tv Bloomberg Markets European Close Bloomberg November 18, 2016 11:00am-12:01pm EST
♪ mark: we are going to take you from new york to paris. cover stories out of berlin and the u.k.. here's what we are watching. the u.s. dollar touching it strongest level in almost a year in irvine by expectations president-elect donald trump across the pond, the euro suffering its longest losing streak on record. recall volkswagen will 30,000 jobs globally in a n agreement to come back from the omissions -- the emissions cheating scandal and invest in electric vehicles. three key appointments including jeff sessions for attorney general. all of the updates, who is coming and going from trump tower.
mark: 30 minutes until the end of the session. stocks are falling today. up for the second week, best run in almost a month. sterling was the outlier last week among the major currencies. it rose against the dollar and is down against the euro. 10 days of decline against the dollar, the longest losing run since the euro's inception of january 1999. sovereign bonds and commodities, let's talk about the world's biggest cement maker raising dividends lying back shares to reward investors following its merger more than a year ago. 2018 offense to .eflect asset sales stemming that is why shares are lower.
the chief executive aiming to fulfill pledges to increase profitability, lower debt, and bring additional cost savings after the economic slowdown and slumping demand for a building material. the italian lender was down 5.3%. .4%. down it said it may announce the share sale when it resents the results of its month's long review on december 13. no firm decision has been made on what firm actions will be taken. it encompasses all major areas of the bank and focuses on , andres to reduce expenses improve risk discipline. this ceo is trying to restore confidence after the shares have been absolutely hammered this year. half of its value has been
wiped away. they are considering raising 13 billion euros. he said i know it is the euro close, but i thought we would do something japanese. something special happened at japan today. the nikkei 225 injured of bull market. it declined, a rise in japanese stocks. the nikkei added 6%, rising more than 20% from the low in june. quite an astonishing run. in anuary, the nikkei was bear market. how things change. was elected president, the best performing developed market in the world is the nikkei, followed by the the island dissect. abigailt over to
doolittle. abigail: we are looking at fault declines for u.s. stocks. nasdaq, s&p 500, and traded slightly higher, but now small declines. similar to year up, weekly gains, but very interesting for the dow. it is slipping away. the weekly game is less than .1% . if it declines more it could be on key for weekly decline. today, we are looking at technology stocks that are higher, including marvin l technology, salesforce.com, all of this on strong earnings reports. also raised fourth-quarter as much as 60%. sticking munication's -- nuance communications also raised. salesforce.com, investors really like them. deferred revenu debt
.- deferred revenue jumped as for what is not working on the session is retail. lots of red. 2 stocks plunging. up an in-line quarter, but by reaffirming the full-year view comments a.m. clyde the fourth year earnings could be lower. fitch, theyrombie & missed on same-store sales, on third quarter growth margins. the gross margins were below what they were looking for. investors are punishing those shares. down in sympathy we have urban outfitters lowers well. it is not only about stocks. we have tremendous strengthen the dollar. 3769.k at g #btv in blue we have the bloomberg
dollar index, white we have the world interest-rate probability telling us the probability the fed will raise in december. hikerobability they will rates in december. rising rates and helped the dollar, so we have the bloomberg dollar index following up, on pace for the best quarterly performance since march of 2015. real strengthen the dollar. withe: let's check in first word news. courtney donohoe has more. orkney: -- courtney: advancing into mosul. one soldier was reportedly killed in the clashes. civilians, someone did, could be seen fleeing the violence. the former philippine take tater -- dictator was very today. the ceremony was marked by
protests. it marked the democratic triumph that the people one when the democratic power ousted him three decades ago. his daughter said that his burial fulfilled his last wish. earlier, mr. obama joined leaders of european countries in germany to discuss security and economic issues ahead of donald trump's inauguration. are outliningals new steps flint, michigan needs he take before switching t drinking water source. they wanted three-mile interconnection to test water for three months. epa officials say they must submit a new water treatment plan. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. donohoe.tney
minister. c fire toy executives over the west african project. the executive is denying allegations. considering an ipo with the canadian business object by need to raise cash for the expansion of a mountain oil pipeline. ofinitial public offer canadian assets is being considered as well as others looking for joint venture partners. fiat chrysler recalling 89,000 dollars and suvs a cousin of a .ossible fuel leak it covers dodge during go and jeep grand chair be suvs -- jeep grand cherokee's worldwide. owners will be notified by mail starting on december 19.
that is your bloomberg business flash for this hour. mark: staying with autos, cutting 30,000 jobs for a saving. the company struggling to claw back from the emissions cheating scandal. a look at whether or not it is , my favorite stat is volkswagen still has 300,000 employees, which is a lot relative to the number of cars it produces. talk us through the measures. >> hi, mark. has a lot of employees. -- this isovernight not overnight. it is over a long time. the company is trying to map out its future care to electric
cars, car sharing, and new technologies. one of the executives put out strongly worded comments. he said this is our way of bracing for the storm hitting the industry. he means the car industry as we know it is disappearing. the concept of owning a car, driving it, it runs on fossil fuel is no longer the car we will see in the future. it might be one you will not own, you will share, you won't drive, it will drive itself. it may run on a battery. a massive upheaval in the industry and folks are trying to adapt. that is a reaction to this. mark: given the influence of volkswagen, it is a miracle reductions were announced at all. will it achieve its goal? is the aim achievable? >> volkswagen is a deeply
political animal. every german company has some degree of labor involvement. thelays a crucial role on advisory board. any major upheaval cannot happen without consent from the labor side. that may explain why we are not outright firings, just a reduction over a longer time, sweating out these people over a decade. you can see in the stock reaction, a lukewarm applause, but not outright cheering. people might be skeptical, is this enough? 30,000 is dramatic, but the opening comments, there are excited thousand people here, and it pales in significance in that regard. people are wondering is this enough? do they need to do more? did the labor side prevail?
something we will only see over the next months and years. vonnie: any capital investment plan that may offset some part of the layoffs in some communities? put out apany separate statement in the afternoon detailing the spending plan. not a lot of meat on the bones. the agreement this morning, the future pact was the bedrock that they needed to move on. with that in place, the labor side on on the management side, both sides pulling along, we will see more accords going forward. there is a sign of volkswagen, is this company one that is susceptible to change? historically it has been a rigid company run by a family, controlled higher family. management has been at the company most of their working lives.
it is not a company that is nimble. there remain skepticism, can they pull it off? vonnie: how much damage has volkswagen done among its reputation among its consumers? >> obviously, volkswagen has to react in a more dramatic way than any other car company. the storm is affecting the entire industry, but volkswagen is doing this out of a position of weakness. the diesel scandal is the big elephant in the room, costing them billions of euros. 20 billion and counting. they're still financially sound, but there is a built in weakness . a lot of money is rushing out the door that they should be fit -- they should be spending on future technologies. mark: thank you. discussesmon wolfson
vonnie: live from london and new york, i am vonnie quinn. mark: i am mark barton. this is the european close on "bloomberg markets." end of theuntil the friday session. global bonds heading to the steepest loss in two decades, preparing for surging inflation under president trump. in europe, rates are likely to remain lower. ecb mario draghi -- ecb president mario draghi said they are relying on support. >> besides the geopolitical risks that remain prevalent, there are three factors that
warrant caution. the defensibility of euro banks, weakness of inflation dynamics, and dependence of the recovery on our monetary policy. mark: joining us from his firms outlook got trump. ahead of the election the prediction was if trump gold rises and bond yields fall. the opposite has happened. many investors have been trumped. where do we go from here? one of the surprises is that the markets have not been looking at short-term issues and predictability. the markets have gone to the
longer term and the five-year mandate. the growth outlook and how to , withr growth president-elect trump, this has huge consequences on the growth assets and equities at the expense of bonds. mark: what are the implications inflation,, growth? alain: i think the starting point is the growth outlook. when you have potentially a combination of tax cuts, infrastructure spending, and the -- of my party 2018, youon, that in person witht one
more growth and previously expected. this leads to higher inflation numbers, and for the federal hike in december that is already priced in. i don't think markets will move anymore. the fed can continue gradually to tighten monetary policy by 2 or 3 rate hikes next year. vonnie: it seems like some investors are looking for more inflation than others. i have a chart of the two year yield versus the five-year forward. where is the true inflation? think in this scenario that we are managing, we understand tax cuts and
infrastructure spending our program of inflation. if the fed stayed on hold you about theorried inflation outlook. and theh outlook -- federal reserve will provide rate hikes. we should anticipate how inflation in a muted way. the action of the federal reserve will be important to with inflation for the u.s. vonnie: what assets are better to be holding and in what duration? to reduceis important the duration of fixed income.
there are ways to reduce the duration. the longest duration is to be ornd in consumer staples [indiscernible] e compartments are in danger. goods flow,of the the curve steepen's the banks will make money on the curve. the hottestof regulations against the banking sector. it is more in favor of banks and against [indiscernible] please carry on. asin: for the fixed income, we mentioned one of the hardest
is ae last decade momentum in the fixed income area of the long end of the curve. 2017 to reduce the duration on the fixed income as much as the equity portfolios. mark: you can't see my chart, days ofs clear euro 10 declines against the dollar, longest losing streak since 199. 9. hello does the euro go -- how low does the euro go? alain: prior to the trump election, the probability of the fed to hike was under 50%. now it is close to 100%. was explicitllen
yesterday that she is going to do something and more in 2017. the momentum that the euro is fast.g has been this is summer rate hike is fully priced in. the market would go into 17, i'm worried for the euro to go further down. you for joining us. look at where equities are trading. 4 minutes away from the end of the session. the second consecutive week, the close is minutes away. this is bloomberg. ♪
we have risen for two consecutive weeks, best run in a month. for nine days this index has fluctuated between gains and losses, the longest run of such endeavors in 2 years. big news to vw reaching a landmark agreement to cut as many as 30,000 jobs globally, 5% of its workforce. ros.ill save $3.7 eu there are 600,000 employees worldwide, that is a lot for the amount of cars it produces. vw was struggling even before the emission scandal that tarnished his reputation, burdening the company with $18.2 euros in costs. has slumped.gold
line.s the blue the 30-year yield is the white line which is up. the fed signaling by janet yellen when she appeared before the joint economic committee that december looks likely that the next hike. week, the most in three years. the donald trump election win is boosting expectation of infrastructure spending, boosting bond yields. the 30 year yield is above 3%. come,w you how far it has it moved from 3.61% e4 to over 3%. old has come down -- gold has come down. the final chart of the week, probably the most significant is bonds.
the continuation of the downward move, the biggest three-week loss in 26 years as donald trump sends inflation expectations soaring. this is the bloomberg barclays index, last week through thursday come the biggest two-week drop in the data going back to 1990. yellen fueling expectations the fed will hike in december. the mobile bond rout content -- the global bond rout continues. vonnie: let's start with country market movers. you can see modest moves, energy and financial are the only two in the s&p 500 that are higher. that is having it down a quarter of 1%. a weaker versus a stronger u.s. dollar. the kroner is not having such a great time either.
the bloomberg dollar index of .5%. , we have seenres a big movement over the last two sessions. we will get to rates in the second. currencies, you can see that as the dollar gets stronger, some vulnerable currencies are getting weaker. one of them is yen trading close to 111. alarm bells there. in spite of the .5% move, it was anticipated, but it is trading above 20, close to 20.5. the turkish lira, when we thought it was a big deal that 3,16 it is now three point 38. it is suffering. the 10 year is yielding, that
spread keeps getting wider. il.mentioned o cold futures coming close to $1200 an ounce. courtney: president-elect donald trump has offered attorney general to jeff sessions. selected mike pompeo to lead the cia. michael flynned as national security advisor. sessions and mike pompeo would require senate confirmation before assuming their roles. flynn would not. trump is going to settle lawsuits that claims his university was a scam. to $25 pay $20 million million to settle a lawsuit in a case filed in 2013 by attorney general eric schneiderman. it claimed that trump duped
students and he may have personally made $5 million on the schools. vladimir putin is making sure he will be a force to be reckoned with for the next tenant of the white house. putin is setting up a team to ensure he wins a fourth term with a wide margin in 2018. his approval rating is more than 80%. russians want to see him continue. detainedics have been in istanbul as part of an investigation into the movement responsible allegedly for an attempted coup. they have arrested 37,000 people and fired or suspended 10,000 more from government jobs in a controversial crackdown following the coup. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i am courtney donohoe, this is "bloomberg markets." mark: one of the u.k.'s
prominent brexit supporters is urging patients in the exit from the eu he spoke to anna edwards. possibleot think it is to think about these things in public. it is not possible. we'll have to be patient and wait for the government to spend time to think these things through and talk to europe, working out what is and is not achievable. the worst thing we could do is end up with pre-negotiation on television or in parliament. ultimately, these things need to be sorted out with europe. mark: as for what brexit may solve, he suggests it may be a long road to a full and sustainable recovery. >> the western world's economy has been down before the brexit vote. it is not afterwards, in many
ways we are in our journey going into the woods. lfson says rising leisure activities puts retailers in a tough spot in 2017. shares have fallen 30% in 2016. the trump trained has dominated markets with the dollar has its best rally in 15 years against the yen. bonds for their biggest loss. central banks in asia shore up their currencies. the greenback's strength also weighing in on commodities. i want to bring in our analyst. we could've brought up 100 charts and we would not be done. let's start with a bloomberg dollar spot index, highest since february. the rsi, what is sustaining the
dollar's gain at these overbought levels? >> expectations for the federal reserve to raise in december is sustaining the rally that we have seen since the election at 96%. for markets it is almost a done deal. that is keeping up the momentum for the last two weeks. until we see what the fed does in december, that is likely to continue. mark: we have had comments from fed officials. the nuances matter? >> they affirmed the possibility of a december rate hike for sure. it is already priced in the market. have to watch for what they say in between the lines. the dallas fed president said the fed is ready to remove some accommodation and they are watching the level of the dollar. it is at the highest since february. that is not something they want to do too quickly.
we have janet yellen saying that even if they normalize policy it will be gradual. these are things that could let the dollar rally take a hit of a breather. vonnie: the emerging market currency, we are having an even harder time at the moment. the mexican central bank rose by 50 basis points and it rarely impacted the peso weakness. the turkish lira, we have looked at 30 or 20 big figures in the past couple of weeks since the election. what is going on with emerging markets, and how can they are central banks help out? kristine: it is because of the dollar rally. because the dollar, and the connections with the world, it is likely the rest of the world currency markets will be swept up in it. it depends on how much capacity the central banks have to shore up their currencies.
also if they want to fight the dollar rally. there is a trade-off between their ability to do it and the realization that they are going to be going against the rally if they do it. vonnie: right. who of them has the reserves necessary? who has intervened already? kristine: malaysia, india, and brazil has stepped in to shore up their currencies. other central banks like the ones in china are constantly watching the markets. it depends on the pace of declines in these currencies. we know that central bankers do not like disorderly markets and they will be watching out for how quickly these moves are happening and what they will do after. mark: the bond markets, it is astonishing. the worst two-week performance for global bond indexes and a
quarter century. this is my favorite bond chart of the week. the spread between the german widest. 10-year, 2% wase 1989, before vonnie born. a long time ago. is this reflecting the diversions between the ecb, boj, and the fed? kristine: absolutely. the federal reserve is talking about normalizing policy. they are the only central bank doing that. the ecb and boj are still in easing mode. fired warning shots signaling they are ready to buy unlimited amounts of bonds to sustain their target. you mentioned earlier mario draghi came out dovish and said the recovery is dependent on ecb policies. both of these central banks --
mark: really quickly, this is the euro falling for the 10th consecutive day, worst since its introduction in 1999. it is the inverse of the dollar index. 105 is important? it was the low from march and the ecb started the bond buying program. who are you talking to about parity? how soon could it happen? kristine: no one knows for sure, but we have seen forecasts are parity in the early part of next year. at this point, it depends on the momentum of the euro, but more importantly the dollar. mark: and with the ecb does in december. kristine: of course. we will watch for comments on quantitative easing. in october mario draghi reiterated there would not be an abrupt end.
to pension plans. it would affect the retirements and take u.s. workers place in 2018 if the company stays on schedule to complete the planned megamerger with dow chemicals. business executives in the u.k. earning the highest salaries and bonuses facing a fresh crackdown . theresa may will likely demand more transparency for bonus payments in the london financial district, in addition to identifying those who earn many times the wages they pay their staff. responding to a populist backlash to narrow the gap's between average workers wages and pay raises and those at the top. the london stock exchange crew must face joint headquarters in the eu country is post-brexit britain fails to secure passporting for financial
services according to a german of the show you says a change must be supervised where it does business. the company's plan for london headquarters was a sticking point for germany. they say the $12 billion deal is binding and remains unchanged. that is the latest from the bloomberg business flash. looking ahead to a vote, europe's political future, headingrench president into a presidential primary that may determine the occupants of the palace and the challenger to pen.the 10 -- le we're joined on the phone from paris. the group of 7 will be whittled down to 2. who will come out the top 2? >> conventional wisdom is the
former prime mr. and nicolas candidatesl be the standing on monday morning, though there is a chance the prime minister under nicolas sarkozy will make it through. one poll put him that connect .ith nicholas sarkozy he has had a lot of momentum in the last weeks and is doing well in the debates. those are the three front runners. polls?rust the >> one has to be careful with the polls. it is the case of we don't know who will vote. if you take a country like france and you do a poll across the nation, you can get a margin that is of 3% or 4%
reasonable and gives you an idea of what is happening. we don't know who will vote. in theu need to vote primary is you need to be a registered french voter, and you need to appear at the polling station and sign a piece of paper that says you believe in the values and you want a change of president in 2017. for you pay 2 euros logistical cost. anyone can turn out to vote. forsocialists vote candidate they think will be easy to defeat? will they turn out and vote for the softer right option in the hope of having a change in president, but one that is more palatable? no front voters join the vote and change things? it is difficult to know. pollsters expect 3 million people to show up. if it is 4 million or 2 million,
they will be different results. nicholas sarkozy is seen as having the party base. if it is only republicans, he will probably win. if it is a wider audience, the other is seen as more likely. mark: the winner could be the next president? >> absolutely. is whohow whether it tos through, they are likely come through standing and be left in the second round with le pen. that is the game here. all the polls show that no socialist can make it through at this stage in the current configuration to the second round next april and may.
vonnie: the last half of the week. it is time for the battle of the charts. the most interesting charts of the day, every day, in this segment. you can research them on the bloomberg running the function on the bottom of your screen. this is a special edition of battle of the charts. >> new updated data on u.s.
inflation. a continuation of a trend that has been going on for a while. the biggest component is driving inflation higher. the rent is too high. everything else is looking weak and is at the lowest inflation rate for pretty much everything besides shelter. this is a problem for the fed. right now we are seeing a rise in interest rates. we saw that that led to a big decline in mortgage applications. clearly, the housing market is really sensitive to low interest rates. prices areat house going up so quickly is compounding that issue. we have an affordability story, sustainability of inflation trends story. vonnie: that is potentially why consumers do not feel there is not an inflation problem -- they feel inflation every day. the federal reserve is looking
corelong-term half for inflation and shelter does not play a part in that? >> that's right. vonnie: 5047 in the chart library. mark: expectations on the rise in the eurozone. mario draghi's five-year forward inflation spotlight is inflation from five years, beginning in five years, five years thereafter. it is far away. 1.58 is the highest since january. on january 11 it fell to a record percent. the last time was 2004. i put the euro over it. euro falling against the dollar, a record losing run. a divergence in inflation expectations. we don't see ays strengthening in price dynamics.
bring on the ecb to review its program with headline inflation of .5%. expect the ecb to extend its program. the ecb foresaw it averaging 4.6% in 2018. the preferred measure is on the up, blink and you will mesh it. -- miss it. i love inflation and inflation expectation. can i issue a friday tie? mark: i will take a tie. vonnie: congratulations to both of you. tune in later for christine lagarde. ♪
david: from bloomberg world headquarters in new york, coming to you from washington, paris, and frankfurt. jeff sessions is the attorney general and he is also named a national security advisor and cia director. we look forward to his meeting with mitt romney this weekend. president-elect from's policies may improve u.s. productivity. we had to washington for how republicans are pushing medicare reforms. how the changes affect seniors and the insurance industry. abigail doolittle joins us. abigail: we are halfway through the trading session looking at small declines from major u.sages in the