Skip to main content

tv   Bloomberg Markets European Close  Bloomberg  November 6, 2018 11:00am-12:00pm EST

11:00 am
this is european markets. here are the top stories we are covering from the bloomberg and alarmed the world. -- around the world. markets await the midterm, investors cautious as americans head to the polls. pushesup, dominic roth the pound higher but time is running out for a november brexit deal. the u.k. cabinet met today and maybe again this week. friedman steps down. --ostile takeover we are counting you down after the u.s. bid terms. today markets dominated i have budget factors. italy is certainly part of the story as well. the pound is trading higher today.
11:01 am
sterling going down the pound going higher. the ftse 100 want lower. -- went lower. continuing decline in crude, certainly something that is worth paying attention to. for the breakeven rates we are protecting -- then we come to what probably is one of the big stocks out of europe today and that is game holding -- gam holding. losing its ceo. some would say that is inevitable. what happens next? does this open the door for a hostile takeover? that is how europe is trading. let's find out what is happening stateside. hit with the details is abigail doolittle. look at the dow, s&p 500 and nasdaq, modest gains for each. tech nasdaq up 1%, dow and s&p
11:02 am
500 second update in a row. and bit of a reversal for the nasdaq which has been down. as for the dollar, some volatility overnight against the euro. right now about flat. today relative calm. where we have not had calm is when we come into this election day. let's take a look at the chart of s&p 500. back in october the worst months since september of 2011. lots of uncertainty around midterm elections, the fed raising rates and as for lowest s&p 500 has recently been in correction territory down about 10%, more than 10% over this time period. it will be interesting to see after the midterm elections what is next. as for the volatility, this volatility we are looking at is not just elections. it has to do with estimates. let's look at some great information we have. this is the s&p 500. earnings for 2019 over the last
11:03 am
four weeks they have come in happy percent. -- half a percent. in consumer discretionary had modest increases but for the rest of the sectors we see estimates have come in for next year and we see that the industrial space is down 1.6%. that could suggest that could suggest the trade war is taking a hit against u.s. earnings for 2019. we do have a slew of health care earnings. dickinson comeon all these companies beat modestly but the outlook not what investors were hoping for. take a look at abc, down 9.2%. view or the full-year it missed etf estimates. we see the shares getting punished by investors. mood taking hold of global markets as investors await the outcome of the u.s. midterm elections.
11:04 am
is juliette dec lerq. these midterms produce trade opportunities? >> i think markets are currently priced on the 80% chance that democrats take the house. trying to be a little more cautious on that generally morality is not trending up in the world and democrats have been campaigning on the moral ground. there is a risk with the world being loud -- i could end up voting with them -- i think that is going to be the interesting take away from today. >> there is this consensus around the idea that we end up with a split congress, the house ends up going with the democrats and the markets seem priced around that. my question is, what is the
11:05 am
trump mission mechanism out of this into the market story? is it that the market looks at this and are is a domestic story? or is it the trade narrative that provides that vector for the markets to latch onto and say, if we do get a red sweep and end up with both houses remaining in republican hands that is a trade story rather than anything else. >> definitely. there is a domestic story and on their i think it is the democrats. if we end up in gridlock i think it is going to be a bit of an economic disappointment in the short-term. action hasislative already happened. i don't think it would be a huge disappointment. there might be a disappointment in terms of trying to extend the tax cuts beyond the end of next year. even if that would actually be
11:06 am
-- which is quite unlikely. i don't think it will be a game changer on the domestic side. on the international side i think we might have a president that would be a strength. with china would be a mistake for the president of the u.s.. i don't agree with him on many things. vonnie: let me ask you about the specifics with the midterms. we are of italy going to see an effect on the u.s. economy. h -- will the fomc be
11:07 am
ignoring the results and plumbing its own course as it happens? >> i think we have an interesting story with the fomc. powell is accused of smoothing the boom trump has created. that is a positive for trump as a whole, the big downside of the boom is that it is often ended up in a bus. the chance is that the bust would happen after 2020 which is a big election year for the u.s.. unhappy trump is really about powell trying to smooth his beautiful boom. it would be like ignoring what a likely to happen with boston 2020 to go against powell at this point. you recommend
11:08 am
smart money placed the end of the year in the u.s. let's they in fixed-income? >> fixed income i still think we will see real rates continuing higher. that is really been the big call. the one thing i have been thinking all year is that because of the fed determination to cool down the u.s. economy, equity of seeing -- multiple if we see at the end of each cycle we will see a real .ate melt up i would continue to recommend selling spikes in equities and continue to look for real yield higher. that will be a problem still for emerging markets. specifically with trump calling a truce of the president of china on the 29th of november. guy: there is an argument going
11:09 am
around that says breakevens are coming down. there is no inflation in the u.s. system despite what we saw with wage data. as a result of which if you look at breakevens you should believe the fed has over tightened already and should start to slow down next year. if i take a look at the two-year 2.3% i have inflation at which is where you would expect it to be. where do you fit in this debate? is the fed in front of the curtain or behind the car or where it wants to be in terms of the trajectory? i have been looking for breakevens lower all year. >> isn't that just the oil trade? >> if we saw a big spike in oil you would see the breakeven curve flattened down. you would get a boom in the short-term.
11:10 am
i am still recommending stocks at the reason real yields are going up. and breakevens going down. main --one of the -- i haveconcerned written numerous times about that. central banks are not targeting inflation anymore, they are targeting financial stability. that is what would extend the cycle in the u.s.. whether trump likes it or not it is time for normalization. that is a move we are seeing everywhere. that is a move we are seeing in the u.s., japan, even in the eu where arguably you i gold is more worrying than in the u.s.. something we have never seen
11:11 am
happened before is that we spent buying someically , frontfuture growth running some of the future growth and right now is the time for payback. i think that is really the move. >> right now it is time for payback. that is an interesting line. thank you for coming to see us. it --r of jd i researcher jd i research. we have election coverage coming up tonight as it unfolds. it starts at 7:00 new york time. that is midnight in london. plenty of people i suspect will be staying up. vonnie: you have no idea. i am sure it is going through the same as the super bowl or any of these events that have us up all night. sometimes we even stay up for the cricket. it's get the first word news. >> the prime minister of
11:12 am
singapore says the u.s. and china should not let a trade fight poison their whole relationship. spoke at the bloomberg new economy for in singapore and said global trade issues need to be addressed or it could turn into a broader conflict. the ceo of exxon mobil also spoke about trade at the bloomberg new economy forum. he is not a fan of tariffs and other trade barriers. >> our business depends on free trade. we are a big believer that economies are best served by having open free and fair trade. puttime you start to restrictions on our business. >> the main accused of sending pipe bomb's to critics of president trump is due in court in new york today. askecutors say they will for him to be held without bail because he is considered dangerous. he is accused of sending improvised explosive device is to numerous democrats, trump critics and media outlets.
11:13 am
a day onws 24 hours air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. vonnie: coming up, talks u.k. over athe brexit deal. this is bloomberg. ♪
11:14 am
11:15 am
vonnie: from new york i am vonnie quinn. guy: in london i am guy johnson. this is the european close. let's talk about what is happening with brexit. the u.k. and the european union continue to age towards a brexit deal. theresa may is said to be considering another cabinet meeting this week, we had one today.
11:16 am
peter mandelson, a former minister in the blair and brown cabinet and a former european trade commissioner said at the bloomberg new economy foreign that he sees britain only having loose ties with the eu after the divorce. i think it is almost certain we are going to end up with some form of hard brexit. if we are going to really manage to this in the interest both of our own economy, investors, businesses, millions of employees that we have, then what you would be doing is leaving the european union but staying close to it. -- discusstake us the state of play with emma ross thomas. up, he said, thumbs thumbs up. what does that mean? the market slightly overreacted to his thumbs-up. what has come out since as that
11:17 am
the cabinet did not agree on anything. there was a lot of discussion about the irish border. just of sort of pull back a bit. we have been saying talks have installed on irish border for months. what is true is that there has been some progress. the eu has accepted a u.k. proposal on making the irish backstopped work. they have said with a conditions. even deeper than we have a sort of crawl attacks to the backstop clause. what we are fighting over is whether the irish backstopped is guaranteed which is meant to make sure there will be no border in ireland, the brexiteers are worried that find the whole u.k. in the eu orbit for ever. what they are discussing now and what the fight is now is not so much about the irish border but about whether that guarantee will determine the future of the whole u.k.. we are talking about legal
11:18 am
language and whether the u.k. will eject itself unilaterally, probably not from that guarantee. theresa may has promise if there is a backstop there will be an end state. -- end date. >> they have made very clear that there cannot be an end date. the whole point of the guaranty is there is no point having uninsurance policy if it is not open-ended. but we are talking about now is some kind of mechanism that the u.k. government could sell to brexit voters and brexit members of parliament to say it is not open-ended, it is not indefinite. where we are now is kind of how to formulate that. is thatresting thing the eu and ireland have said we can accept come kind of -- some kind of exit clause. it seems quite unlikely that they would.
11:19 am
it is a question of whether that would be something that has to be debated mutually or it can be unilateral. the eu is clear that the u.k. can't have anything unilateral. we are stuck on the irish border but it just got a little bit more complicated. guy: amaq, thank you very much. -- emma, thank you very much. let's talk about how the markets are tracking all of this. let's ring interesting to talk about that. -- let's bring in the christine to talk about that. the sense is that we are inching towards a brexit deal. the pound continues to track higher. the market is looking purely at the probability of a deal getting done, to what extent is it then pricing in what comes next which is a parliamentary vote or is the market simply, we will deal with the parliamentary
11:20 am
vote when we deal with it at the moment we will be optimistic on the pound because we think a deal is in the future. >> i think that is what is going on. it is hard for sterling traders look past the next couple of months. his they can hold onto concrete dates and concrete developments and any sign of concrete progress. this is in the context of a broader dynamic of the short position still prevailing in sterling. there is this asymmetric risk and willingness among traders to reward the past even with any sign of positivity during the brexit developments however small or inconsequential it is ultimately. because of that positioning theseop we are seeing kind of reactive rallies on the back of any sign that it is. there is so much asymmetry at the moment. anything on that front that sounds good, sterling traders will be happy. >> other news we got is that
11:21 am
there is going to be a no-confidence or a company's in italy of the leadership. being proposed by the populist government. the market sort of did not react. back down to flatten out, it was lower earlier. what does this mean for the markets? by the markets going to be passed italy for the moment until we get to a meteor debate -- meatier debate on spending and policy? >> like the brexit story there is a lot of fatigue when it comes to markets and taking into account what is happening in italy. we seem to be getting headlines from the italian government every day regarding their position on the budget. and their broader thoughts about the eu. it is a bit of an overexposure if you will for traders at the moment. it is easy for them to step back
11:22 am
and take stock of what is actually a game changer here and what is just noise. we do have this big event risk with the u.s. election coming up. is easier for investors to stay on the sidelines at the moment and take stock of their positions and make a move after we get more clarity on the u.s. side of things as well as in italy. at the new economy forum taking place in singapore we solve that chinese vice president talking about the fact that china won't be pushed around when it comes to the trade story but it is willing to talk. you talk about the midterms, is the trade story actually where investors are focusing their attention when it comes to the midterms? that seems like an obvious potential shift we could see for instance if the republicans were to hang on for both houses -- hang onto both houses. trade is the endgame for most investors.
11:23 am
we thought we are going to get more good news and cordial tone between china. i would expect that what is going to happen to trade in the aftermath of the midterms will be a big driver. indeed.nk you very much this is bloomberg. ♪
11:24 am
11:25 am
guy: live from london i am guy johnson. vonnie: this is the european close on bloomberg markets. it is time for the latest bloomberg business flash. disney shares are higher. the company will -- the move is part of a plan to win the eu approval to buy fox assets. some news in the last few minutes, a private equity firm has approached s
11:26 am
ymantec about and i position. this was the group that bought some assets from broadcom when it was divesting. a group of sears creditors once a court to investigate transactions involved in the retail's biggest shareholder billion or any ledford. ledford --ire any that is the bloomberg business flash. guy: we have three or four minutes to go until europe shuts up shop area as we approach the midterms it has been a very cautious session. are taking chips off the table.
11:27 am
11:28 am
11:29 am
>> 30 seconds to go until europe closes for the day. grayu can see, a lot of
11:30 am
out there today. italy in the gray. germany in the gray. these markets are not drifting far from the flat line. you can see brighter red. we have seen sterling have a much more positive session. let me show you some actual numbers towards the close. by 0.8%.own sterling is a factor. sterling goes up, ftse goes down. that have to do with the translation effect. we saw some reasonable data out of germany. the dax has been very flat. negative session being delivered. let me show you what has been happening in terms of the individual names. we focused on this asset manager that has lost its ceo. that opens the door to a takeover.
11:31 am
that is not what we have seen in the share price today. if you thought a takeover was more likely, share price would go up. share price is down. italy's biggest banks out with numbers today. they beat on all of the major key metrics. the markets like to that. politics remains a significant factor around the time banks. this is the wind turbine business. we will be talking about this tomorrow morning european time. positive reaction from the market, up 14.2%. interesting story around the midterms. this could be a key player in that story. back to this cautious market trading story. this is the average volume of time throughout the session in europe. the-by-hour, you can see blue line is the average. the white lines are where we have traded today.
11:32 am
we have been below the average. another cautious session. the volume telling us that, the market waiting on resolution to key factors. midterms front and center, but don't ignore brexit or the italian story. vonnie: many in the u.s. are cooling their heels, waiting before they make their decisions, placing their bets if you like. up a quarter of a percent. the news we just broke moments ago that there has been an offer from a private equity firm and up.n is quite subdued,ot but definitely not as high as it was in the last few days. equally, the dollar index is playing the waiting game. not only do we have the midterms today with results tomorrow, but
11:33 am
we have the fomc thursday, not likely to learn anything new. there is always that chance. the 10-year yield, interesting to see how that moves before the short part of the yield curve. let's have a look at gnm. you can see russia's myfex is having a good day. turkey not so much. by 1.7%.sh lira weaker the brazilian rial today. absolutely. let's carry on some of those themes and talk about what the market is focusing on now. john roe, the head of multi-asset funds joining us now. good afternoon. 2016in the market remember
11:34 am
and how they got burned as a result. they are going into the midterms much more flat. is 2016 a useful model? john: i think the importance of not relying on the carry trade is a big takeaway. that is what happened last time. expected a hillary win -- people expected a hillary win and piled on the back of it. this time around, i think the flatness reflects these very different outcomes. if you get the republican clean sweep, you can expect higher rates, strong dollar, strong u.s. equity performance with continued stimulus passing through the various chambers. if you get the democratic suite, lower rates, the end of stiffness, no more spending binges for donald trump. markets are a bit nervy going into it. it is probably a 20% or 30% chance one of those will happen. in the base case, you kind of muddle through.
11:35 am
guy: how does this fit into the universe of risk we are seeing at the moment? i am wondering how significant the midterms are for markets or whether the fed coming up later this week is an event we should be paying attention to, or italy being a risk systemically at the moment, or if we should pay more attention to brexit. give us a 20,000 feet view of what is going on. john: the problem is we're going to roll a dice. there is a one in three chance you get a surprising outcome, and everything changes. once we get through that, we can go back to the market theme. if you look at the fed, the biggest risk is as they talk about the end of shrinking their balance sheet. that cannot go on forever. that causes people to refocus on future rate hikes. the reaction to italy is not that surprising. the problem at the moment is populist parties from both ends of the spectrum that want lower
11:36 am
taxes and higher spending. were actually in charge, you would only have one end of the spectrum. if you end up with another italian election, you could end up with less physical tension from their perspective. brexit is a big deal for us, but for a lot of other investors it is much more on the periphery unless we get a really hard exit. it will be back to trade in those kinds of areas after the midterms. we were talking about the worry of clearinghouse yesterday. i want to bring in this news. europe's biggest repo market moving to amsterdam because of brexit. to eliminateants the risk of clients losing access. that is what is guiding this move. it is the biggest repo market in europe moving to amsterdam on brexit.
11:37 am
another warning sign, right? on,: the longer this goes and the longer we have uncertainty, the more companies will be forced into making decisions about the contingencies. a number of people we are talking about is not that big. originally, when century clearing was identified for a lot of derivatives, the euro keen.ies were we said you cannot do that because that would be discriminating against us, that once we leave the european union, they have that right. these kinds of moves were expected regardless of which shade of brexit we get. at the outset, a lot of things like swaps that the euro countries were in favor of, we had to stop them. right, there is that risk around jobs. the numbers we're talking about is relatively small.
11:38 am
vonnie: not just jobs, but does the u.k. retain its status as the financial capital of europe once brexit is finished? john: some activities will inevitably move. you will get more european subsidiaries set up of u.k. businesses. in terms of total impact, there is a whole infrastructure here. lawlegal side, british well-respected, strong property rights. those areas really dictate at the center as well as the neutrality of the language. additionalill see jobs and places like frankfurt, toan, paris, but we are intertwined in the banking system. i would not expect to see a big change. we have certain competitive advantages, including scale that don't go away overnight. guy: i remember when the contracts left germany
11:39 am
overnight. that certainly change things. give us the scale of what we're talking about. this is a $240 billion a month market. this is happening because nex is being taken over by the cme business. this is part and parcel of that business. beforecision was taken cme took over. this is a large financial market leaving london because of brexit. when you take a step back and look at what is happening more inbably in europe -- broadly europe, do you think that financial services publications of brexit are fully understood? this is a market that is leaving for the continent. there are continental banks that forvoicing their concern
11:40 am
lack of access into the clearing business. understand hows difficult this would be for the financial services segment? john: that has been a lot of discussion with the financial services segment understand the size of the move. impact was much larger immediately after the vote, but we actually whittled it down. it is much smaller than the original concerns. i would say uncertainty -- guy: i'm just try to understand the financial plumbing. we are -- i remember financial plumbing broke down in the 2008 crisis. london was at the center of that story. can we put it on that kind of scale? john: no. that kind of scale was about absolute fear of the sovereignty of banks, which does not change with brexit. that is a massive distortion. it was large u.s. subsidiaries of u.k. banks that had a crisis. guy: we will leave it there.
11:41 am
thank you very much for joining us. let's get a first word news update. across america, voters are determining what the next congress will look like. in thee casting ballots midterm elections that are widely seen as a referendum on president trump. the democrats are likely to regain control of the house, while republicans will likely hold the senate. arrested, police have six people in an investigation into a planned attack on emmanuel macron. the person familiar with the matter tells bloomberg the plot was imprecise and not well-defined at this stage. ran's foreign minister says new american sanctions are "an indiscriminate assault" on his country. sanctions,ome of the
11:42 am
describing them as a desperate psychological ploy. says the trade were between u.s. and china in singapore. huge andna is a important market for us. tariffs of our overall eligible revenue, it is about 2.4%. we take things to and from china from a lot of different places, europe, southeast asia, australia. >> as opposed to losing the 2.4%, you will make it up somewhere else? fred: hopefully. caroline: -- global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. guy: thank you. at the top of the hour, live on
11:43 am
your bloomberg and live on london dab, digital radio. if you are driving home, tune into jon ferro and i. we will be talking about brexit and the trade narrative. this is bloomberg. ♪
11:44 am
11:45 am
vonnie: it is that time of the day again, time for our global battle of the charts. you can see all of these charts on the bloomberg. kicking things off today, it is -- >> thank you. as we have been talking about,
11:46 am
today is the u.s. midterm elections. want to take us through a quick history lesson of volatility heading into the elections. in white, we have the 2016 presidential election. this vertical line shows us election day. we see volatility following immediately after. here we are in blue, volatility at about 20. what is going to happen after the elections is the big question. investors are watching. carl riccadonna says we could see a break with tradition and if vic going higher democrats take the senate because that could raise questions about impeachment. you can find this chart on the terminal at gtv . vonnie: well done. what do you have for us guy? guy: jenna brings up the question of the fed.
11:47 am
is the fed tightening too much? take a look at breakevens. they may suggest the fed is over tight at the moment. if you take a look at two-year swaps, is suggests the fed is where they want to be at the moment. credit suisse brings up the next one i am going to show you. in the blue line, the u.s. 10-year treasury note yield, which has been inching higher north of about 3%. the other one is the bank utility index ratio. from higherenefit rates, utilities will not. that tells us how the market is pricing that spread. normally these two are in lockstep, not usually diverging too much. higher rates favor that ratio. we have divergence at the moment. what that may suggest is that the market in terms of the way it is pricing stocks at the moment is fearing the fact that
11:48 am
the fed is over tightening at the moment, and that is reflecting in these ratios. if you take a look at breakevens, you see that in the market as well in advance of thursday. just one of those other key metrics. credit suisse signaling that there is concern in the markets right now. there is concern about how hawkish the fed will be when they meet on thursday. you can find this chart on gtv . vonnie: great chart. fabulously in time for thursday. i think on balance, jeni gets it today because her chart deals with the action, and we are all at the polls today. this is bloomberg. ♪
11:49 am
11:50 am
guy: live from london, i am guy
11:51 am
johnson. vonnie: and i am vonnie quinn. this is the european close on "bloomberg markets." u.s. china trade tensions are taking a central focus. china's vice president says beijing is ready for a trade solution with the u.s. with one major condition. both china and the u.s. would like to see greater economic corporation. -- cooperation. china is ready to work toward a solution on trade that is mutually acceptable for both sides. joined live by bloomberg's sean. what you make -- do you make of these comments? he basically said we are for globalization. is there anything that might help his case with president donald trump?
11:52 am
they were really making this page that china is the champion of globalization, ready to open its economy and welcome foreign goods and to buy more and be a bigger presence in the world. they also had a bit of defiance in their speeches. thet after that bite there, president had a wonderful line on that china would not be foreignor oppressed by powers, which was aimed at the domestic audience. what we are hearing from the chinese is we are ready to make a deal, but we will not out to the bully -- bow to the bully. in washington, they see china as in theg-term bully equation and the u.s. finally standing up to beijing. we are in this dance going into the g20 in the meeting between xi jinping and donald trump, and we will get this trading of
11:53 am
rhetoric back and forth. it will be tough to read where things exactly will be going. guy: it is pretty easy to be skeptical about the chinese talking about being champions of global trade. as we head towards that meeting, the markets are assuming that all these comments we get from either side, that they are talking to the other side. you pointed out correctly that we may look back on this and realized both sides were talking to their domestic bases. this is not designed as communication between beijing and washington. is we over interpreting comments -- these comments? >> we may be. there has clearly been back and forth. we are also hearing some skepticism on the u.s. side that the chinese are really ready to make a serious offer that would really bring an and to tensions
11:54 am
were start the kind of de-escalation process. on the chinese side, we are still hearing confusion on just who they should be engaging in the administration. eagerlic, both sides are to say they are ready to make a deal. in private, both sides are little confused about where they are going. vonnie: sorry. guy: my bad. vonnie: just insane thank you. we will talk more about this issue -- just saying thank you. we'll talk more about this issue no doubt. tuy: shares of mylan bea estimates. taylor, walk us through the story. taylor: up 16%. mylan mightine, .ave a generic version of that
11:55 am
the u.s. drug pricing business is driving sales growth and improving profitability. in the u.s. government sales were off about 14%, but it makes up about 35% of the market in europe, and in europe, sales were up about 2%. --rope was u 36% of the market. a lot of analysts saying that mylan looks undervalued when you look at it relative to tava pharmaceuticals. is trading at 29% earnings. islysts saying it undervalued here. vonnie: what does that mean for mylan? taylor: there are other generics arriving today. we are waiting to hear from two
11:56 am
more companies that are reporting on their earnings. endo have a branded drug's business that is helping, but their generic drugs business is struggling. they are getting a hit from their prescription business. look to see if those price pressures start to ease. vonnie: thank you. coming up, it is balance of power with david westin. today is voting day in the u.s. special coverage starts at 7:00 p.m. new york. we will be back again in the morning. again in the morning.
11:57 am
11:58 am
11:59 am
♪ david: from bloomberg world
12:00 pm
headquarters in new york, i am david westin. welcome to "balance of power," where the world of politics meets the world of business. what we know six hours after midterm voting began on the east coast. kevin: a big night for republicans in the senate. we don't have any official numbers. david: stay with us. we are covering the races in florida. let's go to anna in miami. let's go to the house race. what we know? >> i am here in south florida. we have had a steady stream of voters all day.

25 Views

info Stream Only

Uploaded by TV Archive on