tv Bloomberg Markets European Close Bloomberg April 21, 2017 11:00am-12:01pm EDT
this is the european close on "bloomberg markets." ♪ mark: we are going to take you from new york to london, plus, covering stories out of paris and washington. here are the top stories we're following on the bloomberg and from around the world. french election campaigning grinds to an early heart following the attack. -- an early halt following the attack. how are the elections faring with memories of brexit and the trump election still fresh? and: and bracing -- vonnie: bracing for the possibility of a marine le pen advance. we hear from pure moscovici. should beent trump
having steve mnuchin reviewing tax regulations. will this kickstart the long-awaited tax reform? mark: european equities are trading now, stocks remarkably resilient ahead of the first round of the french presidential election on sunday. these currencies in your second column are falling against the dollar. the euro was up earlier, now down about .25%. it's headed for its biggest weekly advance in three months. yields gaining across europe and cbs isodities your final two columns. gannon is down, reported its third consecutive quarterly drop in volume and -- and included $10 billion take her of -- take over of white wave foods. a move that some analysts interpreted as a lack of
confidence. dairy led by the fresh part. the company said it will immediately incorporate white wave in it's like for like reporting, standard practice is for that to happen after the first 12 months. some say that decision is unhelpful and shows the company isn't confident in the sales outlook. shares down by 2.3% today. we had some date all across europe today, pmi data. euro area economic events accelerating to its fastest pace in six years in april. signaling a strong start to t second quarter amid buoyant demand and strong growth in employment. the pmi for men fracturing -- for manufacturing is rising from 56.4 in march. almost more evidence of growing wage pressures.
it's gaining despite the living election in france on sunday, which could result in a president who is openly hostile to the single currency. the ecb meets next week, here in the u.k., retail sales, the biggest quarterly decline in seven years. consumers feeling the pinch from accelerating inflation. household being squeezed by rising fuel, rising food costs, the result of sterling's 14% drop against the dollar since the brexit vote. the volume of goods sold online and in stores fell by 1.4% from the previous three months. the most since 2010 in march alone. we had sales dropping 1.8%, which bodes badly for economy which has been boosted says the brexit vote by spending from consumers. and of course, further uncertainty is likely with the snap election taking place on june 8. 19 minutes of the trading day in the u.s., abigail, oil is moving
around. abigail: indeed, it is. we'll down 1.5%. apparently the cause behind it is a report showing february experts for iran were significant higher than preliminary numbers that suggests that iran took full advantage of its exemption from the production cuts by opec, according to reuters. we do see oil down sharply, 1.5%, back below $50 a barrel. -- he will how this be interesting to see how this plays out. some bearish action. bloomberg, to the these are the changed majors, the dow s&p 500, the nasdaq. very small declines after yesterday. when we take a look at g #btv 7248, this is the s&p 500 over the last two years. we see some stalling in 2016 and then a beautiful uptrend.
the s&p 500 is back below 50 day moving average and yesterday it reclaimed the 50 day moving average, the head of technical analysis at bc ig made note of the fact that despite that reclaiming of the 50 day moving average, she still thinks more of a pullback is ahead. she thinks we can see the s&p 500 dropped to 2280. and then let's take a look at three movers on the day. looking at mattel, and also schlumberger. way,l missed in a massive posted a much bigger loss than expected, down $.32. they miss revenues by 7%. barbies come back is fading. -- wabco beat estimates. has international concerns. investors reflecting it with stocks down 3%. mark: abigail, thank you.
let's get the latest on the french presidential election. polls showing sunday night first round will be tight, leaving candidates canceling campaign plans after yesterday's deadly attack. joining us from paris is caroline connan. how is that going to play out in sunday's vote? caroline: no opinion polls will accurately measure the impact of these attacks on voting intentions. we had one polls saying 85% of polars were collected before the attack, showing that francois 1.221%, marineng le pen are the front runners at respectively 22% and 23%. and that candidate can actually not benefit from this attack.
is actually going slightly down to 18%. from tonight, midnight french time, a new opinion poll is up -- no opinion poll was allowed, as the end of the campaign. it will be hard to measure the impact on sunday. mark: caroline, how the major candidates responded to the terror attack? caroline: as you know, the attack actually happened during live television interviews last night of the 11 candidates. candidates all did some statements and health and press conferences. we just heard from marine le pen, and of course, we can argue that these could potentially help the far right-wing candidates to secure base and support for anti-immigration and security arguments.
marine le pen, who said today that french prisons have become jihadist training camps and she will restore french borders, so that had said before. she also called for an immediate arrest and deportation of all non-french people on the security watchlist, around 20,000 people in france currently. the terrorism watchlist, we also have republican francois fillon, the other candidate who could potentially benefit from these arguments in favor of increasing security. francois fillon, who said his priority would be to collaborate with russia and the united states in order to defeat the islamic state. he also said he wants to hire 10,000 additional police forces if he is elected. attackedthe primary fillon and le pen, saying they
are just exporting the attack. , which what happens candidates will move into different camps, or will they? is a verythis interesting question, especially the left-wing voters who have been extremely divided between those who might go for emmanuel macron, if he passes the first round, and those who are more towards melenchon. in terms of the left-wing voters, obviously going to be a massive issue, if not other candidates passes the first round. of course, we've had many of here for testing the second round already. macron would win in any case, marine le pen would lose in any case, according to these polls, and melenchon would lose against
macron, but potentially win against fillon and marine le pen. caroline --mark: connan in french. live from paris, london, and new york. onnie: let's check in now the first word news, here's courtney donohoe. courtney: good morning, in the u.s., volkswagen is one step closer to resolving one of the biggest candles -- biggest courtney: good morning, in the scandals -- and mark and the required vw to plead guilty and submitted three years of probation. in washington, president trump will order a review of any significant tax regulations imposed in the last year. the white house as the president wants to reduce regulatory tax burdens that add undue complexity or exceed statutory authority. obama, thedent
government tried to rate in u.s. companies attempts to ship their profits offshore us. in the u k, chancellor of exchequer signals the conservative party will drop it pledge to not raise taxes. that promise has restrained the government for managing the economy sensibly and he believes in a low tax economy, but that the government needs flexibility. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm courtney donohoe, this is bloomberg. vonnie: coming up, more from the imf meetings, next. the international monetary fund weaning -- meeting in washington, d.c. this is bloomberg. ♪
mark: i am mark barton. the european close about 17 minutes a day. francine is in washington and joins us with the newly appointed finance minister of south africa. francine: i was looking forward to this the most at the imf in washington, d.c., the newly appointed minister. thank you for much for speaking to bloomberg. it's been tough for you, you come into the job after a political appointment changes in government, and the credit agencies downgrade south africa. what will you do? >> we are working to in storing investment-grade. we are not panicking. in particular, what encourages us is on the one hand, the downgrades are not based on the weaknesses in the strength of our economy. they were based on perceptions
of uncertainty and at the level of policy and the direction we are going to take. we think there's enough ground for us to recover. mean?ne: what does that when you keep in place the policies that your predecessor who have the trust of the credit agency had an ice -- had in place? based on theis consistency of the economy and government in the country. they don't depend on an individual. there's nothing that i'm going to do as an individual is going to change the policies that have been decided collectively by governments. in terms of fiscal management, in terms of fiscal conservation, in terms of not spending be on the budget that we set ourselves and continuing to implement structural reforms in the economy, i'm going to keep on with it.
of course we have to accelerate those programs, the general educations in our society and when you deal with those issues within the physical ceiling. francine: investors are still trying to find out more. something that made markets appointment of a financial advisor who is has talked in the past about wholesale nationalization of the formation of a cartel with certain other countries. why his appointment? >> in every government, you do not appoint people with homogenous views, because you need to be able to get the best of your opinion available in your country, to be able to balance those views implement in your policies and choosing the right policy packages for your country. economic professor, is opinions don't constitute the
opinions of the minister. he is not a minister in place. he advises the minister in the midst of a wide range of experts available. content if weo be simply appointed homogenous opinions to advise the minister. and we would also have to be content if all we did in south africa was to neglect the unemployment in our society. what we've done is to come in the midst of people who are equally experienced, who are going to provide me with balanced views. we need to move forward. but ultimately, i am the minister and i take my truth from government as well as the ruling party. francine: where you see the budget gap? it seems like growth is not a strong as your ministry and forecast in the past, because of the some of these adjustments. what does that mean realistically for next year?
-- these plans that was adopted, we to maintain them or whether we need to apply for more. we think we are reaching savings, we've reached that spending already in terms of where else we can count in order to meet the budget gap that we have in terms of economic growth and the revenue available for us to implement our policies. nonetheless, we have still been able to generate our own revenue is a country, in terms of the revenue savings and tax collection, to be able to fund our own budget. but we are going to maintain very strict fiscal discipline while continuing to implement the programs for inclusive growth, because we believe in so doing, we are going to be able to expand and have a bigger tax base and continue to increase the revenue.
francine: the meta-got his 3.1% of gdp, is that too hard to achieve? still in early days for us to be able to make an assessment whether we think will stick to the budget gap or not. at the present moment, we are can ined to that, we order to improve the situation, to attract investments, clarify , andy and uncertainty minerals of petroleum as well as communication and be able to see on the basis of debt, we are not able in the short to medium term to increase our budget revenue, and be able to have everything francine: i'm asking specific questions, the market was to find out how you are thinking of investing forward. the director general of your departments has important decisions in the past always
come from the treasury. we've continue that? >> the director general has had a connection to the previous minister. i came in and i found out, and it was it hadn't been the case. and then i had an extensive discussion and insisted on this desire to step down. replacementng for a that made commitments that by the end of may, i will found his replacement. isther that replacement occupying office at that time were no, it is something else. but i am going to have the means to have approval for his replacement. -- ife a way to look for not more competent person who is going to take over the reins and continue to provide that oursurance in terms of institution and the consistent inability of the leadership we have in terms of the institution. francine: you would rather than
be from the treasury? or if is someone you find very qualified, do you think the markets are too sensitive to things like that? are they reading into much to what they want because of the past? >> we looks for someone who is competent. whether they are from within the treasury or not. the people will have to accept that decision. outside our legislative framework. thatwere to say right now i have a preference for someone from within, is going to cause me problems. francine: they might be watching. >> there are people in the treasury who say its experience and expertise are very well-suited for this job. but there are also people from outside. francine: i was not expected a job offer.
on issuance in general, is it something you feel comfortable or the need in south africa will have to do this year? >> we are going to continue. our debt ratio is quite high, 50% of gdp. in order to finance, we have to go to the bond markets and with becausees, unfavorably, the capital raised the bonds become more expensive. we are confident that the south african economy will continue to engage both the domestic investor and bond issuers as well as the foreign ones.
we are taking an international roadshow in the near future. recently i met with the domestic -- [no audio] >> in order to reassure international investors of the collaborative approach they had towards managing our economy. ,e need labor, we need business we need government communicating to our investors. francine: thank you for joining us today at the imf world bank meeting. funny margaret interviews today. -- plenty more great interviews today. mark: to the latest on brexit, prime ministers theresa may's decision to have a snap election. she says it will create stability uncertainty through the brexit process. joining us is simon kennedy. have we gotten over the shock of this yet? ready.i think we are we got seven weeks or 48 days. i think the shock has dissipated
and people are fleshing out those manifestoes. mark: there was a view that would give her a mandate or some grit and determination is true negotiations get underway. there's a different view from seems side, berlin unfazed by this election. most capitals seem unfazed. the eu has been working on setting up on issues such as trade and this brexit bill. rubberstampedines next week are tougher than they were three weeks ago. when beltran first bought them out. the message from berlin as reported by our colleagues there is that attempts to talk to the germans were on the back of the european commission and other members have come to nothing, angela merkel has been clear she is not interested in formal talks or breaking away from the nations that are with her.
it's kind of a disappointment for theresa may. how does the outcome of the french elections potentially alter the path of brexit negotiations? simon: it would be good to know what the outcome is first. we get a bit morbid inside on sunday, obviously, a four-way race at the moment. if you've got the two quote unquote status quo candidates in francois fillon and macron emerging, one of those emerging, and there's a case to be made that it would be quite tough for theresa may. both of them clear that they will fight the european view. macron visited london a few months ago and talked about how much he will fight for france he fight for europe, how wants to coax british and french workers to move to france. of those two candidates, he is the worst.
francois fillon is the talk about, he might being a catalyst. what sort of majority is the consensus of the conservative victory? if that's what most believe. simon: based on the current policy, it could be more than 100%, even still come away with 70%. mark: seven weeks in, minus a day to go. simon kennedy, bloomberg brexit editor. europeanok at where equities are heading as we move to the close. just a matter of minutes away. this is bloomberg. ♪ with xfinity x1...
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of the first round of the french presidential election. banks are leaving the advance. the stoxx 600 is up. round,en gets the second good trigger a selloff in equities. it's very dying area. industry,e banking which is rising today. industry, which is rising today. this is the banking industry, which is rising today. it was a record discount. the concerns are the french election and the valuations and the up coming earnings season. some say they are checking european bank earnings this year. a lot is ached in, to use such an expression.
the big week, deutsche kicks off the european earnings season. this is a chart i've been keeping an eye on all week. it shows the euro dollar versus the pound dollar three months risk reversal. this is the white line. these of the levels we saw in february. risk is not as elevated as it was in february when the suggestion was le pen had a probability of winning the election. that was the highest. was, the risk reversal rate at levels back in february it hadn't seen since the height of the financial crisis. the bearishness of the euro hasn't hit the levels of the pound pre-brexit against the dollar. that is the blue line right there. levels of tension, nervousness aren't as great as they were in february.
the sterling dollar saw a risk reversal pre-brexit. great interview with the new finance minister of south africa, the rand has swung from being the worst performer to being the best. it has returned 3.2% this month for investors. 1.5% to thered to colombian peso. that's beating the average of eight developing nations in the culinary index, which is the blue line. it is rebounding from that 10% drop after the president reshuffled his cabinet last month. what a wonderful chart that is. look ati have a quick the markets consolidating basically into the weaken. we are holding on those gains and yields for the u.s. here in it is still around 104 basis points.
sunday is going to be the next catalyst or anything at all out of washington. we get a little bit of strength today for the yen. we are at one or nine point o six. we haven't watch the 110 mark yet. i thought it would point out the korean currency as well. u.s.up .5% versus the dollar. let's switch to gm. we can look at some of the american movers today. some of the ones moving the most are the s&p down. venezuela is higher, having experienced so much weakness. we are going to go to kevin now in washington dc. we do have some trump playback. this is the president. have her very happy to
in the oval office. thank you very much. thank you. vonnie: all right. you've been watching president donald trump. that was taped playback. we are going to figure out who he was speaking to in the oval office. in heaven nowng at the white house. he has been following the events. there is wanting to talk about. he told reporters we are good shape when it comes to not having a government shutdown. but can you tell us today about the latest? kevin: they are confident. i was just in a white house briefing. the administration feels there will not he a government shut down on april 28.
that is one day before the president finishes his first 100 days in office. they get back from recess on monday. they have to pass a government funded bill by april 28 two of her a partial government shutdown. this is a republican white house and congress, nobody wants there to be a shutdown. you have different factions of the republican party in the house of representatives such as the freedom caucus that is hoping an apprehensive of any type of government funding. if enough of those people deal away and go against the administration, they would ally with democrats and there would the shutdown. this administration increasingly confident they will not have a government shutdown next week and vonnie: this is the egyptian american aid worker the president intervene on her behalf. she was in custody and now she is at home. i am sure her family is thrilled
we will get more details on the process of how that came about. i'm sure her family is thrilled and we will get more detai on the procs of how that came about. not are chastising them to have an of completed in t 1 days. is that fair? avin: they want to have legislative victory going into the first 100 days. i interviewed the head of the rnc. she said the supreme court justice. this is a candidate and these are lawmakers who campaigned that they would be able to repeal obamacare as well as pass tax reform. none of that in the first 100 days has come to fruition. they still say there could be some type of break to run health care as early as monday night. they want to have that to show for. either way, they need to get something done.
reformve said the tax won't happen until -- it's a first year priority. that won't happen the first 100 days. health care next week, averting a government shutdown next week this is leading to a very busy week. this is heading into the home stretch of his first 100 days. vonnie: you brought up steve mnuchin's comments. intented in a state of rather than a reliable forecast. the treasury secretary did say this. >> we have an incredible treasury staff working very hard on this. we are pretty close to being able to bring forward what's going to be major tax reform. vonnie: a statement of intent rather than an actual forecast? kevin: this is something where there is perhaps some agreement, that the corporate tax rate
might the of bit too high in terms of global counterparts. iss is something they feel an easy home run for them politically. they want to get this done as soon as possible. there are a lot of moving parts on this. the financial services committee reintroduced legislation that would walk back parts of the dodd frank act that kick started this as well. it could put some pressure on the senate banking committee led by mike crapo. we could see a forecast in which the deregulatory policies are paired with tax reform sometime in the first year. kevin, thank you. he is outside the washington in washington dc. you can catch our interview today at 2:30 p.m. eastern. it's with the director of the omb.
david westin will bring you that interview in just a few hours. let's check in with courtney donohoe. courtney: president trump and exit the attack in paris will have an effect on the french presidential election sunday. the president tweeted the people of france will not take more of this. a gunman killed a police officer. three other people were wounded and police killed the gunman. islamic state claims responsibility. theresa may says holding an election now would give the country a time of stability and uncertainty through the brexit process. she spoke in a factory. >> i recognize that i will be asking people to put their trust in me as prime minister so i can get the best possible deal for britain. courtney: she also said the election is about leadership, stability, and strengthening the uk's hand with the negotiating
table. bashar all aside said he is not considering asking russia to send in troops to help fight islamic state. russia has been providing air cover since 2015. they have not provided boots on the ground. troops might be needed in the future if more terrorists from all of the world are brought to syria. australia, the vice president will be working to smooth over any lingering hard feelings. he will meet with the australian prime minister tomorrow. relations between him and president trump got off to a shaky start over the terms of refugee deal. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. mark: thanks a lot. french bonds are raising gains in the euro is weakening. round one of those things for the french presidential election.
vonnie: i am vonnie quinn. mark: this is the european close on bloomberg works. let's focus on france. investors are looking for direction as the race tightens. round one is this week and. how big of an impact will the results have on markets western mark joining us is richard jones. until monday, this will be the last time we bring up this chart. this is the spread as we laughingly called it over the last few months. macron that go
through, let's look at the scenarios. what happens to it then? richard: i think we will see some tightening. that is one of the many possibilities i think is not extreme. that is to say if you get le pen , that is the nuclear option. that's the extreme sort of non-market friendly result in germanoney will go into bonds and the rest. richard: you'll post be gold during -- doing well. the usual havens. or you can have a very market friendly macron. i think we see a flight out of havens and a becomes the most market friendly of all the results. mark: sterling was the lightning rod, wasn't western mark there was a massive saw in the ftse
that day. rod.s been the lightning can we draw comparisons between the euro might fair, given the various outcomes, the worst-case scenario? do we see a similar decline in the euro? the bloomberg poling says we will go through the dollar. is that a given? richard: the euro yen and the euro swiss and the euro dollar all probably go lower. i think the key metric to look at will be french bonds and how they react relatives german bonds. that's going to be the cleanest and most granular way of looking at what the impact of the results will be. we won't get that until monday morning. the bond markets will be open until then. think we will get the reaction in the fx markets.
vonnie: they are fascinating, richard. i was looking at our markets live login one of the things it points out is the eastern european bloc countries see real up sick in protection buying. uptick in protection eyeing. that is another proxy for looking at this. richard: i think this is what mark was talking about. reversal,ollar risk the options market on the euro-based,ything it's definitely something that we have seen moving. i think it's important to note that we are not it week levels of anxiety at the moment. we actually saw a little bit more investor anxiety in february. when we actually had those one months corresponding.
i think you're right. fx will be one of the key transaction mechanisms. we don't have long to wait. vonnie: i may as well show you the pound index. bloomberg thatmy it's taking a big drop. is the british pound likely to be impacted either way? the two i think on extreme scenarios that we discussed, will probably see the pound strengthening on the very nuclear one that mark was talking about. if we do see the market friendly it will rally against sterling as well. mark: last friday, there we were. it was a bank holiday. who would've guessed that
theresa may would've called a snap election. it comes as a theme we have discussed week in and week out. your been talking a lot about it. there is further evidence of the weakening consumer being a back loan of the economy. richard: we are starting to see a general softening in the data on an aggregate level. what is really driving this is the fact that consumer household purchasing power is diminishing as inflation rises and wages don't keep pace. the u.k. retail sales today are the latest in a string of data we have seen. they are starting to get softer. it's a seven-year low we have seen in terms of quarterly readings. this is something that will preoccupy the bank of england and they will look through inflation as long as they see the consumer purchasing power
over the past order. mark: i want to get my pound dollar charts out. it's one of the charts of the week. that stop election was called earlier this week. 127ave broken through that window cord or we have been in since october. what is everyone saying about sterling? the market was so short. what next for sterling? richard: i think what drove this is a lot of crowded short positioning in the market. we are not seeing a lot of new positioning being put in place, expecting the pound will rise from here. it very well could. the knee-jerk has been a lot of short covering. dichotomy bit of a going on, talking about the data as we have in the softness of the data versus will the selection give theresa may a stronger mandate?
will it strengthen her hand western mark -- and? it does feel like the short positioning has been coming. there is that scenario. mark: it might strengthen her hand. it might be all rosy here for the conservatives post elections. there are two sides to this debate. richard: in europe this doesn't move anything at all. mark: it's time for the bloomberg business flash. these are some of the big this -- biggest business stories in the news. held down, headwinds would persist through the first half of the her. dealmaking is up sharply after three years of booming m&a activity.
acquisitions were down 13% from the year earlier. there was 5% you are than two years ago. part of the reason is president trump. he has attacked drugmakers and promise to forced down their prices. that is latest bloomberg business flash. be otc. it's the french election special. this is bloomberg. ♪
within. both contained overnightbars show europe. it is spiking ahead of sunday's vote. the market is pricing in multiple out comes. candidates,p four they are fairly close in the polls. they are within five percentage points of each other. i want to draw your attention to the multicolored lines. these are momentum trackers for the top four contenders. this is the standing of each candidate. they show how online communities are discussing them. it also takes into account the mentions of the main actors and the events with them. le pen is first in this. the leader in the conventional pulses third. maybe should we be paying
attention to what is said on facebook. mark: volatility is highest since the referendum last year. what a wonderful chart here in kevin, beat that. something very similar. i am looking at it from an equity markets perspective. you've got the cap 40. that is the representation of the french equity market. we have the stoxx 600 and blue. over the last year or so, french stocks about performed europe. what we are looking at down here in the bottom panel is the volatility. in yellow you've got the cap 4030 day volatility. in purple, you've got the same thing for euro stocks. downward,s volatility even as we head into this election weekend. what interesting, we see
volatility we haven't seen since brexit. we could the more in store for this in a low volatility we've seen recently. you can find this chart. vonnie: i think they are both amazing contributions to the debate as we can. since they are going to be two winners this sunday, i think there should be two winners today. mark: i cannot separate them. if you go for one, i will go for the other and we won't even throw it to the control room. vonnie: you just made my life difficult area i am going to pick kevin. mark: i will pick him up. forget the control room. thanks a lot, emma. well done, kevin. this is bloomberg. ♪