tv Bloomberg Markets Americas Bloomberg December 19, 2016 10:00am-11:01am EST
mark: and i'm mark. welcome to bloomberg markets. ♪ julie: we will take you from new next hour.don in the here's what we're watching. international monetary fund chief chris the lagarde convicted of one count of negligence by a paris court. we are live at the courthouse over her handling of a multimillion dollar dispute. mark: barclays is narrowing its customer list to focus on relationships that produce bigger profits. prepares to tell 700 clients to do more trading with the firm or take a hike. lie: and could oil giant aramco -- minutes into the
trading day. abigail doolittle has the latest on the trading session. happy monday. we are looking at small gains for u.s. stocks. the dow opened slightly lower. this puts the dow on pace for its seventh weekly game in a row. in about two years. we will keep an eye on that. we take a look at the commodity complex. looking at quite a bit of red. we have oil slipping around even. copper down for its third day in a row. lots of weakness for the medalists especially copper -- metals especially copper. supporting a bit of this risk off picture when we take a look at the traditional haven assets.
gold is trading slightly higher. the yen is trading higher against the dollar. typically you can find the tell on trading action within the currency markets. the yen is suggesting there is little bit of a risk off. and perhaps in the 10 year yield trading down four basis point. is the 10 yearn yield is on pace for its biggest move up ever on the corridor. will this reverse? on top in white we have the five-year inflation plot. look at inflation. in blue we have the 10 year yield. vincent has said that historically swaps have led yields. suggesting that
inflation expectations got ahead of themselves. and10 year yield may follow we may see consolidation of that big move up as some of the big bond selloff from november starts to reverse itself. mark: 19 minutes from the end of the monday session. average of over the last 100 days. .1%.e down friday's close was the highest since december. just slightly lower. to tell 7000aring clients to do more trading with the firm or take a running jump and find another bank. they have been cutting ties with smaller clients scrambling to capture a greater share of business from world elite fund managers.
barclays shares are down by 2.3% today. continues to be in the limelight tonight. to government prepares inject 15 billion euros into the italian lenders. italy's treasury planning to participate in the share sale which may increase its hold in the government getting ready to improve this rescue plan if monte dei paschi doesn't succeed. shares are down another 9%. they are getting hammered this year. rising to the highest level in almost three years signaling continued growth in europe's largest economy picking up speed towards the end of the year. that's the macro highlight today. julie: let's check in on the bloomberg first word news now. the board of the
international monetary fund will be meeting to discuss the ramifications of the conviction of imf chief christine lagarde in a decade-old negligence case dating back to her time as the french finance minister. she has denied any wrongdoing in connection to a big state payout to a businessman. was cleared of another account related to her decision to enter into arbitration agreement. the u.n. secretary council has unanimously approved a move to send monitors to prevent mass atrocities by syrian forces and militias who have captured rebel strongholds. evacuation's from the war-ravaged city have resumed. the european union has extended sanctions against russia for six more months to pressure moscow to respect the fragile peace
agreement in ukraine. in china it is a national red alert brought on by a choking smog. cities are limiting the number of cars on roads and temporarily shutting down factories to reduce pollution. than 700ia say more companies in beijing stop production and traffic police are restricting drivers. thejail confidant of embattled south korean president denied on the first day of her trial that she used her ties to extort money from big companies. today was the first public for herce in weeks friend of 40 years. the scandal led to the president's impeachment after millions to the streets in protest.
parenti. this is bloomberg. investors continue to assess the trump rally that has lifted stocks to record levels. joining us now is jonathan ttlieb.n -- goblet -- among the highest forecast going into the year and that has proven to be accurate. do you think this is going to continue to 2017? i was bullish last year and we have surpassed my target and we have a 2500 target to the end from here.st 10% up the way you play it within the nowet is really different than a year ago.
cyclical.me much more -- the market has become much more cyclical. that was not the case this time last year. everyone trying to game out the incoming administration. you talk about what corporate tax cuts could add to profits in the coming year. let's say there were no corporate tax cuts. what does the backdrop look like for profits? in our expectations we are adding absolutely zero to 2017 earnings from anything trump is going to do. thing that is happening is because interest rates are jumping up it is really productive for bank earnings. banks are in one of every five dollars in the s&p.
you no longer have a drag from energy prices. it is now above what it was a year ago. higher energy and interest rates bailing out the facts is -- banks is the biggest benefits. 2% of that is buybacks. you are about 5.5% of plain-vanilla earnings. it's not a crazy number at all. the following year is when you have the chance of really getting some of these benefits from taxes, regulations or the like and then it really starts to matter. why are investors quick to respond to incomplete information whereas analysts are slow to adjust their estimates? analyststhinking the will basically catch up and that justifies the gains? >> the job of an investor is to
say with what i know at this very moment what do i do right now with my money or my clients money. they have to take all of the options and jump in the water where they like it or not. analysts are much more specific. if they don't have enough information to assess something they are much more likely to leave their numbers stale. we may wait for months or years before we know the details on regulatory plans, tax plans, thereforeroposals and what appears to be happening is the stock market is getting more expensive. it appears the peas are rising.
you have one group acting with partial information and the other that is waiting for complete information. you have a timing gap not a valuation problem. view have do investors positive inflation expectations -- is there a point where they think this is all getting a bit out of control? >> as long as investors believe , whether in june or in a year from now as long as you gets are convinced something in the neighborhood of an 8% benefit from a tax break. ont has an enormous impact the value of stocks. investors are going to try to readjust their shares immediately to take advantage of
the. long as you have a good sense it's going to happen the exact timing is probably going to be secondary to the market. once we have perfect clarity on everything that is proposed that's when this rally may be over. when it gets perfectly discounted and there is less to talk about. julie: we have seen huge dispersion in the markets. even on days when we have been rallying 1% or more there are groups dropping by multiple percentage points. you think that is going to continue into the coming year even with some of these corporate policies that could benefit all of america? the first thing is financials are a standout. they benefit when the general economy is better.
the most sensitive to changes in regulation. the regulatory environment for banks is really rough. not 3% better, they are 13% better. you have those groups that are very sensitive to an improving economy. industrials, materials, energy. groups.er interesting old economy stocks. brick-and-mortar retail. are these companies competitive versus amazon? they kind of get bailed out by the economy. they are doing well simply because this is the time in the cycle that they do well.
many of the exciting more tend to lagompanies here because they aren't as levered to the economy. they are more fairweather companies that win because of their intellectual property. thank you for coming in, jonathan golub >. mark: breaking news from the world's biggest advertising company. three of its units have received antitrust subpoenas from the u.s. department of justice. it says it is cooperating with those inquiries. the subpoenas are concerning post production practices. that's the breaking news. antitrust subpoenas from the u.s. department of justice. we will bring you details as
watching 2017. joining us from the floor of the exchange is tom farley. thank you for joining us. one would think that 2017 would have to be better than 2016 different that it was the worst year for ipos since the recession. is going to be and how big of a bounce could we see? >> let's hope. i'm an optimist. it was really the worst year for 20 years. i don't want to predict but it feels really good. asset prices are at all-time highs. interest rates are low and we have a lot of ipos in the backlog. 40 companies are filed publicly. over 8.5 billion in proceeds.
are doing more pitching and planning for ipos than we have at any point in 2016. julie: what about technology in particular? we have seen venture capital funding dry up and big companies go back and forth over whether they wanted to become public. do you think that is going to change? a couple really exciting technology ipos that did quite well. i think looking into next year i will tell you the trends i'm seeing. i met with many ceos. many of them gave stock to their employees a decade ago. employees have a house and a mortgage and kids and they are looking for more liquidity. you will see those larger companies come to market.
exciting on the floor of the new york stock exchange. julie: we have been talking about the incoming administration. there seems to be a lot of optimism around that until things are set in stone there is still going to be that indecision and there's also a level of unpredictability on the part of the administration that will cause folks to delay their ipos until later in the year? i'm will tell you what hearing from leaders of industry in the united states and abroad. i'm am hearing they are optimistic. i think some of what we have seen is going to be real and manifest into a healthier economy.
we need to see some execution. the belief is that taxes will come down. we will need to see them actually take effect for businesses. julie: something we are waiting .or its saudi aramco we heard from the foreign minister of saudi arabia that the country is still considering perhaps even the u.s. as the source of its ipo. how do you make that argument given the recent legislation that allows folks in the u.s. to sue saudi arabia? how do you make that argument? >> i do it personally. i am a friend of the oil
minister. important dayst of your life as a public company when you become public and you need an exchange that can handle massive liquidity. if your exchanges coming to raise 25 billion, there is one place to do that in the world. with respect to geopolitical concerns, we need friends in the region. .e have a very large ipo i will make a personal appeal to come to center -- to consider the new york stock exchange. julie: thank you, tom farley. we are watching shares of wgp after the company's three units received antitrust subpoenas from the justice department. it says it is fully cooperating with inquiries. last week omnicom was subpoenaed in a u.s. probe of ad big
julie: i'm julie hyman. this is bloomberg markets. mark: i'm mark barton. let's get over to the latest. abigail: we have a rally among the chip stocks. goldman has added lam research to its conviction research. also initiated coverage on kla-tencor with a buy rating. that stock is right about flat. overall energy is down slightly. we have gulfport energy nicely higher. upgrade to buy at guggenheim.
plus williams was upgraded to an outperform at morgan stanley and we have a relation of coverage and ever core. some strikes here in energy. the latest onead, that french verdict in the case of the imf chief christine lagarde. we are live in paris. this is bloomberg. ♪ generosity is its own form of power.
you got a mean case of the detox blues. don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. >> live from bloomberg's world headquarters in new york and london i am julie hyman. mark: i am mark barton. this is bloomberg markets. more on today's top stories. is inief christine lagard
a spotlight after a call convicted her of negligence. live outside the courthouse in paris. what did the judges say? it was quite unexpected because the judges found her guilty of negligence, not for ordering the initial arbitration but for failing to overturn it in 2008 when she had the opportunity. the court said she should have had more information, should have read all the notes she received from investment agents warning her that payouts to the business tycoons could give her advice on the possibility of overturning these verdicts. did not attendde the verdicts today. her lawyer said she had to be back in washington, d.c. for the
imf, and the question is whether the imf will actually make any .ecisions regarding her she will receive no sentence or jail time and no fine. she should just be found guilty. mark: do we have any idea whether she will appeal or not? >> i was actually speaking with her lawyer, who was receiving a call just a few minutes ago and he told me that she hasn't decided yet to appeal and he actually said, which was interesting, that she was 80% satisfied with the court judgment. she still was found guilty of negligence but satisfied that she is not receiving any jail time. julie: and we know that the imf board is meeting to discuss the trial developments.
do we have any idea of whether she will in fact keep her position? >> at the moment it is very hard to tell. the board said in an email statement shortly after the verdict that it will meet shortly today in order to discuss the trial developments. we know the imf board was supporting her and we also know that this investigation has been looming over christine lagarde's name since she was named in 2011. she was running for a second trial just a few months ago, so we will have to wait a little bit more to find out what the imf wants to do. julie: i am curious how this is playing in france. how important of a figure is christine lagarde? how much publicity has this trial received and what does it do to her reputation?
>> she has been a figure in french politics since she became the imf back in 2011. she is now a little bit more away from french politics but of course, this trial has been very politically sensitive, given that she was a clear supporter of former president nicolas sarkozy. and the chief of staff, who is also charged in a separate investigation, was also very close to the president. very political, even though christine lagarde has not been in the front line of politics for quite some time. mark: as you speak, we are hearing that the french government is confident in her capacity as the head of the imf. that is the response of the current french government.
they seem to be supporting her. yes. of course, the government is just reacting to the news as we know it. that she wasnment part of was right wing. nicolas sarkozy, who is not in next year's presidential election, so the government is just giving these statements. course, it is too late to the imf. -- to wait to the imf. mark: that big news has broken out of the french capital today. let's move to eastern europe. ukraine is going to nationalize its biggest lender, p jfk private bank. it is part of the wider
initiative to speed the economic recovery. the financed by minister. thank you for joining us today. >> yes, hello. mark: can you give us the idea of the deposit outflows we have seen today? from private bank? more is actually not much 2 billion.ual we don't see a significant outflow. the decision of the government to nationalize the bank actually had a clear stabilizing effect for the depositors and clients of the banks. that is clear everywhere.
just a decision in the banking sector. awaited toquite long basically show that the government and the state is changes.d for serious as you know there was a positive , a statement of support from presidentlso from the , who supports the government action. mark: can we talk about eurobonds? eurobonds are going to be converted into capital. does that mean you don't plan to repay anything to debt holders? >> actually, everything is happening according to the laws. strict adherence to the law. the national bank, who have been working and being a regulator
for these bank -- for this bank since the establishment of the bank, it was very actively working with the bank on improving the situation of the last few years. both held by related parties, so they suggested $2 billion -- 2 billion such bonds. week on a government, will wait for this to happen and that is whatever liability is left, we are going to cover. that is very simple. mark: the opposition has criticized the takeover. do you foresee any problems when it comes to passing the budget in parliament this week? think that is why we
have opposition, to criticize the government actions. actually -- the decision fromeceived with support all the attractions. by the way, not only in coalition but even those who are not in coalition. they support it because it has stabilizing effects on the banking system. we also expect the budget will be voted tomorrow. that is our ambition, to have every single vote tomorrow accepted. that is the plan and that will be below, supporting the budget itself. isitself, this budget basically a foundation for reforms going forward.
when we come back there will be support from the parliament in happen.ur reforms >> so the government bonds that you plans to inject into private banks, how is that going to impact the budget? how is this process organized? all, we are going to capitalize the bank without bonds. the amount that we are planning exact amount's won't be clear until the completion of the audit. an independent audit of the bank. in any way this amount is thatly within the limits were planned in 2016's budget. so this is within the budget for this year. that, there will be
some additional expenses for next year which is the payment of interest on the bonds that we put into the bank. which is also where we will put the budget for next year. so everything will be balanced within the government targets and also within the imf program mark: targets. , once itthat the ebrd has stabilized, when the u.s. expect that to happen? when will the lender be stable and ready to sell. difficult to make projections now. the ebrd is not just a buyer as any other buyer. ebrd is more just a regular buyer. a partner that could help
us to improve the bank, to help develop its services farther. happen, is going to this is what we will see. at the moment, we need to make sure that organization is fully completed. that the bank is fully under control. then, shortly afterwards, a sign of support not only in the supervisory board but also in capital as well. mark: thank you for joining us today, ukraine's finance danylyuk.lexander prime minister theresa may is speaking in parliament. she has just been updated on lawmakers in last week's eu summit.
we are also talking about minister nicola sturgeon who wrote in the financial pine -- financial sign -- financial times that the government will meet its article 50 timetable, whatever the supreme court rules. that decision will be made sometime in january. you can watch theresa may's comments on life. -- on live. vital than ever that our relationship with our european partners remain strong, cordial and .
mark: i am mark barton. this is your global business report. saudi arabia is still deciding where to sell its shares. a look at which countries are in the running. julie: airbnb is getting ready to take on priceline and expedia for a new service for booking air travel. president is looking for international companies to invest in the country's oil industry but will it work? julie: saudi arabia could still decide to sell shares of aramco in new york. despite the law passed by the u.s. allowing victims of the kingdom,cks to sue the saudi arabia has sold less than 5% in 2018. it could be one of the biggest share sales in history. says he seescutive signs of growth next year following two years of an oil slump.
>> we are going to remain very disciplined about the capital we spend and the projects we select. it is time for bp to start growing. we have worked through somebody difficulties that i think the company is well positioned for growth. a airbnb is developing service for booking air travel according to people familiar with the matter who say development of the feature is in its early stages. various efforts to break into the business are under consideration. it would put the home rental startup in great competition with the likes of priceline and expedia. with layoffsar that recently began, and could ultimately total as many as 3000 lost jobs across several units, the airline says it is restructuring to reduce costs. carriers in the persian gulf are under pressure to slow growth after years of aggressive expansion. >> it is time for a bloomberg quick kick when we provide
context and background. iran has been wary of south -- of outside interest but the president is offering international oil companies their biggest role since 1979. in theory it is an attractive proposition but there are plenty of risks. one is that donald trump opposes the nuclear deal that allowed iran to reintegrate into the world economy. i ran possible oil output has returned to its pre-sanction level. most sanctions were lifted in january after the country rained in its nuclear program. in the november deal among opec members, iran was granted an exception allowing it to raise crude production further. outsiderequire technology, management expertise, and capital so the government has called on foreign companies to invest $100 million.
according to a british speculator, until the 1979 islamic revolution, iran had almost no control over its most precious natural resource. when revolutionaries seized power, one of their first acts was to re-nationalized iran's oil. foreign companies were eventually allowed back but most left by 2010 as political risks started to outweigh benefits. iran attractcan the technology? big oil companies will not pass up the oil fields slightly -- lightly. the list of risks is long. in 2017 could see the president replaced with a more protectionist candidate and under the trump presidency the u.s. could impose new sanctions on iran or tighten existing ones. you can read more about iran and all of our quick on bloomberg. had to bloomberg.com for more.
mark: i am mark barton. julie: i am julie hyman. this is bloomberg markets. china is pushing back against an accusation by donald trump that it stole a u.s. naval drone. in a tweet, trump said "we should tell china we don't want the drone they stole back, let them keep it." aging doesn't like the word "stole." joining us now is bloomberg's policy reporter. next, thank you for speaking with us. we did hear that
response from china it was a relatively muted response. why is that? why hasn't china been more outspoken? >> you are seeing a situation where china wants to sort of play it cautious and steady until president-elect donald trump actually takes office. they understand that we have one president at a time and they will deal with the obama administration on issues of policy and what is actually happening and they are giving donald trump a little bit of a pass when it comes to his statements now. it would be a much different story once he actually takes office. actuallying president starts to challenge some of china's core interests in the south china sea and taiwan, i think you would see a more serious response. about much do we know now what the china relationship is going to be going forward, given , these earlyrategy
strategic moves on the part of china? going on is it is really going to be a new ballgame. donald trump has indicated that he is willing to challenge some of china's "core interests." these are some of its top priorities. one of those is taiwan, its sovereignty over taiwan and the other is the south china sea. when donald trump says a lot of these issues that you have taken as bedrock foreign-policy issues over the last 48 years, i am going to put those into negotiation when it comes to settling battled -- better deals for trade, that is going to change the calculus in beijing. it could have broad ramifications. these are two countries that depend on each other for economic growth so you could see broad ramifications, economically, once trump takes office.
mark: can you delve into those? it is a $627 billion trade relationship. beijing says it could strike back firmly if trump continues to challenge china's core interests. what exactly could or might it do? >> a big one is treasuries. china owns an anonymous amount of u.s. debt. if it wanted to start doing something with u.s. treasuries, it could push a few buttons. this trade relationship is just so important. while a lot of these are low-end manufacturing jobs and moved to other parts of asia, particularly bangladesh and vietnam, china is still the factory to the world. to example if trump wants say we will put new tariffs on imported goods from china or china wants to get tough, you could see your iphone getting more expensive.
you could see consumer prices going up across the board. hand, china is a huge importer of u.s. soybeans and other agricultural goods so there are numerous ways in which both countries could inflict considerable economic pain on each other. julie: bloomberg foreign policy reporter nick wadhams talking about the u.s. china relationship. thank you. from the nyse, the company is cut --ing trading on our platform, from 10:50 through 11:05 because of a technical issue. all orders will be canceled, so again, it is going to suspend trading for 15 minutes because of this technical issue. we will bring you any updates. we will let you know when
trading has resumed at 11:05 as scheduled. mark: coming right up on the european close, barton is looking to sever ties in order to boost returns and focus on the ones that produce significant profits. today. net story stocks 30 minutes away from the end of the monday session, the stoxx 600 is down today after two weeks of gains. it is the week before christmas and volumes are down 20% over the 100 day average. look at the currency board as well. there is more of a slight to haven today. stirling is down against the dollar. this is bloomberg.
"bloomberg markets." mark: we are going to take you from new york to london. stories of scotland. saudi arabia and china. what we are watching. barclays narrowing its customers to focus on relationships. the firm readies to sell 7000 clients -- tell more clients to do more trading with the firm or take a hike. lagardehristine convicted of one count of negligence by a paris court. at the parisve courthouse over her handling of that dispute. one" led the domestic box office with $155 million at the box office. will the strategy of spinning