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tv   Bloomberg Markets European Close  Bloomberg  August 17, 2016 11:00am-12:01pm EDT

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: i'm nejra cehic. you're watching the european close on bloomberg markets. ♪ nejra: we will take you from washington to london. here's what we're watching. day 2 of hard u.k. data. the post brexit economy with jobless claims unexpectedly falling in july. we will talk to one and economist who says significant changes may be coming down the line. vonnie: employees and executives bank maye be facing another year with no bonuses.
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sales at target are dropping. the ceo calling it a difficult retail environment. let's have a look at where european equities are trading right now. just under 30 minutes to the close. the stoxx 600 down almost .8%. pretty much every industry group lower on the stoxx 600. this is a normalized chart. it shows that we have had four successive days of no gains. the longest stretch going back two months. investors perhaps questioning the rally we have seen recently in europe. 100.pushed the ftse
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reacting to those hawkish comments we got from fed officials. this is sterling. down almost .3%. the pound has also held near a three-year low versus the euro. this even after we got the expected jobless claims data. down 1.2%.ax index seeing losses in norway. taking a look at the euro, that is pretty much unchanged against the dollar. julie: u.s. stocks continue their slide. it's not down as much as in recent days. down about 6% from the 30 day average. let's check oil now. oil has actually turned positive
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in the past few minutes after we got an unexpected drawdown. also a drawdown in gasoline supply. not seeing a huge bounce in terms of how much of a percentage again but definitely a reversal from earlier and above $46 a barrel. energy stocks still seeing declines. we will see if they start to catch up with oil prices as the day progresses. retail stocks have definitely been under pressure. staples out with numbers and third-quarter earnings forecast. the midpoint is below what analysts have been anticipating. target company is cutting its forecast for four year
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earnings after last quarter was lackluster. ews trailing home depot -- lowe's trailing home depot. the company will cut as many as 14,000 employees worldwide. interesting that the shares are lower. jpmorgan saying this would be a positive step for the company. we will see what happens after the bill. vonnie: we will be watching for them. let's check in on the bloomberg first word news. >> former fox news ceo roger ailes is quickly making his presence felt on donald trump's struggling campaign. he urged trump to overhaul his
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campaign leadership. the head of the conservative website breitbart will be the new campaign ceo. a pollster will be the campaign manager. they will do away with efforts to have trump transition to a more formal toned down approach. stock is dropping with americans who have money in the market. registered voters with investments in stocks and bonds narrowly picked trump over hillary clinton. clinton does better with those who have more than $50,000 invested. in june trump lead among all investors. angeles aast of los wildfire has forced more than 80,000 people to flee their homes. several thousand buildings have been destroyed. part of the interstate has been shut down. turkey wants to free up prison
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space for the thousands of arrested following last month's failed coup attempt. inmates who have displayed good behavior will be released. the turkish government has detained 35,000 people. back to the get state of the u.k. economy. ther yesterday's cpi report flood of data continues today with jobless claims unexpectedly falling by 8600 in july and the unemployment rate remaining at 4.9%. retail sales and public finances still to come this week. what do the numbers tell us? hare,g us now is chris
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economist. thank you for joining us. tell us what we have so far this week. >> it is still very early days to tell what the post brexit world looks like with regard to hard data. we had the inflation data early on this week. the headline inflation rate, not much to write home about. what struck me more was quite a big rise in producer price data. of falls in the pound following the brexit will. vote. not going to see consumer prices rising over the next year -- that is going to see consumer prices rising over the next year. it is still early days. unexpected fall in jobless ga
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claims but there is plenty more to come. nejra: you mentioned the producer price index and the impact on inflation. of course the bank of england has said it's not so concerned about targeting that inflation. is that the right way to approach it? >> they are relatively inclined to look through sterling related rises in inflation because in their view they will be transitory. we share that view. we think the bank will have to hold its nerve and see gradually that drop out. more predominant in its concern is what's happening to real activity. it seems many measures of uncertainty have risen substantially after the referendum.
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we see that weighing on hiring and the economy more broadly. that will start pushing inflation below the 2% target. the mpc seems very keen to inject more stimulus into the economy. the mpc be very domestic focused over the next few years or will anything that the federal reserve do impact how the mpc thinks? >> broadly the bank of england will be looking at domestic drivers of inflation to the extent that it cares about what's happening to real activity domestically driven and the extent to which that's going to drop back following the brexit vote. we will be looking at the effect of the pound on inflation and that could he driven by what the federal reserve does. broadly there is a big divergence between central banks. our view remains that contagion
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from brexit will be very limited. the federal reserve gradually will be moving towards limited rate rises for the next couple of years where the bank of england is cutting rates and injecting more stimulus into the economy to combat such a significant domestic shock. vonnie: what about the data points that aren't directly impacted immediately? we had a great chart about job vacancies declining. is that a sign that companies are already beginning to freeze hiring? >> it could be some early sign in terms of vacancies. more i'm paying attention to some survey-based indicators. for example the pmi data showing quite a big swing down in activity expectations on the
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part of businesses and within that quite take falls in employment and hiring balances. those sorts of things are more forward-looking will presage a slowdown. that is one of the key things the boe will be looking at. nejra: what about public finance data coming up? retail sales might have some kind of brexit uncertainty affect weighing on the reduce consumers -- british consumer. initially i would imagine more of a firm based story of brexit uncertainty. lower investment spending. that will start eating households. higher inflation will start weighing on household real income. perhaps not for another year or so. retail we hope to stay relatively buoyant.
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the upcoming months is one of those surplus months. we will be looking at where the public finances are relative to a year ago. take is starting to fall and that could be an indicator of slower activity post-referendum. nejra: chris hare, thank you for joining us today. coming up we will look at some of the big movers in europe and why shares of the brewer are losing their fizz today. this is bloomberg. ♪
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nejra: live from london i'm nejra cehic counting you down to the european close. we are about 15 minutes away. vonnie: in new york i'm vonnie
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quinn time for the latest bloomberg business flash. target got hit last quarter by what the ceo calls a difficult retail environment. 1.1% which was more than expected target is seeing sluggish sales of electronics. >> notably about a third of its pressure was driven by apple products down more than 20% in the quarter. we are focused on reversing these trends and we are collaborating with apple and other partners to accelerate innovation to deliver stronger sales. vonnie: target has been cutting costs to boost profit but now it risks falling into a deeper slump. billionaires steve wynn's says use -- his new casino is not for kids. he hopes to make it a gambling
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and entertainment mecca. gambling revenue has fallend ard -- in a row. desk.head to the markets this deal we were talking about potentially happening yesterday between linda of germany and praxair of the u.s. it would create the largest supplier of industrial gases. citigroup today touring some cold water on this idea saying it would face tough regulatory hurdles the same ones that scuttled another deal. citigroup analysts saying there is no reason to logic that killed that deal would not also prevent this deal from happening. both of these stocks pulling back today. we are watching hospital shares as well.
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it's a call from j.p. morgan analyst gary taylor. says that total inpatient mission growth in july fell by 2%. procedure growth has decelerated dramatically following strength we have seen earlier in the year. he says third-quarter results are at risk unless august gets materially stronger. ags alliance systems one of the worst performers today. cutting them to neutral. this is a lender and not a tech services company. down by 4%. let's have a look at some of the company moving in europe starting with carlsberg. we are seeing the stock move after the danish rumors reported
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profits that missed analyst estimates. you can find a great chart on the bloomberg that actually tracks the ruble against carlsberg share price. move lowerng this after intel said it won't use the semiconductor whitman to make its 10 nanometer chip. we have it on this board. the u.k.look at construction company narrowing its loss and restoring it dividend after the ceos overhaul of the company in danced. homebuilders have suffered quite considerably since brexit. seeing a rise of 2.9% after posting better than estimated second-quarter profit. in the world's biggest maker of
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bricks it had to cut production of clay products in the u.k. as demand slowed in the run-up to the brexit referendum. coming up european union is proposing new rules for banks riskiest bonds. we will take a look at coco's and what they could become a lot more appealing to investors. over 10 minutes from the european close. this is bloomberg. ♪
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vonnie: live from london and new york, i'm vonnie quinn. nejra: this is the european close on bloomberg markets with under 10 minutes to the end of trading. a european union proposal could make banks riskiest bonds more attractive to investors. we are talking about cocoas which were created after the crisis to help boost capital. joining us now is financial regulation reporter john glover.
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of course cocos were really the jour after the crisis. what is happening to revise their appeal? gets complicated very quickly because these things are driven by strange regulations that a lot of people don't really understand. that's what happened in the first quarter. people kind of realized there might be a problem at some banks with paying the coupons because the coupons on these things are a bit like dividends. you can pay them. it's not compulsory. they thought perhaps we won't get paid. and they panicked. authority since they created a market to figure out a way of reassuring people that they would get paid at least before equity investors
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because that was the key thing. paid on the bond investor. i want to be paid first. this is a way of assuring the bond investors get paid before the equity investors get their dividends or the bankers get their bonuses. nejra: i want to show this chart. we are talking about concerns that banks might have insufficient capital to pay coupons on their cocos. pushing the mean price of bonds lower. the charts showing hsbc and barclays as an example of the first quarter plunge. with these changes in regulations what i want to know is where do people expect cocoas to go from here? >> the problem there was you think that hsbc and barclays for a while issue
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in stride up. people were worried access to the market banks would not be able to sell these things. people got over that fear because these are nice big coupons and that really helps if you are an investor in a zero yield environment. recover but i think that the volatility that the asset class displayed frames the regulators a bit. they said we better do something about this. they have been quite clever in their proposals. in my opinion for what it's worth which is not very much because i have no money, it will probably work. it's not something we have in the united states and it's very fascinating to watch them in europe. .hey did take off as you said
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this is only a discussion paper right now. will it materialize into actual law? >> that's a very good question because the eu's financial t.mmissioner was a bri and he is no longer there. by someone replaced else. it's very hard to discern for the moment which way regulation is going. britain inence of the discussions probably means there's a risk of becoming more restrictive. nejra: john glover, european financial regulation reporter. thank you for breaking down this complex fascinating topic. let's take a look where european markets are trading. we are under five minutes away. the stoxx 600 down almost .8%.
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the longest run of that kind since june. the dax down more than 1%. and take ah it up look at some of the currencies and bonds. weaker sterling today. flat euro. u.k. 10 yr jail yield is down two basis points. the european close is minutes away. this is bloomberg. ♪
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nejra: live from london and new york you're watching the european close. i'm nejra cehic with vonnie quinn.
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just finishing up the day in european trading. starting with gmm on the bloomberg to give you the big picture. germany's dax down almost 1.3%. italy has been one of the worst performers globally in equity markets today. seeing a weaker sterling despite the better than expected jobless claims data we have had today. the euro pretty much unchanged against the dollar. a bit of red across the board. if we look at the stoxx 600 we are down .8%. commodity producers have been largely leading the losses. we are on the fourth day without gains for the stoxx 600 which is the longest streak of that kind since june. investors perhaps reassessing the rally that pushed the ftse 100 into overbought territory
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european investors no doubt reacting to some of those hawkish comments from the fed. highlight some of them today. let's start with the downside. we are seeing carlsberg down here. it looks like it has closed down more than 5%. this is a danish thriller reporting profits that missed estimates as the weakness of russia's ruble eroded. it has been for most of the day down 7.8%. it dropped the most the day after brexit after reporting a klein -- decline insolvency. seeing abnde we are amro of almost 2.7 percent after posting better than estimated second-quarter profit. vonnie: taking a look at the dollar index. one of the important indicators
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before we get those minutes. we are seeing not that much of a change. still below 95. that makes futures pretty much unchanged. right now momentum is with a short squeezed positions and that's going to push oil higher. i wanted to look at yields as well. 76 basis points is the highest we have seen in a few days in the two-year. one point 58%. the spread is at 81 basis points. the broader averages now. the dow jones down .4%. points.down seven the nasdaq down almost .5%. for more on that we have abigail doolittle. abigail: we are looking at some weakness for than the nasdaq.
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are some of most the well-known mega cap names associated with the nasdaq including apple, cisco, and amazon. first two the index's day law since june 27 and the end of the brexit bottom. that could be interesting if that takes place. cisco reports today after the close. analyst for the third time in a row are looking for a small year-over-year decline in revenue. we also have a report saying cisco could lay off as many as 14,000 workers or 20% of the workforce. another drag on the nasdaq e offered a disappointing fiscal first-quarter earnings guide. ubs downgraded their shares to a
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sell. vonnie: what about some bright spots? retail --e have some apparel retailers trading quite higher including urban outfitters on pace for its best close in about four years. very solid second quarter. they beat earnings estimates. children's place offered a better-than-expected guide for the full year. boosted guidance by as much as 20% both of these are up more than 55% year to date. vonnie: let's check in on the first word news. >> good morning.
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british prime minister is enjoying a honeymoon with the public. of the voters surveyed say they are satisfied with her performance. she even has a positive net satisfaction rate among labour party supporters. they give jeremy corbyn a negative rating. eu president donald tusk has a credibility issue with russia. he says russia's version of events in crimea is not credible. accused president ukraine of killing russian servicemen in crimea and threatened a very serious response. russia annexed crimea in 2014. the u.s. is moving to improve ties with serbia. joe biden says they have agreed on a new extradition treaty and pushed serbia to improve ties with kosovo. that is one of the key conditions for joining the
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european union. a linked document could make relations worst between angela merkel and turkey's president. according to an internal government merkel's views turkey is a central platform for terrorism in the middle east. turkey calls the report an indication of a twisted mentality. new security measures for this year's oktoberfest. munich is banning backpacks and other large bags from the us years celebrations. last month germany was rocked by a series of attacks. donohoe.ney turning back to markets and more fallout in the brexit road.
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tension deficit. record low government bonds are wiping out investment returns. that could lead companies to cut dividends to help break this all down. i want to bring in simon kennedy who oversees our brexit coverage. great story on the bloomberg today. one line that stood out to me is companies in the ftse 100 paid around five times as much in dividends as they provided in contributions to provide pension plans last year. this is a bit of a shift. what kind of companies could be affected? >> those with deficits. this story is written by one of our interns this number. among the companies are affected, tesco, ba systems. they are all looking at these deficits and brexit has certainly thrown a conundrum for them.
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their ability to generate returns almost pension plans is hampered. it's going to be a challenge for them. it's going to be a concern for investors as well. nejra: is this only a u.k. problem? an international problem. the great pension gap. it can be a real thorn in the side of companies. it is something a lot of companies will have to address in this era of low return. vonnie: does the pension gap affect share price oat all? if investors start to be concerned about the liabilities of these companies there are certainly things to take into account when you look at the broader balance sheet. vonnie: it couldn't possibly be
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enough to solve the pension problem. in a kind of general way investor managers are going to have to be a bit more creative in how they deal wh this issue. they can talk to the current pension recipients and offer them more now in the hope they will give up returns later. get a bit mores risky themselves and what they are investing in. what other challenges in your coverage of the post brexit environment other than this? >> they don't know the regulations they are going to raise. you don't know who you are going to be reporting to. perhaps the taxes they pay. there could be another reduction in the corporate tax. they don't know if that's going to be the case.
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a great deal of uncertainty. we are seeing reports of companies -- for everyone that done well there is one that does poorly. interesting comment i heard yesterday in terms of the bank of england's quantitative easing program. there was a bit of a hiccup last week. some saying this was a sign of it working because what the bank of england wants is for people to move out of bonds and into other asset classes. >> absolutely. they would have perhaps wanted a better option last week. they got it this week. certainly they need investors to be pushing the risk of assets that would give a return. is a challenge to the bank of england and the federal reserve. nejra: simon kennedy. this is the guy you want to message if you want to know anything about brexit.
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vonnie: and almost everything else as well. from the u.k. to asia. an airliner missed analyst estimates. earlier today on surveillance, the ceo explains the poor showing. >> the big issue is we are facing -- environment. structure going on and everhere we are seeing strong u.s. dollars ainst other currencies. the economy environment is a bit challenging. not just in the u.s. and europe. demand travel demand very much related to gdp growth. we are seeing very short growth here. we would rather be telling an improvement story of the situation is we are seeing less demand.
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we are seeing customer trading down from a long-haul flight to a short flight. we are seeing security concerns in relation to terrorism impacting travel elements. so the demand of travel is slowing down a little bit. we hope it is a short-term issue rather than a long-term one. supply on the other hand we are seeing some light on the long-haul route and the rich australia -- rick to australia -- root to australia. understand there's pressures from all sides but some of your competitors are doing better. i think the economic environment there's not a lot that we can do about it. what we are doing now is to invest in new routes. what we are going to see in europe and in london is that we
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shall the operate more flight to england. five times a day you throw. -- heathrow. lounge whicha new will be very good for our customers. we will continue to make ourselves competitive. we're going to have very competitive fares. we will be working on the cost and we will be keeping it the same if not better. we are investing not just in aircraft but also in lounges. the customer experience is something we will continue investing in. that was the ceo speaking on bloomberg surveillance. coming up its our global battle of the charts. i will be going up against stocks reporter danny version -- danny berger.
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this is bloomberg. ♪
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vonnie: time for our global battle of the charts where we take a look at the most telling charts of the day and what they mean for investors. you can access these on the bloomberg by running the function featured at the bottom of your screen. kicking things off today is danny berger. in about two weeks time the s&p and dow jones indexes are going to break out the wreaths into their own sector. i want to give you a heads start before august 31st and tell you what that means for you. tracked the wreath
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index versus financials. a lot of investors don't have many bets on the reit index which is surprising because when you look how much better it has done then financials as a. 8% whereasut financials is flat. index it'll be down .5%. the question is want to get broken out into its own index will do even better now that managers are aware that they don't have this investment? there's already sign that beginning to happen. here i have the vanguard etf for the reit index. this is weekly inflows. there have been inflows which is a pretty long stretch for this index. you can check it out. this is definitely one you are going to monitor as that switch happens. vonnie: tell us what that stands
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for. >> i'm not sure off the top of my head. vonnie: taketh away. nejra: we have been talking about how a number of european benchmarks have recovered post brexit. italy still has a long way to go. even today the foot the -- the ftse onof the worst performing indexes in the world. up tos really paying hedge against more stock turbulence. what the white line on this chart shows is the cost of three-month auctions trading at the highest since 2013 versus one month contracts. they pushed up the price of these auctions protecting against volatility in italian and is. -- equities. cited italy is the largest risk in european politics this year outside the u.k. with the the question
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drop we have seen in the ftse whether it has actually become oversold and investors can start to find the value here. valuations on italian stocks have fallen to 13 times estimated earnings. the cheapest in four years. ftse mayline shows the have estimated eps minus the stoxx 600 estimated eps. have they fallen enough for the valuations to be attract or is more volatility enough to put investors off? you can see my chart on the bloomberg. vonnie: i love your chart. i think it is really fascinating and complex and interesting as we head towards italy's problems which are only going to get worse until they are resolved at some point. i'm coming over in your direction because even though things have not gone to the side of the atlantic you are on recently i still today have to the title toward
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danny berger. sorry, next time. up next after losing 44% of its market value this year is a time for deutsche bank to cut out bonuses? this is bloomberg. ♪
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vonnie: live from london and new york and vonnie quinn. nejra: i'm nejra cehic. this is the european close on bloomberg markets. one of the most read stories on the bloomberg right now. is it time for deutsche bank to consider scrapping bonuses? bank has sold risky assets and cut thousands of jobs but it has lost about 44% of its market value this year. could bonuses be next? joining me to discuss is lionel
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laurent. keep saying they have enough capital but you have some analysts that tell us the company will need to sell shares. tell us who is right and what could tip the scales? noise thises the time is coming from within the bank. if the head of the consumer bank which is the one part that is doing all right to he says they may have to scrap bonuses for the top people. they have done it before and they might have to do it again. it's kind of a warning sign. saying the shareholders this year might not even be the breakeven year. there may have to be some tough medicine. nejra: are we talking about management board or across the board? >> it's really for the people at the top. this is a trend we are seeing where ceos and directors are trying to symbolically take a staff to try and
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show they are taking even more of a pain than employees to keep them onside. and also to keep shareholders confident that things might get better. vonnie: will it work? it's very tough because bonuses today account for a very small size of the cost base of annvestment bank. it's about 15%. clearly the bigger worry is about fixed cost. deferred bonuses, regulation cost of.t., general doing business. honestly i don't think that in itself is enough to move the needle. the idea thatbout we are going to see a lot fewer bonuses and pay packages in general's banks move their headquarters out of london? it was only the bankers in london that got the massive payouts. >> i think brexit is a very good excuse to pay less.
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they will try and move staff out of london even if it's to lower-cost sensors within the u.k.. this is a cost issue for the european investment banks lots more efficient than their u.s. rivals. i think it will be a good excuse. nejra: deutsche bank has already been saying it may fail to return to profit this year. how does this fit into that bigger picture more so? >> that's why we are starting to hear that noise. shareholders want to know how the bank is doing. bad soket environment is any kind of early comments about bonuses will be reassuring from a cost point of view but also worrying from a profit point of view. a bit of a worry all around. nejra: absolutely. thank you for joining us today. let's take a look at where european markets ended the day. 25 minutes ago was when european
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market started to close. the stoxx 600 closed down .8%. it is the fourth day of a no gain. the longest stretch of that kind since june. the dax leading the losses. ftse 100 off by .5%. down .3% even after that better than expected jobless claims data. the euro pretty much unchanged. down0 year gilt yield both two basis points. that is it for the european close. this is bloomberg. ♪
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>> it is noon in new york. >> welcome to bloomberg markets. ♪
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scarlet: good afternoon. i'm scarlet fu. matt: i'm matt miller. here's what we're watching. -- stocks edging lower. investors eagerly awaiting the fed minutes from the july meeting. explain they could help why fed officials did not signal the timing of their next move. is lower for longer a buying opportunity? hillary clinton takes the lead in key battleground states. another sign of upheaval within the campaign. scarlet: we are halfway through the u.s. trading day. track ofan is keeping the first back-to-back decli

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