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tv   Bloomberg Markets European Close  Bloomberg  May 25, 2018 11:00am-12:00pm EDT

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on issues as wide-ranging as iran, climate change, korea, and all sorts of other issues surrounding opinions that went h the bloomberg and go read the stories and go back on tv to look at what the individual leaders said. they did not necessarily agree and also their mind. the french president took issue with the united states and said at one point that he did not agree that international treaties are reviewed by france, then france will take its stance. at ther putin took a jab u.s. and set every renews -- new administration reviews foreign policy which is not good for stability. a central banking panel that was on in sweden. editor moderated
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that panel. jay powell, carney, others. that was fascinating. storiesook at those because they have a lot to do with central banks and defend its and the power of populism and how it affects central banking decisions. for context, let's bring in marty schenker. in most powerful people economics, finance, global politics all on the program. mickelthwait.n mark: he asked -- vonnie: he asked pointed questions, he asked the vladimir putin how you deal with president trump? >> interesting to hear vladimir putin call john a particular. -- provocateur. he asked about the presidential election and vladimir putin said
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i had nothing to do with the u.s. election which got a big response from the crowd. the headline to me was trade. panel,sensus of the without naming donald trump by name, raising questions about his global trade policy. vonnie: real disagreements in france, for example, most people on the panel disagreed without a president is conducting himself. what was lacking was clear strategy on what to do about it. vonnie: there were other issues dividing them. iran came up. israel and palestine came up. on the issue, do not forget vladimir putin whose event this was, was interested in getting sanctions relaxed. when he starts criticizing the
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u.s. for sanctions as a trade tool, his alter emotive -- all teary her motive is to reduce sanctions put on him by some people on the panel. japan and france are both part of the sanctions regime against vladimir putin. there they are on a panel with him. ready ironic. -- pretty ironic. wasie: emmanuel macron angry about the impact on french companies. >> yes. this is a reflection of the global discord going on. a direct result of donald trump's america first policy on trade. it is causing a re-examination of all types of relationships globally. because it has been unpredictable and changing day today, it is hard to formulate policy. vonnie: korea, we had this
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over-and-back about the summit on june 12, off according to the u.s.. president trump through in a comment saying who knows? premier says a summit is needing. -- vice premier says a summit is needed. >> do think the u.s. alone can meet with the north koreans and get a deal done is problematic. as the vice from your said -- vice premier said, china has a direct and basic interest on what happens in the korean peninsula and for them do not be a full party to a discussion at the peace plan is problematic. it is pretty clear that the chinese are the ones who told the north koreans, hold on, that is when the rhetoric changed and led to the meeting being called off. vonnie: vladimir putin said when
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it comes to global security, worried about security dependent on the u.s., because we will step in, russia will take care of it. >> emmanuel macron declined the offer. it is true. most global experts believe that vladimir putin is playing a masterful game at sowing discord within the nato alliance. they would love nothing more than to see the european allies and the u.s. become estranged with global security and the mutual defense pact. he will play every card he can to try to make that happen. we have massive amounts of troops surrounding him and he would like to see them dissipate. vonnie: i want to ask you, we have four liters or vice leaders and the imf managing director.
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did you get a sense that these leaders know what is happening with the populist movement? and where the international political order is headed? >> no, and that is the point. when you gather these people together and ask them what does the future hold, this is a more unpredictable situation than there was five years ago. or three years ago. you can make an argument that this is what donald trump wants. he wanted to disrupt the normal order of things. lastlt the policies of the two decades or three decades has diminished the u.s., and he wants to change the relationships. , aree, world leaders trying to figure out where they sit in this global chaos that is happening. vonnie: at the same time, stephanie was in stockholm, sweden asking something similar
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to the central banking heads. she asked about populism, the threat to independence, all central banks of the likes of the populace movement around the world. we will leave it there. we will get back to world cup soccer. markets have been moving here and in europe. 20 minutes before the friday close in europe. mark barton is with me. what is going on? mark: england is going to win. there is your answer. gmm feared -- gmm is the function. dictatingdevelopments the mood of european markets. , italyut these indexes and spain are the focal point. spain down by 2% and italy down one point -- more than 1%.
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we could be heading for a confidence motion against the spanish prime minister against -- somebody said they would approve a motion or they want the party to -- they want the prime minister to hold a snap election. we may be moving to a situation where spain will have a confidence vote against the prime minister, following the corruption scandal, or a snap election. europe does not like political uncertainty and a drop in the italian ftse. spainop for the ibex in is the biggest since february and the ftse in italy is weak, the biggest weekly drop since 2016, down 5%. europe as a whole down for a third day, the worst run since march and the biggest weekly drop since march after eight consecutive weeks of gains. that was the best run since 2014. the euro is down against the
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dollar as are all of these currencies. the move in the italian two-year. spanish two-year yield is up i 10 basis points. by 10 basis points. political instability driving sentiment in europe today. .1%, a mirror of the initial estimate. consumer spending losing momentum with companies cutting investment after severe weather swept the country. ,ousehold spending rising .2% the weakest performance in three years. business investment dropping. snowstorms keeping shoppers at home and hitting construction projects. it is questionable whether it was whether the cause of weakness, on balance they said it was not tiered mark carney disagreed. it begged the question, when
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will the bank of england raise rates. the probability of an august hike seems to be decreasing. that was the biggest be sedated in the u.k. ofrling lower since december 2017 versus the dollar which is heading for the second weekly decline. fallen almost 7% since closing at 144 -- at its highest4, level since the day since the referendum. weaker sales data this week beat estimates with inflation coming down. 153, rbc capital markets the most dovish. you highlight the volatility in turkish markets this week. one week implied volatility at the highest level since the financial crisis. further volatility today despite further measures by the central
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stem what we-- have seen in the turkish lira. julie: a mixed picture in the u.s. with strength and large-cap technology is what is keeping the nasdaq above water and keeping the s&p from falling more. the big story is energy. as and five feet dutch s&p 500 energy, the worst single session going back to february because of oil prices. after the saudi energy minister said the country is agreeing with russia and other opec nations to start to gradually increase output in the second half of the year. oil prices over the past four days with the fourth straight session wti declining, around five -- the decline today alone is the worst going back to september. the decline coming on these comments and more and more signs that opec is pulling back from its production cut plan. look at the large-cap energy stocks that are declining.
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as a result of this with exxon mobil, chevron, conoco phillips, even companies that rely on natural gas for the revenue are calling. -- falling. even as natural gas is on the rise. this causing consternation among traders of this company -- these companies. that means that the s&p energy index has a lower waiting in the s&p 500. just over 6%. even on big down days like this, yes, a limiting influence on stocks overall in the s&p 500, but less than it used to when the index was at a time. -- high. as we have writing is in the oil market -- rocky times in the oil market. mark: coming up next on the european close, whether turkey can save the lira.
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this is bloomberg. ♪
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i ame: live from new york, vonnie quinn. mark: live from london, i am mark barton counting you down to the european close in 15 minutes. investors struggling to make sense of fluctuating trade talks between the u.s. and china and political strife from turkey to venezuela. joining us now is lupin rahman in pimco europe who joins us from london. thank you for joining us. , i show the lira implied volatility for the next week. highest level since the crisis
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and the worst week for the lira since the crisis 10 years ago today. we had more measures today allowing exports to repay dollar denominated loans in the local currency. it does not seem to have stopped the route in the currency. what can be done to re-engender confidence in turkish assets? >> the government needs to do quite a few things, being that confident. the start of the process was the central bank hiking, behind the curve previously and a reactive finally. going forward, we need to see more consistent policy from the government. have fiscal dynamics return more on consolidation side and reassure investors they will not confront the economy using the guarantee fund. allow the central bank to do its job, to control inflation. that how concerned are you
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president erdogan who has embarked on his campaign to be reelected next month, that he will try to influence the central bank? he stepped up the rhetoric and then step back from his rhetoric this week. are we clearer as to what control he wants to have over the central bank after the wins?on, if un's -- if he lupin: there is no doubt that the central bank of turkey is a political driven institution. especially given the abuse of her to one -- president erdogan appeared we can hope that corporate and retail buyers of dollars basically come to the states where rates are still high and they feel they can invest in lira. because therom that cost is not consistent.
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as we go, even after the election and after we get some rest like in the market -- respite in the market, the central banks will be much more politically motivated rather than focus on driving down inflation. vonnie: the movement of the last several days. cvs,go>, look at sovereign that is the change today. emerging markets, moving south brazil,ne of them, venezuela, separate completely. which of these countries look more attractive to you as head of em sovereign credit? lupin: any emerging-market sovereigns, we are looking for strong balance sheets and being able to withstand a time of stronger dollar in the global economy. flipside, looking for
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governments that are proactive in terms of their reform agenda. , theres of valuations has been some value created across the em sovereigns, the curve previous to this selloff was relatively flat and now increasingly seeing some direct -- different -- differentiation. now is not the time to go directly into long for the em sovereigns but be more cautious and on the sidelines to see if there is more a vague decisive action by countries within the em space. vonnie: how much more difficult or easy perhaps has your job become since this wave of changes to democracy around the world? populist parties getting in power in all sorts of countries. has your job changed much? lupin: it has changed quite a lot. it has gone back to the early stages of my career when i started off in emerging markets about 15 years ago.
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we have reversed it back to looking at e.m. fundamentals and em political dynamics. -- great financial crosses crisis time where the excess in liquidity for the yields meant there were indiscriminate em. emerging-market investors now have to really understand the external market and the global impact on individual em countries. and think about em more in terms of differentiated asset class rather than normalized. vonnie: lupin rahman, head of emerging markets at pimco europe. thank you for joining us. europe,p, turmoil in spain prime minister trying to play out his term even as rivals plan his ouster. this is bloomberg. ♪
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vonnie: live from new york, i am vonnie quinn. mark: live from london, i am mark barton with the european close seven or so minutes away. vonnie: a special we didn't, these are -- a special weekend, this is an apple is, maryland where president trump is taking -- annapolis, maryland, where president trump is taking part in the naval academy graduation. monday, they remember all of those fallen in service. that whileports president trump has reached a tentative deal with china on zte. the president earlier set a summit with kim jong-un what still -- could still take place on june 12. joined by kevin cirilli live at the white house. getting vertigo or something from this korea summit.
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the koreans expressed their disappointment and the president said it could happen. the logistics are not as easy as that. kevin: the president saying the singapore summit may be back on. he had this to say. president trump: we will see what happens, it could be the 12th, we are talking to them and they want to do it and we would like to do it. kevin: the north koreans released a statement following the president's decision to withdraw from the summit and the president liked what they had to say seemingly. the president tweeted that he found the statement to be somewhat of a positive message. he said good news and to -- to receive the statement. prosperityor long and peace.
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only time will tell. they said the president did not have a coherent political strategy. republicans are praising the decision and saying that he is now focused on achieving a long-term denuclearization deal as opposed to something in the short-term. vonnie: whose court is the ball in? south korea, north korea, china? kevin: everyone would say china has a crucial role to play. the south koreans were caught offguard by the announcement by the president yesterday. ultimately, my sources say north korea will have to decide whether or not they will commit to a long-term denuclearization. republicans and immigrants would agree that any type of conversation with the north koreans should be greeted with caution, optimism, as the talks continue. mark: thank you kevin cirilli. our chief washington correspondent.
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look at european equities 4:15 away from the friday session. gains in london and in frankfurt. for the week, stoxx 600 is down, significant because it is the first weekly decline in nine after the best winning streak since 2014. we have political instability not only in italy but in spain. that is sending yields up in both of those countries and stocks down in both of those countries. core bonds are rising and core stock market is rising as well. this is bloomberg. ♪
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i am mark london, barton. stocks finishing marginally higher, a choppy session with the attention on italy and spain. does mariano rajoy face a
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no-confidence vote or could there be a snap election? questions, that is hurting the spanish stock markets and the italian stock markets falling. stocks holding onto gains for the day, rising for the first day in three but falling for the first week in nine after the best run since 2014. ftse with its worst week since 2016. been data out of germany, business confidence halting a five months slide with a temporary slowdown in europe's biggest economy at the start of the year. business climate sentiment holding in may. little change in expectations. , the economyurvey is stabilizing after exports
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fell the most in five years and a range of indicators, signals lagging growth. this is the euro, continuing its drop against the dollar with the lowest level since november of 2017 and on track for six weekly drop, the were stretch since 2015, falling 6.5% since closing at $1.25 on february 1. ubs wealth management says an improving economy in europe with u.s. deficits will see the euro strength in against the dollar over the next year, forecasting 1.25 21.30 on a 12 month basis. see the euro at one dollar and 26 21st quarter of next year. italy andback to highlight what is going on. the intraday yield, up 55 basis
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points at 2.45%, the highest since october 2014. italy gainingn for the fourth consecutive week, the longest run since october of last year. at the height of the sovereign debt crisis, yield at 7.26%. ahead of the french election, we were at 2.4%, around those levels. interesting be spread rising above 200 basis points. it says it could move to 300 basis points if fresh elections are called, a level not seen since 2013. hingempany says that will upon the election of a finance minister in the coming days. what a few days it has been for european politics.
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vonnie: and u.s. politics, policy, not foreign easy for investors to digest. things are changing dramatically. the dollar has picked up momentum. and strongly4 above 94, helping push yields down with the big reversal for the last three days. 17, 18 basis point move on the tenure yield. -- 10 year yield. about $60. -- above $68. i wanted to point to gold, the beneficiary of risk off traits this week. .90.unce of gold at 1303 movers.ok at gmm, g20
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pointblowing out 18 basis for the two-year yield. went from -30 basis points to plus 42 in the last few days. currencies we have been talking about, canadian dollar under pressure because of oil moves. commodities complex in entirety. mark: the spanish prime minister mariano rajoy says he will complete his term after the opposition party called for a no-confidence vote. joining us from madrid is maria. he is stoic and tried to remain strong in the face of the political headwinds. is it out of his hands? >> it is feared he did state -- it is. he stayed -- said he would stay until 2020, he did not mince in the election, he knows he could
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have the worst results with an election. there is a sense in madrid he is not in control. a week prime minister. mariano rajoy not just, but a growing sense -- not just since that it is just mariano rajoy, but the entire party. mariano rajoy denies wrongdoing. pb, itse that for the may be the end of the journey. mark: take us through the calendar. what happens next week given the opposition wants a no-confidence motion? can they unite? what is the process over the next week? >> it is complicated. options, some say we want a vote of no-confidence to get rid of mariano rajoy. create a new government with new elections. the liberals have -- who have
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rocketed in polls. they said, we do not want a confidence vote but elections. we want mariano rajoy to call them now and if he does not, we may say a vote of no confidence is needed. monday, we will get a sense of what they want to do. they had always provided backup for mariano rajoy and today there was a breakout point when a call for new elections. vonnie: they need to decide on the next leader before they can get rid of rajoy. >> in spain, if you want to get rid of a prime minister, you have to put in a candidate, why the socialist party wanted to do this quickly, they were concerned that maybe someone may do it first. the socialists would have to convince the party leading to
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let their candidate when. -- win. something that would be hard to stomach. the best thing would be to go to new elections. vonnie: how much is what is happening in italy affecting spain? >> you see of risk in spain. it has been contained. what sparked the big moves in the bond market was the idea that analysts for the first time was signaling a make or break part. investors,oreign they have been used of the idea that while mariano rajoy have a formal coalition, he has an agreement. mark: a busy weekend for you coming up. thank you. let's move on. eu sticking to its official
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talking points over brexit, the u.k. in disarray and suggesting fantasy solutions for the divorce. three days of talks are over in brussels with little to show for them. the block marking the u.k. on his plan for the irish border and post-brexit arrangement. british officials -- the eu government says -- a great piece. does the eu want to get close to the u.k., or does it want to punish the u.k. as much as possible? >> punish may be putting it too strongly but it wants to prove eu, if you are not in the you are out and does not want the u.k. to have the same sort of relationship as the 27 other eu countries have between them. that was the thrust of the argument.
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reporters in brussels yesterday and they had a briefing with the senior eu official and he talked about fantasy ideas the u.k. had appeared the eu wants to get the message across that the u.k. cannot be the same and there are consequences of brexit. consequences of leaving the european union. positions --u.k. we kind of want to be out of the eu but we want everything to be the same but the eu says that is not possible. mark: they synonymous eu officials, -- i'm anonymous eu officials, are they acting on the process -- be has been junk car longer and others -- john car longe an >> the people in brussels working on behalf of the 27 other governments negotiating in
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brussels. it is an interesting question. there is tension. between the 27 capitals and these negotiators in brussels. they strike a hard line in brussels. they need to represent the eu. the capitals around the rest of europe may not necessarily have a hard line. they have different interests and would like the u.k. to stay close to the eu. at the moment, the message from the europeant is commission, the hartline. -- hartline. as we get close closer to the deadline, you may start to see some loosening as other capital say, hang on, we would like the u.k. to take part in these projects. vonnie: it will be interesting. today that say 20 or
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more pro-european conservatives are potentially considering rebelling against theresa may. that is a phenomenal block which may grow. what is the worry? >> that is right. that is what i was trying to get across today in my piece. the eu does see these disagreements in london and in the u.k. and realizes that, even in the government, between the conservatives and the oppositions, incomplete this agreements over the way brexit should go. one extreme, it should not happen to the other extreme, we should leave now and not wave goodbye. the european commission is taking advantage of those disagreements and trying to say, we will not -- get a common position and we can start talking properly. mark: thank you very much. playbooke its brexit
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sensing u.k. in disarray is a wonderful piece written by ian. vonnie: time for the first word news with courtney donohoe. >> president trump is pivoting on his summit with north korea, he said today he could still meet kim jong-un as originally scheduled on june 12. the president says u.s. officials have resumed talks with north korea after what he calls its nice statement. north korea responded to the cancellation by saying that it would still be open to a meeting . allies are likely to boost oil supplies in the second half of the year coming from the saudi energy minister who met with his russian counterpart at the economic conference. production cutbacks have driven oil prices to 3.5 year highs. harveyed movie mogul weinstein has surrendered to police in new york. arrange on charges of rape and sex abuse and was freed on $1
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million bail. the first criminal charges filed against him after months of allegations of sexual assault. he claims ruined his career and spot a global me to movement. global news 24 hours a day, on air and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney donohoe. this is bloomberg. vonnie: thank you. let's check on oil markets. at $67.91. down 4% with brent following but not as quickly. some of it is a product of the stronger dollar with the dollar index at 94.17. major indexes, dow and s&p down each. 1%daq is higher by 3/10 of on a potential deal. this is bloomberg. ♪
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vonnie: time for global battle of the charts. battle forall u.s. memorial day weekend. kevin kelly kicks things off. a lot of discussion about what would propel the stock market higher. relying more on earnings growth rather than valuation multiples. the tech sector and you could find growth in the market. the top panel is the price earnings ratio for the s&p tech sector over the broader market. during the cycle, it has remained benign compared to the dollar index. a big reason is because earnings
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have kept pace with prices, different than the last time you saw heading into bubble with spikes and dilation and price. it grows and outperforms the broader market. find out at gene keady go. -- g tv . we had i wanted to -- >> the headline a few hours ago that the italy and german ten-year spreads have widened out, the widest since 2014. we have come back a little bit and now down 205 basis points. april of 2017 to see these spreads this wide. what is 200 basis points mean? we can wait tos see this go up 300 basis points. come back to 2013 to see that. on the flipside, some people long. aberdeen said 200 basis points
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is the first sticker price where we start to get interested in italy. 300 are the benchmarks i am looking at. vonnie: taylor riggs, wonderful chart. on the money. very relevant. badn kelly has had a pretty run of things. battle winner will be kevin kelly. mark: i was there. kevin had it and taylor bowled me over with my regional bias. how thelking about spread could go up to 300 basis points. i am going for taylor which means it goes to the gallery and taylor is the winner.
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i am sorry. well done, taylor. this is bloomberg. ♪
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vonnie: live from new york, i am vonnie quinn. mark: i am mark barton in london and this is the european close on bloomberg markets. vonnie: time for the stock of the hour, the gap, worst in the s&p 500. down 14%. foot locker is up 14%. abigail doolittle here to tell us why. ga,p ontores in retail pace for the worst day since 2016 after they put up a disappointing quarter. the turnaround has been lumpy. two quarters before that were positive and last quarter they were down. the overall cop was up 1% versus
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the estimate of 1.5%. disappointing for investors is the fact the weakness at the flagship store the gap where they are blaming excess inventory for weakness. -- comp they arethat perhaps not supporting the sales they need to see. not everybody surprised. if we look at this chart. in white are the shares of gap and short interest inif we look. blue rising. disappointing quarters at around 12%. there are some bears. this will likely continue. mark: were there any bright spots? >> they maintain full-year guidance, considered a positive that on the other hand, maybe they do not need it. co navy was strong, in line
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mp. other countries -- company strong online but the flagship brand is needed to get back in line to have the turnaround recovery investors are looking for. vonnie: great stock of the hour. let's get a check on the oil markets. wti on the decline. is it the dollar move or something else? $60 per barrel. -- $68 per barrel. tina joins us. a stronger dollar with geopolitical uncertainty. something else happening behind the scenes pushing the price down? >> you not only need to look at opec, the saudi's came out at the st. petersburg economic forum and said clearly that there will be a supply increase in the second half of the year, depressing brent and wti prices. opec this is a flip-flop,
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met and would carry on the policy. is this pressure from u.s. president? >> the opec secretary-general was blunt and said they are they sawg to the tweak from president trump in april when he said opec was at it again and he called prices artificially high. he told us today that when they saw that, they knew they had to respond. there has also been loud opposition that we have seen from democrats on the hill. a pressk, they held conference at a gas station to complain about higher gas prices into the summer driving season here -- season. vonnie: $67.80 and change and brent is down as well. a massive spread. what happens to the spread and how far can we fall before we pick up a little bit? >> the spread has widened today. there is a perceived glut in the
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market but not huge. the u.s. market is more gluttier. oil trade for a lower price. thatre seeing a response they do not want to destroy demand. what we have seen before is the saudi's like the $80 oil price but do not want to see it by been in the form of this man -- demand destruction in alternative supplies for energy. vonnie: how much will it be influenced in that we are going to the holiday weekend, the summer, and the friday? >> across all markets, a lighter trading volume today. the first named storm in the gulf of mexico today. that, unfortunately for people who want higher -- higher oil prices, it will skirt the area and just have rein in the southeast.
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people wanting relief will not find it this week. vonnie: thanks to tina davis with the lowdown on oil markets. take us to the u.s. and european markets. happy memorial day weekend to you. mark: happy memorial day. .5%, we managed in europe to finish the session higher not the week higher. it constituted the end of a winning run lasting eight weeks. the longest and best winning run since 2014. political stories dominating the day. ♪
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shery: noon in washington and midnight in hong kong. from new york, i am shery ahn:. david: i am david westin and welcome to bloomberg markets: balance of power. shery: here are the top stories we are watching.
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what a difference when he four hours makes in the donald trump white house, after saying the summit with north korea was not happening, it could be back on. on the originally scheduled date. .e have on kevin rudd how damaging could the auto tariff be on the economy? we will talk with eswar prasad of cornell university. vladimir putin states do our editor in chief as he hosts his major summit in st. petersburg. what did he say about the relationship with president trump? halfway into the trading day and looking bit mixed. let's look at the markets with julie hyman. clearly: there's


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