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tv   Bloomberg Markets European Close  Bloomberg  August 19, 2016 11:00am-12:01pm EDT

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trading day in europe and you are watching the european close on bloomberg markets. we are going to take you from new york to london and cover stories out of brazil and russia in the next hour. here is what we are watching. of alarity on the timing briggs it. bloomberg is reporting prime minister theresa may's team leaning for the first part of 2017 to trigger the start of talks over the referendum. >> that news of the brexit timing sending the pound lower after trading higher on positive you go data. the latest moves in the currency as well as numbers on inflation, jobs, retail sales, and today's public finances. stock market revolution,
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getting want even before his startsrs exchange trading today. we look at how the new exchange is provoking responses from competitors. >> let's have a look where we are trading right now. just under 30 minutes to the close. we're seeing the stoxx 600 lower. i want to show you the bigger picture of the stoxx 600 post brexit high in red and come off a bit from that. the rally we saw yesterday, the first time in five days, actually. that was pretty short-lived. stocks falling today. i want to have a look and see on the industry groups how we are performing. every industry group lower. commodity producers leading the losses, down 2%. insurers and banks lower. italian banks have been some of the most punished stocks on the stoxx is hundred -- stoxx 600.
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there's a lot to be focusing on here. dax index. i want to show you it is down because this has been a little bit of an unloved rally. we have seen it move into bull market territory. a lot of strategists not buying the optimism on german stocks. upper a second month. it came within four points of erasing its 2016 drop this week. forecasters are cutting their year end targets on this gauge for an eighth time, not protecting -- projecting the dax will slide 7% this year. 90 minutes into the trading day in the u.s., so let's go to the markets desk with julie hyman. julie: in the u.s., things have turned mixed. the nasdaq recently pointed higher, now lower once again. the major averages have been carrying their declines. the s&p down about one quarter percent. dow off about 2/10 of 1%.
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if you look at some of the individual movers bucking the downtrend, two listed on the nasdaq. foot locker is not one. it is up the most since november after its comparable sales rose by 4.7%. the comedy said soft drinks in footwear. average selling prices were up in the second quarter for footwear. applied materials is one of the stocks listed on the nasdaq. this is the biggest maker of machinery used to make some a conductors. revenue and profit predictions may surpass estimates. the company is banking on increase business chipmakers upgrading their equipment. itse comedy raising full-year profit forecast, cutting production and other costs. ross stores, the company second quarter earnings and copper bowl sales meeting as ash comparable sales meeting estimates.
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other assetsk at as well. for example, the 10-year note which we have seen decline in yields over the past few days now is reversing that trend. point 58%. up five basis points. if you look at the u.s. dollar, a reversal of the recent trend. recently, we have seen it fall. now bouncing a half percent due in large part to the pound and the bloomberg news story that the brexit may be triggered perhaps early next year, according to theresa may's plans. we have been watching oil which has been having a big week. it also is reversing a bit today, going sideways to a little bit down. still of 8% on the week and on pace for the best week since april. i want to bring back this chart from yesterday. we are in a bull market for oil. that is the zigzag chart in oil. the 47% chart -- drop we had last year in the climb and now
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after recently falling to a bear market, back into a bull market for those oil prices. >> a wonderful chart. thank you. >> donald trump and his running mate mike pence are in flood ravaged baton rouge, louisiana, for first 10 look at the damage. president obama has no plans to cut short his vacation to visit the state. the president is getting criticized for vacationing and martha's vineyard during the deadly flooding. hillary clinton reportedly told fbi agents the former secretary of state colin powell advised her to use a private e-mail server. "the new york times" reports is included in notes the fbi shared with congress earlier this week. experts urging for a lost airliner are hoping to define a new search area. the new leader of the search says his team wants to study where in the indian ocean the first piece of wreckage
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recovered from malaysia airline wing flap, most likely drifted after the disaster. the plane disappeared in march 2014 with 239 people aboard. nbc primetime viewership of the rio olympics down about 17% from the london games four years ago. it is because millennials are tuning out. the 18 to 49-year-old age group, which is covered by -- coveted by advertisers, is down 25%. comcast paid $12 billion for the exclusive u.s. broadcast rights to the olympics through 2032. news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. nejra: let's get back to brexit. the british pound taking a dive today against the u.s. dollar after bloomberg broke the story the uk prime minister theresa may is said to be leaning toward
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triggering the brexit cross-ice by april of next year. joining us now is bloomberg richardrd strategist jones. great to have you back as we do every friday. i want to talk about sterling. you have interesting lots about the disconnect -- thoughts about the disconnect. >> a very interesting week for the pound. we have had some reasonably strong data, which has seen the pound strengthen. we have given some of that game back today. -- gain back today. shows we measure actually will finish up on the week. that is largely due to the stronger data we have seen this week. the short end of the rates market really has not changed its view on the bank of england profile. this data, i think they have shrugged and said, it is too soon to make any judgment on what this means going forward in theit and what it means for
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longer-term implications of the british economy. therefore, there has not been that much movement. there has been a disconnect between the rates market not really moving at all and the pound actually moving reasonably substantially this week. biggeste've had this drop in two weeks off business we could have article 50 triggered in early 2017. fx were talking about the market reaction in your notes being more about sort of crowded short positioning being squeezed. bearing in mind that and the drop we are, what is your outlook for the next couple of weeks or so? >> i think what today shows us run story.a long it is not something we are going to be obligatory really firm handle on one month after the brexit occurs with one months hard data. it will be something that plays itself out over the coming months and quarters. realistically, i think the triggering of article 50, the
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timing of it, is what is going to set the longer-term tone for the u.k. rates market and for the pound. that is so up in the air right now. nejra: richard, what do you anticipate the bank of england members will be most closely watching at jackson hole? >> i suspect everybody is waiting with bated breath to see what janet yellen has to say. we have had quite a few fed speakers this week. we have had minutes perceived more dovish that perhaps what was expected, certainly more dovish the last time around after the april meeting. so i think central bankers, investors, mpc members will be keen on what janet yellen has to say next week at jackson hole. >> what about other currencies relative to the pound? obviously, this week the pound has been more of a safe haven than it has been the previous weeks. buying the pound for himself, personally. where have slow spence going to from the pound? what other currencies?
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>> one of the most interesting stories since brexit has happened has been the weakness of the pound against the euro. if you look at the euro in a trade weighted basis, it is actually now climbed to levels that we have not seen since january 2015. if you recall, that is when the ecb first embarked on qe. that has been driven primarily by the euro strengthening against the pound. we are seeing some euro strength against the dollar. i think yellen's comments next week will be very important. if we see her lean slightly more dovishly, that might mean dollar weakness or euro strength. this is something the ecb will be watching closely. it could be something were they want to start talking the euro down in the run up to and perhaps at their next rate meeting in september. >> i am glad you brought up the euro. i was looking at it today. we were having a conversation off air us to why we have seen the strength.
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i believe it is headed for a gain against the dollar this week as well. looking at next week and the fact we have jackson hole and these dynamics playing with brexit -- these are two way trades. where do you think the kind of impetus in the trade is going to come from? is it going to be from the dollar or elsewhere? >> i think in the near-term, sterling has been the dominant one and that is driven the euro higher up to now. the dollar has weakened for two straight weeks. i think in a next week, it will be important what chair yellen has to say. we have a ecb meeting a week or two after. depending on where the euro is, the ecb will have their say because they can't be happy with the euro on a trade weighted basis at the highest levels we are seen since generate 2015. that is not in their playbook. as always,jones, thank you so much. more and currencies ahead. the ruble falls against u.s. dollar as tensions rise between
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moscow and ukraine. what could it mean? have bladder pins efforts to revive the -- including
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>> counting you down to the european close, we're just about 15 minutes away. >> it is time now for the bloomberg business flash. some of the biggest business stories in the news right now. volkswagen's production at four german factories is at risk of disruption. a payment dispute with the supplier that makes seat materials and transmission
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parts. the automaker has so far been mum about the severity of the slowdowns. inshortened to resolve it missions cheating scandal. tudor jones urging managers to take more risk in their bets according to an investor letter obtained by bloomberg which says tudor jones is boosting the amount of money he is managing to more than half of his main hedge funds net assets. the moves are essential to a shakeup of the business which this week that 50% of its staff. a spokesman declined to comment. whetheris looking into a startup broke the law by not disclosing was buying its own vegan mayonnaise from stores. making just mayo, the brand appeared more successful than it was. that is according to people familiar with the matter. they say the agency is trying to creekine if hunting improperly recognized revenue from purchases made with the
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company money. that is your business flash for this hour. nejra: i want to focus now on the ruble and other assets as well in eastern europe, and escalation of tension and ukraine could thwart the upward momentum of russia's currency. it is weakening today against the u.s. dollar, trimming third weekly advance. you can see it there as a rout. ukrainian asset has worsened as well. joining us now is bloomberg emerging markets reporter. natasha, we saw the ruble chart. i want to just bring your attention to the chart showing how ukrainian bonds are underperforming their peers. we have the ukraine 2026 bond in white. we have egypt 2025 in blue. iraq 2028 in purple. ghana inpink.
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take us through the market reaction. >> there's been a big flareup in tensions between russia and ukraine that started last week when putin said he was going to crack down on terrorist attacks in crimea. you can see ukrainian bond market has suffered, especially in the past week, one of the worst performing in the world. i think of the past few days, it is overtaken -- the yield have overtaken iraq's. >> it is not just in the bond markets we are seeing this impact. we talked about the ruble. take us through what has happened there and what the outlook is as well. >> the ruble has not suffered quite so badly as the ukrainian assets. what is interesting is the ruble , usually it would be rallying at the moment because oil is rallying.
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oil is not following the big gains in oil and that is a sign that political risk is really returning back to the russian market, which has not really been factored in with investors the past year as tensions and ukraine died down. >> fixturing jake -- the exchange rate is important to russia's stability as well. what level can the ruble weaken to? it is quite hard to say. it really depends what happens now with this conflict with ukraine and nobody really knows what russia's intentions are. tensions ease up, you could see a rally in the ruble because it would then follow oil again. if there was a prolonged conflict like the cranium
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president was hinting at yesterday, -- ukrainian president was hinting at yesterday, there can be huge drop-off in the ruble. you could see it down to levels we saw last year. >> how big are the bond markets in ukraine and russia? >> ukraine structures must of its dollar debt last year. $15 billionbout standing. those bonds -- they pushed back to majority, so they are at much lower risk of restructuring and they were a year ago. if there was a conflict with russia, it would really hurt ukraine finances and its ability to pay back that debt. has russia, the bond market not been suffering quite so much because of sanctions, the demand for russian assets has increased because there are fewer bonds out there. there's a huge hunt for yield and emerging markets at the moment, which means investors
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are quite reluctant to sell the russian bonds. they are more in wait and see mode. >> natasha doff, thank you. up next, we will hear from the ceo of heathrow airport and how the brexit vote could affect the travel industry. ♪
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this is the european close on bloomberg markets with under 10 minutes to the end of training. >> from new york, i am vonnie quinn. their mayg fell after be a trigger of the uk's withdrawal from the european union in the first part of 2017. the business humidity is navigating the impending flip,
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the ceo of heathrow airport on holland says slower summer travel season may not be the new norm. >> too soon to tell whether that is just a blip or longer-term -- certainly, the u.k. is better value for money for overseas visitors and businesses than it used to be. that might see more overseas businesses choosing to invest in the u.k. as well. >> do you have a breakdown of whether people booked later? something i was thinking about, people saying, if there is brexit, i want to go to the u.k. or was going to go to america or northern africa, because i feel less certain about my security than europe is cheaper, safer, and u.k. is attractive? >> i think it is too hard to be that precise. we have seen or last-minute bookings this year than in previous years. it is hard to say why that was. it is not just about brexit. there are people choosing to
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come to save countries like the u.k. perhaps rather than go to some of the european countries where they are a little put off by some of the security issues. but this summer is very much about the holiday market, families coming and going on holiday. we will get a better sense of september and october when the business passengers come back. we will know whether people are still doing deals. he throw is the main route between europe and new york, in particular. business deals and fundraising drives a lot of activity. that is what drops off a little bit o. will that come back for september and october? >> that was the ceo of heathrow airport. as for how the brexit vote may impact international trade, africa's largest food retailer president does not into concern.
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he says he is not concerned about long-term problems. >> i did believe that in business one should approach life with the short-term outlook. the pound has weakened. the pound will strengthen again. we have seen it all before. what is new? personally, i think it was a mistake. but one could debate that until the cows come home. that is the negative side of it. the positive aspect around it is i happen to be in the u.k. a week or two after brexit. new prime minister, new ministers with apparently excellent credentials and making the right noises.
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>> now let's take a look for european markets are trading as we head to the close. we are under five minutes away from the european close. the stoxx 600 down almost agents of percent. the rally we saw yesterday, the first time we saw gains in five days. that was short-lived. other indices headed lower as well with dax down. let's take a look at bonds and see where we are with the yields. this is bloomberg. ♪
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close is seconds away. this is bloomberg. let's take a look how markets
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are trailing, with a report live from london and new york. they's ftse down 2.1%, worst performer among developed markets today. a lot of the italian banks some of the worst performers on the stoxx 600. we are seeing a weaker sterling, down with 8/10 of 1%. we have seen this take a leg lower today. brexit negotiations could be triggered in early 2017. the triggering of that article 50. euro weaker today. we are talking more about a story of sterling and euro strength against the dollar. let me take you to individual performers on the stoxx 600.
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i'm going to talk about a couple of the biggest gainers. william hill up 3.9%. this is all for the u.k. ofkmaker, softened the blow an abandoned takeover by saying full-year profit will be at the top end of its target range. increase 3.1 billion pound bid was rejected. still considering several options in its strategic review after a local newspaper reported the davis conglomerate was asked during a two-way split into an energy and transport company. chart i showed earlier but i thought was important to highlight. what it really shows is a
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political divergence in italy and spain. the italy spain 10 year yield spread is at its highest in 18 months, and this as spain has moved closer this week to forming a government while italy is facing increased pressure on its banks and a referendum in the fourth quarter that may cost .he premier his job finally, i wanted to show you this. we've seen the ftse 100 lower today but the weaker pound has lifted the ftse 100 more than 8% since brexit. that has pushed its dividend yield down to 4%. here what you are seeing is that yields red to the euro stocks 50.
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something like this might make you start to question that. vonnie: i'm looking at the dollar index. 95.re still well below on that note, let's look at a couple of other currencies. the u.s. dollar is 30% stronger versus the end of day. the ruble, below 64. oil,ng not in tandem with but more because of these escalating tensions between ukraine and russia. that has spread to brent. two dollars.an the dow is down 25 points to eight sad -- 18,572.
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up nasdaq is in the green, 1/10 of 1%. >> let's take a look at those winners, helping to explain the relative strength of the nasdaq against the dow and s&p 500. viacom shares up nicely today on the news that a month long legal battle has ended. ae ceo is stepping down, with $72 million severance package. tom dooley will be the interim ceo. many are saying this will be a victory for shari redstone. -- sherry redstone. we still have lots of fundamental uncertainty, this shows in the fact that the earnings estimate for fiscal year 2016 is down 27% year to date. he also thinks there is an
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upcoming debt refinancing cycle that could be of concern. turning to another winner on the day, this is a chip equipment stock. they make the machinery that produces chips. they put up a blowout fiscal third-quarter. very impressive is the guidance for the fiscal fourth quarter. estimates, street ,nd behind all of this strength renewed demand from the chipmakers as they upgrade their equipment. on pace for its best yearly performance since 2003. >> the nasdaq trying to stay green on the week for the first eight weeks run in how long?
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>> six years. one other stock that could help the nasdaq make that happen, ross stores. beating both learning and cobb sales estimates, they put up a comp sale of _4%. -- +4%. this is a discount retailer that is seeming to do well in this environment. ross stores now up about 20% on the year. >> thanks. let's check in on the bloomberg first word news. courtney? >> tropic campaign chairman paul manafort has stepped down, his resignation coming after the campaign announced a major shakeup on wednesday. manafort but also come under increasing media scrutiny because of his past consulting
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for pro-russian former president to ukraine. german chancellor angela merkel says the conditions for lifting sanctions against russia have not been met and she sees no reason to remove them. she calls moscow's annexation of crimea and its military actions a eastern ukraine, quote, breach of fundamental principles. china will propose a joint initiative to revive quick global growth. president obama will attend the summit. olympic medalist ryan lochte apologized on social media, saying he was sorry for not being more careful and candid when describing the events that took place last sunday.
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lochte did not go into detail about what happened at a rio gas station, but said he was involved in a quote, traumatic situation. finally, all-night service launched on the two -- tube. six trains will run on the central and victoria lines overnight. expanded service is expected to boost the u.k. economy. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm courtney donohoe. nejra? nejra: thanks so much. for anyone who's ever been on a london night bus, i'm not sure you would be quite as excited about the tube. now, to what many consider one of the thornier issues in the upcoming brexit issues.
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some tech companies are worried the divorce could cut off high-tech data flows. when consumers in europe shop online, data passes through u.k. servers. hase minister theresa may not said whether he would follow -- they would follow eu privacy laws after brexit. great story on the bloomberg. this issue of data, how important is it? >> really important. flows is one piece. freedom of movement of people and financial passporting, this is really important for an economy that is 80% services such as the u.k. nejra: what are the main points of contention here? you talk about how this could be used as a bargaining chip. >> it is. the eu has these strict privacy laws. the u.k. is beginning to enact
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these laws but it's unclear whether we will see a throw. could be that this regulation from the european commission goes into effect, that everything stays the same. if the u.k. should decide to leave the eu and european economic area, is unclear what could happen and could affect data flows. >> what could happen if the u.k. decides to not stick with existing data privacy rules that the eu has laid out? thatme people were saying they could apply to become certified by the european commission, which would mean the european commission in brussels would look at the structure that the u.k. government creates after brexit and say, this is fine, you can continue to deal with data. or it could seek to do a contract, like the privacy
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shield, between the european union and u.s. could mean there is a gap in regulation, and that's what companies want to avoid. >> i'm thinking about european activists who sued facebook and won. could similar things happen? >> that's the risk. some of the people i spoke to from my story, people who were involved in the trans- -- tre nds, say they are ready to maybe pursue another case, if this post brexit period leads to the u.k. leaving the eu's overarching data protections game. >> talk to us about this means -- what this means for the companies involved. itouldean moving out of the u.k., right? >> that's the sticking points. companies have human resources and tech resources.
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and bige services capital events. it's easier to move people into the eu than it is to move big servers, data centers. that's the sticking point. apparently a private equity company that has begun moving its staff into the eu but cannot move its servers yet it has it can't be offline. it's very expensive to move server infrastructure, and there is a latency issue sometimes. it's really complicated, and that could act as a hindrance. saying it could be a good thing in the sense that get theirs -- that -- privacy back again? is beingk. government lobbied heavily right now. groupsthe major lobbying
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was at downing street this week and they're making their case that they need to stay within this eu privacy framework. they don't want big changes. is that they will probably abide by that and try to avoid frictions or uncertainty in privacy regulations. >> companies in particular they could be affected? these aree, ibm, companies that have data center operations. >> thank you so much. another issue in the brexit debate. coming up, it's our global battle of the charts. we'll see if i can take the crown on this friday. this is bloomberg. ♪
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>> it's time for our global battle of the charts. charts oncess these the bloomberg by running the function features at the bottom of your screen. kicking things off today, joe weisenthal. i won't look at my favorite chart of the week. is inflation story pressure continues to build in the economy and people may be missing it. we have cpi this week. if you break down certain measures, it is still going up. the white line is the sticky cpi healthcare, things
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that change slowly over time. that hit a post crisis high. extracts another attempt at getting rid of some of the noise. big takeaways the for the week was, even though you might think there's no inflation, there are still sciences building up and you should not ignore that. check it out. 2876 on the bloomberg. nejra, one of you got? -- wht at have you got? my charge really kind of shows the link between commodities and inflation expectations. here, theline five-year u.s. inflation expectations and in the yellow line, the bloomberg commodity index which tracks returns rather than prices. moderately returns have seen a
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bounce in 2016. most prices are still near historic lows, and that has kept a damper on u.s. inflation expectations which attract raw materials over the last decade. this chart goes back to the end of 2003. ist this chart highlights this could be why fed reserve officials seem to agree that consumer prices, despite what perhaps joe's chart is showing, are not likely to take off anytime soon. this is why this chart of the day is so wonderful. that basically illustrates the divide of the fed. i won't be the one who picks between inflation expectations and what markets and data are saying, so i'm awarding a friday tie. it's been a while since i've awarded a friday tie. congratulations to both of you. win.g up, a big
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>> this is the european close on "bloomberg markets." now time for the bloomberg business flash. owes $150 billion bridgewater associates -- with a gain of nearly 3% over the first two weeks of august. the return trends decline. the fund has lost close to 12% through july. starwood property trust said it plans to sell its european loan servicing business and it picked
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a houston-based group as the preferred bidder. manages aboutips almost $15 billion of real estate loans in 15 countries. royal bank of scotland will charge some of its biggest trading climbs to post collateral as a consequence of low central bank interest rate. britain's largest taxpayer owned lender informed clients of its corporate and institutional bank that they would need to pay interest on collateral for trading some sterling and euro options and futures contracts. the changes could impact about 60 large institutional clients. and that is the bloomberg business flash. vonnie? vonnie: finally this hour, a big win. groups investors exchange
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goes live today. it will be the 13th official stock exchange and the first to incorporate a delay that shields investors from high risk, high speed trading risk. iex. d-day for i understand two stocks go live for trading today. >> that's right. you are starting with the slow rollout, which will be complete and fully operative by september 2. vonnie: was this always the schedule? or did he and his cohorts have to speed this up? planis has been their since they won approval to become a stock exchange, which was a big win for them. vonnie: but it's true the competitors are also maybe not talking about exactly what they are doing, but coming out with something similar? >> that's ripe it you've seen nasdaq earlier this week come in with a new order type that it
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also says is designed with investor protection in mind. a work slightly differently. it's not a copycat of iex's exchange. you can see there's already changes happening in the market, keying off of this new exchange entering the arena. let's go back a couple of steps straight what privileges does iex have as an exchange? iex is moving from being a dark pool to a full-fledged exchange, which comes with a lot of privileges. one of those privileges is they are able to list publicly traded companies, and also able to get a little bit of a bump in volume because of the rules around trading in the u.s. market, that send a little bit more order flow your way when you have the best price for a security. >> this has been quite
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controversial, this exchange. annie: sure. iex's key feature that was written about in flash boys when they operated as a dark pool and has carried over to their exchange, 360 microseconds speed orders which comes from a coil of fiber optic cable which all orders has to pass through. there was a lot of controversy around whether or not it would be ok to bring an exchange with all the protections and exchange enjoys into the trading re alm with this speed bump. annie: we will be waiting to see if they can send through the rings. their aspirations are to rival the bigger exchanges. >> thanks. a look at where
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european markets ended the day, the markets closed up about 25 minutes ago. the tradingat ended day. stocks heading for their biggest weekly slide since the run-up to the brexit referendum. we did see gains yesterday for the first time in five days. what a short-lived rally. ftse 100 off just a little. italian banks have been particularly hard hit. that is it, for the european close. and this is bloomberg. ♪
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to "bloomberg markets ." ♪
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scarlet: from bloomberg world headquarters in new york, i'm scarlet fu. erik: i'm erik schatzker. here's what we are watching. stocks open lower but they have hold back. the s&p 500 little changed on the week. as donald trump arrives to tour flood damage in louisiana, there are more changes in his campaign. losses are increasing and so are withdrawals. is it time for hedge funds to take more risk? scarlet: we are halfway through the u.s. trading day.

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