tv Bloomberg Markets European Open Bloomberg November 8, 2017 2:30am-4:00am EST
♪ good morning. welcome. you're watching bloomberg markets, this is the european open. the first trade for equities is coming up. we will bring you the first trade. matt is back in berlin. what are we watching? touchdown in china. will president trump gain ground on trade in north korea? he is meeting president xi in the next few minutes. senate republicans may delay corporate cuts by a year.
what is the final draft going to look like? shares tumble after hours for snap. can overhaul -- an overhaul of the snapchat app break even? european's talk about stock. futures less than half an hour away from the start of cash trading, and mixed trade. 50 showingxx unchanged. ftse futures, dax futures, and ibex 35 futures all down a little bit. we do have a slight gain in cap futures.- cac not a lot of movement in terms of index futures. it has a risk off field -- field. what i have is a one-month chart of treasuries so you can see that yields peaked at the end of october and have been coming down fairly steadily ever since. if i twitch it over to a you can seeart
yields have come down in a pronounced way over the end of yesterday's session. the concern about the tax issue is getting investors to go in forbuy treasuries, looking a little bit of safety. .e see them during this across it could be a risk off day. about --red thing weird thing about the u.s. story is the shape of the curve. u.s. data are generally fairly good at the moment. so what is going on? let's talk about the markets around the world. the brazilian markets got knocked around yesterday. equities down 2.55, the reality that move. that is a story to focus on. greek banks got knocked pretty hard yesterday. a story to pay attention to. it has been coming up over the last few days. let's talk about with the quality space and the bond markets. argentina surprising the market yet again.
fighting inflation down there, that seems to be the message coming out of mccree -- macquarie and the central bank. 1.65,s trading down by some risk off trade coming through. the markets have been on a solid run of late. withee the similar story asian equities, they have held onto good gains over the last few days. taking down a little bit but not by much. let's get a bloomberg first word news update. here's juliette saly. juliette: the democrats in the u.s. have scored a clean sweep in three elections. ap and nbc news predicts the next governor of virginia notching a victory in a state that is seen as a keeper a measure. -- keeper are mature. new jersey's new executive
and l de blasio has -- bill de blasio has one another term as new york's mayor. according to an estimate from congress's joint committee on taxation it punch day: there tax chairmanplan and the kevin brady searching for new ways to offset the tax cut to avoid the threat of a democratic filibuster in the senate that could kill it. we will be talking tax with u.s. treasury secretary steven mnuchin at 4:30 p.m. london time. china's overseas shipments held up at -- underpinned by robust global demand. imports showed the strength of the economy. 6.9% as imports rose by 17.2 percent year on year. that left a trade surplus of
$38.3 billion. the u.k. prime minister theresa may is weighing whether to fire a member of her cabinet just one week after her defense secretary quit in a sexual harassment scandal. according to reports in the british media, may is likely to dismiss her international development secretary who held unauthorized meetings with israeli officials behind the prime minister's back. the u.k. foreign boris johnson will fly to washington today in an attempt to persuade the u.s. not to abandon the iran nuclear deal. he is battling to save his own john up in london. it his his first trip since donald trump announced he would certify iran's compliance with the nuclear deal. he haglobal news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. very much for that.
donald trump has touchdown in beijing on the third leg of his asian tour. the high-stakes visit will see the u.s. president look for wins on every thing from the trade deficit to rating and north korea. let's get the latest from beijing. for that we go to tom mackenzie live on the site. is each side hoping to achieve here? front and center for the americans is that trade deficit that they have with china. we saw the latest numbers, the first 10 months came in a surplus for china versus the u.s.. 223 billion u.s. dollars, this has been a major gripe for president trump over the last few months. he says the trade relationship is unfair and unbalanced so he wants to address that to see if there are measures china can put in place to shift that had different direction. then you have north korea which looms large. we have heard from the state
department that it is likely the u.s. will put pressure on china to implement section -- sanctions that are on the ground to ensure the stranglehold on north korea remains in place or tightens. the chinese want to see they are also concerned about some of these investigations there going on in washington when it comes to intellectual property violations. and also aluminum and steel exports. there is the personal relationship between them and the chinese will be rolling out the red carpet and trump will be visiting the forbidden city behind me. a personal tour is what he will be getting with president xi and his wife before they set -- a sit down for dinner. the u.s. defense sector got excited when the south koreans started talking about buying significant quantities of
goods. what likely deals are we going to see? e have heard some details about some of those deals. they may be announced in the next 12 hours possibly. ge is likely to be setting up a fund focused on energy financing around president xi's initiative sachs is interested. chemicalroleum and corporation doing some deals including financing projects in texas. where also expecting aviation, autos, and energy and agriculture. some deals around those sectors. china may also move or take some moves to reduce some of the trade barriers potentially around autos and financial services. they want to ensure that trump comes away with something.
will likelyea they make some friendly sounds but we are not expecting big moves. tom mackenzie joining us from beijing as the meetings start between president xi and president trump. let's go to hong kong and mark cudmore. from a interesting is market perspective, the north korea story is that emerging as a major threat right now. that puts the focus firmly back on washington on what seems to be the most market moving event that continues to be tax. it is amazing the way north korea has moved off the radar especially with trump and asia. it has not that much. we cannot at -- we can expect a headliner to about north korea. unless there is actually a
military escalation, nothing else matters until then. that is a hard thing to prepare for because of military event is serious. it is a hard one to hedge. people have moved on or ignored it. so scary or they will forget about it. taxes the bigger issue. it does look like there is a lot of hurdles to go. the expectation is starting to wane. optimism was accessible but it is starting to come out a little bit. matt: optimism on the mliv team for asian stocks, i have noticed , has turned around a little bit with the exception of west goodmans activision -- wes goodman's optimism. mark: there were a couple of posts from the team, there is a couple of warning signals on this rally. there is a little bit of a euphoria bubble kind of thing. everyone is getting excited. there are too many sudden
bullish calls create a looks ripe for a little bit of correction. i do not think a major correction and i am bullish in terms of that. the three pillars for equities are growth, earnings, and liquidity and all three are giving positive signs. it does mean the structural story remains very strong until one of those pillars gets knocked out and none of them look like getting knocked out anytime soon. debate around the shape of the curve continues. thequestion as to why 10-year is not moving in a way to the -- that you would expect it to give and the data that are emerging. curve continue to flatten, what are the applications? wek: i am in the camp that are in a multiyear planning process which happens toward the end of every kind of cycle at it has a long way to go but overall in a most -- most economic
cycles and with the curve going flat or inverting. 10 year yields have a way to go. we saw it last week, below -- the they are a bit lower. it is not too relevant which where they go. the call is some people think we are at the start of a bond bear market. 10 year yields are in a range, that can be quite wide or 2% to 2.6%, 2.8%, i do not think -- bull marketd is over we need to go to a long-term bear market. yields will stay in this range. there are inflationary pressures that will keep them lower. matt: thanks ray much, mark cudmore, our bloomberg mliv strategist. you can follow insights on the blog. it is a great way to get prepared for your day. the tax issue is one that they talk about their. talking tax with u.s. treasury secretary steve mnuchin
at 4:30 p.m. london time. that is an interview you do not want to miss. steve mnuchin, u.s. treasury secretary on bloomberg live at 4:30 p.m. london time. next, could american corporate tax cuts be delayed restaurant we will continue on this issue and bring you the latest on u.s. politics. this is bloomberg. ♪
markets, the european open. i am at miller in berlin. let's get the bloomberg business flash with for two nights to go until the open of stocks. with that we go to juliette saly. juliette: snapchat parent company plunged in trade. the tech firm says it will redesign its photo and video sharing app to make it easier to use in an attempt to broaden its audience. sales estimates have been declining since its ipo in march thanks to increasing competition from facebook and instagram. credit agricole's slump in third-quarter trading revenue has rivaled that of societe generale. .ales fell that there is a bond trading decline of similar magnitude at socgen. nissan has cut it annual profit forecast by 6% after announcing a recall of vehicles in japan
--t went to an expection inspection process. production was halted for local sales on october 19. according to the country's cars dealers association, deliveries were down by 50% last month. all six factories which produce 1000 vehicles a day for the japanese market restarted output and shipments today. theman sachs' is shaking up leadership of its currencies business. to andrm named jim esposi another officer. esposito relinquishes his role iard withohn will responsibility.
the pay-tv company told the competition and market authority that he would review sky news if the merger handed -- hindered other properties. includes anview evaluation of the koke family's influence. guy: let's talk u.s. politics. .t is pretty much dominating according to the washington post senate republican leaders are considering delaying tax cuts for up to year. if the house tax-writing committee hammers out details of the reform plan. there are two games of for it and we have to figure out which to watch. the house is exciting, there is a lot of action on the field that it is the pregame warm-up that is interesting in the senate.
>> that is exactly right. we do not have a senate billion. whenever the house passes will be for them politically useful for their republican majority who will be useful but the substance of what gets passed in the senate is more likely that not to reflect the contours of the final legislation. matt: trump's lobbying democrats, what is he hoping to gain from the other side of the aisle? jim: that is a great question. there are public and majority is making, has made no bones about the fact that they do not care what the democrats think. my suspicion is that they are trying to pick up possibly one mnuchin or west virginia, they are going after him. to give themselves a little cover.
in case mccain or corker, one of the republicans goes against them. guy: let's talk about what happened in the races we watched complete. virginia.w jersey and the democrats came through, they did not make a mess of it. they delivered. jim: no they did not. is sitting in in terms of the midterms for republicans, this is further confirmation. obamacare is still -- record sign-ups. the data supports that. the tax thing is foundering. likell end up looking [indiscernible] is why the stakes are high with health reform. they have mission-critical, obamacare repeal absolutely was
a swing and miss for their base. but for everybody in the party, it is hitting tax reform passed. the agree on that goal. the question is, can they get there and if they cannot, if at all the crosscurrents in terms of writing a tax bill, it is going to be very tricky for them to maintain momentum, excitement at the base and financial support from the people who write their checks. guy: interesting. it will be an interesting 18 months. thank you for joining us. we are minutes away from the start of stock trading. we will look at the movers. sky is a stock to watch. downlation about shutting sky news if it is a threat to deals on the toy for its -- 21st century fox transaction. the market open is eight minutes away. this is bloomberg. ♪
profit beating operating expenses, risk costs falling as well. matt: a threat because politicians would want in a --ocracy of realism plurality of news sources there, it depends on how you feel about the content. let me talk about these shares seen gaining. earnings before interest and taxes as well is a planned by back could lift the shares according to goldman sachs. jm goldman sachs and a note. credit agricole is going to see pressure on its shares because that company had a massive trading slump, one of the biggest of the french banks. this quarter of a drop of 20% in sales from trading because of its focus on bonds. watch credit agricole on the here.de, watch
guy: welcome. a minute to go until the start of castrating. gilts are about to open as well -- the start of cash trading. gilts are about to open as well. andpick up the pennies today is going to be an upside they from the get-go, but there is some noise around these markets. here is what is happening in asia and washington. it will be interesting to see with how we trade. keep an eye on richemont. what have you got? i am looking at -- matt: i am looking at the crude oil spread right now. the chart is g #btv 5238.
i have been paying close attention. it depends on whether you look at wti or crude. maybe crude has a little bit longer to run here, guy. . guy: xi jinping hosting him in beijing. the concern up until this point is that we are going to see north korea becoming a significant and standout problem, and there is going to be escalation. as a result of which, the markets would be nervous about that. that has yet to emerge. trump seems to be focused with the trade story right now. it is going to be interesting to see how the rest of this meeting transpires and ultimately what we learn. european open. we are up by .1%. small gains in europe.
these and gains over the last few weeks. we are seeing the real standout story. is an interesting start. the story out in beijing. let us go to manus cranny and find out what else is happening in these markets. manus: guy johnson, the warning signs are coming from a whole variety. there is the polls and the birds. they haver -- sold all of their listed equities based on positive performances. the opening sweeps down 1/8 of 1% on the financials. oil just is that little bit lower despite the curve that matt has just been showing you. . warning of a credit market they are saying this is the head of norway's biggest bank. credit spreads at their lowest level since the financial crisis, and the credit market, well, looks more interesting.
some individual names, abn amro down. beat,lk about the sales third-quarter sales rose excluding currencies. the ambitious goal is they will meet their targets, through keep theye -- so keep an eye on luxury goods. you saw closing down .1%. the market had anticipated a drop by 2%. that is a lot better. the cfo is leaving. the chairman beginning to put his footprint across the company. and a dish in all $2 billion buyback. at the bottom -- an additional $2 billion buyback. they finished a $1 billion share buyback. building through 3%. may be one parent regarded as misfortune. to lose both -- that is what is setting up in
the u.k. government. this is theresa may and her government. a state of crisis, as we say in ireland -- she may be forced to -- it looks more and more fractious. like ation looks more tail risk and more like something that is moving into a possibility here in the u.k. as we go into 2018. that is what my sources are telling me. sterling is volatile again. gilts are bid. i am off to radio. matt: i will take it from there. guy: matt, pick it up. matt: i am back from a menace, so it is good to see you as well. donald trump, the u.s. president, is in beijing, meeting president xi on his five nation tour of asia. we can see live pictures of the entourage, the two entourages walking.
the past agenda, the u.s. president will be keen to discuss america's huge trade deficit with china. it was a massive campaign issue for him. the full year gap between tennessee sales to the u.s. and its imports will probably hit 250 billion dollars. joining us now is our guest. jerry, this was a huge issue for trump during the campaign, but he seems to have gotten a lot closer to the chinese than the fiery rhetoric we heard in 2016. anythingpect to see out of this meeting that is going to concern you as an investor? >> all year, things have been simmering away, but nothing particularly eventful has happened. trump has always been a little bit compromised because he is talking about trade on the one hand and military needs and security on the other.
tradets to resolve this deficit even though we should still be talking about whether it is appropriate to be talking about a lateral trade deficits or multinational. it up the same time, he is very concerned about north korea and the path to trying to resolve the north korean nuclear situation is by china. whether that is diplomatic or military, china needs to be involved. i was in china recently and i met an academic that relations.those there was a piece saying china was willing to consider regime change in north korea. italy's comes with caveats. -- it always comes with caveats. they would be willing to consider it only if the u.s. drills with south korea and withdraws troops. that is not going to happen. we have on the bloomberg
this tool, ectr is the command to type into your bloomberg to of data on bunch trade. i have got the united states year, and i am listing all of our trade deficits. you can see with china, we are looking at 327 billion over 2016. mexico is the second-biggest. germany, the third. do you expect to see trump making any headway in changing this? if he did, i would expect investors around the world to shift their portfolios a little bit as well. gerry: i personally think he might struggle to manage this directly with china. there will be some deals announced that might change things a little bit. ultimately, the trade deficit is a tool that appeals to the wider audience. it is a very specific way of talking about whether an economy is open and whether the u.s. is able to make the most out of a relationship. with china, that it's very difficult.
it is very closed off to many of the services that u.s. companies would like to offer, whether it is financial services or tech services. i am not sure he will have much impact in the chinese negotiation. what i am a bit more concerned about is that i do think trump, and his administration, are very focused on trade, and they will end up needing to do something very significant to get the ball rolling, because at the moment, everything they will trade in the first year of power is very minor. we had a very significant tariff as opposed to the entire sector. it has been nibbling away at the edges. what worries me is that tom has basically said many times you thinks they will need to -- he thinks they will need to leave after. i can see that he might actually say we are leaving nafta with six months notice, the required on his period, and that would really send a shock through the global supply chain, including asia, impact in korea in particular, that i think is to be very mindful of in the next
six months. guy: let us talk about what is happening in the asian markets. we will roll through a few charts. this is because b. it goes from -- this is the kospi. strength to strength. this is the nikkei, going parabolic right now. are we getting ahead of ourselves in asia in terms of positioning right now? investors are buying and aggressively. gerry: i am not sure the positioning is all that exists extended just yet. it has been trailing in the past. korea is doing very well for relatively specific reasons. the tech cycle is -- samsung is making most of its money from its chips because it's margins are so high. you look across the region, you start getting into tech in china as well. things look quite hot. evaluations of these regions do not look frothy at all. the earnings will probably slow, but when you are slowing in
chinese tech, earnings are growing at 50%. that could slow quite a lot. with valuations that are not particularly stretched, you can see quite good momentum. guy: what do emerging markets look like? gerry: i don't know the exact answer to that, but it has been a very leading path. percent ofthan 20 the emerging markets index, the tech sector, which is always worrying. guy: i can correlate what is happening in the states and the s&p because i can make exactly the same argument for the s&p. it is exactly the same trade, just geographically dispersed. we call the other one developed markets, but in reality, it is the same thing. they are quite similar. u.s. tech is driven by the advertising on facebook and google, for example, and the iphone from apple. in asia, it is a combination of things that are quite different. it is products and the margins at the moment which are huge. the internet of
things. 3-d sensors will be going into things. it is a brand-new technology for the mass market. the world. you get into china, and even though tencent and alibaba are big companies that look little like their u.s. years, tencent is making most of its money out of gaming, so it is a completely different industry. there are a few different things going on in the emerging-market techs i call i think are really interesting. matt: i am looking at the msci emerging market index up, gerry, and your today, we see gains of 31%. interesting because goldman sachs came out today and sees the index rising another 10% by the end of next year. there is a lot of issues going on in emerging markets. debt, saudiezuelan arabia going in and arresting and others.
are there any risks here that worry you? gerry: i would not say we are all in. everything we are focused on is that diversification to make sure when the problems arise, we have a portfolio that can handle those. in terms of the emerging-market performance, it has been excellent. it is coming off a very low base. underinvested, very cheap. all three have started to reverse over the last 1.5 years. the exceptional returns probably will not be repeated. it has been a very synchronized global recovery because of those characteristics. somebody emerging markets exposure as well as specific exposure. we like to keep some hedges -- not hedges, but more diversified. there is good value in being long yen and short three and won -- and short korean won. i was looking at the election
cycles and it is something like of the bond market has elections. it includes russia, where the result is complete, but there are many others that will be more contentious, like in mexico. we think there is good momentum in the earnings and room for both margins and valuations to expand in you merging markets. i think we see double-digit returns through next year. fowler, a nice start to leave you with for the moment. board out inigh hong kong. just to see this massive spike. you have seen this tencent spinoff. the hong kong market is already flying. so great ithis was had ripple effects out into the borrowing market and everywhere else. fascinating story to watch out for. you find that on your bloomberg. there is the #3660. we are entering a bear territory
as the yield curve flattened. we will discuss the bond market, next. it is interesting times. what is this flat curve signaling right now? what is it telling us about what is happening stateside and globally? there seems to be strong demand for that 10 year out of there. we will discuss that, next. this is bloomberg. ♪
sessiones into the right now. let us take a look at some of the individual movers in the stoxx 600 index. i have the mov screen up here. ahold. see royal all it is gaining 4.7% here, because of the buyback, because of the results that are released. investors very happy about that, and it is one of the biggest winners. you have a lot of defensive stocks appear. you have unilever, nestle, these stocks doing quite well in today's trade. if you look at the other side of the ledger, you can see credit agricole right up there at the top. credit agricole trading. sales from trading dropped 28% in the quarter. one of the worst-performing banks as far as trading revenue, and that is because of its focus on the bond market. natixis says that will put
pressure on the shares. otherwise, you see a lot of -- interesting to see salve here . line and, they are in still a big drop. almost 20% gains year-to-date. it is down almost 5% today. guy: let us talk about what is happening with the bond markets. it remains a fascinating topic of conversation. we are scratching our heads and wondering which part of the market is signaling what. this is u.s. your today, around 60 bit -- year to date, around 60 basis points. you can see what has happened since the kind of 2007 prices on more than what has been happening with the shape of the curve.
trading at 67 basis points. anotherwler, if we find 60 basis points, the curve is flat, then it is game over, isn't it? gerry: they will tell you that. the forward are pricing that the curve will be flat. it can stay flat for a while. be wrong. recession indicators on a horizon, three-year show uncertainty. at the moment, we are not too concerned in the short-term term, and watching, but only moderately concerned. guy: is the 10-year mispriced? that kind of makes sense. the fed is raising rates. the front end comes up. the u.s. economy is doing alright right now. 2%, 3% geeking out growth depending on which numbers you look at. the unemployment is low. there is no wage growth and
inflation, but everything else kind of looks like the u.s. economy is chugging along. gerry: my view would be no. the term premium as a concept is really about the premium you should be getting the uncertainty of taking a longer yield. at the moment, there is not any inflation that we have had from a long time. in addition to that, because we still got high debt burdens, the likelihood of a steep backup in yields is low. what is probably most important at the moment in terms of what's happening with the flattening of the u.s. curve driven by the 10-year not being able to back out of this 245 level, is the global market is dehumanizing again. part of the reason we have this momentum is you have synchronized recoveries globally, allowing all banks to talk about taking policies away. to allowing bond yields rise. we have seen a little bit of data disappointment in europe. china is slowing down.
you have yields in the u.s. well regions.lds in other there is quite a lot of demand for higher assets which includes treasuries. matt: i am looking at the bloomberg intelligence global investment bank index here. you can see this is a five-year time that we had a rough at the end of 2015 with the deutsche bank issues, and all the problems with trading revenue. it now, we have come back pretty strongly. 35% over the last 12 months. is the flattening curve a problem for banks? the flattening curve usually impacts the valuation of banks, so certainly is a headwind to what u.s. banks in particular can do from a valuation perspective because they have improved their valuation. the market has repriced banks significantly. it does not necessarily impact earnings, which are driven by the overnight rate and the short
rates which are rising, especially with rate hikes coming through. obviously, with the growth in the economy, a little bit of growth. very supportive of lending. the outlook of banks shows there is reasonably robust earnings growth on the horizon. to some extent, particularly the u.s. as well. we might not -- we should not expect too much more from a valuation perspective at this stage. this were toly, if go so flat that it becomes inverted, we would expect a recession. there is not so much talk about a u.s. recession right now. and in europe, growth is getting stronger and stronger. how long do you expect this to last? gerry: it is a good question. in the short-term, it is very hard to envisage what might cause a recession. from an economic perspective, it seems extremely unlikely. it is possible some of the
market technicals, which there are segments of the market that look frothy. asset values generally are high. there could be some market reason for a recession, but even that is sort of hard to predict an unlikely over the next year. what we would be looking for over the next couple of years is whether there is a significant amount of stimulus from the u.s., which might cause faster rate hikes to control inflation. whether inflation breaks out on its own because the labor market is showing more and more signs of being extremely tight, but then also, just what is happening globally, because part of the reason why it is very hard to envisage a recession at the moment is china helps drive a globally synchronized recovery where everyone looks like they are doing quite well at the moment, and in 2018, the story will be that there will be a bit more divergence, and weakness in non-us markets in particular with financial stress into the u.s. economy. guy: it is going to be interesting to see what the oil
story does for that and of oil keeps climbing, what factor that plays. gerry fowler will stick around, at aberdeen standard investments. we will be talking tax with the treasury secretary. steve mnuchin will join bloomberg. can't wait to hear what he has to say about what is going on in washington right now. of next, mid-cap movers for you. this is bloomberg. ♪
guy: 25 minutes into the cash equity session in europe. let us find out what mid-caps are on the move. games andsoft makes it has hit a record high a the most since july. first top revenue beating estimates. it is too early to raise the guidance despite the jump in ises because the company still at the launch of origins. the launch could be what ubisoft needs to fend off -- renntag, and rub they beat. dropping the most since june through this company offers armored car services. learn toext, socgen code. what banks are doing to keep up with the disruptors. interesting to see what deutsche
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matt: touchdown in china. will president trump gain ground on trade and north korea? he is meeting xi jinping as we speak. talk jeter's. a washington post report says senate republicans may delay corporate tax cuts by a year. what will the final draft actually look like? and snapped. the mobile messaging firm shares tumble after hours. can an overhaul of the snapchat app turn it around? welcome to "bloomberg markets: european open." berlintt miller injur
alongside guy johnson. guy: we saw a quiet session in asia. we are seeing the same thing in europe. below the surface, as ever, is where the action is taking place. let us take a look at the grr screen and what you can see here. this is the breakdown of the stoxx 600. the fence is doing reasonably well. good doing well, up by .7%. at the bottom end of the screen, look at the financials. banks down. insurance down. financial services down. that is where money is rotating out of this morning, and we are seeing a number of individual names. abn amro is out this morning. a bunch of french bank in focus. that is where we are seeing some of the money been taken off the table. it let us get an update here. sebastian salek. sebastian: donald trump has arrived in beijing. he called on the world to abandon support for kim jong-un's regime, saying north
korea is a help that no person ll no personhe deserves. all responsible nations must deny pyongyang any acceptance, he says. pres. trump: today, i hope i speak not only for our countries, but for all civilized nations when i say to the north, do not underestimate us. and do not try us. we will defend our common security, our shared prosperity, and our sacred liberty. sebastian: in the u.s., the democrat victors scored a clear sweep in three elections. wealth north am will be the next northamr of -- ralph projected to win governor of .ort
expected to win the second term as mayor. they have effectively gutted a to foreignlated affiliates. according to a preliminary estimate, that pushed a $74 billion revenue hold. it leaves chairman kevin brady searching for new ways to offset the bill's tax cuts to avoid the threat of a democratic filibuster in the senate that could kill it. we will be talking with steven mnuchin at 4:30 p.m. london time. parent company plunged after missing revenue. the tech firm says a redesign is needed to make it easier to use and broad an audience. sales estimates have been declining since the ipo in march thanks to increasing competition from facebook and instagram. global news 24 hours a day, powered by more than 2700 journalists and analysts in 120
countries. this is bloomberg. matt: thanks very much. he has triedsays everything and continues to keep up with technological changes disrupting the european banking industry. speaking to bloomberg's ed robinson at the web summit in lisbon, he said he was doing everything from investing in simtech startups and even learning to write code himself. , what do i mean by this? taking the challenge as serious, which means understanding there is a need to change the model and embrace the technology. secondly, capitalized on what -- capitalize on what is a part of the banking relationship. still with us is gerry fowler from aberdeen standard investments. gerry, this is an issue that has
really been picking up a lot of steam lately. simtech for the last couple of years. over the last few days, we have bankershearing big, top a they are going to possibly replace thousands of humans with ai, with robots. what do you think about that idea? gerry: i am sure that there are elements of truth in that in that ai and the blockchain technologies might become useful and replace jobs. in the short term, we continue to see more technology being useful for doing jobs. of talk around major financial services being completely disrupted. i am a sure i believe that either. the banks are on top of this. maybe they cannot quite move quite as quickly. they cannot buy startups as they become successful. financial services will be very significant. it will not necessarily be as disruptive as some of the rhetoric. of theohn cryan is one
bankers who has been talking about putting robots in people's places for a wild. the financial -- for a while. the financial times has a story where we have 92,000 bankers, and we should have maybe 40,000. are there banks like deutsche that are just way overstaffed and still need to do a lot of had cut -- headcount cuts? gerry: i am not too sure. i would not be able to talk about specific bank or more broadly the staffing in the sector. knew davidlways created however, and artificial intelligence is a bit of a funny word. i do not think there is going to be computers that can do the job all day, and to some extent, you look to what technology has done in the past, google is a form of artificial intelligence. in reality, that is not the way you would talk about artificial intelligence without having a
consciousness, but it makes it much easier to find things that used to take a lot longer. these things continue to iterate come a continued to be useful, and they allow us to be more productive. i don't see too much threat to the global financial system from artificial intelligence. guy: it will be interesting to see how this is affected by this. mr. cryanobably what is talking about. let us switch back to a conversation we were talking about earlier. the flat curve. gerry: it means that financial valuations will struggle to push on from here. there needs to be a rising yields in inflation expectations to rise for them to do very well. we are still experiencing a very good swing. great are rising in many countries. that is the earnings of banks. there are other interesting things going on. we are going to get some material deregulation. or they will use that for investment probably into yield
trades around the world. there's quite a lot of potential positive news still coming out of the u.s. that does not require a lot of legislation. you go across to china, and you have discounted banks that are starting to benefit from rising depressed levels previously. they cleaned up the banking system to a relatively significant extent. they put a lot of the -- into the nonlisted banks. the large for banks in china that are listed are actually relatively clean. switch it to an asset class. do i buy bank equity or do i buy bank credit? and more broadly, and this is the bloomberg corporate return more, an unhedged one, broadly as credits, are they starting to make you nervous? has rallied a lot. the thing with investing in credit versus equities is the difficulty of handing the risk, because the ratio has been phenomenal for credit because they just are not volatile,
especially during upswings. credit has been a better investment for a while, but we think the credit in financials and broadly is looking more rich versus equities. credit to some extent has a very finite return. you cannot really have in a lowons exceeded yielding environment. in the equities, you can't have your expectations exceeded. longer thannues for people think in a more synchronized way than people think. the earnings could be into double digits with more capital returns. that would bern difficult to be exceeded in credit markets. matt: what are your biggest concerns when you look at bank equities, gerry? in the u.s., you have the fed, you know, on a rate rise path, and here in europe, although we don't have the ecb really even close to that, we do have the other side of the supervisory side of the ecb starting to look
at npl's and maybe putting pressure on some of the powerful banks. -- some of the parole for all banks. what are some of the biggest concerns you have about banks? gerry: to some extent, it is a nice situation to be in. things are heading in somewhat the right direction even if it is a little bit clunky. banks in europe have done quite a lot of self-help already. it would be useful is the deposit rate was not negative. they have got themselves into a much better position than they had in the past. the risks in europe continued to be the lack of inflation. the ecb is essentially being forced to take risk asset purchases. for technical reasons, more than they think inflation is heading back to 2% in any short timeframe. inflation continues to be very weak. it would not take months for the
concern to reemerge, and there is nothing worse for financials than deflation because of the leverage they used to generate problems. guy: thank you for spending so much time with us, gerry fowler, from aberdeen standard investment. not quite done with him yet. gary will be joining matt and i, the radio team more specifically, on london dab digital at 9:00 a.m.. we look forward to continuing the conversation with him. still to come, a microsoft ceo joins us story looking forward what ishe has to say on happening in the tech landscape. next, talking about a russian --pany which has we will talk to eurochem's head of mining. this is bloomberg. ♪
matt: welcome back to "bloomberg markets." i am matt miller. i am alongside guy johnson at our european head quarters in london. we are death about 45 minutes into the trading session -- we are just about 45 it into the trading session. nejra: starting with apple, rising the most since january. three things the highlight. thed-quarter earnings beat
underlying operating income. also, the company planning to buy back to billion euros of shares year. and it raised it on a 17th 250 million14% to euros. it is one of the best performers on the stoxx 600. heidelberg cement, one of the better performers. line with analyst estimates. it also said it has strong demand in markets from northern europe to australia, so quite a broad swath of markets. the u.k. says heidelberg cement is missing out among uncertainty caused by brexit. nonetheless, the numbers driving the stock up to the highest since may and the most since november 2016, the brett of the gain we are seeing. on the downside, credit agricole down 4.5% right now. a slump in third-quarter trading revenue is what the market is focusing on. it posted one of the weakest trading quarters of the french tradingrroring a bond
decline at socgen. it was the reason the trading business suffered more than some rivals was because of credit agricole's focused on bond. the stock dropping the most and hitting its lowest since june this year. guy: thank you very much indeed. i have a chart for you. this is potassium chloride. it in 2009. it has come down sharply ever since then. there is an oversupply of the fertilizer in global markets, but one russian company is about to bring even more. eurochem is spending $6 billion attwo new mines to reduce it a time when prices are at a 10 year low. around 8will be million tons per year, around 30% of global consumption. moscow,us now from clark bailey, head of the mining division at eurochem.
thank you for taking the time to be with us here on bloomberg. potash on lot of global markets. prices have come down pretty sharply. where is the demand for the products that will be produced from these mines going to come from? same place it is now. it is going to continue to grow. it is in brazil, india, china, north america, europe, and even russia has been building a stronger demand. demandlark, if you see if thatng to grow, and is the case, why has the price come down to significantly? are other people putting as much into the supply or more? i mean, you're going to boost the supply by more than 1/10 globally. remember, we are
stepping into this very slowly, that percentage, which is over a long. period time. the market being at 64 million tons has been projected to grow by all the big players for quite some time for maybe -- on the forecastedthey 4%, but maybe it is more like 1%, 1.5%. if you look at the capacity increases, once we started a on we are less than 1%. a small fraction of the total market. our first year production, which will be next year before casting right now to produce about 446,000 tons out of one plant and under 30,000 tons from another, is all dependent upon our mining the scenes to feed the new mills, and that will 2025.ver time to 2024,
you mentioned it. it takes a long time to get there with these kind of mine s. the point being that -- guy: what is your relative production compared with your peer group? if prices continue to come down and one would assume demand is going up and supply is going up as well, at some point, you will see those in caching each other out. but can you guys produce at a significantly lower level than your peer group? clark: we have charted what everybody says they are producing at and what their tots are and what it takes get themselves to market. we have a little bit of advantage over most of them. one, because we have probably some of the highest grade at the the best grades out of canada, which are in the area. we have that kind of grade or better. but we have an advantage because the black sean in
to deep water which gives us an advantage, so besides that, their cost of operations in russia are less than canadians were the european cost, so the competitor is -- if you look at the chart of who thoseeapest is it is folks. we can compete against them because they will be cheaper in getting ourselves to market. at the lower end, we are going to be competitive. itt: i just wonder, clark -- don't want to put you on the spot or have you end up in a you went to college at austin, the capital of freedom, what is it like doing business in russia, especially right now in putin's russia? clark: well, politics aside, working in russia is not a
problem at all. i find the people are very much like americans or canadians, very friendly. there is no issues here from a personal basis or business basis. all right. it is just very interesting and because of the relationship between, or even the alleged relationship, between the u.s. and russia. i'm sure on a business level, there is none of that. clark, thanks so much for joining us. the pictures look amazing. the business does look very exciting. clark bailey, head of the mining division at eurochem, coming to us from our moscow office. up next, we are going to talk about the cooling off of coal power. the german mining, green party shows a willingness to compromise on climate policy as german coalition talks continue. we will have the latest from berlin. this is bloomberg. ♪
election. the greens appear to be willing to give new ground. where do things stand? >> they are in the middle of preliminary talks right now, and if you look at any negotiations, especially negotiations as complicated as you have now, there is all kinds of weitioning in terms of are not afraid of new elections or willing to give up demand on this. we heard from the greens who gave up their demand to end coal-firepower, and these are hardline been made on the campaign. it is a way of saying we are going to soft and a certain -- soften a certain demand and we want something in return. guy: who is going to be the german finance minister? patrick: don't know. that is a question financial markets are asking, right? patrick: the official coalition
talks start probably at the end of this month. they want to wrap it up by the end of the year. german politics, if you stop bringing these questions up, who is going to be finance minister? the answer is that they fill these spots at the end of the negotiation. the assumption is that you may get free democrats in the finance ministry, but that is pure speculation. if they give the liberals, the market liberals, the free democrats thomas something big, they might relent on their claims of ministry. matt: they might want the foreign ministry position. obviously, we are so early in negotiations. we heard they could last until christmas, and some people have said january or february. we will be talking to you a lot more throughout the next few weeks and months. german donahue covers politics for a spirit up next,
francine: the trump tour arrives in china. wilbur ross amounts $9 million worth of deals, but will this impede progress with north korea? senate republicans delay tax cuts. what they will look like and when we will get them. the brexit breakdown. wall street sounds a warning as theresa may loses another top minister. the morning. this is "bloomberg surveillance" and i'm francine lacqua in london. we are speaking to portugal's finance minister,