a good question. as i said before, business confidence is up quite a bit, which is terrific. you also have a situation where you are close to full employment. full employment should lead to higher wages, especially if you get the tax cut through. you will be adding stimulus to the economy that is already pretty close to full employment.
it seems to be that's been the missing ingredient. another missing ingredient i would like to see hopefully from the tax cut is capital spending. that is one place where you can probably see the most confidence corporations if they don't actually issue debt to buy back stair -- buy back shares. vonnie: we will bring in ira epstein. they're saying it is hard to know whether oil goes to 70 are back to 45. what is your theory? be: my theory is it would hard to go down to 45 again as long as euro buyers are good and china doesn't going to make slowdown. that could be a watershed. they said over the weekend they are going to look at projects that only work at $50 and higher
and they will concentrate on shale. that gives you an idea that if that hedge is about 55 or 56, they may do nothing, they may be more about returning to investors rather than growth of the company. i think that is a watershed moment from a major oil company. vonnie: i want to ask you about gold. we are seeing it back below $1300 an ounce and yet on the bloomberg saying gold is a preferred asset for people like hedge fund managers. ira: is it or is bitcoin? bitcoin is out producing everything, so i don't know if gold is. gold had a problem without inflation story and that seems to be what keeps missing on that. then we keep hearing about higher interest rate hikes, strong dollar, not gold trend. gold has a lot of headwinds. i think the key for gold will be $1275 get back on their
last year. epstein withis ira futures in focus. jason trennert is still with us. jason, any interest in gold? ofon: over a long period time i think some and that -- all investor should have something in gold. bitcoin is being seen as somewhat of a substitute. i'm very skeptical. this too easy to steal point. i think gold around 5000 years. this is the problem to see of governments. i don't think that changing anytime soon. i think everyone should have some gold in their 4 -- portfolio. you say when it comes to technology it will replace financial and energy is the
biggest target of increased rental -- regulation. what effect will that have only tech sector? this tech sector obviously is bigger on facebook, amazon and google. double overobably here. just looking at the local landscape. onpresident trump can drop jeff bezos, that would be up -- there are questions what antitrust, privacy, taxes that i think eventually will be issues for the companies. i'm much more interested in things like materials or microsoft or some of the more traditional players which will again go back to the capital spending. those other companies will have a little more issues from a regulatory point of view and
years to come. a nice segue into financials, which we touched on. i want to elaborate further. what is jay powell, what do they add do you -- deregulation impact on the financial sector? jason: in some ways a could argue that randy quarles, with all due respect to chairman powell, randy quarles is a more important appointment because it will be vice chair for financial regulation in that role in the stress test on banks. you also side bill come out of the senate where the senate committee last week to diminish the number of companies or banks that would be considered systemically important. i think there is a real focus now were thinking that perhaps regulation went too far and ironically it probably helped all the wrong people. it helped very wealthy people with financial assets and hurt people that had bank accounts.
it helped very responsible large companies and hurt smaller companies. the u.s. is all about giving capital to irresponsible people to spend it. there's a little bit too much of the approach. i think this administration understands that. vonnie: you have a great chart in one of your notes that shows the bull market within 81% return that authority provided in the course of 104 months of this point. you are concerned about fixed income. jason: fixed income in particular because this is very focused on nominal gdp growth. it doesn't necessarily matter whether we get higher inflation or higher gdp growth, the more important thing is that growth as a whole in terms of their wages, they want that to be higher. that presents a problem for fixed income generally.
emma chandra has more from new york. are: in zimbabwe, lawmakers said to begin impeachment proceedings against robert mugabe. in a speech he failed to announce his resignation. last week military leaders took control of zimbabwe, ordering him to step down. they may bebia, able to recover up to $100 billion in sub test settlements from those arrested in a corruption campaign. payments aresays based on the amount of authorities believe they took illegally. the u.s. proposal on rewriting nafta is unworkable. mexico believes the u.s. plans to tighten content rules for car manufacturing would do serious damage to the industry. the eu posture you negotiator has a warning to the u.k.
they say banks will pay a heavy price for leaving the eu. >> there -- the consequence of brexit is that the u.k. financial service providers lose their eu passport. they lose the services of 500 million consumers and 22 million businesses. emma: they also said it is up to the u.k. and not the eu to settle the border issue between northern ireland and the republic of ireland. 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. chancellor angela merkel's efforts to build a government fell apart. the euro has been fluctuating on the news today. investors questioning how developments might impact economic growth.
but get back to jason tram and -- trennert. jason, you talked earlier about going to japan rather than european stocks. the fact that my georgia -- minority shareholders -- what about the europe side of the equation? is that more with regards to japan or a negative call on europe? think of the mark get it is -- moment it is more of a bullish mark on japan. the dividend ratio is about half that of europe. about 27%, there's more room for japanese companies to increase payouts and european companies. -- we missedaces europe, we thought it was a chance it would never end and there might've been a chance we overemphasized the risk in , especially in holland
and france and germany. thinkcandid, i still there's a big risk. real andical risks are the currency isn't as cheap as was a year and a half ago, which might provide less of a left for european companies. it is a little bit of a combination. japan is more tractor. europe has its own issues. mark: the u.k. does not seem to have the prospect of a -- referendum. where does the u.k. fit into your investment spectrum? to,on: it would be hard regardless of your feelings on brexit, it will have an economic cost. .he cost will be some recession it may be a mild one as the economy adjusts to this new paradigm.
antainly i think from economic perspective and an earnings perspective, it is hard to get particularly bullish on that from my perspective. vonnie: a curve at 61 basis points, what does that signify? jason: we get that question a lot. i'm one of those people who can should put it in a context of absolute level of interest rates, which is to say that interest rates are still extraordinarily low and i think it is premature, especially when the fed funds rates with negative in real terms. that is a to see really damaging economic signal. certainly you would rather have this steepen rather than flatten. perhaps signaling that it is -- it comesn, a lot of down to whether you get the tax cut through. in 2003 when you got it through 240 -- sury yield from
going up 150 basis points about six weeks. you have to be careful if you are betting on the long end of the curve because you are largely betting on whether congress gets its act together or not, which could be tricky. vonnie: are you backing on the economy being able to withstand the four interest rate increases? jason: it depends on whether the fiscal stimulus gets through. if it does not get through, i don't think the economy could withstand fed tightening. i think the fed would scale back its plans. i think the four titans are assuming you will have fiscal stimulus on top of what is already a full employment economy. i don't think it could withstand it if the tax cut does not go through. vonnie: jason trennert, thank you for your time. let's get to turkey,
central-bank measures failing to bolster confidence. ra weakening against the dollar. our euro chief joins us -- are turkey euro chief joins us. what is the latest? clearly these moves in the thists have been driven by turkish armenian gold trade. what can you tell us? >> the trial is certainly the thing to watch. certainly things investors in turkey are watching. the trial will start next monday. the big question is the main character in this trial, a turkish iranian gold dealer, where is he? he has not participated since september and he was released from jail more than a week ago. his whereabouts are unknown. the speculation is building that he has turned witness for the u.s. government, which raises the question of who is the ultimate target of this case, is
it turkey's government, banking system? that is the big question going around. arisingnsions with nato , does this raise questions about the solidity of their reliance -- of their alliance? >> there was an incident on friday were a nato drill being held in norway apparently sunk a civilian contractor for nato in this drill. rgogan wasesident e taken as hostile. he ordered the turkish people withdraw from the operation and all of this is happening against the backdrop of questions about whether turkey really wants to be a part of nato, whether nato wants turkey there.
and increasing tensions with vladimir putin. vonnie: talk about the market reaction and how the central bank is reacting to that lira weaker now. the central banks have been holding the line. they've introduced some peripheral measures to boost the lira. they are not effective. this is happening as investors are saying the only real solution to this is a rate hike. erdogank, ergo on -- was saying rates were too high in the central bank is on the wrong path. thee are questions about central bank having the appetite or support to do this. vonnie: we will keep a close eye on that. coming right up, looking more insight. how the industry's undergoing a
♪ in new york, i'm vonnie quinn. mark: live in london i'm mark barton. this is bloomberg markets. let's turn to the metals market. nickelel, the largest producer in the world had its annual strategy day in london. announced plans to invest in projects to cut emissions. joining is now the deputy chairman.
for these projects to cut emissions, how important are they? of the are at the core new staging tragic -- strategy implementation. we would be willing to become more green and also help others to stay greener. emissions byutting at least 75%. the project would be implemented. to two ubermove on and volvo. matter big subject giving your exposure to nickel. you have got this corporation agreement on batteries this
year, how is that going to work? what are you investing in it? can you paint the picture for us? >> i'm not in the position to describe the initial agreement in full detail, but we are in the business of producing precursors that are used in the production of batteries. we are exploring the opportunity facility a production that would be supplying precursors. there are be stages before this. no one is in a hurry. view on hows your electric vehicles are going to continue to transform the metals market. onrey: i think it depends which side you are on.
producers, cobalt producers, it seems to me a good opportunity over a decade or two. the production of these electric vehicles will become massive. in terms of metal content for a , you would have to use more metal. mark: palladium is the other side of the story. if electric vehicles push out other cars from the market, how does that affect the whole palladium? andrey: it is not going to happen overnight. future, we seeable would have internal combustion thenes and that is why engines would be using palladium
to treat the exhaust gases. mark: palladium on a 17 year high. does it go for it -- has it got further to run? andrey: not really because there is a relative -- with platinum. it used to be like that 20 years ago but then there was a major destruction in the market. now palladium is coming back. we would be interested as a producer as well as the -- at the largest producer to provide price stability and supply stability. to the car industry and other customers. the cfo the net -- that suggested the dividend could be lower. given the prices have risen since then, could the dividend still be lowered? you have a high double-digit
dividend yield. you are also investing heavily. is that a rask -- risk? ♪ it is -- andrey: it is a balancing act. you have to look at the size of the dividend, you have to look at the net debt ratio. going forward, we would be to fine tune, because there is a formula that determines the size of our dividend with the market conditions. works so far. management would not be comfortable to go higher than 1.8 or two times.
we would be informing the shareholders about fat come -- about that. if the markets would be more supportive, then the prices would go up decisively and that would allow us to go lower. mark: great to chat to you. so much to talk about. thank you for coming in, andre bougrov. vonnie: fantastic interview. the man he was been dubbed the fixer in washington. jim messina, why he says president trump is tweeting his way to losses in 2018 and 2020. ♪
our next guest says president trump might between his way to losses in 2018 and 20 by alienating swing voters. this is according to jim messina. deputy white house chief of staff under president obama and was a campaign manager obama'sa plus 2012 -- 2012 reelection campaign. how likely is that the gop loses in 2018? who voted for obama and donald trump are the key. i spent my own time talking to these voters about what they want and what they are thinking about president trump. the only thing they care about, it is the economy. is what isic issue propping up the trump presidency. while these voters have a 20%
disapproval rating of the president, they still view his achievements and record on the economy positively. the way democrats need to talk about this is be very specific. the daily tweets, you saw this morning and all weekend, it is distracting him from doing what he should be doing, which is focusing on the economy. when they do that, he goes from plus five, to -21. president trump's daily tweets are killing them with the voters who elected them. vonnie: have you reverse engineered his strategy? is this part of the strategy or something distracting? jim: i think it is who he is. he hasn't changed, he knows exactly who he is. he has been doing the same play over and over. it reminds me of the new york giants offense. he has one play and that is going to the base and that is all he knows how to do. vonnie: i have to ask you about the story.c story is does that mean we get some kind of tax reform package for matter
what and will that resonate with his base given it will not do what the middle -- due for the middle class what he said on the campaign trail? jim: here is the problem. on one side, the republicans have to deliver for their base. they are saying you been in office for a year and haven't done anything. tax reform is the most important thing, get it done. i believe they will pass some tax cuts. on the other hand, these people have to go back to the district and defend this. tax reform, even before it is past, is only watt -- is wildly unpopular. the voters am talking about are even below that approval. they say wait a minute, you said we would get stuff out of this and we don't get anything out of this. 4/5 of the tax cuts go to the people we think are doing ok. this is a nightmare for republicans. mark: you also worked on theresa may's campaign in june to be
reelected. movingbrexit process along swiftly, du you think she will still be there leading it when the process concludes in march of 2019? jim: i do. the country has said get this job done. the party promised to get greg's it done, we will deliver that promise and negotiate a firm exit from the eu and the prime minister will do that and will get high marks for a clear vision of how she wants to get it done. these are tough negotiations. a lot of the prime minister's she is negotiating with are also my clients. i can tell you how difficult these will be. it is clear she has the mandate to get them done. mark: can you give us an insight into what they are thinking,
where they could meet in the middle? what sort of deal will we be looking at when this concludes? clearly we are dealing with northern island of those sort of things in the u.k., but what it will look like it a years time? jim: the devil is in the details. what i can tell you is there is real agreement on moving forward in making sure that we ensure the flow of economic goods across the eu and make sure we don't damage the economy of either the u.k. or eu, we are co-dependence on each other and i think you have united agreement and that. as you know better than i do, the devil is in the details. in many ways we are talking about politics rather than substance. it is politically hard for a lot of these to make a deal. vonnie: you couldn't get more opposite then obama and theresa
may on positions and you work on both. what questions you have about whether it still has a future in practice? the i think if you look at conservative party in the u.k., they are democrats in the united states. european politics is so far left of the united states. i went to work with david cameron after president obama dennis are looking at cameron's record and he's a mainstream democrat in the u.s. if you look, there is real consensus in the eu and u.s. on several things and that includes economic immigration and a whole bunch of issues that we are dealing with an brexit right now. there is agreement on how wildly unpopular donald trump is. across all the countries in the eu, trump's friend approval ratings are things i've never seen before. vonnie: steve bannon's new group , what impact will that have going forward? jim: it is great for democrats.
the more he can talk, the crazier these positions and candidates like roy moore in alabama, it is good for democrats. i don't think it is good for our country. mostly what you are seeing with bannon is a whole lot of talk and not much action. i'm looking to make sure donald trump is not the next president of the united states. vonnie: when you find a candidate who can beat him, you have to talk with us. mark: great stuff. coming up, the european close while following stocks. for only thesing second day in 10. the stoxx 600 up by three quarters of 1%. ♪
this is the european close on bloomberg markets. ♪ mark: here are the top stories we are covering. the eu gets tougher on the u.k. as brexit talks twist in the wind with no clear path forward. chief eu brexit negotiator suggesting that u.k. banks may lose their passporting rights once the divorce is final. markets still on the low side. dividend investing remains a top strategy for many investors. janice henderson has crunched the numbers. we will show you the countries shown the biggest growth. uber wants to hit the driverless road with volvo. striking a deal to buy 25,000 autos. have the deal will shape t