tv Bloomberg Markets Americas Bloomberg November 14, 2016 10:00am-11:01am EST
vonnie: we will take you from washington to frankfurt and cover stories out of new york, london, and south korea. here is what we are watching. donald trump's's first staff fixed rattles the establishment outsider divide. we look at who he is surrounding himself with as well as a weekend spent watering down some of his oldest promises from the campaign trail. are the bond vigilantes trying to tell us something? still wielding considerable power to constrain public spending. we will be watching for a news conference from president obama later today. tourars up for a european and they visit to peru.
30 minutes into the trading day in the u.s., we have a deal and you -- julie hyman has all of the goings-on. julie: yes. we are a sideways move after the best week for u.s. stocks and 2014 in the wake of donald trump's his victory. as they reassess what that the emphasis mean, seems to be on infrastructure spending. dow today rise to a record once again. not a big move but enough to take it to a record. lacking once again about one quarter of 1%. though we are not seeing much of a movement, there is a big in the s&pnce again 500. financials continue a strong rally as we can -- as we see the yield curve continue.
on this talk of infrastructure tech as well. the s&p financial index is at its highest since may of 2008. the index is also on a record high here. we have watched bonds very closely after last week and that is continuing this morning. the 10 year yield is up 11 basis points this morning. another very large move as it goes to 2.27%. the highest we have seen since january. all of the talk of a spending and what that one mean for yields here, moving on to commodities, we are oil prices down today as -- as they increase their production. steelmakers are continuing as
well. still questions in terms of steel tariffs. morgan stanley raising its rating. and it is also higher. mark: similar themes here. the inflation trade is playing out. best week since july last week. you have got industrial goods and services, declining with utilities and real estate. we see the yield curve across the globe. these are the best since january today. to novemberse back of 2015. since trump was elected. four days, the banks have risen 5%.
this is the below chart and the index telling us they are overboard or oversold. above 70.86 since slumping into a five-year. 36%. upside theen a real worst since may, the euro-dollar trade through next year. renewed dollar strength following the trump victory. the green lines, 115 and 105. the dollar is approaching a sweet spot for a rally.
the forecast one of five, 95 four 2017. keep an eye on the european bond curve. this is the yield differential between italy and spain. yielding and spread differential, 57 basis points. greater than the spanish bond market. brexit thatsince italian yields started rising more than the spanish on mark after a year of gridlock in againstd not deter or the economy. fear about the upcoming constitutional -- boosting on 2% for the the first time in over a year. the risk is very much playing bond market today.
let's check in on first word news today. alicia has the details. >> donald trump made it clear what he looks -- what he is looking for. presidential elect was interviewed for 60 minutes. pro-life. i am the judges will be pro-life. in terms of the whole gun situation, everyone is talking about the second amendment and they are trying to change it. will be very pro-second amendment. >> trump says the issue of same-sex marriage has been settled by the supreme court and he is fine with that but he is focused on overturning another ruling that legalized abortion. 's election has upended president obama's journey to greece and peru p must now reassure global leaders, something he may not be quite sure of himself, that
donald trump will be ready to lead some genuine 20th. is holding ama news conference and you can watch it live. rockedve earthquake has new zealand. there was widespread damage to roads and businesses. the quake measured a magnitude 7.5 in an area north of christchurch. damage could be several billion dollars. paris has marked the one-year anniversary of the attacks that killed 130 people. lanterns with red, white, and blue were leaked and staying reopened the nightclub where most of the victims were killed. global news 24 hours a day powered by more than 2600 senate analyst in more than 120 countries. this is bloomberg. donald trump's
presidential victory continues to send ripples through global markets from the selloff to the emerging -- joining us now, he correctly predicted donald trump would win the white house. congratulations. how do you position yourself for a trump when an are you sticking to those positions? some humility.ow let's face it, all of us are struggling. i want to pick up on a couple of things, particularly what happened when one old reagan was -- some people think because of trump of his personality, i think it is it is a good analogy. there are a couple things ronald reagan did. he sat down and met with the current chairman of the federal reserve.
the discussion apparently went along the lines where reagan said, doing it the fed? trump has made a lot of , and i think we need to think this through. are we had a complete change in interest rates and will that be read by a very different mandate from the fed? a couple of ideas cross my mind. could we have a more defined mandate? ?ould we have a gold standard these are things mentioned in passing over the last 12 months or so. was a piece of legislation put to the house and never actually passed. that was that the dual mandate should end and that the mandate should concentrate on inflation only. most other modern central banks have. response by mike pence, if that gives you a clue. they mayt seems like
not be the immediate priority. do you think in the background markets, there is a fear about how much the federal reserve and the actions will be impacted? >> i appreciate they are not maybe the immediate priorities, but us, i think they are paramount. the new president will have two places to fill as he goes into inauguration. places where congress would not allow congress to fill. players, thewo key whorman and deputy chairman in 2018 cannot be renewed. i am saying those two people that are chosen will give us probably the biggest what happens in markets in the first years of donald trump passes presidency. position do we
ourselves potentially to some move toward the fed in the early trump presidency? >> i think he will pick -- a fairly aggressive tightening in fed up policy. be lessndate, that may likely. if you look at bond markets, most of them had peaked. up. ec basis points backing now the politics are supporting that move, going into 2017 and 2018. it is a big problem for markets. and: you predicted brexit trump winning. that is two big calls pier 1 what are your other big calls? there are big political events coming our way in the remainder of this year. his -- give us something for the
next year. everyone is listening now. >> i'm worried about the politics of europe. i think the way leaders will after donald trump passes presidency show how he is out of touch. let's see who was picked to be the standard bearer for the french presidential election. you have the insider, 71 years done, running a slush fund in paris. the guy has got a lot of bad things around him. closek it will be very and i hate to say this, but he has got a pretty good chance. markets, i think
there is a view that the dollar will go a lot higher. thet quarter years of reagan presidency, it was up 45%. match a stellar wise where do you anticipate 10 year yield going? it creates a huge problem for the ecb. the qe program is here to end. an -- doesdoes not cannot hold, they all of europe together. who will buy 2%? i do not know who will. trading at 7%. i am afraidroblems to the dollar will be seen as a safe haven. we have the economy cranked up.
uncertainty about what donald trump will do. us now, chair of the monetary economics institute, also a member of the german espoo -- economic in the wake of donald trump passes victory last week in the u.s. election, reflation seems to be the buzzword. is the outlook for the global economy changing in the 's success?mp if you look at the bond market, great change. >> yes. i think there is still a lot of uncertainty. as you say overall, the moretation has been growth, higher interest rates. we see that in bond markets. market: that is obviously the case for the u.s..
translatenecessarily across the globe? what is the thinking across ecb and other central banks now? >> with the key is, the protection is in that the u.s. will step back from free trade, that would be bad for europe. journal -- germany would be heavily affected. the u.s. would also not benefit. i personally do not believe that will happen and i think we will see some measures but i cannot imagine president trump engaging in a trade war. that is why i am fairly optimistic. yields are rising in the aftermath of the election. counteracting ecb policy to some beent, we know there will some when it comes to trade.
do in as the ecb situation like this? >> i think the ecb will pretty much continue with the plan. they will continue the purchasing programs and announce that it will last longer. downnk they should slow and that the message is that long-term rates are rising and that is putting some upward pressure on longer-term rates in germany. in the euro area. i would think that is a good thing. the bigger problem in europe is that we have lost any sense of market discipline for governments. week, we haveasic no impact for market conditions. they should really consolidate and make economies fit for the future, reform them. vonnie: many governments have been doing that --
many governments have been doing that. >> i asked a question. >> many have done that. >> if you would look -- yes, if you look at countries they respond, early and they have been consolidating fastest now among european countries. if you look at italy, it is true they are tight -- trying to reform now but there was not much happening before. mostly by tax increases. much of a threat is the victory of donald trump to the whole of the european project. in the next 12 months? >> the brexit referendum was the bigger shop -- shock but trump's's surprise is
encouraging populists around europe. what is key is they look more closely at what people want. people want more decisions made close to home, and what is done on the european level delivers a clear win-win for everybody, european policies on counter --rorism, on border control patrol, maybe this will be a push to move forward. mark: we have seen the big rally in european banks shares. following the victory of donald trump. just seems to be on regulation. the think he will dismantle done fat -- dodd-frank or not? >> i am not sure about that. i think on balance, the ministration will mean -- it
does not help or hurt europe at this point too much. still fairly unstable. capital.o build up it did not happen as much here as in the u.s. we did not need to build up more in the banking system. mark: thank you for joining us. share of monetary economics at the institute for monetary and financial stability. still ahead, another big day for multi-billion-dollar deals. we have details on all of today's m&a action. this is bloomberg. ♪
a look at some of the biggest business stories in the news right now. buying atment bank rival. it says it is acquiring so it can expand expertise in energy deals. based in houston, it will become a subsidiary. the americancquire drugmaker pharmaceuticals. according to people familiar with the matter. the deal could value at as much as $8 billion. toss could fall apart or they could attract other buyers. to buynder has offered the owner of online gambling service in a deal for $6.7 billion. the ceo says it is one of the best interest to be positioned as a private company. for british retailers
accuse visa of force him to pay hundreds of millions of dollars. this comes on the opening day of a trial for london. -- that is your bloomberg is this flash. still ahead, president-elect donald trump makes two key hires, selecting reince priebus as white house chief of staff and chairman steve bannon as top advisor. who benefits from these moves? this is bloomberg. ♪
rock for the city of mosul. bloomberg's -- reports from .ubai -- aimed to stopping them from advancing into the heart of the biggest city. with the fighting now taking place in close quarters, the risk of civilian casualties means the forces cannot be backed up by air support. european union foreign ministers have reaffirmed their support for the iran nuclear agreement, which donald trump branded the worst deal in the world and vowed to renegotiate. top diplomats are calling for a more robust european defense and a greater european voice in global affairs. emissions are
growing at a slower rate according to the global carbon project. -- sions will increase china's greenhouse gas output is falling. global news 24 hours a day powered by more than 2600 journalists and analysts. let's head straight to julie hyman with the latest on a few m&a movers. julie: harman international is the audio company and samsung is buying it for eight ilion dollars, trying to expand in automotive technology. this also seems to be connected to the samsung heir apparent. this acquisition happening shortly after he ascended to the board of the firm. buying harman is going to help samsung into the top ranks of auto tech suppliers and also
give it some relationships with established automakers. $112 a share is the offer and you can see we have harmon trading at 100 -- $110. these acquisition that the german company has made since 2014. share, up about 19%. zeman said this is going to help supplement industrial software portfolio. elliott management back the offer. zeman rising 1.5%. a company that is not necessarily a household name but is called amaya. it is a kadian company and its founder has offered to take the company private. $6.7 billion is the value of this deal. this is an interesting situation because the founder took an indefinite leave from the
company earlier, this year. insider a come back trading probe he is the focus of, and he already made an officer -- an offer for the company back in march. the shares rise 17%. vonnie: thank you for that update. issident-elect donald trump picking -- filling out top members of his staff. rights previous was named chief of staff and stephen bannon was named chief strategist. why hetrump addressed has lobbyists on his transition team even as he rallied against them in his campaign. >> we will have restrictions on foreign money coming in, we will put on term limits which allow people that a lot of people are not happy about, but we are doing a lot of things to clean up the system, but everyone that
works for government and then leaves government becomes a lobbyist, the whole thing is just run by lobbyists. vonnie: for more, we are joined by bloomberg's white house correspondent. everything that the issident-elect said palatable, but let's begin with who he is actually putting into place. characterize the relationships, going forward. mike: it will be a difficult relationship and the choice of these two men who represent two warring dimensions of who president-elect trump is sort of signals that he may not have fully figured out whether he wants to govern as an establishment president or as a populist, more of a bomb throwing radical right president , and there is probably an internal tension within him, and now he is setting up a dynamic
at the top of the white house where there are competing power centers. vonnie: is it risky or brilliant? mike: from a white house standpoint, it is considered risky. that said, there are some businesses that drive from creative tension and you see that in a number of industries. in this case in washington, people are more used to something where you have a chief of staff who has the power. mark: this is hardly draining overturning the republican hierarchy, is it? my: you could hardly have gotten a more establishment figure. he is very close to the house speaker and he is the head of the republican party, has been for years. he is the pinnacle of the washington republican establishment. that said, steve bannon is the exact opposite. he is mr. outsider, someone who
came up through breitbart report. very provocative with a lot of complaints. these are just polar opposites to be the head of his white house. mark: donald trump's longtime ally said this is going to cause rebellion in donald trump's base. what is the response going to be? mike: maybe you won't because you have steve bannon who knows how to talk to that group. the element is being included in the white house at the top, so what we will have to see is how they manage that. in the end, the proof will be the putting. is he pursuing establishment republican agenda, cutting taxes, deregulation or is he delivering on these promises of restricting trade, restricting immigration, other things. vonnie: last night on the
interview, the president-elect was very earnest and seem to be in great shape when it comes to at least goodwill towards the country and it -- in its entirety. in terms of policy, he said it like you was going to backpedal on some of the campaign promises he made, in terms of obamacare and women's rights. itre does he come down when comes to things like appointing a supreme court justice? courton the supreme justice, he has certainly laid out some strong markers during the campaign to appoint very conservative supreme court justices. obamacare, all he said was he would not tamper with the most popular elements, that is that everybody can get insurance preconditions, everybody can keep the kids on until they are 26. --re are ways that you could what democrats would view as hollowing out obamacare, even as you kept those principles that
are extremely popular. obamacare statement, all that said to me is he is a savvy politician. those are the most popular elements. what he will really do, we will see what comes next. white house correspondent in washington, d.c. president obama will hold a news conference at 3:15 eastern time. mark: coming up, bonds have come crashing down since the trump election. how long will it continue? we will hear. this is bloomberg. ♪
vonnie: you are watching bloomberg. mark: this is your global business report. president-elect donald trump selection may be a boost to london's slump in -- slumping housing market. buying harmang is four $8 billion. -- for $8 billion. mark: president-elect trump vows to repeal and replace president obama's signature health care law. vonnie: donald trump selection may be a boost for the london ausing market according to property housing website -- a property website operator. it could be the return of international housing investors looking for a safe haven. stevens is expanding its industrial software
capabilities. agreed to buy an oregon-based graphics company that represents a 21% premium. andoubled its stake pressure the company to improve value for shareholders. samsung electronics is making a big move into the automotive technology business. it agreed to buy harman international industries, the price of about $8 billion in cash. that represents a 28% premium. high-end car audio and is the leading connected car technology. harman industry's chief executive had this to say on the deal. >> this transaction is an ideal strategic fit that will maximize our complementry strength. samsung's global scale, r&d capabilities and distribution
channels will provide harmon the resources to broaden our technology portfolio, expand our reach and -- the stainless steel timepiece when our $11 million in a sale by phillips in geneva. no word as of yet who the buyer is. the watches one of only four -- the watch is only one of four. vonnie: time now for our bloomberg quick take where we put context and background on issues of interest. the affordable care act has succeeded in lowering the number of uninsured americans and survived a series of supreme court challenges but now faces its biggest threat yet with the election of donald trump. here is the situation. donald trump out to repeal obama and replace it with a more modest plan. democrats say they will do their best to block bills that would
tear down the signature achievement from president obama. uninsured rates have fallen roughly to about 10% throughout the country. some of the biggest u.s. health manyers have pulled out of of the exchanges, saying they have been losing hundreds of millions of dollars. at least 1.4 million people will lose the obamacare plan they bought in a health exchanges for 2016, forcing them to pick new plans. pay fornt individuals the plans is expected to rise by roughly 25% on average. 77% of enrollees would still be able to find plans once subsidies are taken into account. was how do we preserve a system of employer-based insurance while ensuring access to coverage for people to sick or too poor to afford it? making it work required a combination of subsidies,
increased spending on medicaid and the individual mandate, the unpopular requirement that every american obtain insurance or pay a fine. donald trump said he would replace subsidies by allowing people to fully deduct their insurance premiums from their taxes. he would move to a system of medicaid block grants and wants to allow insurance to be sold across state lines. a repeal could result in about 25 million people losing coverage while adding $33 billion a year to the federal deficit. you can read about health care on the bloomberg. at the bloomberg.com for more stories. right to bonds which have plunged since the election of .onald trump bloomberg daybreak america is about how much further yield will rise -- muchcas about how
further yield will rise. >> the 10 year part of the curve would run about 150 basis points up in yield. the 30 year may be closer to 200 basis points. yield could move quite a bit more, closer to 3%, and you are right, we have to be cautious about the risk trade could break down like it did during the taper tantrum. during that, there was initial selloff in the high-yield market, but by the end of the year, high-yield bonds were stronger. if you look at the high-yield market and the corporate market in general, donald trump's policies and the economy and the situation we are in should be positive for credit fundamentals, at a time when high-yield default rates are peaking and coming down off of the commodity bust. >> also tying into the broader landscape, you do see yields going higher and at some point,
donald trump is going to want to borrow a lot of money to pay for infrastructure. what can he do to calm the bond markets so he can borrow? >> we have to keep in mind that rates are very low. from a borrowing perspective, it is quite attractive for the united states to be borrowing at these yields. there'll be plenty of bonds for higher yields and still a thirst for yield and the market. at some point, value in the treasury market will be there. have notg time, we been getting paid enough to take term structure risk. we have been keeping our portfolios shorter in terms of duration exposure. at some point, -- it will be i don't think inflation is going to get out of control, so somewhere with the 10 year around a 3%, there is better value there, and i'm sure investors around the world, where rates are very low, those
yields would be quite attractive. >> that is a 100 basis point move. at some point, it needs to be matched with solid, hardgrove. i want to understand from you have geared the u.s. economy is after six years of ultralow rates. when you are that geared to that story, you get a backup of 100 basis points, is that not significant in a big way? >> you have to look at what is driving the rate increase and this rate increase is driven by inflation expectations. if you look at how tight monetary policy or how tight rates are in terms of real terms, real rates are still negative, and i think if the fed starts raising rates and i believe they will, starting in december, real rates will remain accommodative for the economy. i don't think nominal gdp can
rise here. real gdp can be pretty attractive, and in essence what this does is it is extends the cycle for maybe a year or two years, and allows corporate profits to be fine. speaking earlier on bloomberg daybreak america. vonnie: still ahead, more on donald trump's impact on bonds. ♪ some of the biggest drags on the major averages right now, we have facebook down 3%. amazon down almost 2%. netflix down 2.5% -- netflix down 2.25%. stocks are weighing because they are seen as not particularly conducive to success and a trumpet administration. -- in a trump administration. ♪
mark: live from london and new york i am mark barton. vonnie: and i am vonnie quinn. back to the bond selloff which is not easing following donald trump's victory. is the bond market sending the presidential elect a simple and unambiguous warning to be careful or could cost you? joining us now is the editor for bond and fx and bloomberg news. is this a postelection nightmare for the bond market that it is going to wake up from, or is this the new regime? if we can know describe it as a nightmare, just yet, but the moves have certainly been surprising. very large, sizable backup in yield. inflation hasr
any additional stimulus from the government coming into the markets. how are you going to fund that? what does it mean for the federal reserve? are we going to have more government spending, does that mean they will hike quicker? these are things weighing on investors minds since the election. they were trying to factor in some of the proposals that donald trump has been putting forward. saying about $250 billion worth of government infrastructure spending. is that how the federal reserve is going to be looking at this, doing their own sort of mathematics on a solution? >> i think that we will be looking into how much fiscal tightening has come about because of the moon -- because
of the moves in the markets and the financial index that we have not seen for much of this year now. that tells you that the move and the dollar -- moves in the dollar and the moves in the bond market are doing some of the tightening or the fed and that will cause slackening -- slacking off a bit. down the line, they will have to think about how do we find the right balance between moving now and avoiding having to move faster, later. mark: in 1994, former president bill clinton passed what many call the ambitious to mystic agenda. or the the difference soul -- look -- similarities between 1994 and 2016? >> one of the differences between then and now is the policy rates would federal reserve were completely different. much much higher and this time we are coming from a lower base and therefore, there ought to be more flexibility for the
government to borrow at reasonably low rates, even if they are higher than what we have seen over the past one or two years. on the other hand, the bond market has a concept that you want to keep on board, you don't want to scare off investors who are already backing away to sales from china and japan and saudi arabia. you need to keep the bond market on board to a certain extent because of thing start to turn nasty, that can whip across all the other markets. mark: foreign demand has been a key reason why we have seen this drop-down in yield in recent years. his are any guarantee that foreign demand will remain strong? anyhe rock -- is there guarantee that foreign demand will remain strong? >> one exception may be which is japan, where the 10 year yield is being held by the bank of japan. that is still pushing investors from tokyo to look for the
higher yield. if you are trying to worry about your currency and defending that against the dollar, you need to sell treasuries rather than keep hold of them in order to maintain your fiscal balance. these kinds of things are weighing on the conundrum facing overseas investors. vonnie: i pulled up -- thank you for joining us and the two year yield is -- mark: coming around on the european close, we will examine stocks under par. could a selloff now be better for the incoming president? ♪
mark: we will take you from new york to berlin and we are going to cover stories out of the u.k., wall street and japan. here is what we are watching. prime minister theresa may will give her first major speech on foreign policy since taking office in july. she will argue that changes in the air post a donald trump win. vonnie: u.s. stocks continue their rally in the wake of a trump election, but the new president's best hope is offering equity change. we await a new conference from president obama later, today. mark: let's have a look