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tv   Bloomberg Markets European Close  Bloomberg  April 7, 2016 11:00am-12:01pm EDT

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european close on bloomberg markets. mark: we will take you from new york to london and to answer them in the next hour. here is what we are watching. u.s. equities are falling, along with stocks in europe over news concerned that central bank policies have failed to revitalize growth. are the concerns as dire as policymakers make it seem? the political future for brazil's president hangs in the balance. today, a report suggested proceedings move ahead but jpmorgan tells investors that
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they are not pulling out of the region. mark: and the ecb says it has not run out of room to ease again. a larger rate cut and exempting some deposits from negative rates. let's head to the european close. 90 minutes into the trading day get to the, let's markets desk. julie hyman has the latest. julie: stocks falling to the lows of the session as the nasdaq pulls down by 1%. global growth worries continue to return to the market. that is manifesting itself in the reaction we are seeing in the japanese yen, going to the highest versus the u.s. dollar actually now below 108 again. going back at least to october. 10 year yields are going lower
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today and gold is rising. so today there is more of a risk in the market. what is interesting is that lately, we have seen more of a risk on. or have we? recently, we have seen this rebound in the stocks. this is the white line. and this is the world index, the broad index of what we have seen around the globe. it happened at the same time that we did see indicators with caution. gold has also been rallying and treasuries have been rallying and he yields have been going lower. that is because lower church is here. so even as stocks have been going higher, we have seen investors with timid behavior that indicates they have been cautious. and now we are seeing stocks come off of the rally, the highs that we have seen. mark: news crossing in the last
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hour on tesla? julie: yes, the model three, the more affordable vehicle, they have been taking the preorders and says they amount to 325,000 orders which would imply sales of $14 billion and yet the stock has been ticking lower ever since this news came out. there may be a couple of things going on. if you look at how the stock has done over the past couple months , going back to february 10, the stock has rallied 80% since then alone. a part of that may be an effect of potential short squeeze that we have seen with the shares. they are heavily shorted. the other potential reason for the decline could be the idea of production. is tesla going to be able to make 325,000 model threes in order to meet the demand? when it has had issues in the
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past, it hasn't been an issue of demand, that an issue of supply. mark: have a peek at what is looking to the stoxx 600 in europe, 30 minutes ahead of the european close. earlier, we were up but now we are down .8%, health care stock is rising but a majority of the industry groups are trading lower. that is over concerns over economic growth. political concerns have been driving bond yields up for the six consecutive day. this is a wonderful chart of the hour. gold on the longest losing run since 2012. that is when the ecb president, mario draghi, uttered the words, i will do whatever it takes to save the european union. today, it is well below those levels at 1.6%. that still, this is the longest stretch since july, which leads
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to discussions about political talks over the government throwing in great -- throwing in risks about bailouts and briggs it concerns. a homebuilder is here in the u k and shares are down today. developers in central london are offering investors discounts of as much as 20% on purchases of luxury apartments as demand for international buyers plummet the cousin of higher taxes and flow commodity prices. that is benefiting -- that is fascinating. this goes back to 2000. we had a report today from halifax showing prices rose in march but halifax did say that it is unsustainable because we corrected on the confidence and
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uncertainty once again surrounding the upcoming referendum. fremont prizes is up year for year the most since july 2014. we have a shortage of homes here and record interest rates that is boosting the appeal of companies. i wanted to show you this. going back to 2000. in 2002, the annual rate was 30%. we came down through 2009 into negative territory but we have been rising ever since. that halifax says these gains are not sustainable because of brexit concerns. it is the brexit word again. betty: it is. let's check in on the bloomberg first word news with vonnie quinn. vonnie: belgian prosecutors are investigating the terror attacks and they want information on the man in the hat. he was seen with two suicide
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bombers moments before the bombings. newly released photo show him leaving the airport and going to a nearby town. authorities are asking the public for any information or photos. vladimir putin has a night having any links to offshore accounts. he says that this is part of western efforts to weaken russia. his longtime friend is the owner of $2 billion in assets says he has done nothing wrong. merrick garland boko -- president obama will go to the university of chicago and will argue that senate republicans should give garland a confirmation hearing. asked ther -- have judge not to send them to prison. a filing says he is in poor health and has already been shamed by the case. he tried to pay $3.5 million in hush money to keep misconduct a
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secret. venezuela, the president is trying to save electricity by declaring every friday a holiday. pushed waters levels to a critical level. global news, 24 hours a day powered by our 2400 journalists. mark: thank you. in his annual letter to shareholders, jamie dimon wrote about his outlook for brazil, where political turmoil continues. a congressional report released today gave the go-ahead for the impeachment proceedings against the president. betty: right, but that is not scaring off anybody including jamie dimon. he said worst-case scenario, they could lose $2 billion of
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their own investment but they are not retreating because the long term prospects are fine for decades to come. agrees -- good to see you. so you would agree with jamie dimon? gary: yes, we are moving from a time of uncertainty with no visibility to visibility. the lower house votes april 15 followed by the senate and then thee is a trial and once trial begins, then the vice president assumes control. betty: but it is peculiar, because as these proceedings seem to become a reality, we have seen the stock market go up and it seems like business leaders are coming out and saying, this is actually a good thing. gary: i think this is a good thing. anyone but him. that is the headline here.
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nobody knows who the replacements are but it is anybody but her. betty: what investments do you see there? gary: long-term, it is very attractive. long-terthe replacements are but it is anybody but her. betty: what investments do you see there? gary: long-term, it is very attractive. long-term goals related to brazil are businesses with the middle class. mark: many are coming out but you are going in. are you a natural contrary in? gary: we are in this case. there are a lot of people who are watching and we have great experiences in brazil going back a few years. a better perspective than most. and we don't want to be calling a bottom but it is a transition time. mark: when i be most think that -- the most attractive sectors? property, houses, those kinds of things. not housing. not offices. betty: are you worried?
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even if she is impeached, are you worried that corruption will continue? gary: this scandal and washout, operation carwash, this is a great thing for brazil. because it was not led by a person with a political agenda. it was people doing their jobs. it was the federal police, congress and there was a message. corruption will not be tolerated. betty: and you think that will change? gary: yes, it is the beginning of a new era, one with less corruption. betty: do you think she will be impeached? gary: we believe she is on her way out, it is just a matter of when. mark: saudi arabia, which you were going to mention, it is a fascinating story.
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we have had the news in the last week that the economy -- they are in the process of revamping their economy. are there opportunities in saudi arabia for you? do you think this is achievable? this is an or miss. ofs is a potential revamp the economy. and it is potentially a conservative society. gary: we were just inside saudi arabia visiting with saudi aramco. been a monetization of long-term assets. it is a rejoining or a joining of major sovereignties. so whatever is capitalized is .onetized and saudi will join taboo dobby with major players as global
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investors through the sovereign wealth vehicle. as you point out, lower oil prices are a factor. saudi arabia is an important country. an important ally for the united states. and lastly, i think this represents a pivot away from fossil fuels to lower carbon. mark: how close is it really opening up? it is an enclosed society and many say they don't really want the ways of foreigners taking over. would you say this is a true it is openingthat itself up to external investments? external thinking? gary: it is symbolic, absolutely. not just to get a transaction completed, but ongoing in public markets.
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change?t mean truly a i'm not sure. society, it is a strict society. we were not anticipating this to be more than financial at this point but perhaps, over time, there is a more international nation. potentially $2e trillion in sovereign wealth funds? gary: it would be the largest, by far. betty: a huge margin. what kind of impact with that have? they have to put the money somewhere. gary: there are a lot of people smiling. betty: a lot of people lining up. gary: there is this idea of the saudi's joining sounds like
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allocations,after i'm sure it will be invested well. betty: did you book your ticket already? gary: i don't want to disclose that. [laughter] betty: before we go, what about areas right now that you were considering going to put there is geopolitical turmoil around the world -- anywhere that you are pulling back from? gary: not really. there are plenty of folks who won't touch was ill right now -- il right now. columbia, as well. through latin america. ant -- dallas gary garrabr
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much more ahead on european markets. mark: you better believe it. stocks are lower in london led by shares in a banking at energy. and we have much more of the potential fallout with brexit. if britain leaves, there is a chance part of the credit market would leave with it. ♪
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betty: live from london and new york. i am betty liu. mark: i am mark barton. this is the european close. betty: we will look at some of the biggest business news in these -- some of the visit -- some of the biggest business news right now. drugmakers are trying to rein in their debt, valeant has been
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given more time to file its report, the company is under scrutiny. expectedricans than filed claims for unemployment benefits last week. 267,000, nine thousand fewer than the week before. weekly unemployment filings has a below 300,000 for more than a year. recovering to the most level since 1973. and one of the hottest things on the web, the first trailer for star wars. the two-minute teaser arrived and it is scheduled to open in december. can you wait? that is your bloomberg business flash. mark: the death star. i can't believe i have caught sight of the death star. have a look at what is happening
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at european equities. it is a similar story to what is happening there. stocks down, global growth iscerns, and the stoxx 600 .9% lower. 2000 14, still ahead. a brish exit from the european union. that is what we are discussing next. eu banks could find themselves with a liquidity problem. ♪
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mark: you are watching bloomberg markets and i am mark barton in london. betty: i am betty liu in new york. this is the european close. mark: if britain decides to leave the eu, there is a corner of the credit market leaving with it. european banks could be left having to replace as much as 108
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billion euros or $123 billion of security. joining us now is alastair marsh , why could european banks be left with replacing as much as 108 billion euros of securities? banks and global regulations are required to hold a certain amount of liquid assets that they can so quickly in case of an emergency. one of the stories or things you learned from the crisis was that banks were left holding assets that they could not so quickly when they needed cash. and as a result, banks have a requirement to hold liquid assets. mark: what are these securities? alastair: the biggest portion our government bonds, highly liquid and can be sold quickly. a portion of that is also acid -- asset bank security.
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from mortgages or credit card debt or auto debt and those kinds of things. mark: why won't they count anymore? alastair: under eu rules, the assets that back those rules have to be from an eu member state and if britain is no longer a member than those assets don't count. mark: does that mean the banks will have to sell these assets? will they sell them ahead of the referendum? if we leave to leave the eu, after the referendum? alastair: we don't know exactly what they will do but it is likely that they would sell because they are holding them for the purpose of meeting this requirement. so they can meet global regulatory standards. and you imagine they would just dump them and try to replace them. mark: this market has been strict anyway. the repetition has been battered and how much has it shrunk russian mark alastair: since 2007, about 40%. so quite a significant
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contraction. the story from the fx, the security story was that it bloomed before the security crisis and then the name becam tarnished and regulators have penalized it and try to shut the market down and there have been a few attempts to revive it such as mario draghi's purchase program but there has been little fruit from that. mark: -- the labor candidate running spoke about the upcoming referendum on the eu. >> if we turn our back to the european union's 500 million customers, they are walking away from a market with so many jobs in london at the expansion -- it is ludicrous. and the idea that we would elect a mayor who wants to leave the european union is hostile is taking a risk with our future. a u.k.rexit is not
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issue, it is a european issue. alastair: exactly. most of the discussion has been about the u.k. that actually, it has a huge impact on europe. in terms of inks, a lot of the discussion has been about relocating headquarters or personnel but what we are showing here is that there is a regulatory and financial impact on them. mark: thank you for joining us. that was alastair marsh. the european close is minutes away. the stoxx 600 is down more than 1.6%. falling for the second day. this is the european close. ♪
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mark: let's take you through the action.
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health care, best-performing industry for a second day. the stoxx 600ry, itself is down by 1% over the day. salesng and home goods found a less than estimate -- .ell in estimated lovely short of clothing retailers. i should have a stamp on my head, mark barton normalize at 100. because they all seem to be normalized a hundred. this is draghi's preferred
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inflation gauge. the ecb is jawboning. draghiot draw the -- today saying policymakers will not surrender to excessively low price growth. the central bank is ready to do what is needed. the inflation expectations have been rising. 1.42% highs of last year. -- we ignored the pounded the last week or so. volatility is on the rise. level, implied volatility, which measures the exchange rate euro-pound over
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the next three months. at its highest level since 2009. we can't get away from the upcoming referendum with less than 80 days to go. volatility continues to climb. we are not at the highs of 2009 when we were roughly at 21.979. at the way we are going, how soon could it be before we reach those 2009 highs? will be hereens, i to chart it at and be on the referendum. betty: normalize any well. [laughter] from thees are out ecb. he went through some of what they showed. they showed that policymakers do not rule out the possibility of a further rate cut or further rate cuts deeper into negative territory. mark: now joining us for a deeper look, neil williams group cheap economist -- chief .conomist at hermes
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show we start with the accounts first come otherwise known as the minutes of the ecb's last meeting? it was discussed, a larger rate cut. and it was discussed that some portion of axis reserve would be [indiscernible] that didn't happen because of a complexity. we had a rate cut. there's room for more. did we have anything that is mind-boggling from the meetings? : he will never get a detailed set of minutes when there are 19 countries involved. so we got a summary. it doesn't offer much scope for them being something radical and revolutionary left in the toolbox. which is getting that bit and dear. for the time being, dr. draghi has done what he can can but i don't doubt he will dabble again with negative interest rates.
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just an aside, they are not new. i just about remembered in the 1970's, switzerland had them and they did that work then. long-term negative interest rates because the -- is a mark: that chart behind you, lows, that from its would being purging. are you in the camp that inflation, even expectations, are going to creep up or, as draghi said, as pressed said today, they are ready to do what it takes to get inflation to the target? how much stimulus to we need? is too soon tot pop champagne corks. that has really gone up with u.s. and global expectations. and don't forget, the euro has
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gone up, not down, since christmas. and since we have the second -- the acceleration in kiwi last month. oil is partly to blame. oil, the core rate in the euro is at 1%. there is a lot more that should be done. but as we know from japan after 17 years, once you have a tap on, how do you switch it off? betty: and there are comparisons between japan and what is going on here in the u.s. were you surprised by the the fed minutes yesterday, in the vigorous debate around raising rates? and a week after that, we get such a dovish speech from the fed chair? byl: i wasn't too surprised what were a proper set of minutes, not just a summary, from the fed. largely because it seems that the fed members believe firstly the u.s. economy is on the right track.
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let's face it. for the advanced economies. it is in the fast lane. secondly, my reading is that the fed members or at least some of them. from their lens they believed as high asis not 1.5, but as low as minus four. -1.4. as low as it seems the fed hasn't stopped. but what i am looking for is to more increases this year to then peek out at only 1%, which is a much lower peak rate than we are obviously used to. we just looked at a chart of implied volatility with a record of 2009. are brexistt -- concerns got you shaking in your boots?
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new: not really. even if the u.k. votes to stay income a we know that referenda really do not put the issues to bed. that is what happened with the scottish independence vote that we had the before last. in terms of the pound, the pound is really the main press release. it is the thing that is showing that there are no beginning to create -- to creep in. if the u.k. does vote towards brexit, the impact on assets will be impressive. impact on gilts is more debatable. health might actually like the -- gilts might actually like the fact that we are moving toward a lower profile. but who will buy the gilts? might mean a brexit that the bank of england will have two wheeled out it's kiwi.
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mark: we will chat more and more about this in the next few mons. neil williams from hermes. betty, how are things looking over their? betty: we are two hours into the session and not looking great at all. tech shares taking a big hit today. the nasdaq down over 1%. abigail doolittle has more. abigail: that's right. we do have the nasdaq down at 1% at this point. the worst drag is apple. hearing positive chatter on the 7.laxy s when we look at a six-must chart, we see the sellers have recently pushed apple back below the 200 day moving average.
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very similar to late last year ahead of a big decline. so there could be some weakness ahead for apple into the april 25 second-quarter report. betty: what is the bright spot here? kb go: trading her off of the trading off ofl: the open, bed bath & beyond. they declared a dividend for the first time ever. you would think that would be a positive. but bloomberg analyst seema shaw has a different view. she says the initiation of a revenue may show that .- merchant pressure looks like the strong downturn over the last year could remain in effect and send shares lower yet. betty: thank you so much. the bloomberg on first reviews.
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vonnie: an extradition request by egypt has been approved. he is accused of forcing a flight from alexandria to cairo .o land in cyprus the hijacking ended peacefully six hours later. thousands of refugees camped out at the largest port in greece have been given an ultimatum. moved to camp's voluntarily within the next two weeks or be expelled by force. stranded inen greece because europe has closed its borders to them. meanwhile, pope francis is heading to the greek island of less post to show solidarity with refugees being deported back to turkey. the pope accepted an invitation. francis has says -- has said europe has a moral obligation to take in your refugees.
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leaked files charley's $2 billion in transactions involve individuals and businesses that presidento russian vladimir putin. global news 24 hours a day. still ahead, from -- on the european close, we will year from the pearson chief executive john stalin. to transform the media giant. he will explain what it is next. ♪
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betty: please time now for our global battle of the church
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where we look at the most telling charts of the day, what they mean for investors. kicking things off, joe weisenthal. the beginning of the year, there was a lot of anxiety about european banks that were plunging nonstop. then of course, we had the ecb go into action, expanding its balance sheet, saying it was going to buy all kinds of bonds. but let's look at what happened. this is the bottom here, middle of february. since then, we have seen this day surge in the white line, the , theean high-yield bonds risky bonds that the ecb is going to start bond buying. but this green line is european banks. that rallied a little bit. but it has been plunging again. european banks heading back to the low levels that they've seen in february. and there's got a be a lot of anxiety for people at the ecb
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who are watching the stock chart and worrying what that meant for the banking system and, overall, the broader economy. so it's a mixed message. joe: absolutely. i don't think they want to be seen that at all. i'my: i'm also -- mark: also talking about bottoms. this is the bottom of the stocks msci world index, the measure of global stocks on february 11. since then, it has riven -- it has risen by 12%. does the rally and risk assets have legs? about thescinating higher portion of the charges come at the beginning of the year, you had stocks falling and bonds rising. that is the traditional relationship. one rises, one declines. but since march time, they have been moody -- they have been moving in lockstep. the price of gold has held onto
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its gains and the yen continues to rise against the dollar. the haven assets are gaining. says that havens -- one analyst says that havens are an indicator. they are slower to react. does that tell us that this rally and risk assets is over? betty: we shall see. but i will tell you one answer, mark. mark gets the win today in his battle of the charts. moving to the education sector, john fallon says it is still in good business. interview, hee spoke with fallon about the efforts to reorganize. it makes a: i think simpler company. it has been through significant
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parlor folio changes -- four changes. when you go through a process like that, you go through a hodgepodge of changes in hr. where turned to modernize and transform and simple mise the company so we can scale more in few or global products. education is a great business to be in over the long term. like any business, it has its ups and downs. more difficult period. but we have a compelling certification plan underway. pearson delivering $1.2 billion and then resume significant growth from their onward.
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i do think it is a good business for the long-term and that is something we are working very hard to demonstrate. david: random house pen when, that is not an education operation. house-penguin, that is not an education operation. are you adjusted and selling it? john fallon: the business is doing very well. we are still in the process of consolidating and integrating businesses, so we don't peek achievee don't peak synergies yet. i think let's work our way through until 2017. that will be the first window of opportunity for us to exercise our right to dispose of the asset. but for now, we are very happy with the performance and please to be a shareholder desk and inased to be a shareholder
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penguin random house. david: if britain were to leave the eu, what would it mean for pearson's business? john fallon: i don't think it would mean a lot as such. clearly, we would prefer not to see the degree of economic uncertainty it might ring to the markets in london in the short term. i hope britain doesn't leave the european community. a recent survey of vice chancellors and universities --oss the u.k. are overly are overwhelmingly in favor of written staying. i hope it doesn't happen. it's something we will manage and work their way through. fallon withas john the david westin. voters in the netherlands have overwhelmingly rejected close
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european ties with u.k. -- with the ukraine. ♪
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from new york and london, i am betty liu. mark: and i mark barton. business flash. labor leaders in germany say they have lost confidence in management and they are demanding job protection. it all has to do with the growing cost of the vw emissions testing scandal. price of a home surge to $302,000. but halifax says the growth may not last. that is because of a lack of
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confidence in the economy and concern the u.k. may vote to leave the eu. bloomberge latest business flash. folks in the netherlands have overwhelmingly rejected a treaty the eu and ukraine. they say this is an ongoing process and the eu will implement what he can with the ukraine deal. this vote is pushing the pound lower. the thinking is the dutch vote could embolden the chances of a brexit.ed grexi why did a judge put this to a vote? : last year, a new law was passed in the netherlands that allows any citizen group that collected 300,000 signatures to put an a lot to a referendum and this is the law
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they chose to a group of activists spent last fall, sin the country and got enough signatures to put it to a vote. they wanted to make their relationship between the netherlands and the eu more difficult. betty: given that this could be , howe for the brexit strong of a clue? and is this something that international investors outside of europe should be watching closely? celeste: it does signify a growing sense of eu resentment and growing amount of motivation for people to come out to the polls and voice their opinion. indeed, the pound fell for a third day against the euro, making people pretty concerned that this could be something that bridges voters will take increasingly seriously come june when they have their own vote on whether or not they stay in the eu. mark: what is the reaction like in holland?
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the prime minister pushed for this vote. he pushed for it to be fast -- to be passed. is he under pressure? his this intermittent -- is this an immense blow for him? immense i would not say blow, but he has to go back to his cabinet and take the vote seriously and say that netherlands cannot ratify the treaty. it is t only one of the 20 members that cannot that's -- that has not ratified the treaty. so he has his work cut out for him. it comes at a pretty bad time for him as he and his cabinet are less than a year away from national elections. it has clearly emboldened his own opponents. thanks for joining us.
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here is a reminder of how we finished the day here in europe. all i can see is red across the bloomberg. just one industry group rising today. health-care stocks gain a for a second day. energy stocks down. banks down. autos down. today.rling falling the euro down against the dollar. and greek bond deals -- not greek, spanish bond deals rising. tonight's't forget rare conversation between the fed chairs past and present. stay tuned at 5:30. ♪
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scarlet: welcome to bloomberg markets.
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good afternoon. alix: here is what we are watching at this hour. a rush to save havens is driving the dollar to its lowest level against the end in 24 -- in 2014. scarlet: u.s. stocks pulling back since the march fed meeting, turning their attention to what the next earnings season will bring. alix: for still no relief in the commodities market. crude oil not showing any signs of remodeling. scarlet: we are halfway into the u.s. trading day. we need to check in with julie hyman. stocks, aike the u.s. resumption of this weeks declines. julie: definitely.


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