tv Bloomberg Markets European Close Bloomberg September 27, 2016 11:00am-12:01pm EDT
close on bloomberg markets. ♪ mark: we will take you from new york to algiers. a couple of stories out of moscow, london and saudi arabia. vonnie: here's what we are watching. an exclusive interview with the president of the world's largest private equity firm, blackstone's tony james. he will tell us why markets aren't factoring in political risks in the u.s. or europe. a ronclining today as said it is unwilling to freeze output at current levels. the oil minister tells us just how many millions of barrels a day it wants to raise production. dampening prospects of a deal. have a look at where european equities are trading
right now. 30 minutes away from the end of the tuesday session. declines once again. stocks opened higher in europe after the first presidential debate. oil started declining on the expectation. of aiminished expectations deal likelihood in algeria tomorrow. currency falling against the dollar. bond yields falling in the core in europe but rising in the periphery. something to do with concerns about europe's banking industry hitting the more highly indebted nations like italy and spain. you can see oil on the commodities column. look at the shares down by 2%. this is a british distributor of holding materials. to cut the 10th of
its u.k. branches. 80% by the way. this company's profits come from the u.s.. shares are down by 2% today. this is interesting. on the day the bank of england started its corporate bond buying program. the 18 month program. the average yield on investment-grade sterling debt is hovering there a record low of 2.2%. in anticipation of central bank demand. the euro is falling against the pound. it was rising earlier for a third day. people are talking about a hard brexit. that's pushing down the pound. it's almost at level in three years. get over to the markets desk. julie hyman has the latest. julie: we are seeing a boost in going contrary to
what we are seeing happen in europe and despite a drop in energy shares. all three major averages hanging on to their gains even though they have parent them. the imap and what is on the move. a lot of consumer discretionary, technology. cyclical groups are leaving the game. you've got energy down. another leg lower after an iranian oil minister spoke to reporters in algiers and said neither saudi arabia nor iran made proposals. you've got other commodities also week today. gold and copper are selling off. disney considering a bid for the social media company twitter. you can see if you look at all of the potential bidders disney
is faring the worst today and some analysts are putting their prospects and synergies at the highest among those. up next hour exclusive conversation with blackstone president tony james. we will get his take on the first presidential debate and how global markets are being affected by the election. this is bloomberg. ♪
operating officer of the blackstone group. a clinton supporter. co-author of the book rescuing retirement. erik schatzker is with tony james. erik: good morning. there was a lot at stake for investors and business people and the economy in last night's debate. what did you learn? >> i think the candidates painted a great contrast between the two of them. there is nothing else that crystallized the issues. i think hillary came across as cool under fire. balanceck a nice between being tough and not overly aggressive. i think she was well-informed and had her policies. was clearly the adult in the room. interesting for a while but became very repetitious. and a little bit grating.
i didn't learn a lot from either candidate, ironically. i think both were very true to form. in that sense i'm not sure they changed the balance of the election much. erik: it didn't move the needle. i think people went into the debate with high expectations that he would fall flat or she would be cowed or one of them would deviate in some remarkable way. i don't think that happened. voters are going to wait and see what happens the next couple of debates. erik: one of the things he hammered away on was his plan to cut taxes. it would involve a reduction in the corporate tax rate from 35% to 15%. proposal trump's tax more popular among ceos? >> i don't think anyone takes it
seriously. honestly. away at theering amount of debt the government has and now he is talking about attacks planet that will -- a tax plan that will balloon the deficit. it's trump talk. is it mathematically possible? if you want to have huge deficits. erik: there's no way to pay for it. >> i don't think so. erik: you are also a financier. somebody who can do the mass. hillary clinton is also promising a lot. proposing to pay for almost all of it by raising taxes on the wealthy and closing corporate loopholes. that ation is is realistic. -- or goodlicy policy? >> there isn't enough demand.
we can get into that later maybe. one of the things holding back demand is income inequality. more spread that a little evenly whether through taxes or other means like minimum wage i think we can get more economic growth and it will be good for everyone. i think there is an everyone wind approach. do i think the wealthy can afford to pay someone more taxes? yes i do. i don't think alone that's going to do it. >> you can't find enough money. there just isn't enough that way. noticed you probably equity futures rose during and after the debate. the mexican peso moved. it was all taken as a sign that investors judge tillery clinton the winner. whyhat's how markets react
haven't markets been pricing in the growing odds even if they are still not 50% of a trump presidency? >> i don't think the market has reacted all that strongly after the debate. own andhillary held her that eliminates some level of uncertainty. markets don't like uncertainty so they will strengthen a little bit. it's a very interesting conundrum and a lot of investors are talking about it. people the answer is just don't think trump is going to win. they are just discounting that. i think trying to assess what a trump presidency would mean -- it's unknowable. you don't know what his policies are, anything. it's hard to handicap that. erik: take a stab at it. what haircut would you put on the s&p 500 if you thought trump
was going to win? >> i wouldn't know how to do that and i don't think he will. i think that's what most markets think regardless of the polls. markets are more negative about trump's chances than the polls. erik:i what we are getting at is this idea of pricing and political risk. much priced into the stock market today. we have seen stocks selloff since hillary clinton's popularity peaked in the polls. but not by much. the market is pretty good right now. >> we are net sellers on most things. prices are high in any kind of historical context. almost any asset. that's one of the things driving markets. the overwhelming factor is interest rates are so low and there is so much capital around
the world it's got to go somewhere. where is it going to go? where people can earn returns. so it stays in the stock market. this shows french and spanish sovereign cds. of 2010. beginning have come way down from where they were during the sovereign debt crisis days. does this make sense to you given everything we see in the world today? of populism,de anti-immigrant sentiment, central-bank policy running out of room? europe has a lot of problems that are long-term. in the short-term the ecb has said we are going to defend the eurozone no matter what. they have the printing presses to do it. it makes sense that equities are
up because discount rates are so low. cd measure is a measure of risk as well as base rates. the spanish economy is doing very well. it's the fastest-growing growing economy in western europe right now. the rest of -- the risk of things in promoting -- imploding and defaulting has gotten smaller. erik: you are trying to draw attention to an issue that neither can the -- candidate is talking about. retirement savings. you and an economist have just published this book about it. my question is -- i know this is an important issue for you. why now in the heat of the election season? >> ira timing is probably not too good on that. crowdedoubtedly getting out. i started on this crusade a year ago. one was talking
about retirement and the problems that americans are going to face in retirement. people my age than my kids and my grandchildren. people my age are very fortunate for a lot of reasons. the bottom line is half of americans have no retirement savings whatsoever and very little prospect of building them up. they are not able to save. of americansd half could not come up with $400 in an emergency. $400. striking. we have an issue which i think is huge. a gallup poll shows two thirds of american are worried about it. so i think it's a big issue. it affects everyone. why start now.
this is an issue we can solve if we start now and we can solve it painlessly. if we wait it's like so many slow rolling crises. if we wait until it is on us it becomes much more divisive socially. lot of oldwhole people in 20 or 30 or 40 years and they are going to be in poverty. this chart shows in a nutshell what you are talking about. if people stuck with the 401k that's what they could expect based on what we anticipate for returns over time. when you are talking about is replacing the 401k with a retirement savings program. that's right. people roll their 401(k) accounts into the new accounts. the principal amount is guaranteed by the government. 6% they are invested to earn or 7% a year rather than 2% or
3%. that's all part of it. americans can't save because they don't have enough income. one of the things we do is repurposed the text adduction that affluent people get for their 401(k) contributions and use it as a credit to subsidize contributions from people of median income. wall street isn't as welcome on capitol hill as it might have been once upon a time. do you find people receptive to what you are saying? >> the simple answer is yes. we vetted are planned with any number of economists both democrat and republican. most of the prior heads of the council of economic advisers have all vetted it and giving it the thumbs up. variouseen talking to
senators of both parties and we are getting a very good reception. most all of them see the issue and know it's a key issue to a lot of voters. quarters of the voters in america are concerned about it the politicians will listen eventually. the plan for the democrats, they love the idea of helping all of these people that are otherwise at real risk of poverty. the republicans like the idea of personally owned assets not part of the government. personal responsibility. and no deficit and no new taxes. trick to find the way to satisfy both camps. think we've done it. the key to it is starting now and doing it gradually over time.
you will have to have huge taxes or huge deficits or a lot of poverty. there is no good answer if you wait. erik: someone will have to champion it. thinking of that divide between washington and wall street. can you see either candidate taking a treasury secretary from wall street? i think donald trump could do that. it's less likely with hillary. though she might benefit from that kind of experience? >> someone in the administration that understands finance markets business in the u.s. and internationally. it's a good voice to have. aik: you would think it is good voice to have. look at the trouble that antonio whiteside getting confirmed as treasury undersecretary.
he is a democrat and still couldn't do it. erik: what kind of person do you think she goes for? >> could be an academic. one of the names banding around is sheryl sandberg. do you think she will do a good job? >> i don't know her well enough to say. never met her. erik: if it were up to you -- i know you were passionate about this retirement issue. what would be the single top economic priority for the new administration? >> under the label of jobs and income. to do the need following three or four things. infrastructure spending. both candidates agreed on that in different ways. i think we should raise the minimum wage significantly. it should be national.
money in people's pockets and it will be good for business because of the multiplier effect of the economy. business will benefit from that. i think we need to invest more in technology. intellectual capital. all of that is our future. we have to invest more in r&d. and i think things like education is important but it takes so long to play out that it's not going to affect jobs in the near term. have anergy can near-term impact on jobs. i don't think it has to be a budget buster. thank you so much. tony james, president and chief operating officer of the
blackstone group. mark: great interview. let's get back to the opec meeting. oil is in the frame. energy minister says his country and saudi arabia have made no new proposals following iran's rejection of a plan to freeze out put at current levels. >> at the moment we are continuing. not only with the islamic republic of iran but with all members of opec. russia and other consumers. to we hope this will lead building. let's get the latest from that opec meeting in algiers. it seems like a deal is off the table for now.
does that mean we are looking towards november? at the the sense moment. definitely an uphill climb. let me get you up to speed with the latest developments. we understand there will be a joint meeting between saudi arabia and russia. still no clear time on that front. all eyes are on that meeting and the sense we are getting from a lot of the players here is that now the groundwork can be late for that. we have some developments over
the last two hours. we understand russia and saudi arabia will be holding a joint briefing. from -- thed iranian oil minister. they had not received any proposal from saudi arabia which goes contrary to what we have been hearing from sources in the run-up to this meeting. cohn and spoke earlier with the minister. here is what he had to say. toit is time for members change the views and may cook something for the next opec formal meeting. >> is iran ready to freeze production at current levels? >> no. at the current level we are not ready. >> you want to go to 4 million barrels a day? >> yes. mark: we will have more from
algiers in the next 24 hours. out is unwilling to freeze put at current levels and wants to raise production to 4 million barrels a day. curbing any hopes for opec to reach a deal to stabilize markets. take a look at where european equities are finishing the two day session. six minutes left. the reald so well with appetite for riskier assets in the wake of the first presidential debate. it wasn't just the pay so that rallied against the dollar. equities in europe rallied to start. the diminishing probability of a deal in algeria laying on the price of oil. and the continuing problems in germany's banking industry weighing on deutsche bank and the entire european gauge as well. that's the situation. five minutes away from the close.
to forget this comes in the wake of yesterday's drop which was the biggest since july 6. we are looking at the third continuing decline. that's the situation. vonnie: happening right now, joe biden is campaigning for hillary clinton at drexel university in pennsylvania. thecampaign stop follows first u.s. presidential debate of 2016. you can see live pictures of the vice president. earlier clinton told reporters on the plane to her rally that she felt positive about her debate performance. the european close is minutes away. this is bloomberg. >> to assure them that donald trump doesn't represent america when he says that he would not --honor article ♪
the first two hours of trading, stocks were higher by two thirds of 1%. the new started filtering out from algeria. it seems unlikely there will be some sort of deal struck to freeze production, let alone a cut. if this goes to the next november meeting. the meeting has to take place tomorrow. it who knows what will happen in the next 24 hours. it banks are falling, led by deutsche bank. i wanted to start with comments from the chief executive. he said the fallout from brexit will weigh on profit for four years. it the negotiating could take four years. it will depress yields. that is a measure of profitability in the airline industry. to remind you, he is a vocal opponent of brexit.
theid stick to forecast for fiscal year. big banking story is germany. commerzbank and deutsche bank, they will announce 9000 job cuts. that is according to the overhaul of the blank operation. cost cuts of up to one billion euros. it comes after we reported friday that commerzbank is going to cut thousands of jobs. they will boost profitability. that is according to people familiar with the matter. shares are down by 2% today. in the wake of the ongoing decline in the banking industry, it's the worst performing engage within the stoxx 600 this year. it is down by 25%. i thought we would do some technical analysis.
the green line is the day average. ideally, if you want to mention the upside, you want the 50 day moving average. now, the price is not only below the 200, it has broken below the 50 day moving average. it is to the downside. the relative strength index we are oversold. we here at 43. it's a nice gauge to get some feeling of where we are right now with the stoxx 600 bank index. at 11.4 times the estimated earnings. the average over the last five years has been 11.25 times. equale this year, we are to where we have been the last five years area -- years.
vonnie: we see a little bit of the game today. it's only one third of a percent. look at the peso. it was interesting what happened after the debate. it weekend on the way into the debate and strengthened as it looked like donald trump wasn't making much sense on things like trade. traders might have thought. there is a move the peso. we are still at 19.46. clear close to the 20 mark. we do have a meeting on thursday. the 10 year yield is ever lower. futures, there may not be a deal, is created. equities don't seem to care. the dow is up about a half of a percent.
the s&p is up 4/10 of a percent. the nasdaq is up 6/10 of 1%. for more, let's go live to the nasdaq market. abigail: we do have the sense here today that the markets have shrugged off the tone in the u.s. we have the nasdaq higher. it's reversing small losses on the open. there does not feel like a ton of conviction here. as you were mentioning, there are other signals meeting everything is not well beneath the service. is down byty complex more than 1%. the 10 year yield, it is at its lowest level since september 7. the 10 year yield may be telling us a story about the nasdaq composite index itself. when we take a look. areaue, this is the nasdaq
in white we have the 10 year yield. over much of the last year, we have had the nasdaq stalling in a range. interestingly, as the interest rates only decline, after brexit we see this big divergent. we see the 10 year creep higher. there could be summary convergence. there could be some bumpy markets ahead. on the surface, we do have the nasdaq higher. amazon and netflix are sharply higher. jpmorgan has taken the price targets higher on all of these internet stocks. there is a $1000 price target on amazon following them recently doing the same thing. amazon is going to be the e-commerce giant. networks is higher. facebook and priceline as well.
this is what's working today for the nasdaq area courtney donohoe has from the newsroom. courtney: she heads to north carolina. she met quickly with reporters. she was asked about donald trump's claim he had a defective microphone. everybody who complains about the microphone is not having a good night. courtney: donald trump has a rally in orlando florida tonight. cancelednment has bonus payments for state employees. the salaries of saudi ministers have been cut by 20%. the deficit ballooned to 16% of gdp last year. another push from the european union. the commissioner says the british prime minister needs to start brexit talks before april.
it might be too long to wait past the first quarter of next year. until talks cannot start may. the clock is running out on a vote in italy the could seal the political fate of the prime minister. a referendum on changes designed to streamline the way the country is one. -- run. end of the revolving door government. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. mark: european stocks are falling today. the u.s. election, the italian referendum, the vote in germany, how will these events impact asset classes?
thanks for joining us today. we should start with the debate last night. it is freshest in our minds. we discussed the peso gain. then the rally in europe. there were concerns about experiment was the rally about the debate? the person -- the peso certainly seem to be. asia, i thinkn it's hard to attribute that just to the debate. there are a lot of factors and politics in the issues around the banks are in there is concern that the scarcity is becoming an issue. i think these are all factors that lead to some market volatility and potential spikes and volatility. be inlity, we continue to
a low growth world. we have a low-inflation world. reality, i think the political events will be absolving by the market in a reasonably effective way. mark: what gives you confidence selloff,t? initial when we come back from those losses, is that the worst it can get? is that the case study? referendum?ian for the u.s. election? for the german election? >> if you look at volatility coming down, though spikes are related to things like brexit. it is surprising that brexit did not have a lasting effect. the lesson i take from that is the power of the central bank.
expectation that the fed will be raising, it is very conditional. monetary balance sheets around the world will continue to grow. there is lots of cash out there being injected into the system. our belief is the world economy continues to recover. there is a low potential growth world. that moneys got to be put to work. that is the dominant driver. we've been so preoccupied by central banks and their actions. the election has crept up on us a little bit. bloomberg,en to my something like the mexican peso might react. equities are reacting. between clinton and trump in the polls, the s&p continues its
march. does it break out of its range at some point? playthink how the polls out will be important in terms of the u.s. election. i think as we get closer we will likely see a substantial swing. we could see markets breaking out of those ranges. reality, there is so much uncertainty around the event itself. how you price donald trump presidency. the uncertainty around policy. thinking, the monetary environment is going to be the dominant factor that helps the market absorb these political elections. the senate referendum, etc.. speaking of central
banks, the boe is holding the corporate bond market. what you think we will see? >> i think to be honest the moves that probably are priced in. the bank of england has been very transparent in terms of what it's going to buy. size.ndicative of the there will be less transparency in terms of what it's for. i think we know well ahead of time that the market has moved. it reflects the buying program itself. it's an important step. it's clearly a supportive step for corporate bonds. we get the ecb buying corporate bonds. there is a bid from central banks. it becomes a bigger issue. if you look at the bank of england, they struggled. that's not to say they will
continue to struggle. scarcity will become a factor at some point in the not-too-distant future for the ecb. it's already a factor for the boj. that's why they are attacking the yield curve. they are trying to pivot that around 10 year. one of the reasons for that is because of scarcity. mark: stay with us. up next, we will talk central banks and where to put your money, especially if more easing is on the table. this is bloomberg. ♪
we are back with the asset management. we're going to look at central banks. we talked a little bit about the bank of england. i want to talk about the federal's are. will they run into a scarcity issue? when might that be? >> i don't see this as an issue for the fed. we are comfortable the fed will raise interest rates very slowly. the level of peak rates in the cycle will be much lower than the previous cycle. i think that's the message for the fed. december,e expect in one move possibly or two in 2017. it's a very different type of cycle. i think other central banks where they have active buying programs, that scarcity issue will become a significant factor at some point in 2017.
vonnie: at some point in 2007 in, what your clients saying? and they still happy to be an u.s. assets? are they looking for alternatives? emerging markets had a great year last year. >> we think u.s. valuations in the equity market are choppy. more value in europe and japan. there is no doubt that the underlying economic story in the u.s. remains a good one. it still a low growth world. that's what we're in. we see a low probability of recession. the second since world war has been 13%. it is slightly above average. environment, we think u.s. equities can perform ok. we see more value in other parts
of the world. emerging markets have had a good run. the fundamentals there are improving. while the u.s. has been the dominant factor in outperforming, there are other markets with the capability to catch up. your you are releasing look ahead strategic look ahead for the next few months. you are about to do so. you have set the focus should be on an effective tax code. elaborate on that. >> we have a strategic rolling view within that. we have a tactical process. it changes every week. we see environment where the spikes of volatility, we think it's very important to be adept. it creates opportunity. it generates alphas. we try to have longer-term
anchors. we want to have a tactical approach that allows us to get in at the right point. that's not always at the bottom of the market. we are trying to take advantage of the spikes in volatility. we think that will continue. mark: can you give us a comment on opec? what camp are you in? i read has said it won't take part in any freeze. iss that mean the meeting dead? what does that mean for the price of oil? >> everybody would be happy to freeze. iran is not pumping. passing. what would mean freeze in that context? not a lot. the iranians want to get back to full capacity before they commit to a freeze. that's another issue. it's unlikely we will see any
results in mark: oil is heading below 40? will you be brave enough to say that? >> i think it will languish in the low 40's for a while. our strategic view is somewhere around 55 for wti. as the demand was going to be there, it comes down. we will see it rising, been on the short term. that's an interesting range. thanks for joining us. coming up on the european close, we will hear from martin gilbert. that's an interesting range. thanks for joining us. he says the market is near a dangerous situation. this is bloomberg. ♪ vonnie: live from new york, i
am vonnie quinn. mark: this is the european close. it's time for the bloomberg is this flash. the chief executive of europe's biggest discount airline warns brexit will hurt earnings for four years. leavingthe process of the eu will depress airfares during that time. they have put contingency plans in place. they will take flights away from the u.k. in the next two years. latimer pins was to reduce americanissue -- on made technology. a russian made product will be installed in its place. he is concerned about the security and reliability of american software.
that is the latest bloomberg business flash area -- flash. andie: he told francine mark gilbert why he is worried about on markets. >> the shock we got after brings it was in property. up until then all the regulators wanted any shock to be in the bond market when interest rates started to go up. prices are at all-time highs. england buying even more will just push the price up more. into a dangerous situation. are you worried about banks? the have in making a return. that be a concern for regulators? >> certainly for investors.
i think these low interest rates don't help. banks are finding it tough to make money. a lot of them don't have the systems to actually charge a negative interest rate. you want to thanks need banking system. , look atentral banks what the bank of japan did last week aired they are going to target the 10 year. that has to do with china keeping a system alive. i think the ecb is aware of this issue. i'm not sure they can do anything about it. francine: is there something regulators can do? how do you deal with it? regulators what the banks to be as safe as possible. i don't think they care that we as investors make money.
they have made the much safer. andrew bailey sites that the banks are now eight times better capitalized than they were before the crisis. the's been his focus area sad this for them is it's becoming more like a utility. >> that's arguably a good thing. francine: not for portfolio manager. >> i am with you. what we want is safe banks that pay nice dividends for the pension fund. that doesn't press. stay watching. this is bloomberg. ♪
we are covering stories from washington and london. here's what we are watching. u.s. stocks are rising. .here is a surgeon american aim at the federal reserve in front of millions of viewers last night. he accused the central bank of plain politics in a challenge to its legitimacy the could have lasting consequences. one company that we are watching is enjoying a seven-year rally. 2016 may bring that to it in. they are reporting after the bell today. we are halfway through the trading day. let's check in with julie hyman.