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tv   Bloomberg Markets Americas  Bloomberg  May 31, 2019 10:00am-11:00am EDT

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and new york and 30 minutes into the trading session in the united states, the last one for the month of may. guy johnson is out today. i am vonnie quinn. straight to economic data, we have the pce data this morning. right now we are getting sentiments coming in a little worse than anticipated. it is at 100 even. economists were looking for one a 1.5. 110,nt conditions expectations 93.5, which is down from last month. the most eye-popping move today and markets, the mexican peso is at its weakest of the year. about 3% -- still weaker after the u.s. dollar after the president announced he would impose tariffs across the board on imports in retaliation for migration from mexico.
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that was going to affect june 10, escalate until october, at which point we would be at a 25% tariff. we will be talking about that throughout the show. you can see the s&p 500 is down 1.1%, and some of that is due to the auto parts makers, general motors one of those companies down. the worst performance for the s&p goes to gap, down a most 15%. the spinoff of old navy is now in question. you're seeing similar performances in europe, down 1.3 and thefor the cac 40, worst performance, and in italy, of course for the month of may,
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all of these indices have performed badly. , theax down more than 5% cac 40 down more than 10% for the ftse, and italy having a tough month. some of that is due to the european banks. investors focused on global , for the worst may since 2012, with the president announcing the tariff across the board on mexican inputs -- imports. on top of that, as if that was not enough, china is preparing a list of unreliable into tolls -- entities. we are joined now by mike mckee. were we not expecting this today? it is an across-the-board measure that takes place from
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monday and one week. probably does happen, although the mexicans have sent their foreign minister to washington to try to negotiate. stymied in efforts to limit immigration, so this is something that he can do. he is using a law to do it that has never been applied in trade before, and there may be pushback from congress, but it appears the president has the authority to do this. does it ramp up from the 5%? interesting. when you look at the immigration figures, this is the high season. it gets hot along the border, and immigration drops off, so it's possible that he makes a point, and as the numbers fall during the summer, he says we won, and that mexico is limiting immigration so we cannot escalate this. that remains to be seen. we will have a chart
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about this, so we will pull that up to see where it goes. betweenou draw a line one and the other? and is a political issue, the other is an economic issue. trying to doent is this, and it will cause problems. that puts in jeopardy the new nafta negotiation. very upseteader is by this move, and the mexicans are not going to want to pass nafta if they are being penalized for their experts. it raises questions about the future of trade deals. if the president negotiates a trade deal with a country, and tariff,orces -- imposes then why would you want to negotiate with the united states? we have not talked about the
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impact of the tariffs on consumers. cars andhe value of other vehicles imported into the united states from mexico was about 68 billion dollars last year. 5% on that would be re-hundred -- $346 billion. you would beober looking at almost 80 $7 billion. and throw in the tariffs, you could get almost a trillion dollars worth of tariffs in place. that would start to really impact consumers per they would ,e paying a lot more for goods about 1% of gdp. it would be a real hit. vonnie: then we have china potentially that may not be a line in the sand for an. one -- yu
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>> there's two aspects to it, the chinese currency would be a benefit to the chinese because they can absorb a certain amount of tariffs by letting the currency depreciate. a affect in the market certainly with other asian currencies, the chinese have supported it and kept it from doing that up to this point. it would not impact the united states all that much, but could lead to problems for the chinese. last time it depreciated, the chinese had a problem with capital flight. that is one issue. the other is this undesirable company list, a list of companies that they feel unfairly treat companies and businesses in china, and that could include companies as varied as apple or any of the
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companies that have said they will not do business with huawei because the president told them not to. there are possibilities for harm to the u.s. companies. vonnie: right now the stocks index is down, and some companies are being impact. so far this is a market problem. we are not seeing it in the economic data. you could argue that the consumer data was a slight that affected, but we really are not. how quickly does it matter? >> it will take a few months before you see a lot in that data. it will be interesting see -- to see it a week from today. we are starting to see some impact in some industries because of tariffs. the ones that have been applied so far, while they make a lot of noise, they have not had an economic impact yet. as this grows,e especially if the president does the extra round of tariffs.
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don't expect it to hit the average american viewpoint for quite some time. vonnie: michael mckee, keeping us honest on these headlines. much appreciated. fieldsestin and alex about theer guest trade tensions with mexico. tariffs potentially could be damaging to the u.s. economy. if the trade fight with china goes down a bad path, it could trouble the u.s. economy. for me i am trying to separate what is noise and what is really going to affect the economy. so far the fundamentals have been strong. do you agree with neil, joyce? dates that the market will focus on. there is the meeting of the trade ministers on june 8 and ninth. there is the g20 at the end of
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the month. i think the market is signaling that they are preparing her worst-case scenario. vonnie: today was an escalation even though we have not got these tariffs placed yet. that's june 10. it is the ramp up, the threat, right? what our clients calling you about today? >> about the currency. bey are asking if there will further currency weakness, and also about how we look at the economic growth forecast, like michael said, we have taken marginal forecast changes so far i'm about the question is, the full effect of china goes into place, will you have to take road off by about 1% instead of the .4% that we have taken off of china, the .2% off of the u.s. for mexico as well, that cap that we had taken down,
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could it go even lower? vonnie: does the fed get involved if it looks like it is going in that direction? could the president have made it come true that the fed will have to cover it? market is pricing that and. that's not in our forecast right now. we need to see how this plays out. i think the market tells you this is a risk as far as the way they are looking at downsides versus the market. mexico is the third largest trading partner trade you've got china, then you've added in mexico and other questions as well. vonnie: it is difficult to think about something like an environment like this when you're worried about headlines and what happens with trades. at the same time, when the chips are down, that's when you should be thinking about esg. is for what the future
10:11 am have been linked with china, just because of the need because of pollution. a lot of people are looking at what this means for some of the clean energy companies in china. i think more broadly they are looking at how are we assessing howoverall geopolitics and this plays into policy around environmental governments investing. been morphedas into national security and technology discussion, a broader discussion than trade. vonnie: at what point are your hands tied and it comes to things like national security and companies being placed on blacklists? at that point investing gets horny?
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thorny?ts -- it does. we need to wait and see on that and see if it changes some of the improvements which we have seen over the last year. what we have seen was actually quite a few improvements on both the environmental and social side. we need to see if that continues, if we see aggressive policies that make it more difficult. vonnie: does this month make use nervous -- make you nervous? >> it feels like a repeat of what we saw last year. i think the difference is you have these negotiations between the u.s. and china. now you are into scenarios that feel binary. and you had other negotiations take place, so i would not be saying that it not be resolved as easily. a lot of discussion had already
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occurred. vonnie: an absolute pleasure. i hope you come by very soon. now with renita young. these two have agreed to form a study group on the pressure on defense system. the u.s. is opposed. bloomberg has learned that erdogan once to examine any risk that the system might pose to american-made fighters. amazon reportedly is interested in buying prepaid wireless phone service boost from t-mobile. according to reuters, a deal would allow amazon to use their wireless network for at least six years trade ahead of the fcc -- the head of the fcc he would recommended the merger be approved under certain conditions, one would be that the companies will sell boost. took harsh measures
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after the failed summit the president. according to a newspaper, north its former top nuclear envoy to the u.s. and other officials. the envoy was charged with espionage. call them the political odd couple, ted cruz is backing a call by alexander acosta cortez to ban lobbying by former members of congress. he wrote on twitter that the swamp would hate it, but a chance for some cooperation, global news 24 hours a day on air and tictoc, powered by more than 100 journalists in over 120 countries. this is bloomberg. let's get a check now on the markets. it is not a pretty day for the last day in may. in the dow, not a single
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foruter -- component higher the s&p 500 down one and a quarter percent as well, and the worst performer is gap. lower,lation brands also this is on the threat of tariffs. mexican peso weaker , and the 10 year yield in the u.s., 2.16 percent. tomorrow the full interview with huawei ceo, and that airs at 9:00 a.m. in hong kong. this is bloomberg. ♪
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vonnie: this is bloomberg markets. let's get a check on the markets prayed the last trading day and mail. abigail doolittle is with us. abigail: it is looking rather bearish on this last trading day. it is the first and worst down a month in the year. you can see the s&p down 1.2%. lowest, notlso its on pace for the worst week, but still we see decline. 1.7 percent.down china down only a quarter of 1%, so the tariff threat is not rippling through their during that session, and the overall trade war, perhaps seeing a little bit of relief. chart, we at this have the shanghai composite
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which led this year's big rally. the other index is here, the dax is here, and the s&p here. the point is china led all the in april.eaking back it is starting to pickets head back up. the s&p 500 technically is confirmed for a drop down to at least 2650. let's take a look at the gap on pace for its worst day since 2016 after they missed estimates. consolation rands and kansas city, both of these names are getting pressured by the tariff threats by the president against mexico. and another piece of this story the bond rally, we are going to see that earlier in the session it did hit a record low, -21 basis points. it is amazing to think that investors are paying the german
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orchid for their money. it is down 20 basis points, a big rally for bond. it will be interesting to see whether at last. abigail doolittle, thank you for that. here's a look at some of the biggest is the stories right now. wells fargo in talks to settle an investigation into procurement of low income housing credits. we have learned the justice department once to resolve the probe within the next couple of months. wells fargo's settlement could exceed $100 million. traders at barclays is making and taxth loopholes laws. we learned that there are remnants of a sheltering years ago. deals that might be responsible for about 10% of their trading revenue. the ceo of this italian bank is
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not common adding -- commenting about the offer for commerce bank. still the ceo says this is not the right time for european blanks to complement this. this is very difficult to do in the current environment. on working focused on a new plan. booke: that is your blue business flash -- bloomberg business flash. this might be a cliche, that millennials like avocados, but is a serious issue for the u.s. right now. prices for avocados have soared this year. as you can see, it is quite the search. i think it may impact every american and their breakfast toast. you can see this chart on our
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show in your library. this is bloomberg. ♪
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vonnie: it is time now for etf friday. firms are working with the sec to launch nontransparent etf's. this is ouruss guest. what are these nontransparent etf's? they sound scary. >> it's this umbrella of what we are calling nontransparent etf's, etf's that will not display their holdings on a daily visit as. -- all ofike this,
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these different reasons. be of seen a lot of demand on the issuer side for this type of thing. have seen two examples. they have very little asset, no demand for them for there's a little more excitement around the active shares, and they got approval last month. when these things launch, we will see how well they do. vonnie: explain more about open and funds. wereen active shares approved, the legal law firm that specializes in the asset management space, they wrote a piece that basically said they think it is legally feasible for the open and funds to convert. why would they do that? there are reasons. one is if they wanted to go the active shares route, they have to pay a fee which they may not want to pay. also, when you do that, you have to launch a new fund, so you lose your track whether --
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record. some of the biggest drivers behind this, they don't want to lose that record. by converting to an etf, they could do well. the other thing, actively managed funds have seen 1.5 trillion in outflows. managers are looking for a way to stem those, and possibly going with this would be a way -- a way to do that. vonnie: looks like we have seen a couple do that already. thank you. peso taking ahe dip after the president threats higher tariffs on imports from mexico. this is bloomberg. ♪
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♪ in now withs check renita young. >> the president as escalating
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the fight with mexico over the border. he said he will impose a 12% tariff on imported products unless it stops the flow of illegal immigration. the duties could rise to as much as 25%. goods toported many the u.s. last year, and many items cross the border several times while being assembled. the vergears to be on of striking back at the u.s. for blacklisting way way. black's -- -- blacklisting huawei. china national radio says more will soon be announced. british prime minister theresa may was the first foreign leader to visit president trump after he was horny -- sworn in. he will be the last leader to meet with her before she
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resigns. the final meeting is likely to end the relationship as it began, awkward attempts to paper over a lack of personal chemistry. it is a battle of the north and it will be the battle of the north american billionaires tomorrow. that's when they square off in the champion league soccer final in madrid. joe lewis has controlled them since the turn of the century. john henry is the principal of the group that owns the boston red sox, and it winner gets a big increase in its value. level news 24 hours a day on air -- 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 i am renita young, and this is bloomberg. treasuries rally for the fourth day as the administration's trade battles gain momentum.
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obviously it was a double whammy today with the president launching the threat against mexico of tariffs and china talking about this black list of companies. capitulationhis is because we have seen such a terrible month? >> i thought we were supposed to get a rebalance, to help offset what we had seen earlier. we are not seeing that, and to me it has been interesting. we've had a lot of auto parts lowss, they are off their this morning. then you have the constellation modelo, having one of its worse sessions in a long time, and then kansas city southern, this strikes me as probably the greatest proxy you could have for relations. it is having the worst session since the day immediately after
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the election in 2016. i think that shows the extent we are worried about general commerce, but it seems like they are carving out some kind of auto related exemption. if these tariffs do go into effect and start to ramp up, are all stocks with exposure to mexico a sale? >> i think that is what is going on to a certain extent, they are trying to disentangle that. it is telling that before this trade war re-escalated, we were enjoying the kind of expectations, that were flattish, and then earnings expectations for 2019 starting to pick up. sales expectations are now kind of moving to the downside, and the upward drift we had an earnings has reversed. they beat the trade war is the thickening it is
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barriers for cross-border commerce will hit the top and bottom lines for companies. this is a catalyst for expectations. --nie: what are rereading what are we reading into -- >> in a way i think for a while people have been looking for this treasury rally has gone too far. if you look out -- look at bond epf's right now, the biggest are all in over bond territory, all technically overbought. that would suggest there is a lot of momentum behind the move. even more than the 10 year, i like looking at the 30 year. it is completely erased. while we were thinking supply-side, faster growth, higher yield, we are now looking at trade war, disinflation and lower rates, so i think we have
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turned that environment completely on its head. i think that suggests that is where we are operating now. if thisas this -- continues, it turns into a self proper sizing fantasy. >> i think people are looking for what is the different price on these different puts, the fed put, and i believe before this morgan reheated up, jp suggested that trump would not have the stomach for even a 4% selloff in the s&p. he has caused one now that is worse than that. people are going to be struggling to figure out what the strikes are, what the pain tolerances. i think rich claire ptak kind to help move the coal post clara -- -- rich how dovish the market wants them to become an that might play out
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, that cap getting bridge. vonnie: it's not just u.s. stocks that are suffering this month. the dax is down. it was the best performer, and the ftse may have gone down more than 10% this month. that would've had something to do with your pain moves, too, right? moves, too,pean right? >> certainly. right now we are actually on a streak of rest of world equities , outperforming the s&p 500 for the sixth straight session heard that is the longest street stash streak of this year. this speaks of the idea that if this becomes a technology battle , guess where the tech companies are, where the high growth is? we are hoisted on our own petard on this front.
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vonnie: we will get to that a little later. even as trade tensions swirl kashkaria and mexico, is confident that the u.s. has has room to run. >> it's more noise and rhetoric than big action. obviously tariffs with mexico could damage the u.s. economy. if the trade fight with china really goes down a bad path, that could trouble the economy. i am trying to separate out what is noise and rhetoric and what will affect the economy. so far the fundamentals have been strong. are think a lot of people saying how much is really a thunderstorm about to come through. your bise chair of the fed, he said -- had something to say on
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that subject. this is what he said. >> if the incoming data were to show a persistent shortfall in orlation below our objective were to indicate that global economic developments present downside risk to our baseline outlook, then these are developments that the committee would take into account in assessing the stance for monetary policy. >> the question is what data do we need? we have been below the target. that is being delivered. what specifically would you look at to determine that? >> i would separate both things. one is the fundamentals of the economy, and what is happening to inflation it -- inflation. as we've had this target, we have been under the target the entire time. my reading of it is that inflation expectations are
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anchored at around 1.7%. that saps our ability to respond to future downturns. that is one issue. overall the economic fundamentals, does it look like the economy were slowing down, if these tariffs were causing businesses to retrench, that could put the fundamentals of the real economy on a slower trajectory. areer could be because changing the path of policy. i am not quite there yet. i take a lot of comfort from the fact that the job market is strong. i want to see that continue. we have to wait and see how the data comes in. >> there was a great column here that talked about trump you said the president may have found a up for the -- ratchet economic fears through trade threats. what i mean by that is that you have trade threats, the market
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sells off, that tightens financial conditions. does that mean you have to wind up cutting? how do you do that? how do you get the cover that you need for the economy? >> one of the things i am proud of, i think everybody on the committee has been focused on doing the right thing for the economy based on the data and not focusing on politics or rhetoric. that is the best thing we can do. you can't worry about who said what and will it be perceived that we are responding or over correcting her the only way through the political noise is to focus on the data and on our goals, stable prices, 2% inflation, and maximum employment as many americans are working. i think that is exactly what my colleagues and i are focused on. up, amazon is
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looking to go mobile. the company is reportedly interesting -- interested in these companies, more on that next. this is bloomberg. ♪
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♪ york, thise from new is bloomberg markets. buyingis interested in boost from t-mobile and sprint. it would be a so-called also deal that would give amazon access to their wireless network for at least six years. amazon has the cash. t-mobile and sprint are allowed to combine, they need to get rid of boost. is this the perfect solution? obviously reuters heard about
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this, and everybody and their mom is interested in this. it is because of the agreement, and if you believe that everything in the world is turning to the internet, and the internet is going mobile, then owning spectrum is really important appeared the question is with sprint and t-mobile really want to sell this to amazon? would they prefer to sell it to someone like comcast, and then with the doj thank who would be the better competitor? from their perspective, what they want is for these assets to go to somebody to create a genuine competitor. cable companies like comcast are already in that business. ,onnie: so many questions obviously t-mobile and sprint, they went to satisfied the doj,
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-- they want to satisfy the doj, but they don't want to hand over all of their assets. for amazon, why would it make sense? >> amazon's business is done through the internet. all of that is going mobile. to have spectrum is a good decision for them. like i said, whether the company actually wants to give us amazon is another thing. if amazon wants to get into this business and build up 5g, that would require an investment from them. we know that amazon has had discussions with dish, which owns a lot of spectrum, about pardoning on building a network. what would charger be like, what would a google be like, and how would they sweeten the offer to make it better than amazon? >> i think the doj can stipulate
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who they might want to buy these assets. i think at the end of the day, it might not be down to sprint or t-mobile. i think what they will really look at is who is going to be the best competitor. from where we stand, charter and comcast are already in that business. growing theirdy mobile spots rapidly. their subs pull away, this is the area of growth for them. they might make a better competitor. vonnie: give us the argument while -- why boost is a good asset to have. it is a prepaid service. >> i think the main attraction is really that lease, the six year lease that you're getting it at wholesale rates. six years, that is the attraction.
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eye on we will keep an how that progresses. latestime now for the business stories and the news right now. price,sk is paying the shares have fallen 43% this year. ranked number 46th on the blue bag -- bloomberg billionaire index. he is down from 29 at the start of the year. next is set to reveal its devices and apps. the conference beginning monday will move the company closer to the future in which the iphone is not the central cog. the company will highlight growth areas. disney is likely to have a hit
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on its hand with the new star wars attraction in california. it is looking ahead to future attractions. the largest company plans to do more with its blockbuster marvel superheroes. disney will create land based on the characters at theme parks in california and paris. bloombergur latest in is this flash. we will take a look at what is next with a sense of heightening today, futures in focus coming up. this is bloomberg. ♪
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♪ vonnie: live from new york, this is bloomberg markets. it is time now for futures and focus. we have a guest joining me now from the cme. i imagine you are not
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anticipating what you came into today with the president threatening escalating tariffs through october. where are you seeing the most reaction? grains, futures all reacting. tariffsthe trade war and with the trump effect, you never know what will come out of his mouth. risk.ways have that no one expected anything to happen with them threatening tariffs with mexico. that will affect the whole nafta new program moving forward. the bigger concern as far as the grain markets go is pretty much the weather. it is affecting everything, this is adding pressure to all of the grains. even oil is being affected by summing -- some of the weather. we had flooding. the refinery rate was up about 1.2%.
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even with those outages, they still had a positive tone with the right. the tariffs are causing demand fears, so we will see how this plays out. you never know what will come out over the weekend. option seen a lot of flow on both sides. for oil you see a very heavy skew to the call side, the upside, same with grains. we will see how this plays out. vonnie: we are seeing a situation with oil, it is now down 2.4%, and down 13% for the mouth -- month. our guys getting kyl down there? our guys getting killed down there? >> yes. at the same time the option flow has increased, which means futures are being offset by option positions. we will see how it plays out. everything will be going off of the headline risk, what will the
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president tweet next. this is in full effect especially right now. questionbviously the is whether this is capitulation or whether we will find some support and come back in for the first trading day in june and build a better fundamental market. what is the thinking down there? >> everything is going to be doing to the trump affect. we had the big trade war talks, breakdowns with china. now he is threatening mexico. the rumor is he is going to start to threaten the you that she you. we will see if that happens. -- start to threaten the e.u.. that is the headline we will look at next. g.m. is our stock of the hour as shares seeing their bull after being hit by
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the threat -- it is all about the president today. obviously general motors is having a major impact on several of the indices. >> what we are seeing they are falling with the rest of the sector as carmakers and the makers of parts, not just the metoo to those who are based some of theu.s. biggest makers around the world, and of the mexico's annual experts, -- not surprising that we are seeing such a big reaction in this sector. the thing about g.m., it seemed to have the largest exposure to the 2019ome 20% of production is being done in mixer -- mexico. if you look at their production of vehicles last year, and g.m.
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produce the most, about 834,000. if you look at the grr, you see the equipment -- >> among the worst. vonnie: exactly. >> when we look at how the auto sector is affected going forward, if you take a look at , as a whole, this month down more than 15%, it's worse to mouth since 2009, it depends on whether these tariffs will be implemented. saying thelysts are biggest factor really is the prime. we had the u.s. mta negotiated, and a lot of the market has stopped worrying about mexico. beingiffs do end up implemented, we could see stocks dragged down perhaps another
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five or 10%. the concern is the risk factor now because opened the second tariffs, that risk factor goes into the second half of the year. vonnie: we will be keeping an eye on the automakers. let's take a look at markets now. as you can see, down 1% for the s&p 500, all dell components are down. mexican peso two and half percent weaker, just off its weakest point of the day. yield, not aar recovery, but we are also still low there. the european close is next. this is bloomberg. ♪
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vonnie: 30 minutes left in the trading day in your appeared from new york, i'm vonnie quinn. this is "the european close." what a day already. the last trading day in may. it has been a tough day in may. adding another 1.5% drop, ftse down more than 10%. thanks have a lot to do with this. thanks adding hit hard today. all of this is because president trump threatened to begin tariffs on imports from mexico and then escalating from 5% to 25% by october. across europe, banks putting in poor performances. the stoxx


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