tv Bloomberg Markets European Close Bloomberg May 9, 2017 11:00am-12:01pm EDT
"bloomberg markets." ♪ mark: european stocks keep rising. the stoxx 600 at its highest level in nearly two years and the ftse at its highest in nearly a month. with the french election in the rearview mirror. how will europe's biggest -- how are europe's biggest banks positioning themselves after the emmanuel macron win in france? find out why he says europe is still on a rocky road. we will look at india's new push for financial reform with the head of one of the nation's biggest states. -- be a bigggie opportunity for investors?
we will have a look at where european equities are trading, right now. gmm is your function. equities are rising and the stoxx 600 gaining for a third day. all these currencies are falling against the dollar. the euro continuing its slide after mccrone -- macron won the election. eon droppingility 20% on rebounding power and gas costs in germany. a nuclear reactor that is off-line after halting in early february. shares are up 4% and you might ask why.
underlying full-year earnings target. it has adjusted -- it's adjusted net income is on track after one-off factors dented earnings in the first. shares up by 4%. they world's biggest reinsurer, unit three shares down by 1.7%. first-quarter net income rose by 29%, missing estimates, surging stock markets, driving a 37% jump in the investment results. the company's troubled primary insurance unit after a loss in an earlier period. rates eroding income from investors, catastrophes weighing on prices. finishing with germany, german exports are rising for a third march,and you want -- in
a sign that europe is benefiting from a global pickup and trade. exports rising from 4% in february. industrial out port -- output dropping. that is still marked a gain of 1.1% for the first quarter. that is what that chart shows you. how is it looking over their? julie: we continue to see the nasdaq and the s&p 500 around new highs. the s&p touching new highs as the nasdaq does not quite make it. the dow does not quite make it there, excuse me. the nasdaq continuing to outperform. thatng about this idea tech is contributing disproportionately to the gains that we have seen. this chart is a look at the nasdaq versus the s&p 500 and
the s&p 500 equal weighted index. this is since the election. it has had these -- the nasdaq has had these runaway gains versus the s&p 500. the s&p straight up is the blue. it is not just tech that is doing well, but it is a pretty broad basket. 500t two thirds of the s&p is higher in that point of time. what about today? it is a lot of tech. apple is trading at a record. amazon set a record as it rolls out its new echo device. bank of america rallying along with yields going higher. marriott out with earnings and its shares already record, as well -- are at a record, as well. the forecast for that looking pretty strong for marriott.
even though the russell 2000 is not maintaining records, we have some strong cap earnings. the online furniture and home deke or retailer, shares up 21%. tech companies loss was -- that company's loss was lower than estimated. sturm ruger and company the -- sturm ruger, the gun maker, the revenue decline was lower than the overall u.s. background check data which infers it is doing better than the industry. mark: let's get more on investing in europe as you move into the final stretch of the earnings season after seven years of stagnation. many uric -- european companies beating on profit and sales. helen driver, joining us. we know the trend in european earnings. everyone is bullish and by the time we get to make, everyone is downgrading estimates.
something strange is happening in 2017. helen: you challenged me on this point, last time. we have seen it all before. we are two thirds of the way through the season already. we have actually seen earnings estimates this year upgraded, so we are now expecting earnings growth of 15%. this time around, it is the real and it is getting better. i spotted your chart on german industrial production. the data is coming through, whether it is germany or the composite pmi's. the best we have seen in six or seven years. it's for real. mark: let's look at this chart, the stoxx 600 versus the s&p 500. a great chart. it is not been cheaper than the sideline. -- sub line. it puts in perspective, that little rebound. look at where we've come from.
does that show the disparity in performance between the two? helen: i think so. you have seen u.s. stocks recover. the u.s. stocks were very sharp into the downturn, what we rent -- we mounted within a couple years and we have had many quarters of growth. europe by comparison, we went down and we are only now getting going. there is a big valuation disparity and we think there is quite a long period for the actor close and for the two to come together. vonnie: is there a sense of being more settled now that the french election is over? i know we have we -- i know we have parliamentary elections in june. how settled are we? helen: i did not hear your question. vonnie: can you repeat, mark? mark: how settled are we, post french election?
how settled do you feel now that the big hurdle that was the french election is out of the way? helen: i think we are very settled. i think you are seeing that in some of the m&a activity. the markets may have been concerned about french elections , the forthcoming elections in the u.k. that has not stopped the corporate's. the corporates are looking at the earnings recovery. they are looking at bond yields recovering and thinking perhaps this is the moment where we need to act. debt is as cheap as it's been a long time. we have seen the markets very strong. that helps their valuations, that helps their currency to go out and make acquisitions and we have seen a lot of corporates repair their balance sheets. they may have cash on balance sheets. that headroom -- headroom to allow -- hedge room to allow
them to go out and make acquisitions. unrest has been popped to one side by corporates. mark: policy specifics is what we want, now. we got a bit from theresa may. it's all brexit, brexit, brexit. all parties will be releasing their manifestoes. the conservative party will cap energy bills and theresa may has confirmed that will go ahead and you are seeing the likes of centrica declining. we are moving away from that brexit to specifics. helen: if the polls are to be believed, in the polls have been slightly more accurate, -- and the polls have been slightly more accurate, but what we are looking at now is the specifics and this energy price cap, it
andrumored a few weeks ago we still need to see it for real in the manifesto which comes through, next week. in some respects, i would say this is old news. you look at the share prices of centrica, these companies have already been hit hard by rumors, speculation. it was the ed miliband that first talked about the price cap, last time around. some of that is already in the price. shares are down a little bit. it is the specifics that we need , toee, you are right differentiate between the winners and losers. vonnie: what about yields? we are getting boe information on thursday and there is more to come in june. are you looking at yields? where do you anticipate they will go in britain, in europe
and the u.s.? apologies, i did not hear the question again. were you talking about yields? mark: where yields will go in europe and the u.s.. helen: data would suggest that the pressure is building. seen threeiously rate rises in the u.s., and that seems to have been well set. europe is probably a little bit early days, yet but if we start to continue to see the base pmi , we have already seen that the pressure is building. mark: the earnings season has encapsulated all sorts of results. tesco has its own issues, don't they? helen: i think it is a great opportunity from a stock pickers perspective -- stock picker's
perspective. you picked on some u.k. names, their. much of the focus in the u.k. market has been rightly on brexit. it has not been a disaster. beat --all actually hsbc shell actually beat numbers. it is a stock picker's market. we need to look long-term. we are seeing inflation pick up in the u.k.. that is going to squeeze the real incomes of consumers. when talking to the management teams of tesco, the -- historically people like to say inflation is good for the supermarket sector. it squeezes the market in your pocket. we have actually had really strong consumer spending numbers
, up in april. 5.5%. it has ticked up from the three months average. my concern is we are looking in the rearview mirror and going forward, things are going to get tougher. mark: helen driver, head of global equities at ovi the investors. bloomberg markets will be joined by martin gilbert, the chief executive of aberdeen asset management. vonnie: let's check in on the bloomberg first word news. courtney donohoe has more -- the bloomberg first word news -- the bloomberg "first word news." courtney donohoe has more. follows: the election months of political turmoil caused by the ousted president's scandal. a decade of -- moody's election
and's nearly a decade of conservative rule in south korea. the trump a administration is calling for a major military shift in a can a stand. pentagon --and the nevada pedagogue would set troop numbers in afghanistan and they would be more freedom to use airstrikes to hit taliban targets. president trump and the palestinian leader just met last week at the white house. the disco will meet again in bethlehem. the president has excepted the invitation to the west bank city during his visit to israel. in the u.k., aber party leader jeremy corbyn refuses to leave out the possibility that the country would stay in the eu if he is elected prime minister, next month. the bbc asked him seven times to confirm that the u.k. would leave the eu and he declined to answer directly. he made brexit sound like a done deal. >> this election is not about brexit itself. that issue has been settled.
the question now is what sort of brexit we want and what sort of country do we want britain to be after that. corbyn says if elected, he will make sure britain gets a good brexit deal. global news 24 hours a day powered by 2600 journalists and analysts. mark: coming up, axel weber weighing in on policy and why he sees more volatility ahead for europe. this is bloomberg. ♪
counting you down to the european close in 13 minutes time. kathleen hays caught up with axel weber, the chairman of ubs. he explains what he sees increase volatility ahead, even with macron's victory. axel: you look at the french election in 92, they had roughly 3 million supporters and now it is 11 million. there is a rise in these forces. the bigger concern for me is not the immediate future. the immediate future will see a relief rally for the euro. we will see stronger data coming out of european highs. there is no problem for the rest of this year, but you move into the italian election next year and there is -- there is a very strong anti-european sentiment, so there are more problems ahead. the british assets in brexit,
there is a countdown with problems that will only be solved in the 12th our. there is more volatility ahead -- 12th hour. there is more volatility ahead. you are saying that brexit is much more than just a risk to the u.k., it is a risk to all of europe the cousin can hurt the economy and spill over into global markets. axel: markets are really not good at pricing binary events. it could be a hard brexit and from what you hear from the british government, they want to have influence over immigration so they are not part of the common market and they want trade agreements for the rest of the world -- with the rest of the world. that is a definite -- that is the definition of a hard brexit. chosen, and so i think there will be a hard exit at the end and that is -- that could have very negative repercussions on europe and on
the u.k. and it will spill over for the next couple years into market volatility. every speech the prime minister gives and every election will be priced by the market. they will be relief rallies and banks like usand have to choose strategies that will basically make sure that we can be of continued service to our clients throughout europe and the u.k. mark: ubs chairman axel weber. vonnie: still ahead, the drama novell -- overr paint maker axa novell. details next. this is bloomberg. ♪
the european close eight minutes away. we like to be precise. the battle for control of akzonobel. -- ousted chairman over his refusal to negotiate with pbg. joining us now is benedikt kammel. this is a fascinating story. are they going to get their way? will the chairman end up being ousted? benedikt: it does not look that way. akzonobel came back and said we did not know what good it would do to oust the chairman. it shows that we are in a very difficult situation. elliott very unhappy with the company's refusal to engage. you will remember we had three attempts by ppg to get them at the negotiating table and so far, they have said we are not interested and that trying to go
, we will see where it goes. not:'s elliott and ppg aware of the power of dutch company boards? they are probably now becoming aware of the limitations and the question is where does it go from there. it might be that pbg says we have come as far as we could, we tried three times, we had very short and fruitless negotiations with the other side. this is not going anywhere. they could go hostile. built-in, orles they might go in. vonnie: where does this leave akzonobel after all of this? can they pull together something for their shareholders? benedikt: they have certainly alienated the shareholders, as
we saw with elliott. there is a lot of anger and frustration on the side of the shareholders who say you are not filling your duties. you should look at this bid and do your part to at least engage. they have to win the shareholders back and the way to do so might be to say we have a better plan, to split the company. the onus is on the company to put up the better strategy. pbj could walk away from now and split.kzo performance -- akzo, they really need to the shareholders will certainly come after management. vonnie: what our shareholder advocacy groups saying? in the u.s., you have three or cointreau coming out and giving recommendation -- three or four coming out and giving recommendations. benedikt: we have a couple
others, big investors saying you really should engage. the management at this point says we have a plan. is better, stick with us with fewer risks involved. they arehe meat throwing at the critics. mark: good to see you in perp -- in person, benedikt kammel. taking a look at where the european markets are, as we head into the close. just four minutes ahead. i will leave you once again with our currency board. this is bloomberg. ♪
did you know slow internet can actually hold your business back? say goodbye to slow downloads, slow backups, slow everything. comcast business offers blazing fast and reliable internet that's over 6 times faster than slow internet from the phone company. say hello to internet speeds up to 250 mbps.
and add phone and tv for only $34.90 more a month. call today. comcast business. built for business. the shlike a bald penguin. how do i look? [ laughing ] show me the billboard music awards. show me top artist. show me the top hot 100 artist. they give awards for being hot and 100 years old? we'll take 2! [ laughing ] xfinity x1 gives you exclusive access to the best of the billboard music awards just by using your voice. the billboard music awards. sunday, may 21st eight seven central only on abc. mark: live from london and new york, this is the european close. i am mark barton with vonnie quinn. stocks finish with two industry groups rising today.
basic resources, media, health care, higher basic resources at yesterday, falling for five days out of six. the benchmark counts for the third day. highest level for the stoxx 600 in 21 months. .andora, 6.6% lower today the dutch charm bracelet maker first quarter earnings beat estimates. revenue from its signature product, charms, rising 1% on an organic basis, weakening from the fourth quarter's 4% game -- 4% gain. one analyst said, is the party over for charms and bracelets? sales an 8% increase in at pandora's branded shops. while that is a concern, the company is diluting its earnings profits by expanding too far. the company has said it plans to maintain a strong pace of store openings with 275 to be added
this year. pandora down by 6.6% today. commerzbank, the german lender, number two in germany today. beating estimates it benefited from a rise in income from its trading business, just six months after it rolls out its strategy to scale back that business revenue from its core retail and corporate businesses. this is a company in the throes of a turnaround strategy. the chief executive announcing 9600 job cuts by the end of 2020. and the sale of an at ways market. the commodities division restructuring, low rate risk revisions for the portfolio. chairs by the way today were roughly up to a 60 month high. let's finish up with bank of america merrill lynch. has fallen to its lowest levels since october of 2014. we are going to talk about that in just a second. this is a measure of future
price wings supplied by options markets in global rates. equities, commodities, and currencies. the global uncertainty index has come down as well. it reached a record high in january. should we be worried? the first question i will ask sid in a few minutes. vonnie: it might be but if i get depressed -- to ask the first question it will be about volatility. the vix below 10, it was a bit of a surprise. that was a watermark. another indicator is the yen. 114.09. now the korean won -- the korean you want, with a new leader. potentially it is not as friendly as some of the other candidates. that is weakening the korean wan. crude oil's future just below 46 a barrel. is global macro
movers like g-20 movers. turkey stocks are rising a little bit. the currency board has been having a difficult time in terms of yields. well, and japan moving as a little buying here in korea after that. still a risk off in korea. abigail doolittle has a deeper look at volatility now. >> one of the bigger stories this week has been the fact that the vix yesterday did sink below 10, closing at its lowest level since december of 1993. what does this mean? we really don't know. this is our trading signal charge, a long-term chart of the vix on bottom in yellow and on top, the s&p 500. where we see these yellow marks, that is where the s&p 500 won. camein 1993 and 1994, we ahead of the big run for the s&p in 2005, 2007, it
was really before the financial crisis. so what this means for the s&p 500, we have one very bullish outcome and one very bearish. one takeaway is it is a big move either way. chart,a look at another this is g #vtb 8451, a long-term. the vix is down 51% from its origination in 1990. the s&p 500 up more than 580%. one point to be made are these huge divergences around that tech bubble and the financial crisis. the divergence now is even bigger. perhaps this is reconvening at some point. who knows at this point? we seem to be in a new normal wear this low volatility flows out. theaps, the s&p 500 in downside, and finally, where is there volatility? kevin kelly of recon capital told our team that there are
spots of volatility. on the bottom, we have the s&p 500 fixed. vixne, we had the energy above 18. kevin kelly at recon capital said if we didn't have energy volatility so elevated the s&p 500 fixed will be -- s&p 500 vix would be lower. somewhat high if you can believe that below 10. mark: amazing. sticking with a low volatility , sid verma, markets reporter for bloomberg. there is volatility. but there isn't much volatility as abigail was saying. why is there not? sid: that is a very good question. i have the honor of working in markets myself. i think there are lots of different forces out there. there is no reason to be scared ,bout the world central banks
obviously looking to raise rates. theot risks in china but at same time we've had these warnings that things could go wrong for a while now. markets have weathered populism, fed rate hikes, they have weathered the u.s. election, and economic data has really bailed out a lot of that's we have seen -- bets we have seen. we've seen trade volumes across emerging markets increase to spiriting levels. have a good day throughout emerging market growth as well as developed market growth, less reflection on the u.s. power output. we've got good data that has bailed out a lot of people and there are technical reasons as well. mark: just coming back to central banks, we had one guest last week who said, if you are a central banker, with volatilities this low and you are looking to raise rates, and
the fed is looking to normalize the balance sheet, surely we should take those potential risks into account. you might assume volatility would be greater now. does that tell us the gap between reality and what is about to happen? but this could be the peak complacency for markets if you think the ecb is going to take that. if you think the fed balance sheet reduction puts the rate hikes through the backdoor, if you think the chinese credit growth is going to plummet this is all bad news, and it is great to try and set against that. but there are technical reasons. the fix is a function of realized price swings. since volatility has been low, vol. low vol begets
there isn't much data that the vix provides with a forward-looking indicator about how the markets are going to move. there have been historic examples but that is just a couple of data points. in general, we don't really see a great correlation between realized price wings -- price swings and low volatility. vonnie: these days it feels like the question, why do you want to be president, it seems like why you have to have an answer for why the vix is low. an economist tweeted out last night, it is a function of fine economic data, accompanied by nothing major in terms of a lack of growth or underlying growth and contained inflation. what should we look to? what would be a leading indicator now? sid: well, we do have leading indicators now. we've had low commodity prices. we've had finds that china credit growth is going to potentially fool.
we've seen an increase in bond yields both in local markets and in dollar markets by chinese borrowers. and really, an increase in chinese credit growth last year bailed out risk assets and therefore the converse is true as well. lower credit growth could reduce risk appetites and that could have a ripple effect across developed markets. -- we have seen oil and energy prices increase. that is assigned. there are technical forces at play here. investors might not necessarily be betting that volatility is going to remain low. they could be looking at different products to hedge their portfolios. they could be looking at exchange rate of products. my colleague, dani burger, has a great story out about last week information inow
exchange credit product linked to the vix it self and could impact the vix insects -- the vix index. with asset managers, they are not that enthusiastic about buying hedges because that could eat into their returns and they are competing with their passive counterparts. there are a lot of technical facets that are not being captured why this official data. mark: as if by magic, dani burger will be on battle of the charts today. good to see you. bloomberg's sid verma. vonnie: did we ever have a battle of the charts with one person? mark: not sure who she is battling. i will try to find her. vonnie: me. i might be sick. let's look at first word news. courtney donohoe is here with more. >> health insurers are asking for big increases in the cost of their obamacare plans next year.
in maryland, virginia, and connecticut, premiums will rise more than 20% on average. one reason, instability in the lost coverage market that has been compounded by the trump administration. turkish prosecutors are demanding 40 consecutive life sentences for the man who attacked a nightclub in istanbul during the new year's celebrations. accordingcurring -- to turkey's state-run news agency. the attack killed 39 people and the islamic state claims response ability. according to the united nations up to 245 refugees and migrants are feared dead after two ships wrecked in the mediterranean. smugglers were operating the boats. of asiawarns that parts will grow old before getting rich. a new report says asia's rapidly aging population means the region is shifting from being the biggest contributor to the global workforce to subtracting hundreds of millions of people from it. the imf estimates asian
population growth rates will fall to zero by 2050. 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. mark: coming up, india going through a period of financial transition, enduring tax reform trying to end their love affair with cash. we will talk to the head of one of india's biggest states. that is next. this is bloomberg. ♪
pushing for a less cash economy, pursuing a goods and services tax reform. how smoothly will this transition unfold? at the panel is the chief .inister of the state he joins us from stanford, california. becky for joining us today. one recommendation -- what recommendation will be panel put forward to ensure a smooth transition towards the cashless society in india? >> it is going on well. after demonetization, our cashlessare promoted a society. all transitions will be cashless. -- we are studying all of these things and we are
doing an interim report. now we are studying further the best practices available all over the world. you know very well, india is very strong in information technology. indians, my state is dominating. mark: what constraints are you facing? there must be difficulties, given constraints and infrastructure and skills and financial literacy. >> it is very interesting. literacy, we are having variable advantage. but at the same time, physical and bandwidth and all of the things we are told, apart from that, we are correcting for cashless transactions.
they will come online. mark: i want to talk about the nationwide rollout of this goods and services tax, which probably will be put in place on july 1. the you think india will be able to ensure a smooth transition towards one nation, one tax? >> you are right. ones going to become nation, one tax. this is one of the important financial reforms in the country, after economic reforms. all political parties, all state governments supported this. it is a consensus nation. in this nation that is an excellent advantage. processes will be some for five and also tax collection will be improved. is going to happen.
all state governments are in concurrent with the federal government. e with the federal government. for a very short time they were able to make it and then they would implement. mark: chief minister, i want to talk about your capital which you are rebuilding. it is an almost singapore-like strategy to make it a global city. how is that progress going? when is it going to be finished? announceery happy to that to build a capital is a rare opportunity. only a few people will get it in their lifetime. build a capital or build a city. this is a capital and at the same time this is a city.
given a call to the people, this is important to us. we are having financial resources, why don't you come and join with me on the land pulling? we solve the problem. this is the best case all over the world. will go on to help us in preparing more details. on the base of that, we are having consultants all over the world. we are having them in nine as economic city, health city, education cities, sports .ity, this is all developing at the same time, we want to make the city one of the best cities in the world and also we want to make international commerce here.
i am working in that. readied. being we have given singapore, one area within the capital city, 1600 acres of land. us.anies are working with we will start the work. once that is working, i would say the government funding the places promoting, all of them are given land. infrastructure we are building now. internalso building infrastructure also. it is a very rare opportunity for me to build a city. i've never had that experience. cities, that is
favorable. today, it is the best city. this time, i am building out a ring road, 182 kilometers. the best in the world. that is how i am planning. a capital city, it is an economic city, tourism, you name anything. minister, thank you very much for joining us today. chief minister nara chandrababu naidu. coming up, battle of the charts next. murder -- the emerging markets. this is bloomberg. ♪
most compelling charts of the day. what they mean for you. you can access these charts on the bloomberg by running the function at the bottom of your screen. kicking things off today is dani burger. >> i am looking at how punishing it has been to be in small cap. here i have the small-cap u.s. index in blue on the bottom. i have futures positioning for small caps. after the election small-cap positioning takes off, gaining a lot here. people are optimistic about the domestic economy where things are going. it starts to trade in a range. look what happens to these .hat's -- these bets this is large speculators, lots of hedge funds. the most short they have been in three years and of course, what happens when the hedge funds go short. we get a high here. so ruffle at a high, hedge funds at a record short.
they are right now gaining on those positions. not quite at a long, but still short. this is g #btv 8453. vonnie: i really like that one, but to my credit, i did turn up and i am presenting. i deserve a little bit of credit. mike had to do with the reading we had yesterday. emerging markets stocks and recommending emerging market etf's. i would like to have read dani burger's tweets because she was at the conference. i thought oil might be on the decline but this is not hurting the bem rally. rally.e.m. you might think stocks are suffering with oil down five dollars or so a barrel and they are not. as it happens, the emerging markets index is at a multi-month high and so is the
currency index. so is the e.m. sovereign bonds index. you can see oil all the way down there in contrast with these. that is likely to go even higher. you can see that chart at btv-8196. mark: what you are saying is then he gets credit for your chart -- what you are saying is dani gets credit for your chart? for telling me something i didn't know. the hedge fund short, i like that divergence. dani is the winner because it was both her charts but it was her actual chart that wins today. later on bloomberg, technology. interviewve a special with the disney ceo. ♪
vonnie: from bloomberg world headquarters in new york, here are the top stories on the bloomberg and around the world we are following this hour. in market, stocks have gains after the s&p 500 and the nasdaq hot to all-time highs -- hopped to all-time highs. crude resumes its decline. the volatility index, not seen since 1993. disney reports second-quarter results today as investors show concerns about troubles at espn. the company could get a boost from a strong phil slate and also robust gains from its theme park. -- film slate and robust gains from its theme park. in the art market, we will hear from the head of postwar and contemporary art later this hour.