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tv   Bloomberg Markets European Close  Bloomberg  April 26, 2019 11:00am-12:00pm EDT

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in the european trading day. from london, i'm guy johnson. vonnie: in new york, i'm vonnie quinn. this is the european close on "bloomberg markets." guy: oil is getting battered this afternoon. take a look at what is happening with brent. we were just talking to phil struble at the cme. crude certainly under pressure. that is rippling through into european markets. some of the big oil makers have been down for a few sessions now. they had a big start to the weeks since they are very tough going. european markets feeling that a little bit. he flat at this stage come up right at the bottom of the market, the european oil majors are going to get hit. mining stocks also down. states prettyited interesting. pce highlights this idea that the fed is going to be on hold. we did see a capping out of the
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u.s. treasury market. we saw pressure on yields. that is reflected across the atlantic. the gravitational effect between the bond market and the treasury market pretty well-established. bund yields being dragged lower, and a little bit of a price pickup, circa zero at the moment, but that little negative sign there pretty important. vonnie: in the u.s., yields turning lower. we were below 2.50 earlier. traders are digesting a little bit now, perhaps seeing some of the underlying portions of the gdp report, maybe not so shiny. back down to 2.49. the dollar index is slightly weaker, causing a little pain for emerging-market currencies. starbucks down 7/10 of 1% off its lows of the session, a good quarter. kevin johnson earlier spoke about initiatives in china and other areas.
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intel is having a terrible day, down 10% and dragging many chip stocks with it. we will be speaking with intel ceo coming up later this hour, bob swan. is: let's talk about what happening in these markets. we've come to the end of the week, right in the middle of earnings season, trying to figure out what the global economy looks like. this week aren't exactly great around the world. tell us a story of a global economy that is slowing down? what does that mean for european equity markets? let's talk now to jonathan from citigroup to get a take on what is happening here. you've got a pretty punchy call. i know it is an out of the money call on the ftse 100. you are talking about potential 10,000. to let's talk about what european markets could do in an
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environment that has slowing growth. i am wondering what you're thinking is right now. jonathan: at the start of the year, investors were in panic territory. we wrote reports called don't panic. depressed economic data has historically said to get strong returns going forward. we had strong returns. now what? for european shares, u.k. shares, you need low or modest in thed growth, 3% or so u.k., 4% or 5% in europe. then you need share prices to reconnect to the underlying dividend trends. what has happened over the last two years and the last 12 months is we've had a significant the rating of equities in the u.k. and europe, partly because of politics. if we see reduced risk coming through, reduced concerns over
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the global economy, less people are concerned about the end of the cycle, we get a re-rating, a reconnection, and that is where the upside risk is in the market. guy: year-to-date, ftse is up .0%, cac up 17%, dax up 16% are these nice numbers? is the risk actually that it is going to be tougher to make gains for the rest of this year? by the sound of things, you are not entirely convinced that it is. jonathan: it is likely to be tougher, but how much participation has there been? you look at the flows, and we are looking at record net outflows from the u.k. and europe in terms of equities. a lot of that is coming from international investors, a lot of that is coming from u.s. investors steering clear or pulling out of european shares. globally as well, we have not seen investor participation.
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wet we require from here is require to see confirmation that this is the global economy extending. the yield curve concerns and other concerns at the start of the year need to receive somewhat. then you can see the -- need to recede somewhat. then you can see a strong rally come through very quickly. there's a reason we might have a bit of a pause at some point, but we still see generous upside as we go through the next 12 to 18 months. vonnie: for the u.k. to reconnect to all of this, you say the pathways require a lot of faith, right? perhaps the more base case is that this wouldn't happen until the end of next year. jonathan: to get to big numbers, ftse 10,000, you need a leap of faith. you need to effectively remove the brexit risk premium, which is very difficult to do. it is not an impossible
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scenario, but it is very difficult to do. or you put a lot of weight on an emerging global equity bubble. that is quite hard to do. ur base case, we are saying we are likely to price out some of the concerns investors hold, and you still get up site. over the last 10 years, the most uncrowded trade in equities .arkets has been upside risk investors have perpetually left upside risk alone. our point is we don't need to have aggressive assumptions to continue to see continuous upside risk. vonnie: as you look around europe, there are plenty of geopolitical risks, not just europe, but also spain, italy, banks in germany. what do you see as the greatest
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risk to european investors over the next 12 to 18 months? our pathway was threefold. first of all, because of incentive alignment, very simply the major superpowers, china, the u.s. and europe have now got incentives much more greatly aligned because we have seen the growth cushion we had this appear. downside risk from here for china growth, for european growth, comes quickly to the u.s.. the u.k. has had to stop imposing tightening in this growth penalty on the rest of the world. intensive alignment is actually an extension of the policy we've had over the last 10 years. the second thing is china. slow -- continuing to china, if it had been slowing, would continue carrying into a
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recession. tendean companies, which to be very global in their outlook, can get access to nominal growth of 5% or so. guy: do i just go out there and by out of the stoxx 600 etf and expect that will deliver some upside for me? do i need to break it down from a stock sector point of view? i am wondering how i play this. theoretically, the european banks should be a high trade. industrials massively exposed to china trade. where do i need to invest in europe to get the biggest bang for my buck?for you seeing in the earnings season that confirms or disproves that? have very strange, polarized markets right now. markets, we've got
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historically wide gaps between equity and bond yields. there are eight or nine countries in europe where the dividend yields to local bond yield cap is 300 basis points are higher. the only thing really you need to believe in to own the higher equity market is the security of phenomenal growth. so where do you go in the market? the gap between cheap and expensive is at 2009 levels. stocks have rarely been this cheap in relation to fixed incomes. the equity market is a playground for investors, providing we have an extending cycle which then supports expensive and cheap stocks at the same time. you're looking at near-term or markets rally in. . guy: viewers in the united
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states are totally unconvinced about europe. if i am a european investor, investing in the states has been a no-brainer for a very long time. how can you persuade people that that is coming to an end? at the moment, u.s. markets are hitting fresh record highs. i'm getting a decent return on the currency. there are lots of reasons to buy america. jonathan: i don't the guy can persuade american investors to come to europe. i don't think i can persuade european investors to buy more europe. perhaps there is no need. but it has a free cash flow yield of around 5%. u.s. technology is the most expensive sector in the world. the u.s. is still this incredible cash generating machine. there are risks, corporate leverage is a little but higher, but what we have learned from history is that when we go to the zen cycle phases, it is the leaders of the cycle that also lead that phase.
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europe has structural challenges. lack of technology, political risk. europe has trading opportunities to outperform. we probably need to see a weaker dollar. how likely is that? guy: so what happens with the buck? what are we at, four month highs right now? you just seen gdp out of the united states. 3% growth. europe is flatlining. jonathan: this is the third part of our partway -- our pathway, the dollar. if we are in a strong dollar world over the next 12 to 18 months, that is headwinds for emerging markets and global growth, and cycle risks go up. if we are in a weak dollar world, we think the chances of going back into the world of synchronized global growth is pretty high to very high. emerging-market equities in europe to put a outperform in that period. to get a weaker dollar, you need
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slowing u.s. growth in absolute terms. do we have that? yes. we need a fed that is easier. we have that. the third thing, you need confidence in the rest of the world in economic terms. that is the missing link right now. we do not have a market that has confidence in world growth. china is starting to stabilize. europe is the missing link. as we go through the second and third quarter, if we get stabilization and global growth, we have three things historically which should give us a weaker dollar. that is the key to europe competing and possibly outpacing. thank you very much indeed for coming to cs. jonathan stubbs joining us from city group. vonnie: let's check in on the bloomberg first word news. here is we need a young that here is renita young -- here is renita young.
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u.s. gdp grew stronger than expected. the economy got a big boost from inventories and trade. that offset a slowdown in consumer spending. president trump meets with japan's prime minister shinzo abe today, i day after trade talks began with the two countries -- resumed, actually. both sides are hoping to reach an agreement that focuses on agriculture and vehicles. the u.s. wants to reduce the trade deficit in japan. it also once rate or access to the country's agricultural antset -- it also w greater access to the country's agricultural market. -- theg-un warns the top detente on nuclear talks is at risk, and that the dispute with the u.s. could return to its original state. ford says the u.s. justice
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department has begun a criminal investigation into emissions testing. the automaker says it is cooperating, but can't predict what the outcome will be. in february, ford revealed its emissions testing could be flawed. an emissions scandal has haunted volkswagen for years and cost it third $2 billion. billion.t $32 global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm renita young. this is bloomberg. vonnie: thank you for that. still ahead, investors punish intel. we speak with ceo bob swan as the company cuts forecasts. this is bloomberg. ♪
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♪ guy: from london, i'm guy johnson. vonnie: in new york, i'm vonnie quinn. this is the european close on "bloomberg markets." it's been a big earnings day. also some economic data out. let's check those global markets with abigail doolittle. abigail: the s&p 500 fractionally higher. we still have the chips index down 1.3%, the worst week right now in more than a month on weakness from intel. take a look at the russell 2000. we have a real divergence between the chips being down, small caps higher on the day. in europe, the german dax higher on the day, up about 3/10 of 1%. on the week, there is a risk off tone. let's take a look at some of the asset classes. the shanghai composite on the
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week down 5.6%, its worst week since october of last year. fears around stimulus being cut plus a huge rally this year, investors seeking chips off the table. -- the euro-yen is down 9/10 of 1%. index," upe "fear for a second week in a row. it may suggest some volatility ahead, especially with the shanghai composite down on the week. for the s&p 500 over the last year, this is a chart we looked at many times. we had a massive range between roughly 2600 and 2800. the s&p 500 right now nearly record high it put in last september. we also have the rsi that has been above overbought territory, now creeping back down. the question is will this time be different, or is the s&p 500 going to go back down in the range of cautiousness? this may be important considering the widening of the
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s&p 500. finally, in terms of some of the earnings movers in the u.s., ford and mattel soaring on strong earnings reports. ford put up a massive adjusted earnings beat, beating by 73%. goldman sachs saying those results show progress. target is down in sympathy with amazon, which is higher, but promising monday delivery, so target is down 5.2%. lots happening on this friday. guy: busy friday. thank you very much indeed. about the roundup case, the pesticide that has been linked to cancer, this is the court case or series of court cases bayer is having to fight at the moment.
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there is a vote later on that is nonbinding, but could cause the ceo some problems. whenever going to find out? reporter: it could be quite late. these shareholder meetings in germany can go on for a long time. everyone is sort of battling over the sausages on offer, that kind of thing. this one is going to be especially contentious. there's a whole list of people who want to ask questions, shareholders lining up to offer their opinion. it could be close to midnight. vonnie: as i understand it, there's actually an overflow room, so shareholders are outside even watching some of the proceedings. the chairman is still very supportive of the ceo. will that outweigh all of the retail shareholder lack of support that exists? eric: the ceo was really put into this role by the chairman, so it is really his protege. he's obviously going to get a lot of support from the chairman. as guy said, this vote is
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nonbinding, but it is 50-50 which way it will go. even with the chairman's support, you've lost 50% of your shareholder support. that doesn't look so good for the ceo. guy: are we talking about small shareholders, or big institutional blocks of shares? eric: we had several big institutional shareholders come out and say they will vote against. it is not clear who else might. there's a lot of mystery around who might vote against, but it is big shareholders as well as small ones. vonnie: but would be the right thing for the company? clearly this was a problem before the current ceo took over the company, this roundup problem. it was not really something except that he inherited. there's only so much you could expected to be doing as i ceo. is he not a come pushing that to everybody's satisfaction -- is
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he not accomplishing that to everybody's satisfaction? eric: they knew they would have some lawsuits on hand. the number has swelled to over 13,000, which they issued earlier this week. it has clearly grown a lot bigger than they thought. they lost a couple of lawsuits in the meantime to buy month santos -- to buy monsanto. were they aware of how it could balloon and how serious it could get? that is the big question everyone is asking now. vonnie: we will be awaiting the results eagerly. thank you. still ahead, investors punishing intel. the stock down almost 10% and dragging chip stocks with it. we will speak with ceo bob swan after the company cut forecasts. this is bloomberg. ♪
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guy: live from london, i'm guy johnson. vonnie: in new york, i'm vonnie quinn. this is "bloomberg markets." it was the worst performance for exxon mobil's refining business in 17 years. they lost $256 million in the first quarter. stockpiles of gasoline squeezed margins, and extensive repairs slowed out but. all of that you wrote it exxon -- slowed output. all of that eroded exxon profits. american airlines estimates it will take a 350 mullen dollar -- a $350 million hit to earnings because of the grounding of the 737 max 8 and rising fuel costs. that is your latest bloomberg business flash. let's check u.s. markets now. we are seeing them turnaround, though fractionally. the dow jones industrial average is up 1/10 of 1%, as is the s&p
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500. chip stocks are recovering just a little bit. that is sending the nasdaq down, but just fractionally, by about 1/10 of 1%. the best performer in the as beaver hundred right now, procter & gamble, up two point -- in the s&p 500 right now, procter & gamble, up 2.25%. -- worst performer, and dell performer, intel. we will be talking to the ceo. guy: oil is falling, the dax trading a little bit higher. wirecard trading up. the european close is almost upon us. this is bloomberg. ♪ moving is hard.
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[ sigh ] introducing an easier way to move with xfinity. it's just another way we're working to make your life simple, easy, awesome. go to xfinity.com/moving to get started. vonnie: 30 seconds to go until the end of the trading week in europe. kind of a next bag. quite a big bag. london is suffering because the miners are trading low.
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oil is trading lower. so it's metal and that is affecting the london market. heavyweight stocks have a big effect on the london market. on the continent, things are easier. the dax is outperforming a touch. not getting blow away markets. two things to watch out for. spain had an election. pay attention to that. the spanish equity market has not been a great performer relative to its peer group. the other thing is after the close, the s&p has a ratings review on italy. , butuld start to get news over the next few hours, pay attention to that. european elections are coming up. i thought that would make the s&p europe, but watch out, brent. the dax is trading higher, wildcard having -- wirecard having a reasonably solid morning. 40 trading up .1% -- cac trading up .1%.
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let's tell you what is happening with the royal bank of scotland, coming out with a difficult set of numbers. a brexit affect. mr. mcewan announced he will be leaving. today the royal bank of scotland is raining out the brexit faith. it's numbers reflects the share pricing. we will talk in just a moment about this. today's numbers encapsulate deutsche bank's problems. the investment bank consumes huge quantities of capital yet delivers very little in terms of returns. i wonder if the commerzbank deal would have resolved those issues. sanofi out with a solid sense of numbers. the drug sector is one of the best-performing stock sectors in europe. key drugs performing strongly. there are highlights in europe and the drug sector has been under pressure, particularly stateside. is the see that, there
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top end the story, media and telecoms going back. you do not want to be first out of the gate on something like emissions. media telecom and health care doing well. let's take a look at the bottom because this reinforces the problems the london market is having. basic resources down 1.1%. it is the oil and gas sector which is fading now, brent is trading down 3.5% as a result of which that is being translated back and those equities. that is a look at the european close. vonnie: here in the u.s., we have the tenure at 2.50, down from where we started the week after the strong gdp data. under the hood, it was a buildup if inventory and a slowdown in consumer spending. you will have to wait to see that picks up again. the dollar index rolling around the 98 mark.
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having difficulties with some emerging markets currencies which are feeling the pain versus the u.s. dollar. nymex crude oil down to below $63 a barrel. this on the oil companies reporting and other items. , 51.87.wn almost 10% we will be talking to the ceo about the forecast, which has lightened. let's look at global market movers. the commodities lower across the board. brent, crude, wti. you can see emerging-market currencies a little stronger .oday obviously in equities, not a great day overnight in the asus shih-tzu -- in the asia session. guy: a big week for european banks. we finished up with deutsche bank revenue outlook.
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to figure out what is going on and where we go next with this post commerzbank talks, let's bring in steven arons and from frankfurt. this encapsulates the problem deutsche bank faces. a huge consumer capital, does not produce much returns. i do not understand how a commerzbank deal would have come close to solving that anyway. >> i think you are describing the problem perfectly. that is the big question at deutsche bank and they were hoping that the commerzbank deal would expand the business -- the deutsche bank business model away from the volatile business of investment banking. that was one potential rationale for the deal. we are focusing on detail and not trading anymore. that is now off the table. happen to that investment bank that is not producing a profit.
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it is consuming vast amounts of capital. it is an open question. vonnie: what happens next? the regulators decide it is ok for cross-border mergers to happen and is that allow other banks which have expressed interest in commerzbank to come back to the table? steven: that is right. that is definitely the scenario we are looking at. we know about several banks that are now considering what the next move on commerzbank should be. we have reported on unicredit and ing, the dutch bank, all of these are now thinking about how to best move. the challenge will be for them to convince the german government, which is a big shareholder that they're are the right ones to take control of that bank and the price, that we will see a lot of movement over the next weeks or months and will follow that closely. the data from around the world -- i will exclude the
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united states -- broadly the data around the world are not looking that rosie. that will reflect back into the german economy, particularly the bits of the german economy that deutsche bank has exposure to. give me a sense of how the macro overlay is affecting the discerning thinking? layer oft adds another urgency to the debate of what is going to happen with the bank. deutsche bank is exposed to the seeingand that market is dark clouds, not least because of the global slowdown, especially in europe. the question is what is going to happen and they want to get the bank in order before anything like a strong slowdown hits europe. why there iseason a sense of urgency after so many years of disappointing expectations about the bank.
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frome: we have had banks many different countries express an interest, either openly or less openly, everybody from socgen to ing to unicredit. if one of them were to win commerzbank as a partner, would that be of the disadvantage to the other banks? steven: it is difficult to say. probably, yes. it would strengthen commerzbank in germany and therefore create a stronger competitor to deutsche bank. however, the market share of commerzbank is not very big in germany. the new competitor that would be created as a result of the takeover would not be that much bigger. deutsche bank is a very international bank. it wouldtition threat create, i do not think that
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would be very big. it is another concern for the bank. a stronger rival in the home market is a problem. guy: it has been a busy week. steven arons joining us out of frankfurt on deutsche bank. spain, elections will be held this sunday for the fourth time in four years. joining us from madrid is bloomberg news spain's bureau chief. charles, who is the frontrunner and you might jump ahead this weekend? answer ishe simple the frontrunner is the incumbent socialist prime minister. he has built up plenty of momentum going into this final week of campaigning. the opinion polls we saw before the blackout on the publication of polls on tuesday were showing -- clearly is the frontrunner going into this process. he has been able to reach out skillfully to voters to his left
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and to his right with a message ,bout scaling back austerity pulling back the crisis years spain had in an early part of the decade, and stressed the need for dialogue over the issue m which hasseparatis distanced himself from the party to the right. be: the big question has to can sanchez, can he form a , or will we get another election? charles: the answer is we do not know. we will find out on sunday night. it certainly looks likely that sanchez will have to build a coalition, have to secure some
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kind of government pact. he has a party to his left and they look like a comfortable partner, but he would still need to line up more votes to be able to form a governing majority. he may need votes from the basque nationalists, a much more problematic outcome would be if you would need votes from the catalan separatist parties. that would put him in an uncomfortable position. the other outlook is a complete blockade, a completely hung parliament. charles: how much -- vonnie: how much anxiety are the markets expressing? charles: the markets have been fairly sanguine about these elections. spain ofno sense in questioning the european project
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, the economic policy of the sanchez government has been fairly orthodox. i should say the other political block, which could challenge to win these elections is this trinity of parties on the right. the people's party, the insurgent spanish nationalist party. they do not seem to have the same momentum as sanchez, but if they were to win, the markets might have a positive reaction because they have a strong message on cutting taxes. we will have to wait and see how events unfold on sunday. vonnie: our thanks to bloomberg's charles penty in our madrid bureau. let's check in on first word news. renita: china's president xi jinping appears to be signaling approval for president trump's
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trade war demand. in a speech in beijing, president xi addressed a number of reforms the u.s. had focused on in trade talks. protectident pledged to intellectual property rights and allow foreign investment in more sectors. he also said he would avoid competitive devaluation of the on. prime minister theresa may's government is continuing with what she calls difficult brexit talks with the opposition parties. opposition leaders say may has refused to cooperate -- refused to compromise. if she cannot get a deal a next few weeks, the u.k. will be forced to take part in european parliament elections. that may be toxic for maize conservative party -- four may's conservative party. he hasn, sanchez says seen opinion polls move in his favor. he will find out at the gamble paid off on sunday when spain votes. sanchez hopes to reach a
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majority in parliament with his left-wing allies, but without the catalan separatists who helped him win power last year. tapping former president obama's biggest financial backers in an early round of fund raising. the former vice president has announced he is running for the democratic nomination. biden heads to california next month for a fundraiser that includes former google chairman eric schmidt, jeffrey katzenberg , and an obama campaign finance or. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am renita young. this is bloomberg. guy: thanks very much. european markets done for the day. we are through the auction process. only a little bit of a pickup during the auction. -- the back end
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of the session. the dax trading higher, the cac 40 trading higher but during the auction not much going on. boat -- both up .2%. be taking tow will the airwaves on dab digital radio at the top of the hour. you can also find it on all of your bloomberg devices. this is bloomberg. ♪
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vonnie: welcome to our radio and tv audience. shares of intel falling, its biggest one-day drop since september 2008. the chipmaker cutting its full-year revenue outlook. joining us now on the phone is
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bob swan, intel ceo. we saw 10% drop at one point today. particularlymers, in china are just tapping the brakes. the markets seem to be thing this particular part of the chip cycle is coming to an end. which of you is right? bob: good morning. for the corner, we came in better than expected, both on the top line and on the bottom line. what we saw our underlying trends in terms of memory of ang, the consumption significant amount of purchasing we saw last week. we are going to a digestion phase with our cloud service providers globally, and third is the slowing of growth across the board for our business in china had a real impact. despite a quarter that was
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better than we expected, as we look forward for the rest of the year we think we will be in a digestion phase coming up extremely strong 2018. the end demand of data that consumers and enterprises are , the analytics that need to go with that, we think that is as strong as it will ever be and will continue to be strong in the immediate term. our view is the end markets are strong. we are through a consumption time in the u.s., but in china as well. vonnie: we should point out that intel is up 23% this year, beating the s&p 500. i am curious. up onceers pick customers deplete stockpiles? bob: that is our expectation. we indicated yesterday that we believe we will still be going
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through a digestion period in the first half of the year, but the indications are inventory will be completed and the signals we are getting from our customers is they think they will start buying more in the second half of the year. our expectations are that the second half will be stronger than the first half. guy: mr. swan, gross margin 56.6. when is that number north of 60? the fullur outlook for year we would be roughly 60% in 2019, which is lower than last year and to a certain extent that is a good thing. i say that because we are accelerating our transition to our next process technology. when we go through those transitions, the implications in the earlier stages of high-volume manufacturing is to
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have a dampening effect of gross margins. this year we will be down a little bit from last year. would drive around progress we are making on migrating to next technology. guy: are you losing market share? at what we call the expanded pan of $300 billion. that market is the largest market we have ever seen. we view our market share as roughly 23% or 25%. we have to inies this increasingly data centric world are significant. our expectations is we will grow share as we go through the next several years. we are excited about those prospects despite the current digestion period we are going through. vonnie: it does seem like perhaps amd has taken a little
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bit of share. how do you take that back? bob: it is an exciting time for the semi market. the opportunities to grow are fairly significant. in light of that, there is increased competition intensity all over the place. our focus is on building the best products in the world. whether it is to the data central market, whether it is to of pc market or the internet things, which is a growing part of our business. building the best-performing technology in the world has stood the best -- the test of time and our expectations is we will continue to do that going forward. vonnie: if you can stem the declines in the data center portions of the business, what do you do about the fact that amazon and these other customers ?ave spent on the cloud
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that is a one-time jolt. is there something that can replace that. bob: when you look at the large cloud service providers, their markets,te, for their their markets continue to be extremely strong. ultimately, those growth rates need to consume the kind of technologies that we are pdu,ying, whether it is they need to consume the kind of technologies we are building. there end market growth remains relatively strong. we believe that as they go through this digestion period, demand signals will begin to pick up and we will benefit from that increased demand. guy: when do think server demand will come back? bob: we indicated on the call that we expect the second have
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to be stronger than the first half. the signals we are hearing from cloud service providers and some of our oem's for the enterprise and government space that they are looking for digestion through the second quarter and a pickup through the third quarter. one of the issues that has come out of this is execution. have you got your arms around understanding how close you are to fixing some of those problems that are presumably relatively within your power to do so? over the last couple of years we have grown the company over $12 billion in the last few years. billion, our $6 growth was $6 billion more than we expected. that placed significant demand on our capacity. we have had to dramatically expand our capacity in the u.s.
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and around the world to meet that growing demand. what we haveons on conveyed to our customers is twofold. one is we believe in the second half of the year we will have supply constraints in the aggregate. we still have to work with our customers on mix of demand relative to supply. secondly, we told them they can count on us to never be a constraint on their growth in the future. what that means is we are expanding our capacity and organ -- in oregon and arizona and new mexico in the u.s. and expanding our presence in israel and ireland which are a big part of our global networks. we are putting more capital to work so we have the capacity to do with the growing demand our customers are experiencing. we've told them we will not be a constraint on their growth going
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forward. vonnie: thank you so much for joining us today. congratulations on another quarter. bob swan ceo of intel. and thank you to our radio listeners for joining us as well. guy: time for the stock of the hour. it is american airlines. i expect the 737 max 8 will be an issue. kailey leinz is here with the issue. kailey: growth is noun positive territory despite a deep forecast cut from american. they see earnings-per-share dollars- between four to six dollars, and they previously thought $7.50. the 737 max a big part of that. they have grounded it through august and that will lead to 150 delhi flight cancellations and capacity reductions of 2%. that will shape $.60 per share off of earnings and that impacts $350 million, in addition to
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fuel costs, which will be $650 million in savings. that is $1 billion in additional cost. where you may be seeing positivity is there is indication that there is still pricing power in this quarter. revenue will increase between 1% and 3%. of they be where some positivity is coming from. vonnie: thank you for that stock of the hour. coming up, balance of power with david westin. he talks with the chief spokesperson for howard schultz. in u.s. markets, we are down fractionally on the nasdaq but up on the s&p and the doubt. chipmakers still a bit of a drag. this is bloomberg. ♪
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david: from bloomberg world headquarters in new york, i'm david westin. welcome to "balance of power," where the world of politics meets the world of business.
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on the brief today, shaun donovan from washington where japan's shinzo abe is it to meet with president trump entree later today. -- president trump on trade later today. michael mckee new york on the u.s. economy. shawn, let's start with you. what we know about the discussions with japan over trade? shawn: we know both sides want these things to go quickly. they are the first round of talks last week. they meet again this week. the leader shooting down again -- the leaders sitting down again later this afternoon. they want to move ahead with these trade talks and given the uncertainty in the relationship that has been there. for president trump, that is focused on the agricultural sector. a lot of farmers who would like to do a lot more selling to japan

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