tv Bloomberg Markets European Close Bloomberg May 6, 2016 11:00am-12:01pm EDT
close on "bloomberg markets." ♪ mark: we are going to take you from new york to london in the next hour. here is what we are watching today. voters in a brexit as the u.k. decide on a new mayor among other things. in ireland, his second term as prime minister. we will break down the outlook in europe. vonnie: labor markets slowed in april. payroll data coming in weaker than expected with 150,000 jobs added. how will the federal reserve read the report? mark: area finance ministers will hold an emergency meeting on monday to discuss greece. we are speaking to the largest private holder of greek government bonds.
it is 90 minutes into the trading day in the u.s. already so let's head to judy hyman -- julie hyman. julie: losses are accelerating in the major averages. all three falling to lows of the session, particularly the nasdaq which is down .6%. does it have to do with the jobs report or is something else going on? there's corporate news helping to pull down major averages. only materials and telecoms are in the green. utilities and health care advocate of worst-performing groups along with financials, lower after the jobs report. within utilities, there are specific stories driving those stocks down. southern company doing a secondary offering, diluting the ,alue for existing shareholders coming out with earnings that missed estimates. we are seeing a broad decline, american electric power also
lower. within pharmaceuticals and health care, endo is leading declines down almost 38% now. the company cut its full-year earnings forecast. it is well below what analysts had been predicting. that is in the face of increasing competition, including from earlier than expected generic versions of a painkiller that company makes. you can see the other pharmaceutical makers are also down sharply in today's session. , weing to the other assets are seeing what is going on with jobs. the 10 year yield is little changed, unchanged. it has been bouncing around today. the dollar trading slightly higher in the wake of the jobs report. what is interesting is coming up to the jobs report, there has been a divergence. you would expect normally the dollar and yield to go the same direction. that has not been happening recently. yields singing to reflect the outlook for inflation. the dollar has continued to
trend lower. we will see if they come back into line. not happening today unless you figure no change is back into line. mark: down for the second consecutive week, the biggest weekly drop in two months. .6% lower today. it has been another day dominated i earnings. crowne plaza, holiday inn. will markets hit middle eastern travel? slow demand in europe and america. shares are down 1.5%. the german company, chemical maker, the chemicals and additives unit, it is a transaction valued at $3.8 billion. this is a story that broke last night after the european close, rejecting the unsolicited $9 billion offer again after the french drugmaker threatened to go directly to shareholders,
setting the stage for other possible suitors in this bidding battle for motivation -- m edivation down 1.3%. vonnie: matt miller has more from our newsroom. for matt.t is rami we had to the wildfires in western canada. they may become the most expensive catastrophe in the country's history. the fire are an area bigger the new york city. more than 80,000 people have fled the city and 8000 people had to be airlifted out. insurance losses may go over $7 billion. a number of republicans have backed away from the party's likely presidential candidate, donald trump. he does have one of the richest republicans in his corner. that would be billionaire casino magnate sheldon agents and -- sheldon adelson. he has donated millions to
republican candidates. north korea has begun its first full meeting of the ruling workers party in 36 years. that meeting gives kim jong-un a further chance to solidify his grip on the country. he came to power five years ago after the death of his father. little is known of what he plans to do it that congress, but he may focus on economic growth as well as military strength. news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. back to you. mark: thank you. are the results from the u.k. -- area results from the u.k. she will extend her time as the head of scotland's so my autonomous government. lossesour party suffered to the u.k. independence party. a mixed picture in england, just seven weeks before the u.k. votes on whether to stay in the e.u. joining us now, simon kennedy.
something for everyone. for those looking for signs of the u.k. heading for a brexit, there was not much? >> there was not much. this was not a country about to stage a revolution. yes, it is scotland. he gets back in without a majority. the labour, party did as bad as it has done in several decades but not as bad as forecast. bitales, it rose a little but not as much as it wanted. country you look at in seven weeks that will march out of the european union. mark: traditionally, the opposition does well in these elections. this was a real test of the new labor leader's popularity and vision, whether it is reaching the country. what is the verdict? elections are used to give a bloody nose to whoever is in power.
expected one.e as a referendum on jeremy corbyn, it was a referendum on him and he got a bit of a bloody nose. labor did not perform as badly as some expected beforehand. labor party officials say the project is still underway, that jeremy corbyn still has to build rapport and policies. certainly the opposition party would have expected to do better in an election like this. vonnie: do you anticipate these results impacting the campaign for a brexit? >> one group pointed out if you wanted a strong labour party to work with the government to deliver a brexit, that is probably not the case. you don't have as strong and opposition as you would want to have. infighting against brexit, it would be good to have a stronger
labour party. that is probably what you don't have as a result of these elections. mark: thank you, simon kennedy. still ahead, it is jobs day-to-day. hiring in the united states has slowed to the lowest level in seven months. what does it mean for the fed and global economy? where talking to mohamed el-erian for perspective next. vonnie: president obama is going to deliver a statement on the economy from the press briefing room. we will bring that to you live right here on bloomberg television. ♪
mark: live from london and new york, i am mark barton. vonnie: i am vonnie quinn this is the "european close." it is time for a look at some of the biggest is stories -- business stories in the news now. genera electric raised $49 million sharing chairs -- selling shares in the largest ipo in the czech republic since 2008. jeff arnold wants to shrink the finance business and focus on the industrial unit. a new government report tells the tale of two americans when it comes to retirement. the best pay u.s. workers are on track to have 11 times more money saved for retirement than the lowest paid. voluntary savings plans have replaced traditional pensions. about 60% of u.s. households nor 401(k)an ira starley count -- style account. mark: let's talk jobs. the big day today.
u.s. employers adding a lot fewer than expected last month. payrolls increased by 160,000 in april. that is the fewest in seven months. with 40,000 less than the estimate. vonnie: your treasuries falling initially on the report. it has climbed back to where it was. joining us with his reaction is muhammad ali area -- muhammad el-erian. you say in your bloomberg column today this report makes life more difficult for the federal reserve. it does. does that mean they won't move in june? several houses today moving their call back to september. >> the market reaction initially was overreaction. the extent to which analysts have gone to eliminate the probability of a june hike was also an overreaction. if you look at the internals of this employment report, it is quite mixed. to conclude that quickly that
june is completely out of the question and we are unlikely to get a hike in 2016, i think is going to far. vonnie: the mixture would seem to be better fundamentally than recent months. the quality of jobs created is better. there are fewer created, partially due to the weather and other seasonal elements. >> put it in context. average wes means on have created 190,000 jobs this year. that is down from 220 last year. that is to be expected. we are taking slack out of the economy. if you look at the labor participation rate and population implement rate, both moved suggesting there may not be that much slack. secondly, .3% increase in monthly wages is a meaningful number. if you look at the employment report as a whole, it suggests
it is a labor market that continues to heal. job creation will come down in terms of numbers, that wages are going up. i think that is what the fed is one to focus on. i'm looking at our interest rate probability function on bloomberg. it is telling me there is a 47% probability of a rate hike in december. a meeting this year which has a higher probability now than 50%. you are still saying two hikes are very much a likelihood in 2016, yes? two, oneying one to certainly, maybe two. the fed has learned it has a window. financial markets, relatively calm. the dollar has depreciated. when the fed looks at whether to hike or not, it looks at the
famous equation ben bernanke set out in 2010. it is about benefits, costs, and risks. you have to take all three into consideration. i think they will hike at least once and could twice this year. mark: you wrote the fed is happy to validate market expectations it has helped manage in what has become a strangely intimate, codependent relationship. as we know, not all codependent relationships are healthy. does this relationship have the possibility of becoming unhealthy? >> i think it has. if you look at what has happened in japan, it is a clear signal central banks are getting closer to that line that separates effective monetary policy from not just ineffective policy but counterproductive monetary policy. i think japan signals a warning to other central banks to be
careful not to overdo it in terms of unconventional policies. vonnie: do you see the fed moving in september before a u.s. election or would that create uncertainty in the markets? >> it is possible. if we get relatively stable markets, if we get jobs reports like today, yes, they will hike. you have got to step back and think the fed wants to normalize policy. it is worried about the collateral damage and unintended consequences. this is a fed that would like to normalize very slowly. if there is a window, it will take advantage of it. it learned from last year when there was a window and it did not do it, and later on life became much more complicated for them. if the volatility continues and the bank of japan
has to do more, does this put the fed in an awkward position? the fed does not have much at its disposal right now. at thefed is looking bank of japan with very mixed feelings. on one hand, it is looking at a bank of japan that cannot deliver the outcomes it wants. tot is quite a warning sign the rest of the central bank community. in addition, the japanese appreciation does not help global rebalancing. neither does the euro appreciation. on the other hand, the depreciation of the dollar gives the fed room to maneuver. i think at the end of the day, it is domestic consideration that you have greater room to maneuver that will prevail. mark: there is a chart to my right which you cannot see which shows the relationship between treasury yields, specifically the two-year and the dollar. it seems as if that relationship broke down in mid-february.
do you expect something to give here or has that relationship broken down for the time being? is there a reason for that? >> i think the reason is basically because you're looking at a relative price when you look at the exchange rate. the minute you put the dollar up there coming up got to start asking questions about what is happening in the rest of the world and how markets are reacting. the biggest surprise has been that markets have reacted in a counterintuitive way to the further loosening of monetary policy in japan and europe. that is the biggest surprise. that raises the question of why. there is good evidence that at some point, markets go from pricing flows to pricing stocks. that is something to keep an eye on. vonnie: bank of america, goldman, and barclays pushing the next interest rate hike out to september.
i am curious how the fed changes its messaging. it had been forward talking about june in the last couple of weeks. possibilityg up the for the june or july meeting? michael says july is still a possibility. how does the fed change messaging? >> i think they will remind us of data dependence. they will remind us there is an employment report coming up in june. they will remind us last august and september, we also hit a soft patch in terms of job creation. the major unknown for me is something you were talking about earlier. with the fed move ahead of the brexit referendum? that is a major unknown to me. i don't have a good feel for that. in terms of u.s. data, they will remind us that our recent historical examples of soft patches and let's wait for the jew number. vonnie: if you think the fed will move now given these numbers, it doesn't really matter what happens with the brexit. it is a moot point at this
point. i am curious to know about the fed's credibility. it had been serious about moving in june. and now that is going to move all the way out to september, does that not dent the fed's credibility? >> the fed has not signaled that. the markets have signaled that. i think the markets have overreacted. i said be careful. the fixed income markets are overreacting. they are overreacting fairly sharply pricing down the probability of a rate hike all of this year. i said be careful, it is too early to do that. it is the markets that have overreacted. the fed has not said anything yet. it will be interesting to see how they come out after this number. i think they will remind us we are data dependent, applications is all over the place because data is all over the place. i think they will say we will wait and see. vonnie: thank you.
vonnie: live from london and new york, i am vonnie quinn. mark: i am mark barton. this is "european close" on "bloomberg markets." where do we stand on expectations? we brought up work with muhammad ali area. he thinks there could be one to two rate hikes. it is telling us something different. >> it is our favorite bloomberg terminal function. i think it is great. to me, today's jobs report did not shift the dial much. i think it catches the eye that we went from 10% to 4% in june. i don't think that is a huge
deal. if you look at december, that is 46%. where we have had a big shift is when we look at the beginning of the year. 74%, december was 93%. in the four months, we have had a big shift but it has been gradual over that time. i think today's jobs report had something for everybody, but it did not shift the dial much. mark: let's look ahead to next week, richard. we have analyzed the jobs data in some detail. next week, it is the quarterly inflation report and quarterly growth forecast report as well. this week has not been a good week for data out of the u.k., has it? >> it has been a second week in a row with disappointing data. we talk a lot about brexit. we know that is framing the entire pricing for the pound for u.k. rates over the last month or two and will continue. if you look at the actual data,
i think the chart on the big screen is very interesting. that orange line shows when it goes above the orange line, we are getting economic data surprises on the positive side. when they go below that orange line, we are getting negative data surprises. mark: the economic surprise index for the u.k. >> correct. that turned sharply lower and we are believed -- below zero. last week in consumer confidence, gdp. it is pulling into a slowdown partly affected by brexit. mark: there are other factors. there are external issues. >> indeed. i think what is going on is a lot of the official data, we won't see the slowdown until the second quarter. i think some of the survey data is pointing towards that. brexit is definitely featured. mark: how is carney going to keep out of the brexit the next week? it is going to be tricky. >> i think it will be very
challenging for him. the line they will take is there is a lot of uncertainty now with the brexit debate. let's see where we stand afterwards. i think the way david is pointing it shows the bank of england has a big challenge. mark: mohamed el-erian talking about the importance of the yen and bank of japan not acting. we have had little japanese action because it was the golden week holiday. this is the yen going back to the end of last week. >> i think it is interesting because you see a sharp drop in the value of the dollar versus the yen. on the a marginal move third of may, on tuesday. we ground a little bit higher. i think we have traded sideways. next week could be interesting. mark: "the close" is next. stay with us. ♪
let's take you through all the action. the jobs report came out and stocks were already lower. we fell as low as 1.3%. we then started clawing back almost all of those losses. it looks like we will close the day down and 4/10 of 1%. leaving the stocks europe 600 to the biggest weekly drop since the beginning of february, the second consecutive weekly drop. another busy day for break -- bank earnings. the italian lender posting -- up byrter earnings 2.4%. in the cases and paolo, first quarter par dish profit beating estimates still fell by 24%. barclays said revenues were
disappointing, which sent the shares down initially earlier. they finished the day up by almost 1%. the world's biggest steelmaker also releasing earnings today, first-quarter profits following 33%. contending with slumping prices of not only steal, also iron ore, but what he does see is a broad recovery in the global market. after prices have rallied in recent months. this is an industry that has been hammered by china exporting record amounts of steel as its own economy slows. we have seen an improvement in its fortune, shares down 1.2%. i want to tell you about shares traded the big publicly funding management group, slumping the most since june 2003, 8% lower.
citigroup cutting its recommendation to sell. lowered the price target 182.0 pence from we are at 130 today. the average price target of analysts is 170 pence. shares in man group are down by 24% in the last 12 months. you have got your own data check. vonnie: i am having a look at the vix which is just down a little bit. now we are sort of cello -- settling in around the 16 and a half mark. the dollar continuing to hold on to its weakness, helping the strength of the yen, when a 6.71. the interesting thing about yields is we saw a spike in yields especially when it came to the 10 year yield just after
the jobs numbers but they have relaxed now. let's look at the major averages now. the s&p 500 down about 2/10 of 1%. the dow is an changed. there are some stocks moving. overall, that index is unchanged. the nasdaq down one third of 1%. let's go to abigail doolittle with more live. abigail: we do have the nasdaq down once again, on pace for its third weekly decline. blocking that trend are the shares of yelp. they posted a strong first quarter and boosted their -- something that rbc capital has not seen from yelp in a long time. multiple price target races
including credit suisse. 84% upside potential is possible on a stock down more than 10% on the year. are the on the nasdaq shares of and are international -- and international. estimates had already been cut this year and the range has been cut by as much as 27% as the company's legacy generic business underperforms. a bearish reaction from the street. suggesting a stock that is already down with an 80% over the last 12 months could slide even more. vonnie: let's check in on bloomberg first word news. ramy: months of ireland's
political gridlock have come to an end. after brokering a deal, have won a second term. in 2011,ny took office irish bonds have returned a world beating 92%. in london, labour party an could become the first muslim candidate. they are questioning whether his links to the muslim community would make him the right person to keep the country safe. britain will vote do 23rd on whether to remain in the 28 nation bloc. the presumptive republican nominee said, i would say they are better off without it but i want them to make their own decisions. pope francis denounced selfish interests to keep out migrants.
leaders from germany, italy, and the european leader, the pope was given the charlemagne award for promoting european unification. global news 24 hours a day powered by our 2400 journalists and hundred 50 news bureaus around the world. on monday greece will hold an emergency meeting to discuss the possibility of imposing additional austerity measures if it fails to meet budget targets. greek unions have already gone on strike. an additional $6.2 billion in budget cuts, weaving many transit stations empty. leade: the government will greece out of its latest crisis. what do bondholders want to see next? joining us is paul kazarian.
just how many greek government bonds do you have? paul: a lot. vonnie: an amount or proportion? it sounds funny that you are the largest. paul: it is not that hard. we purchased bonds at a low percentage per se -- percentage price back in 2012 so they sound large. the largest holder is probably only three or 4 billion its face , do not it is large misunderstand me, but it is not as large as it sounds. ofnie: we have seen a lot changes in greece and the imf is stepping in once again and getting frustrated as the creditors. we are going to see strikes so obviously the greeks are not happy. the government is trying to hold things together. what is the best possible outcome? paul: clearly where the
government and the imf start becoming more transparent about their financial information. it is very hard to rally a population when you are saying inaccurate numbers about your debt and debt relief. i think every paper you turn up you hear debt relief, but where should i look? what you will not hear is any quantification of debt relief and it is amazing how often it just gets mentioned and no one asks, what is the number? ?ark: what is the number, paul debt relief is continuing to be it,ed about, the imf wants the creditors say we are going to have to strike a deal and then we will talk about some sort of debt relief. what is the figure? paul: last year alone they received 17 billion in debt relief and not a penny of it was accounted for as a reduction in debt.
.urprising? absolutely going forward with this third program they have come anytime additional funds come in about 20% of that is actual debt and 80% is debt relief. you have another 30 billion already built in this line of credit with the esm, which is so surprising because you have basically 60 billion right now backed up with the esm that they will be allocating. when it comes in, about 80% of every euro is debt relief which should go on their books as .educing debt and it does not it is perplexing and i think there is a lot of agreement to show their debt at present value. vonnie: some of these programs were to go to debt servicing and debt relief to buy time for greece to get out of the mire and start growing again as an economy. is that not taking place? paul: i think you probably have two forces now that are opposing
disclosing the accurate debt number. one is paul thompson from the imf and the other is the finance minister. they are not using transparent accounting procedures that are internationally accepted to show the debt number. it has become a political football for a lot of them. have anly need to honest understanding of what is the debt relief number. mark: paul, are we going to get a deal struck before july? are we headed for another summer of discontent? are we looking at a repeat of last year or will some sort of deal be struck before then which ensures we have a smoother summer, especially across the continent in europe? paul: even if there is no agreement on the macro procedures like pensions and
reforms, what you do have is you already have this backup line with the esm. that provides another 30 billion of debt relief over the next three years, so you sit back and say, worst case for the greeks which is a two-edged sword, is that they end up getting forty-year money at less than 1% from the esm, which for them is massive debt relief. it has been structured in a way to allow them to say, why don't you continue to work with esm because those terms are aaa rated terms. they are just not disclosing it for political reasons. i wish they would. really quickly, when is the last time you bought greek debt? the last time there was trauma and the last time we try to get paul thompson and the finance minister to debate us publicly about the debt number.
we offered $100,000 to their favorite charities if they would come on bloomberg and debate us with you about the debt relief. we still make that offer again today, that we would make that dedication to charity. vonnie: maybe you double it today. paul: we would consider it. vonnie: paul kazarian, thank you very much. chairman and ceo of japonica partners. we are going to be listening to president obama, a live shot of the press briefing room. he will deliver a statement on the economy and the payrolls report. we will bring you that live. ♪
vonnie: you are watching bloomberg markets. it is time for our global battle of the charts where we look at some of the most telling charts of the day and what they mean for industry. you can access these on bloomberg. kicking it off this joe weisenthal. the unemployment rate has been going in one direction and this is down. , it is a five-year chart heads lower and lower up until last october when it hit 5% and since then it is flatlined. the labor force participation rate which had also been going down started taking up at the same time. right around the same time the unemployment rate flatlined, participation started going up. the unemployment rate started -- stopped dropping but at least the labor participation rate.
meaningful .2% drop in the labor force participation rate so that starts to turn around and that flatlining of the unemployment might start to get a little concerning about the labor market. you can see that chart. vonnie: coming up his mark barton in london, and he is rapidly approaching your rear end. mark: and the left corner you have spain, and the right, the u.k.. if i were to tell you that one of the stock market is trading at a three-year low relative to the stoxx 600 and one is trading at a record high relative to the stoxx 600 you might say it is the u.k. that is trading at a three-year low. you would be wrong. actually, it is spain. this is the chart that shows it. spain has its own political risks and what is juicier is
bryan singer says if you want to make money, you want to put money into spain. he is a game theorist and says the market is way too pessimistic about the outcome of the spain election three days after the u.k. referendum in june. he says there could be a coalition government which means that right now, it is the best time to vote on spain as a small window into play because there are more outcomes and the spanish stock market has fallen by 23% in the last year. it is a wonderful piece on the bloomberg terminal. especially if you like the prisoners dilemma and game theory. that.re on vonnie: it was so close that joe, i think you did win. joe is our winner today. sorry, mark.
vonnie: live from london and from new york, i am vonnie quinn. mark: i am mark barton. this is the european close. treasury secretary jack lew will be visiting puerto rico on may 9. he will repeat his calls for a congressional action to provide puerto rico with access to an orderly restructuring regime and independent oversight. how the also highlight crisis has harmed the health and welfare of the island.
now we are turning to something completely different, much anticipated superhero sequel captain america, civil war is out. they have already made major global's dollar early -- major dollars globally. what will it do in the united states during its opening weekend? joining us is eric davis. much money do you think captain america will bring in. eric: analysts think it could make as much as $200 million the opening weekend but i think the 200cast is $180 million to million dollars. it is the highest by margin -- by marvel. vonnie: paul, have you seen it? : the reviews are fantastic and we are going to see it this weekend.
used to bebox office memorial day but now they are opening in the beginning of may. mark: it seems that they have the midas touch with marvel and pick star. it seems they can go -- do no wrong. the ceo has gone out over the last seven or eight years and some that's on certain franchises. each one of those has been a home run. the box office coming out of the disney studio with those franchises alone has been extraordinary. what is amazing, if you look over the next five years at disney's release schedule, there are blockbuster proven winners and multiple and each year going forward. it looks like the multibillion-dollar bets they have made have really played out
for disney and shareholders. mark: why is it that marvel, that disney can keep hitting these home runs when you look over at warner bros. with batman versus superman, it is desperate for a franchise and continually netting over a billion dollars and it cannot seem to do it. what do disney do? what is marvel doing? films toy have had 13 master this cinematic universe. superman, technically only the second film. they have suicide squad coming up this august, which i think will be a big home run for them. do not count them out yet, there are coming. i think marvel, especially when i hooked up with disney, they introduce a lot of fun.
when you watch captain america, civil war, sometimes you are laughing very hard and other times you are on the verge of tears. vonnie: it has to be a combination of outline because people are interested in pretty sophisticated plot lines, and also everything else we just said. at some point, the teams get expensive. when would that the? erik: that would be right now. robert downey junior is making crazy money and they are putting him in the new spiderman movie as well. as long as they can make these ensemble films, opening them up in early may, then they can take riskier chances on films like aunt man -- ant man. i think they are just knocking it out of the park with everything that they do. they found the recipe and it is working. vonnie: our studios taking
enough chances? will they run out of franchises or will we just stay addicted to them and it does not matter? paul: i think what is happening is we are seeing certainly the big for studios relying more and more on franchise. it has become a real global business. china is about to become next year the number one market in the world after north america, so they have to bank on these big franchises. swap out superheroes, this summer we have finding authority, bsg, world of warcraft, independence day. what is going to be the big surprise of the summer? erik: that is what i am curious to see. films were big surprises. i say look at something like a jason bourne or independence day
resurgence, taking place 20 years ago -- 20 years after the first. i think, and suicide squad and star trek, there is a new star trek film coming out this summer so i would not count any of them out. vonnie: my list just got longer. i am still catching up on fall movies. thank you to eric davis and paul sweeney of bloomberg intelligence. we are waiting for a statement from president obama on the economy. he is speaking live from the brady press briefing room next. ♪
scarlet: from bloomberg world headquarters, i am scarlet fu. alix: happy jobs friday, i am alix steel. in just a few minutes, president obama will be making a statement on the economy off the april jobs report we saw this morning. we will take you live to the white house briefing room. scarlet: speaking of jobs, april posted the weakest gains in job growth. alix: markets showing muted reaction to that data. stocks are trading for a fourth day, headed for an 18 month low with a drop in treasuries and yields higher. scarlet: we are halfway through the u.s. trading day. julie hyman