tv Bloomberg Markets European Open Bloomberg August 12, 2019 2:30am-4:00am EDT
>> good morning, welcome to "bloomberg markets." the european open. today the market say the out of office is on. asia stocks trade mixes holiday closures crimp volumes, european and u.s. equity futures rise. maybe because of goldman sachs warning of a recession stateside. the cash trade is less than 30 minutes away.
shrugging off the risk. european and u.s. futures gain despite president donald trump's assertion that trade talks with china in september could be called off. the beach. yields fall in italy following affirmations of the country triple b rating by fitch. the deputy rating -- man tells that leaving the eu is not part of the plan is he begins campaigning officially. i don't think anyone is scared of democracy. we ask for elections. one should be scared. i don't want elections. we are coming up with strange governments. we just want the people to vote. net profit aramco's falls by more than 12% in its first ever half-year report. we will hear from the group's cfo later this morning in an interview you do not want to miss.
look quickly, less than half hour away from the start of cash trading across the continent and in the u.k. it appears to show it is still a risk off trade. investors are reaching for the safe haven of the japanese currency, now falling down to what all five. 105. you can buy fewer yen for your dollar. futures are higher both here, europe and the u.s.. in terms of european futures, we see futures up three quarters of 1%. pretty big gains. the poor performance of equity indexes on friday. getting into the markets now. -- bloomberg mliv strategist out of singapore. what that the china you on fixed income tell us, and is that why equity markets are optimistic? >> good morning.
its yuan fixing by just a little bit. that seems to be what everybody likes. there is some chatter around today about china is redefining a range for the currency, or china is defining a floor for the currency. i'm not sure i buy that. i think the consensus is that the yuan is headed lower. we had these two former central bank officials in china talk about the risks of a growing currency war. we had the imf issuing some warning signs on the chinese economy. i think the currency is headed lower. at the same time you don't wanted to fall too much, you don't want it to fall to dramatically because that could upset global markets. overseeing a controlled depreciation. that is what everybody wants to see. that encourages investors to help explain why the csi 300
rose about 1%. matt: let's talk about brexit news. the times that u.k. lawmakers are planning to force an extension for brexit. what is the outlook for the pound? hearingely we have been brexit is -- a no deal brexit would be a calamity. it seems like the pound has really been pricing in, reflecting expectations for a calamity. over the past three months it is performing major currency against the dollar, down about 7%. risks pricing in all the that a no deal to force would entail. timesne article from the saying that lawmakers are redress to the eu to there is no no deal brexit.
wouldd not say that this spur a big huge rally in a pound. at the same time, things have been so negative that any optimistic news on the currency would be welcomed by traders. maybe the pound can find the floor. speculative conditions just turned positive. with the outlook there? like -- yanis just z/yen just seems to be unstoppable. haven of choice. it is really seems to be unstoppable. aw people are talking about dollar yen rate of 100 may be coming up. the yen is presenting some interesting dynamics for the bank of japan. if you are investing in yen you have to put your money somewhere. a lot of that money is going into the government bond unit. that has dropped government bond yields down to -22 basis points.
which is through the bank of japan's target range. it's about -20 basis points. it's really testing the bank of japan. the pound was closed today. starting tomorrow people will be looking for the bank of japan to signal what it wants. does the central bank want yield to stay within its range? why even have a range? or will it just say, it is probably beneficial for the economy if yields fall anyway. we will have to wait to see what they signal. goodman, bloomberg mliv strategist. but get the bloomberg first word news. for that we go to olivia back in london. olivia: violence intensifies as a hong kong faces its 10th week of protests. last night protesters through projectiles. police responded by firing tear gas. if i was three days of demonstrations that begin on
friday. most protesters were denied police permits. the opposition has a primary this weekend. of incumbent president, 47% 32. that gives them a bigger percent of 15 percentage points. they have long said that he would have trouble overcoming a margin of more than seven at the main election in october. 32 people have been killed and 16 missing after a typhoon struck china. it struck through the eastern coastal province towards shanghai. or the one million people were evacuated. china state tv puts the damage at over $2 billion. jeffrey epstein was found dead in jail this weekend. the former financier was accused of molestation and sex trafficking. promptedent suicide outrage among those seeking justice for his victims. the jail where he is being held as the target of two separate investigations. one young bar says his death
raises serious questions. prime minister boris johnson has a rash spending promises. the institute said it is a little reckless to commit to big spending funding increases, at the same time as promising tax cuts. is it a commendation of those things and brexit that could lead to a big increase. news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. matt: that was olivia in london. the moment in the sun. italy's deputy pm tours the country's beaches in a bid for the top job. we are live in sicily us, remember bloomberg radio is live on your mobile device or on digital area if you are in the london area tune in. this is bloomberg. ♪
2.1%. wednesday we get the big german gdp figure, or it could be a small figure. it probably shrank in the second quarter. forecast a 0.1% contraction. there is a we have a central bank rate decision from mexico. forecast of 25 basis points at to 8%. he also get u.s. retail sales for july, forecast for 0.2% increase. on friday, indonesia's president prevents the country's desk presents the country's individual budget. italy's deputy prime minister is making the -- for the top job. summerpending the touring more than 7000 kilometers of coastline posing for bare chested selfies. he told bloomberg exclusively, no one should fear in early election. i don't think anyone is
scared of democracy. we ask for elections. one should be scared if we were saying, i don't want elections. we are not letting the people vote and coming up with strange governments. we just want the people to vote. italyjoining us now from is maria. chatterjee?ini's what is he -- strategy? what is he doing on the beach? >> he is ready for the election and wanted to take place quickly. voters,eaking to shaking hands, taking pictures in full campaign mode because he is polling at 40%. incentive tong make sure that italians and the staff who have never voted or considered to vote for a man of the north would actually vote for him this time around. i spoke to him at the beach and he feels energized and good
about the stock price. he also told me there is no lvini era.fear a sakv he does not want to take italy out of the european union. this is what he said. deputy p.m. salvini: an exit from europe or the euro is out of the question and not being discussed. our we are discussing about rules on immigration and taxes. there is absolutely no pants to -- no plan to exit europe or the euro. >> that was the anti-in deputy prime minister speaking to us in sicily. he has a very strong incentive. that is according to him, but the timing does not depend on him. it was dependent on the president of the tie-in republic umaine decide to delay that
decision. he wants this to happen because there are some very difficult decisions that will have to be made towards the end of the year. there is a budget for 2020, put the hike would be unpopular in 2020. a lot of this is still up in the air. in terms of today we are waiting for an official date, for a no-confidence vote. he is still the man that is leading the coalition, that voted no-confidence that would put an end to this very shaky coalition. matt: maria, thank you. sicily aftere in speaking exclusively with my tail salvini -- matteo salvini. authentic brands group, the company that manages juicy couture. infested $875 million
becoming the largest shareholder. the deal values more than $4 billion. they lost their brand ambassador in china after one of its controversy.on my they listed cities and their respective controversies but chose hong kong as independent nations rather than special administrations of china. for sake says it is sorry and respects china's residency. they are leaving after almost a decade in the top job. he said he will continue at the company until a successor is in place but is looking for another challenge in his career. shares have outperformed industry pairs. saudi aramco posted a 12% decline in its first-half profit. that is the world's biggest oil had semi annual results for the third time. that income was $46.9 billion in the six months, down from 53 billion a year earlier. there was a decline in the price of crude and an increase in cost.
company officials say they could sell shares in 2020 or 2021. that's your bloomberg business flash. matt: thank you very much. olivia in london. protests in hong kong continue for the 10th straight week as cost is -- clashes became violent. hong kong police fired tear gas and rubber bullets to clear the streets. stephen engle is at police headquarters. what's the latest? hen: i was at police headquarters most of the morning where we are expecting another protest later this evening. it's hard to tell exactly because the protesters have taken on a flash mob approach to the road tests with a don't necessarily announce where they will be. they pop up where they feel they will get the most impact and keep police on the chase as they try to crack down more swiftly. the protests have popped up again out at the hong
kong international airport where there was a peaceful sit in protest for the last three days on friday, saturday and sunday. it is now monday. they have extended that invitation for another day, a fourth straight day. we are getting reports from our colleagues at the airport and on the hong kong express railing that it is standing room only on ast hong kong express train well as tens of thousands. there is no official number yet. a vastknow it's building, but apparently i have seen the pictures. ofas safely say, thousands lacqua had protesters have taken to the airport sending their messages to arriving passengers that they are unhappy with the level of police crackdowns on their protest. in particular, they are upset about one of their own female protesters who has been all over the news as of late from yesterday. apparently being hit in the eye
with a rubber bullet and local media has been speculating that she could looser i many of the protesters at the airport, as well as medical professionals protesting elsewhere have been wearing eye patches over there right i as a show of solidarity -- over there right eye as a show of solidarity. matt: some fallout for cathay pacific as well, isn't there? stephen: yes. one of the first protests that was held at the airport. there were petition sent around and a number of cathay pacific. staff had sign that petition. there were civil aviation authorities of china that issued a directive to hong kong airlines including cathay pacific that any ground staff or flight staff meaning pilots and flight attendants will have shown any support or participated in these unlawful
unrest that they call it are not going to be allowed to fly into maiman airspace. that means flights into the maiman and over into chinese airspace, which includes every cafe flight to europe. it is significantly bad news for half of their as revenue comes from hong kong and china markets. 1/5 of their fights are into the mainland. we are also getting news today that one of the largest asset management companies in china has advised their staff not to fly, or directed them not to fly cathay pacific or its affiliate. more pressure on cathay pacific. we are seeing the stock down the most in three years and to the lowest level in a decade. chief north asia correspondent stephen engle there in hong kong. but take a look at futures here rising across the board as we get closer and closer to the
european open. must than 10 minutes to go. you see ftse features up more than half a percent. in today's equity market and we are looking at gains in the u.s. futures as well. we are minutes away from the start of cash trading. we will take a look at the stocks that you need to watch at the open. after it received another takeover offer from ams. this is bloomberg.
we are six minutes away from the start of cash trading in europe. let's get your stocks from around the newsroom. fromng at the miners today our equity steam is following this. what are you seeing ? slump in ironther ore. trading down more than 5%, now at $87 a to 2% trading ton. china sparking fresh concerns about the demand side story to keep an eye on rio tinto, as well as the steelmaker this morning. we will watch those. obviously we are looking at, or out, i should ask you, is it a bidding war? >> i suppose we are getting
towards bidding war territory. they have put in another offer. you will see shares and they have made the offer go in opposite directions. they are getting a higher offer. their shares have jumped at the open. they have not been super happy when the bid was for us revealed their shares fell. it is being called that they will head lower again. two stocks moving in different directions on the same story. both for joining us. you can get all the latest stock stories from our equity steam by typing first go on your bloomberg terminal or via the mobile app as well. i want to quickly tell you that it looks like we are going to ceo. new they say they support the at abb.ent the cofounder. a large forward writing and email and of course a big stakeholder there.
matt: we are a minute away from the open of cash equities trade. annmarie hordern is standing by in london. annmarie: good monday morning. let's kick it off, up 7/10 of a percent. light volume due to some closures for holidays in asia. japanese yen, 105 handle on that, extending gains since last week as president donald trump says we could see talks stalled. the pound is trading around 1.20. the times is pointing the number of mp's could ask for an extension. an oil is trading under $59 a
barrel. bernstein says the group needs to cut one million barrels. of -- barrels a day. we are higher across the screen. dax futures up seven tens of percent. u.s. futures are pointing to a higher start in new york, as well. 8:00 in london, that means it's the market open. ftse 100 opening slightly flat, but to the upside. ibex up 4/10 of a percent. still waiting for some others to open. looks like we are going to have this risk on day. you could see the foreign exchange market, the yen higher and the pound higher. let's look at individual sectors across the market. it is green today. what i was most interested today was what was going on with minors, the slump in iron ore price. energy and minors up
this morning. also, consumer discretionary, anything to do with trade wars and news headlines usually moves autos and luxury. they sit in consumers discretionary sector. overall, a bright monday morning. upt: we're seeing 500 stocks and only for down. brent is a strong to the upside this morning. in terms of the winners, we see sap right up at the top. the software maker up more than 1%, as is lvmh. luxury stocks doing well. also some pharmaceuticals up. novo nordisk is a gainer. bayer is a gainer this morning. keep an eye on the winners, but a rising tide lifts all boats. as far as the losers, that's the more interesting story. ferguson is down almost 2%.
national grid is down .5%. roche is off, but because it's so heavy, it manages to be one of the biggest drags on the stoxx 600. once again, now 30 stocks are falling, 551 gaining. almost everyone is up this morning with european markets opening up broadly higher. stocks in asia kicked off the weekend fairly mixed fashion, as traders wait trade tensions -- weighed the trade tensions. there are holidays, in japan and other places as well. concerns abouts u.s. recession, saying goldman no longer expects a trade deal before the 2020 presidential election. the bank also lowered fourth quarter growth forecasts by 0.2 percentage points to 1.8%, which
is still better than a stick in the eye. that's at least growth. joining us is andrew sheets from morgan stanley. what do you think about the call? what he think about the likelihood of a u.s. recession? andrew: well, on the trade front, our view has been quite cautious and pessimistic on reaching an agreement. i think all the indications so far are in a process that continues to drag on. i think the recent indications point to continued escalation. we're still pretty cautious. our growth forecast is below consensus. recession is not base case, but it's a realistic their case. we're putting a 20% probability we get u.s. recession in 20 months. matt: what do you think about earnings recession? a lot of people said we're already there.
20% probability is a very high. you expect earnings to continued to grow? forew: actually, the case an earnings recession is better than an economic one. we've had negative year-to-year growth. i think the second quarter is looking more desk close to 0% -- close to 0% growth. estimates to the out growth look to high. -- too high. --hink the odds s&p hundred five -- s&p 500 -- that's why we moved underweight equities. the odds earnings decline year-over-year is very high, probably higher than the odds the overall economy goes to recession. matt: the dollar strength has really been a concern for not only the president, but now it seems for a lot of others, pointing out a strong dollar may
not be only bad for the u.s., but may be causing a global recession. let's your view on dollar strength -- what's your view on dollar strength? it's andrew:. u.s. has a limited toolkit to act. but also, i think a lot of blame is put on the dollar. some of it justified, some of it unjustified. if you pull up a chart, it's up maybe 1%. that's some strength, not really enough to blame the weakness we're seeing. the weakness is coming from trade uncertainty, coming from over stimulus pumped into the economy over the last 18 months, and a big boom we thing is unwinding. those are the culprits in the weakness, not the dollar. matt: let me put to you the mliv question of the day, andrew, which has to do with trade, as
well. the question is, does it really matter if september trade talks are called of? how do assets react if september trade talks are called off? andrew: i think assets react poorly. it's not that we think they would act poorly because trade itself is this enormous drag on growth. but september trade talks called off would be one more indication this would drag off for longer, one more indication they would remain more cautious than they are spending, and cubs of the heels of another important development, which is the federal reserve appeared to indicate, they are not willing to do whatever it takes to support markets and keep financial conditions at historically record levels of easiness. you have a fed that struck a balanced tone, trade that drags
on longer than expected, and both of those things, if you combine that with earnings growth around 0%, a number of other challenging indicators, challenging signals out of the bond market, all of that would continue to make us cautious in the market. matt: what are your fed cut expectations? does the fed, especially with the worsening trade war and concerns about dollar strength, go to at least twice more this year? andrew: yeah, well, we think the fed will cut in september and then in october. on the surface, that would seem supportive, two rounds of easing in quick succession at a time when unemployment is low. the s&p is still within a couple percent of an all-time high. but the problem is expectations. the market is expecting more than a 25 basis point cut, and the fed can ease another 25%, and it's still going to be a
disappointment. that's the biggest disappointment. expectations. even if the central banks followthrough, it's not necessarily an incremental positive. matt: absolutely. arguably around the world. thanks for your time. you're going to stick with us. more from andrew sheets from andrew stanley. , we bring you the stocks on the move so far. for theters the battle austrian light and sensor maker. ams not faring too well on that news. we'll bring you both. this is bloomberg. ♪
stop --t's get to the top stock stories. and reordered has the story for us. -- annmarie hordern has the story for us. annmarie: they are up nearly 10%, ms down more than 2%. second time the charm, ams offering 3.7 billion euros, the second time for this offering, potentially sparking a bidding war. private equity is interested, as well.
abb also to the upside. ceo.have a new he comes with a plethora of experience and a good track record. that start adding a boost -- stock getting a boost. matt: i guess they lose their ceo and investors sell off the shares. 1.6%,t sound like a lot, but it is on a day when almost every single start is rising. now, italy's deputy prime minister making a bid for the top job, starting on the country's beaches. salvini is touring 7000 kilometers of coastline, chatting to fans, posing their chested for selfies -- bare chested for selfies. joining us is maria tadeo. this is his strategy. everyone is on vacation. why not go where they are? although i's right,
have to say this is no vacation. this is a maritime day for salvini. he was out and about the people, shaking hands, taking pictures, going for a swim. he wants to present himself as a man of the people and he wants to do that where many people won't vote for a man of the north. i spoke to him at the beach and he told me he wants the election to be done quickly. he also told me investors have nothing to fear from a salvini government. we're not going to leave. we are going to cut taxes. let's take a look. europe or them euro is out of the question and not being discussed. what we are discussing about, find wrong, and want to change, our rules on immigration and taxes. there is no plan to exit europe
or the euro. salvini, theas italian deputy prime minister. he is pulling close to 40%. you can see why he has strong incentive for early election. the timing will depend on the president of the italian republic. there are difficult decisions to be made. the budget for 2020 and a plan to hike for 2020. those are difficult decisions that could be problematic for salvini. that's why he wants this to be done in october. it's not clear he's going to get it. matt: thanks very much, maria tadeo in sicily talking to us about salvini's elections bid. andrew sheets at morgan stanley is still with us. what do you make of the political turmoil in italy? but stillw, really, managed to royal debt markets
friday. andrew: political volatility in italy is a common occurrence. this is an issue that's going to be with us for some time. it does inject risk. btp's we liked earlier were neutral now. we've moved neutral a month ago, and that volatility will stay with us. you have a tight deadline into october in terms of election dates, when a budget is due. and the european union potentially dealing with budget uncertainty at the same time the proposed brexit date is. a lot of things converging around late october. that's going to mean investors are going to continue to inject risk premium into italian assets. matt: does this kind of geopolitical risk fuel the negative yields that we're seeing in germany? today, butnchanged
still -58 basis points. andrew: it certainly does. that's one way to explain and justify the extra nehring moves we've -- extraordinary moves we've seen in european yields the past weeks. -- thes also important yields are low. they've moved to all-time lows. we're finally getting to points where european bonds are no longer positive carry, or their kerry has been dramatically reduced to the lowest levels we've seen. yes, it's a low yield, but now it actually costs money or doesn't return anything. for foreign investors, the economics have deteriorated. for japanese investors, economics are holding german bund over jgb have moved sharply
in favor of holding jgb. both of those factors, as we get caught up in the political noise and reactions, in some ways, european yields don't have the support they've had these prior moves. matt: of course, they're both negative. jgb's and runs are both negative bundsunds are both -- and are both negative. up3-d is the way to pull this function, which is a fascinating one to play with. what do you think about the negative debt? if the ecb keeps moving lower, is the fed cutting central banks around the world or will we keep moving lower? already going to see more negative debt? does it make sense because of the price appreciation? one,w: i think that's slightly unlikely, given how far
these markets have moved, given how far rates have moved ahead of a potential another round of quantitative easing out of the central bank. the european markets have a lot in the price. but i think also, it's important to step back and think about what this means for other markets. i hear quite a bit because there's yielding debt in the world, there should be a good thing for risk assets and stocks. that's the reason the stock market should go up. it is important to distinguish a couple of factors. first, why are yields going lower? generally, because investors are more pessimistic. i don't think that's a great indication for stocks. secondly, if we think about how markets are trading, what's the correlation between yields and credit spreads and yields and stocks? if this boom and yielding that was a good thing, you would expect the correlation to be
lower and credit spreads tighter. that's not what we're seeing. the correlation is equity markets would prefer for yields to be higher and growth expectations to be better. that's how we're looking at this. we're not viewing it as a good thing, but i cautionary thing for equity investors and the reason we're cautious overall. matt: that makes a lot of sense. we've got more time with you. andrew sheets will stick with us for another block. henext, president trump says doesn't need to devalue the dollar. some are starting to get worried it's incredible run could be spelling doom for the u.s. and the global economy. we'll talk about the dollar and more. newsdayery heavy fx with andrew sheets on the others of this break. this is bloomberg. ♪
one worried about the dollar's rise. the greenback has trance to every other g10 currency. some are worried this assent could be a catalyst for a recession with morgan stanley and brandywine among those standing -- sounding the alarm. andrew sheets is still with us. it's interesting, you know, i grew up listening to economists like david malpass preaching about the importance of a strong currency and strong dollar. now, you probably would never say that in public. but, now we're hearing from other economists strong dollar might be a problem. what do you think? andrew: when you think the dollar is a complicated issue, the u.s. has enjoyed enormous benefits from being the world reserve currency, borrowing rates on the belief the dollar
is a strong, stable source of value. now, i think that dollar strength is a headwind to u.s. growth, certainly a headwind to u.s. earnings. it's also important we don't overstate the issue. if we go back to that chart you pulled up, the dollar is roughly unchanged from where it was since 2015. it's up 1% the last 12 months. so the dollar has been stronger, but if we look at what's been going on in global pmi's and global earnings, you can't blame all of this on the dollar. there's clearly other things going on. yes, some dollar weakness would help, but it won't solve the things that are behind our current market concerns. matt: it is a bit of a safe haven currency, as well, and there are certain -- for example, if you are concerned of
a hard brexit, you are going to sell the pound against the dollar. although people are selling it against the euro. what do you think of the pound? and i wonder your thoughts of timing. do we see the pound against the dollar or against the euro fall into october 31? what's your take on the brexit situation? andrew: i think, unfortunately, we might. our economists at morgan stanley think if we are looking at a no deal brexit on october 31, then the pound could trade between one and 110 against the dollar. unfortunately, the odds of that outcome increase, or at least media reports suggest they are increasing, that raises some downside risk. so, the pound is cheap. we would certainly agree with that. but the pound was cheap at 142 the dollar, 130 to the dollar.
examplethat's a great where valuation could be a long-term predictor, but not a great guide over the next six to 12 months. at some point, the pound will present a good opportunity. but we don't have a buy recommendation on it yet. we prefer the euro in europe as a currency, that the market is to negative on, also an expensive and might have more support than expected. matt: let me finally ask you about the chinese yuan. how closely are you watching? is it is important this week as last week? andrew: i think it's incredibly important. why are stocks strong today? the fixing is a little bit better. we don't think it will begin substantially. we don't think that would be consistent with china strategy of trying to attract more foreign investment. if we think back to 2015, weakness there was
matt: we are 30 minutes into the trading day. shrugging of the risk. european stocks climb and use futures gained despite president trump's assertion trade talks with china could be called off. btp's on the beach. yields fall in italy following affirmation of the triple berating i fitch. tells premier for salvini bloomberg leaving the e.u. is not part of the plan as he begins campaigning in sicily. >> i don't think anyone is scared of democracy. we ask for elections. one should be scared if we say
we i don't want elections. we are not letting people vote. we just want the people to vote. matt: and saudi aramco's net profit cause more than 12% and its first ever half-year report. we'll hear from the cfo later this morning in an interview you don't want to miss. good morning and welcome to bloomberg markets. this is the european open. i'm matt miller in berlin, 30 minutes into the trading day. let's take a look and see how markets are shaping up in terms of individual movers. first off, a lot of gainers this morning, 551 stocks are up. only 60 stocks are down. nestle helping to add the most points to the stoxx 600 index. novartis and sap ringing up the rear. suffice it to say, almost everyone is up. ams is the biggest loser, off
12% after offering over $4 billion entering into what could be a bidding war for the car, light, and sensor maker. rolls-royce, not the automotive brand owned by bmw, down more than 2%. and then you see banko bill bow off, as well as kb see group. apbvik down after they run at the beginning of next year. that's a look at some of the movers. let's get bloomberg first word news with olivia hows in london. olivia: thanks. violence intensified as hong kong faced its 10th week of protests. demonstrators help projectiles. police responded by firing tear gas. the clashes followed three days of demonstrations at the airport friday.
at least 32 people have been killed and 16 are missing. it swept through the east and coastal profit and's toward shanghai. more than one million people were evacuated. china's state tv puts the damage at $2 billion. jeffrey epstein was found dead. he was accused of molestation and sex trafficking. his suicide prompted outrage. the jail he was being held is the target of two separate investigations. u.s. attorney general william barr says the death raises serious questions. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. matt? matt: olivia, thanks very much, olivia hows in london. set aramco's transparency train keeps on rolling. the biggest exporter posted a 12% decline in first-half profit, the first time the
company reported earnings, and later hosted its first earnings webcast at 2:00 p.m. and ray hordern is standing by ash annmarie hordern is standing by -- annmarie hordern is standing by. annmarie: the fact that they are doing this is news in itself. they have profits at $46.9 billion, 12% loss from this time last year. they also gave out the 2018 first-half numbers. they are citing first have oil numbers, but higher cost. one thing we should note, compared to other oil companies, they have higher taxes. for each barrel saudi room co-produces, possibly getting less due to taxes then you would see from other top producers. in saudi arabia, they have to do social spending. this is what funds the military. we're going to be speaking to the cfo following this
first-half results. what's most interesting, they're going to have the first ever earnings call. who do they need to speak to? they only have one shareholder. that is the royal family. this is them testing the waters, taking tiptoes towards what they want to do, the ipo. they are starting ipo talks for 2020 42021. matt: looking forward to that. thanks for joining us. joining us now is neil beverage, senior analyst. what do you think of the numbers? what do you think of the state of the business? neil: i think the numbers are not surprising. we saw 12% decline and that was largely driven by the reduction in commodity prices we saw year on year. also slightly higher charges within the result. the result itself wasn't exceptional, but what was really
interesting was the increase in payout ratio. the payout ratio increased to 100% of net income. that was the standout from the result. it was signaling they were going to be paying out cash to shareholders, as much as possible. isthe moment, the government running a sizable deficit. they want the cash. the clear measure -- message was the high payout. matt: how much did the murder of the journalist khashoggi affect demand for this kind of ipo? is this something investors think about at all? i think certainly geopolitical risk in saudi arabia increased for a number of reasons. it was not only the should khashoggi incident. it was tensions within the middle east itself. and clearly long-term, there's
questions where long-term demand is heading, particularly with pressure for countries who reduced carbon budget. i think there are a lot of questions around long-term investment case for aramco. but what the company is doing is really making the case for investing the company through the very high dividend returns that the company can offer. with of the payout ratio that we a $1oday, over 100%, on trillion market cap valuation, it would imply yield of summer 9%. 9% -- somewhere over aramco is looking for $2 trillion valuation, which would imply dividend yields closer to 45%, but that's going to be the key selling point they will make for investors. there are risks around the future. but your getting a very good dividend for investing in the company. matt: five years ago, the price
of oil was over $100. now we are almost half of what it was then. the last 12 months, down 20% for oil prices. how important is it the saudi's and opec or opec plus show that they can stabilize this price? neil: i think it's very important. sally still needs a break even of somewhere around $80 for its budget. it clearly wants to see higher prices. with the u.s. continuing to grow --duction by 1.5 million. 1.5 million barrels a day, that's significantly higher than global demand, and its resulting in oil prices coming down. market,ei -- stabilize we need them to cut to half a million or one million barrels of supply a day if they want to keep prices above $60.
we live in an era of price management. the policy is clear. they are going to defend pricing. we will need to see confirmation the cuts will come through if we see prices above $60. going back to aramco ipo, this is critical. as the saudi's look at the 2020, 2020 one-timing, the clear hope is that we are going to see a slowdown in shale oil production, which is going to create a favorable market backdrop for an ipo. matt: i was just going to ask you about that, the shale picture. you think there's going to be a slowdown so it creates less of a headwind for ipo price? neil: i think certainly $50 a barrel, there's no way the u.s. can grow at 1.5 million to 2 million barrels a day. just naturally given where we are with oil prices. basin has aical
life and i think we will see a maturing of the plays within this, certainly the people for and the permian, which will slow down the growth we're seeing. as we get into the early 20 20's, we're certainly forecasting growth will slow to half a million barrels or less by 2022. that creates a better environment for aramco to grow as a company. matt: thanks for your time. neil talking to us about aramco and oil. up next, we bring in the stock movers, including tello oil, after an oil discovery at their exploration well tops forecast. it's a gain of almost 20%. this is bloomberg. ♪
matt: welcome back to bloomberg markets. this is the european open. we are 43 minutes into the trading day, and looking at gains across the board. i want to point out argentina's eurobonds are open and tumbling in the early trade after the primary vote we're -- that i'm about to tell you about. the president has lost a key
primary vote. the opposition candidate won 47% of the ballot, 15 percentage points above him. they previous he said the president could struggle to come back if it became wider than seven points. this could trigger a selloff across argentinian assets. a strategist says the peso could lose as much as 25% of its value. joining us now is justin carrigan, bloomberg's managing editor for emerging markets. we see the eurobonds tumbling an early trade, i guess no surprise there. there's this spell the end for macquarie? is this in the and to just -- does this spell the end? justin: it looks that way. if this were replicated in the october election, then fernandez is elected and becomes elected without need for runoff. we'alreadyre seeing how that's
interpreted. he's a market friendly guy that took over four years ago amid optimism among investors that he's the man that was going to turn around the story and restore confidence and so on and so forth. that hasn't worked out. these needed a bailout. he's still got austerity and action, but that's hurting ordinary argentines on the ground. this is what is reflected in the election result. matt: what should investors reflect -- expect for a government if he wins the election at the end of october? lot depends on a what happens between now and the election. if this causes a lot of turmoil in argentine markets, and it looks like it will in the short-term, then that kind of place into the fernandez
narrative that the current government is not able to hold it together. then, of course, once he takes over the reins, he is going to inherit a poor situation. and whether the imf wants to stick with an argentinian in that scenario becomes an important question. and then the cat is out of the bag and who knows where it goes? it's an uncertain moment in the argentine story. that's what we're seeing in markets today. matt: thanks very much, justin carrigan, emerging markets managing editor. let's get to stop stocks stories now for annmarie hordern. annmarie: i want to kick it off at the top of the stoxx 600. soaring this morning's total oil , topping the forecast. on monday to the upside, just this morning, upgraded to buy, his goldman sachs.
to the downside, thomas cook plunging, down 20% now. they seek an additional 150 million pounds. matt? matt: thanks very much. it's m&a monday. let's take a look at the deals driving markets and big movers in europe. joining us from our deals team is sarah syed. , maybel about ams' bid starting a price war, certainly moving the markets. painfult's been a movement to cover. the feeling was they were the only bidders around in this process. about a month ago, they said they would like to make a bid. they rescinded that offer, said they would like to do another, and pulled it back again. it's been a roller coaster ride back and forth, putting pressure
on bain and carlisle, the equity consortium that made a bid for the business. matt: so do we get them coming back to increase the offer? sarah: that would show their eagerness if they do come back with a higher offer, that they have been doing due diligence. for the offer they are putting on the table, as far as their considered, it is a fair and good offer. they've also been under pressure last week, the largest shareholders came out and said they felt the bid from bain and carlisle undervalued the business, and that put them under pressure to reconsider the offer they had got on the table. connectionsk of the to the auto industry. what does ams stand to gain if they do get this purchase? sarah: massive exposure to the automotive market, which is not a positive thing. matt: what is good about that?
sarah: that's one of the things that struggled and was a point of struggle for bain and carlisle to get financing in place. but yeah, exposure to the automotive market is not good. but the diversification that would help spread out ams' risk and revenue return and diversify that. so the risk is high, but they stand to gain a lot by diversifying fully. matt: what else are you looking at? this is one deal. i know there's a lot of smaller deals popping up. what is big on your radar? sarah: we like to think august or the end of july it's a summer wall, but it has been -- summer lull, but it has been very busy. there was a $27 billion deal in the middle of london summer. that's one of the things we're
working on. there are deals in the u.k. they made an offer for this business. the key shareholders in that process are not happy. we might see another bitter merge -- bidder emerge. we're looking at the public to private situations, and also massive corporate carveouts. matt: a lot on your plate. thanks for joining us. if you're a terminal subscriber, you can get the latest news by typing in m&a go on your bloomberg terminal, and you can get a lot of really cool information. coming up, the rich get richer. the 25 wealthiest families added to $50 billion to their fortunes. we'll break down the winners next. this is bloomberg. ♪
matt: welcome back to bloomberg markets. this is the european open, almost an hour into the session, looking at big gains, the dax up over three quarters of 1%. remember we had a rough friday, as well, so this is a little bit of a dead cat bounce. the numbers are mind-boggling for rich people getting richer.
$74,000 per minute, $4.5 million an hour, $107 million a day. that's how quickly the fortune of one family has been growing in the past year, the waltons, the family behind walmart. it places them at the top of bloomberg's annual ranking of the world's richest families. in the times since i started speaking, they made $30,000. it's not just the waltons who have seen their fortunes expand. that when he richest families added a quarter of a trillion dollars to their wealth in the past year. joining us now for more is tom metcalf. what is fueling these big gains for the rich? tom: i think it's two things, really. the environment out there is great for anyone with capital. low interest rates, stock markets are booming. if you are lucky to own walmart,
or the koch brothers, they are going to see their fortunes multiply. on top of that, we're seeing families do as much as they can to make sure they stay rich and get richard. --y are looking richer richer. waltons,looking at the they are doing everything they can to keep pushing these numbers even higher. matt: are there any new entries this year in the top 25 there? the ale biggest name is saud family. this aramco had their latest quarterly results, and the number we give to them is $100 billion, a huge figure, but likely a lowball one because there's so much opaqueness and difficult to unpick that particular fortune. but we managed to get a baseline figure for that family.
they're around $100 billion. matt: what about any decliners? any families falling down the ranks? tom: yeah, not everyone is getting rich, certainly not at the same pace. the courts family is down $8 billion. bmw had a bad year. a few families have fallen off the list. the disco family are no longer there. the duncans of america. in the lee's in korea. matt: tom metcalf, bloomberg's wealth reporter, talking about the richest families, one of our most read stories of the day. that's it for the european open. stay with bloomberg television because up next, it's surveillance with francine lacqua. i'm headed off to radio, which you can check out if you're on london dab, or on your mobile device anywhere around the world , internationally broadcast.
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