tv Bloomberg Markets European Close Bloomberg June 29, 2016 11:00am-12:01pm EDT
you're watching the european close on bloomberg markets. ♪ mark: here is what we are watching today. david cameron had some choice jeremy corbyn today. we will discuss the latest play within the halls of westminster. vonnie: the msci all country world index heading for its highest levels since the u.k. referendum vote. the latest assessment of whether the banks can weather a financial crisis comes later today. in will foreign banks fare the latest round of stress tests? vonnie: let's head to the markets desk.
julie hyman has the latest. julie: i was just checking volume which is elevated today. average fore 20 day the s&p 500. all three major averages rising to their highs at this point. we have a broad-based rally. health care also doing well along with industrial. a little changed today. even they are in the green. a lot of buying on relatively heavy volume happening today. look at the s&p 500 over the past two days. the rally we are seeing following the u.k. referendum induced selloff. we have a gain of about 3%. the two day decline heading into it was 5.3%. we have not yet recouped those losses but we have some us-based
strategists saying the brexit move in the united states is perhaps finished for now. i want to get back to oil. oil inventories just came out half an hour ago and they were bullish for oil prices. a decline that was almost double what analysts had been anticipating. that's giving a boost to oil stocks as well. energy shares are the best performance as a group in the s&p. here are some examples. all gaining by more than 5%. i want to look at the dollar as well. pulling back by about a percent. that is probably helping oil prices in today's session. roughly 10% here is above the daily average. today is the third biggest gain of the year for the stoxx 600.
yesterday was the second-biggest. june 20 was the biggest gain of the year. we have seen the biggest games of the year for europe's benchmark in the last three days. every index is rising today. the two day plunge prior to the two-day gain was 10.8%. those posting back brexit losses. europe's index measuring volatility. the biggest three-day fall since december. the recent peak was june 20. that was june the 16th. that was the highest since august last year which was the 2011.t since august bloomberg's pound index which
measures sterling. this quarter the pound index is down by 7%. there's the red mark. that's the biggest quarterly decline since the fourth quarter of 2008. that was when lehman was happening. the decline was a steady decline. thursday the bloomberg pound index was actually up by 2%. the declines this quarter have come in just recent days post the referendum. this is credit risk. gauges i like to keep an eye on. calling for a second day only a couple days ago on monday. both credit gauges rose to the highest level since february. cost of charge the protecting european corporate bonds. the white line the cost of
protecting european banks and insurers. credit risk is declining. vonnie: insurers getting downgraded as well. let's check in on the bloomberg first word news. courtney collins has more. courtney: another blo to w to turkey's staggering tourism industry. more than 200 were wounded it. . the turkish government blames the islamic state. all that has devastated tourism. last month tourist arrivals in turkey were down 35% from the a year ago. president obama will make his first campaign appearance with hillary clinton in charlotte, north carolina. to campaignheduled in wisconsin but it was canceled because of the orlando shooting. the puerto rico debt crisis bill has survived a key test vote in
the senate. the senate voted to invoke cloture. friday a $2 billion bond payment is due. puerto rico says it cannot pay it. the bill would set of a board to oversee the restructuring of its debt. the nba is getting its first owner from china. jiang is buying 5% of the minnesota timberwolves. billionaire glen taylor will control -- regain -- retain control of the team. i'm courtney collins. this is bloomberg. mark: more fireworks at westminster today. david cameron will be resigning in a couple of months took a jab at opposition leader jeremy
corbyn, saying he must step down after losing a no-confidence vote. >> he talks about job insecurity and two months ago -- it might be in my parties interest for him to sit there. it's not in the national interest. and i would say for heaven 's sake man, go. mark: you'd have to say given the circumstances, david cameron is in fine fettle. he's on form, isn't he? twice he has appeared in the house of commons in recent days. >> he certainly looks like a man who has nothing left to lose. many years ago margaret thatcher gave a similarly combative performance when she had already been essentially fired as well. did night in brussels he cut a very sorry figure as he came out of probably his last eu
summit in brussels. it apparently was a very somber affair. a lot of leaders extended a certain amount of sympathy for him but also made clear that the mess the u.k. is now in his on him. the hats are thrown in the ring for the conservative party and its chaos in the labour party. take us through what's happening. >> both parties are in the midst of a crisis we haven't seen in more than 30 years. let's start with the conservatives. the hats go into the ring today. we're already seeing the beginning of a lot of worse trading. are theing candidates home secretary and boris johnson , the most flamboyant figure in britishge politics -- politics. we'll probably get seven or eight candidates in the conservative parliamentary party. then it will go to the party membership.
labor is a much more complicated affair. the no-confidence vote by an overwhelming majority. talkingple are now about a potential breakup of the labour party. mark: like in the early 80's. >> even worse than that. vonnie: what leverage do they o entice votes? >> on the one hand we can see just how bad the economic and financial crisis is facing the u.k. as investors face the possibility of leaving the european union. there is a certain amount of pressure even at this late stage on the candidates to potentially rethink the whole idea of leaving the eu. the candidates have is when they go to the rank and file membership of the conservative party, the average age is 68 years old.
very conservative, pretty strongly anti-eu electorate they are going to be going to. there will be very little room for compromise for any tory leader on what a new relationship with the eu would look like. vonnie: who would get on best ?ith leaders like angela merkel will a new leader have any chance to speak with the new leaders? >> it's an interesting narrative. the home secretary has spent a lot of time in brussels negotiating with other about crime and terrorism issues. she's putting out a narrative that if you want someone who will go to brussels and has a track record of negotiating deals with brussels than i am the person to do that. certainly boris johnson is not a
but-- he has many qualities negotiating and negotiating tactics are not necessarily characteristics you would associate with boris johnson. it was probably an emotional final dinner for david cameron. he's been pushed out today. where are we? because everyone was emotional but the reality is we are heading out. is that where it is? >> that's the message from brussels. legally of course the next british prime minister is under no obligation to carry through on this referendum. technically speaking anything is possible and there is a lot of talk about how can britain possibly get out of this? as far as eu leaders are concerned the message last night was, you are gone. mark: let's say a pro-eu
candidate won. articleht not invoke 50. >> it's also difficult to see how you would get a leader in place who would advocate that position. you would essentially be asking mps to go to their constituents and say, we know you voted to leave but we are going to campaign on a policy of remain. you would be opening up a huge opportunity for the u.k. independence party to do very well. both parties are in a tricky place here. the party that could benefit from this -- one party that could very happily and consistently campaigned on a platform of remain is a liberal democrats -- the liberal democrats. nobody is really talking about winning a majority but they could do very well. vonnie: at what point did the members of the european parliament from britain have to not go into the european parliamentary sessions? there will be some decisions
being made at that level on all sorts of other clinical affairs in the world -- geopolitical affairs in the world? >> the u.k. as part of the european union and will remains least two years from now. realistically a lot longer than nothat. on paper the u.k. is a fully participating member in the eu. another very interesting thing we saw today in brussels is britain's almost slow-motion exit. there was a meeting of all the leaders today minus the united kingdom. the u.k. commissioner in brussels also resigned. britain has gone into a limbo membership that is technically a member. heard from boris johnson he would not call a snap
election. leader callxt tory an election soon after? >> for boris johnson it is not clear that an election would be in his interest. a lot of people see him as being the man responsible for the brexit vote. he might get a lot of the blame for the economic chaos or the problems we are going to see over the next few months. he might not necessarily be the most popular man in the u.k. come next october or november. it very much depends who gets the prime ministership. that is one of the great uncertainties. right now the big unanswered question. thank you for joining us, bloomberg's executive editor for international government. coming up, will scotland find a way to remain in the eu? a passionate advocate for that,
vonnie: live from london and new york, on vonnie quinn. -- i'm vonnie quinn. mark: and i'm mark barton. this is the european close. nicola sturgeon is in brussels meeting with very as leaders. scotland voted 62% to 38% to remain. joining us now is bloomberg's ryan chilcote standing by with alyn smith, a member of the european parliament for scotland who earned a standing ovation the other day telling the eu
parliament to not let scotland down. he is also a member of the scottish national party, a passionate believer in europe. just as passionate as the leader of the scottish national party who is now in brussels. thank you very much for joining us. i want to start by asking you. nicola sturgeon. what can she realistically expect to achieve other than a photo up? op? >> it's much more than that. scotland has a strong credible confident government. we have a credible leader. we are united. stalin voted to remain in the eu and we are reaching out to our friends and colleagues across the european continent and wider to make sure scotland's voices heard. today is about opening the doors. do youut what authority have to be talking to the head of the european union?
>> with considerably more authority than the u.k. government does given that the prime minister has resigned, the opposition is a shambles, and a wonve campaign has just on on a campaign that was predicated on lie after lie. ryan: you are talking to other countries in the eu. name some that support the idea of scotland seceding from the u.k. >> we are not at that. this isn't about that. we had a referendum about independence in 2014. the people of scotland made a decision about that. predicated insion large part that the only way to save you status was to remain in the u.k. there's a lot of people thinking about that right now. this is to make sure scotland's interests are represented. ryan: it looks as if the u.k. is going to exit the european union. that's what the majority of the
people that voted in the referendum would like to see. and whoever the prime minister is going to be can not enforce that. but politically speaking it would probably be wise. so you would have to secede wouldn't you to become a member of the european union if the country you are located in is out? about fivei counted ifs in that scenario. we have had a divisive nasty unpleasant campaign that has misrepresented immigration. a lot of people are regretting that they voted to leave. the implications of what that actually means are only now sinking home for those people. there's a lot of things that are very much in flux at the moment. i don't think anything in this is automatic. scotland has a strong government that is making sure our allies know that scotland is open for business. welcoming, we are
a pro-european nation, and we want to be engaged in that process. ryan: i want to continue with the secession scenario. i was speaking with the president of lithuania yesterday and she said she would rather see a united kingdom with scotland in it than scotland seceding and joining the european union. from an outside perspective clearly that would be better for everyone perhaps with the exception of the people in scotland that want their independence. >> again, there's two ifs in that scenario. we are not promoting independence at the moment. we are promoting what is going to be in scotland's best interest to salvage as many of our rights as we can. we're not talking at the start about rerunning the vote for independence. it's not about that. it's about making sure we get as much european status as possible
and make sure that scotland -- and there are also similar voices from northern ireland and london demanding those talks as well. if you decided to have another referendum because you got slammed on the first time on the pound issue, wouldn't it make sense to say, this time we are going to use the euro? >> this entire interview has been very hypothetical. let's deal with what we do know. we know the westminster government is a mess. there has been a narrow vote to leave. westminster politics are still very much in flux. the s&p government will stand for scotland's best interest. ryan: where and what do you do next after brussels? >> we keep discussing about what's going on and hope that is to serve the interests of scotland. ryan: thank you very much, alyn smith. a member of the scottish national party saying, this is not about secession. showing we are a
wednesday session. we are seeing a second day of gains. have a look at the currency board. sterling is up for a second day against the dollar. the euro is up. the fixed income side of things, the 10 year yield is falling in the u.k., germany, italy, and spain. we are seeing an equity rally and a bond rally. that's interesting. the close is literally four minutes away. this is bloomberg. ♪
check this out. up by 3.2% at the close. biggest gain since august of last year. erasing its losses that took place in the two days after the brexit vote. the two day loss for the stocks, 10.8%. 6% four day loss is a mere but a big rally in the last couple of days across europe's maine at three -- main equity forces. lowering its outlook on 12 lenders, including barclays. brexit will reduce their properties. we expect lower economic growth and higher certainty over the future trade relationship with two lead tolieve -- reduce demand and wholesale funding conditions. these are how the banks have
fared since friday. hsbc flat down by 3%. the other three have fallen between 23 and 28%. that is just four trading days. quite astonishing. the expectations of swings in sterling, dollar over the one week, two week, and one month. we are seeing all three gauges lower today. two week volatility down for a third day. one month down for a third day. one week and two week were at records last week. this is a lovely chart. thethe sterling level, price of sterling is rippling across asset classes right now. this is a chart gauging the euro,ation between pound, and the euro stock 50.
.80 ofrelation is that one means they are moving in lockstep. beforethe highest since .he single currency in 1999 sterling is rippling across all sorts of asset classes. vonnie: you can say that for sure. in the u.s., i am looking at a volatile index as well. index it self benefiting as well from this calm environment is up to 95.68, so a big game for the dollar index. 83.8ening the curve, points, so really that is down 10 basis points from last week. it sank to both ends of the curve but the two-year yield is up 61. i want to bring up the china currency because the offshore and be is stronger today and we have it on good authority that
authorities intervened to support the offshore you on to calm things. we want to take a look at the u.s. embassies now, so let's head to the nasdaq. >> whiplash is the word of the day after suffering from its worst two days since last august . on friday and monday the nasdaq was down 16.4%. today it is enjoying its test two-day rally, three and a half percent. it is being driven by technology, this includes deutsche bank saying these stocks among others are long ideas to buy right now. strong conviction from deutsche bank. the top percentage performer in the nasdaq 100 today, cd8 -- seagate technology.
the company could preannounce it second quarter to the upside on each trend. he is basing this on channel checks. his conviction is not strong enough to upgrade the stock. the stock is very close to a $24 price. vonnie: we will check in with you a little bit at the nasdaq. joining us now for more on market reactions, eddie perkins, chief equity investments officer at eton. you say this is really too early to buy the brexit because there is more to come. what gives you confidence? i think there are many open questions that need to be answered in the coming weeks and months and even years. the idea that a two day pullback in the market creates sufficient buying opportunity seems misplaced to me.
we have many questions that need to be answered and what it comes down to is how the policymakers can make decisions. that is betting on the nimbleness of bureaucrats. it has been worse on mainland europe than it was in britain. does that mean you look more to mainland europe? you are a value person after all. >> i am. obviously, the part that sold off the most was european financial stocks. i think there are good quality industrial companies or defensive stocks that are not to expensive. those are the places i would go. inexpensive defensive stocks on mainland europe. if they are in the u.k., there are more global companies were things are answered. in your noteked
about the selloff on friday and monday being orderly. what could turn it into a disorderly move? >> i think we need to see the reaction. i am not sure we have seen it yet. whether that is retail investors only money out of european etf's or hedge funds, there are a lot of risk parity funds that have a systematic methodology for reducing risk when volatility spikes. so there is a lot of selling pressure that i think still has to come. be market for now seems to taking comfort in the idea that central banks around the world will be accommodated and there is a little bit of scuttlebutt that the brexit could be reversed, which i think is remote, or at least the consequences can be softened with the negotiations in the coming weeks and months. the perfect prompt to
bring up our world interest rate probability function. in the u.s., according to this function, it is more likely the fed will cut rates than hike rates. the probability is telling us we are 35 to 50% charts of a rate cut next month. really? >> you would need to see real stress on the market for that to happen. thatnk it is a safe bet the fed is on hold for the rest of the year. they've only got 25 basis points of room to cut. in order to fire that, they would need to see real stress and global markets and we are not seeing that. vonnie: i am going to bring our viewers into the function on the come to thecause we united kingdom and the probability of a cut in august is more than 50% and in september, 58, and it goes on.
cause itunited kingdom to implement other kinds of measures? >> i am not an expert on that topic but it is reasonable to assume that is a probability if that is real stress. slippingk. economy is into recession, that seems like a reasonable bet. vonnie: as a value person, you way the macro and fundamentals, but how much do you look at an individual companies balance sheet and say, you know what, long-term i am going to go with this. >> that is right. we have a bias in favor of good quality companies that have strong balance sheets. that is all the way we invest. paying close attention makes a lot of sense. some of the moves we saw particularly on monday were sold out for the second day, very balance sheet oriented in my judgment where those companies that have a lot of debt and we
have seen a lot of corporate's over the last several years around the world take on leverage to buy back stock. that algorithm, that model of buying back stock and levering up starts to come and question and you've got to look through the current level of earnings and stress test what the downsized cases is and what that means for balance sheets and that is the work we are doing at eaton vance. vonnie: eddie perkins, values manager, thanks for joining us. let's check in on first word news. courtney collins has more. >> no one is claiming responsibility for that deadly attack at the airport in is dental. officials say three suicide bombers opened fire and then blew themselves up near the airport's arrival call. 41 people were killed and 200 wounded. in the last year, turkey has been the target of attacks right islamic and kurdish militants.
russia's president vladimir putin has lifted the ban on tourists into turkey. the move came after bruton spoke with turkey's president. it was discussions -- it was the first discussion between the two since turkey shut down a russian warplane. couldn't sympathy for the family of the russian pilot. david cameron doesn't think he is the only one who should lose his job after the brexit vote. cameron called on labor party leader jeremy corbyn to step down. >> he talked about job insecurity and in my two months to go it might be in my interest for him to sit there, it is not in the national interest. for heavens sake, though. -- go. >> corbyn has said he won't quit even though his colleagues gave him a vote of no-confidence. for the first time in three decades, alaskans may not be getting a check from the government.
alaska faces a budget deficit. that means the annual oil fund distributed not to every alaskan. the governor will announce vetoes today. global news, 24 hours a day, powered by 2,400 journalists in 150 news bureaus around the world. i am courtney collins. this is bloomberg. mark: coming up, the sbo tc back. stay with us.
telling charts of the day and what they mean. you can access these by running the function featured at the bottom of your screen. kicking things off today is danny berger. way to do battle of the charts today than to look at biotech companies. prices for stock biotech companies have been quite down in the dumps over the past year. the nasdaq index has fallen 26%. a lot of that has happened since people have been selling off riskier assets. these charts show the ipo market for biotech companies. as the stocks have fallen, this market has gotten really icy as well. overall trend of biotech companies having a hard time of raising cash currently. you can see this past quarter over here there have been only eight biotech ipos. that compares with 17 at this point last year.
quite the difference. a lot of that is happening with this volatility we have seen in the nasdaq biotech index. vonnie: i am sure we have a bunch of ceos -- i am sure that is a question for many of those ceos. we will see if it takes up later in the year. mark, you have something related to brexit? was, sitting on my desk this morning and there i saw it. ireland 10 year yield flashing. record low. i must do a be otc for my wonderful coanchor. it can't be found anywhere else. we looked at the irish 10 year yield. versus the other bailout nations going back to 2011. we went down 2.6%. the high in 2011 was 14%.
toland outlasted from 2010 2013. greece, the red line, still in bailout territory. 37% in march 2012. in january 2012. all those yields are much lower. special, iextra include the ecb total asset on its balance sheet line. dragias when druggie -- said he would do whatever it takes to save the euro. said "i want to bring those balance sheets up to that record level of 2012." right now, we are at $3.1 trillion which is a record. finishes, we will
be nearer to 4 trillion euros. spectacularirish for vonnie quinn. #btb. vonnie: i adore your effort. i may just click this for whenever i am feeling down. i want to avoid any idea that i might be balance -- be biased so i can't have you in today because your gift to me was so wonderful. i am going to let danny berger when. congratulations. i am glad we are back. today,ess tests coming will banks have the capital to increase their dividends? this is bloomberg.
european close on the bloomberg markets. this is the chart of the hour. this is the ftse 100. we have split it into four. at 6338. it finished friday, it3% on rebounded to a half percent on tuesday. it has retraced all its losses. it is actually up from when we had the results of the referendum on friday. quite astonishing. a lot of these companies take a lot of their sales from abroad, over three quarters come from abroad. it is quite an achievement for it to be higher than it was during the start of trading on friday morning. at some of the biggest business stories in the news right now.
in the euro area falling slightly on the eve of the brexit vote. the index would remain unchanged, confidence did improve in the u.s. industrial sector and financial services. european banks expect several billion dollars to call -- to fly with the federal reserve ruled that will keep capital in the united states and raise costs. 11 other foreign banks have spent up to $500 million of legal and other expenses. umbrella legal structures for the u.s. unit. partnership with kanye west, the deal would include athletic shoes and a of co-branded retail stores. line into its own business unit is easy branded sneakers.
some fashion credentials. that is the latest bloomberg business flash. the fed willn, release results of the second part of its annual bank stress test. we will learn whether banks will be able to distribute capital to their shareholders through dividends or sharing purchases. joining us with a preview is michael moore. he covers the finance industry at bloomberg. banks have the capital to expand economic shock. r.day is all about cca what is it going to impact? >> it is the key point in the year for the bank investors. the fed gives a thumbs-up or thumbs down on the capital plan
and the big thing that has been introduced over the last couple of years is what the banks have started calling the mulligan, which is when you ask for two big of a capital distribution and the fed can say no and you lower your ask without failing the stress test. you get a little bit of a do over and the fed indicated they would be punishing banks if they had to use the mulligan on multiple years. i think you will see the banks start to get a little bit more aggressive and maybe more than taking the mulligan this year as the fed tries to ascertain where it is comfortable with banks distribute in capital. mark: last time a couple of foreign banks failed. deutsche, sent in there, would itdifferent this time? >> would be interesting to see. the foreign banks have more practice with the stress tests. probably won't be doing
major distributions to their parent companies, given that they are having to set up these legal structures to be self capitalized. i think you won't see the aggression that you will see from the u.s. banks in trying to distribute capital. it is just a matter of whether the fed is comfortable with the way they go about the test. whate: let's listen to mike mayo had to say on that very topic. >> the u.s. banks are taking their medicine after the u.s. financial crisis raised hundreds of billions of dollars of common equity. the regulation put in press several years ago, you have the stress test the entire decade. banks did not take their full bennison and now they have this issue. -- full medicine and now they have this issue. vonnie: what does it say about where they have to do their business? is it going to become a reality and when? think those are two issues
that are a little bit separate. you have the capital issue and european banks have started to catch up to u.s. banks. they are starting to make up ground. then, the question of where to put the people, i think the eu and u.s. banks are both facing that in london. the problem for them is a lot of it is out of their hands so they have to wait and see what the politicians are able to negotiate. they don't want to be the first mover that moves people and then it turns out they didn't have to but they also don't want to be last and face higher costs. mark: janet yellen said in a congressional testimony that the stress test process is about to undergo meaningful changes. what impact is that going to have? >> i think the big question is what will the next capital impact be?
of changinge talk the assumptions, changing the time periods they look at. fed wantsi think the to balance it so the impact is relatively neutral but how they strike that balance will be very delicate. time in london, four: 55, 11:55 in new york. in the next hour, with black rock chief executive larry fink. this is bloomberg. stocks rising for a second consecutive day and the ftse retracing all its losses over the brexit vote.
>> we are taking you from london to new york to aspen colorado in the next half hour. here is what we are watching. aobal stocks rebounding for second day and the dollar weakening on speculation that policymakers will try to prevent brexit from hampering local growth. the ftse has -- fink sit down with larry in the hour. shery: i will be sitting down with sam eisley, cofounder for his current pick in the pharma sector.