tv Bloomberg Markets European Open Bloomberg February 2, 2018 2:30am-4:00am EST
♪ welcome to bloomberg markets: european open. i'm an edwards in for guy johnson. -- i'm an edwards in for guy in for -- anna edwards guy johnson. the castrate is 30 minutes away. this is bloomberg. -- the cash trade is 30 minutes away every -- 30 minutes away. this is bloomberg. ♪ can he turn around europe's largest investment bank? u.s. trade secretary liam fox tells bloomberg britain cannot
enter a customs union with the eu post-brexit. for the complicating theresa may's negotiations with brussels and her own party. all eyes on the united states jobs report. traders will be paying attention to wage growth. will it be enough to shake off the retreat in equities and treasuries? was than minutes away from the european open. take a look at futures. we are looking at a mixed trade in futures. ella think they are positive in britain, negative on the continents. andttle bit of direction trend. at the same time, we see u.s. treasuries yielding more than they were yesterday, 2.78% now. just yields have come down a little bit, but still at a level traders haven't seen in a long time. that could spook as some traders and it could be a reason you
have seen a selloff in the features session. will that carry through into the cash session? will that yield attract investors to put cash back into the risk-free rate of u.s. treasuries? what do you feel on gmm? anna: let's take a look at the gmm function. we are expecting a little bit of weakness, maybe the ftse will be resilient. all the fx moves in their to take account of. indices, it'suity interesting to see the asia equities session. it focuses on the negatives in the tech earnings report rather than the positives. generally, we were weaker across asia, picking up where the u.s. left off. focusing on the earnings story on the bond market story on interest rates globally and how much of an edge that will take off equities globally.
market,oreign exchange it's interesting the yen was on the move. the fed had to jump into action. it called them into action once again. bit of strength coming through in iron ore is of interest as we watch it. we are going to get some energy, some oil companies reporting today. , exxonshell earlier on today and for the reports from europe later on this month. let's get a first word news update with sophie kamaruddin. sophie: german chancellor angela merkel's block with the social democrats has secured an agreement even though large to france's remain. the secretary of the christian social union says negotiators remain willing to compromise. the parties are dozing in on the
deadline to complete talks by sunday, so they have given themselves to more days if at sending -- two more days if outstanding issues arise. donald trump is releasing a memo about the fbi's illegal surveillance. the move is likely to ratchet up partisan warfare over robert mueller's investigation of the trump administration and his 2016 campaign. has said theretary u.k. must not enter into a new customs union with the eu after it leaves the block. his comments to bloomberg set a new brexit redline for theresa may's negotiations with brussels and her own party. fox also offers support for the embattled prime minister. >> her middle name is resilience and that's what she is showing and i wish more people could see
the commitment she is showing britain's interest on with china. bitcoin slumped to its lowest level this year, among concerns and speculation about the viability of the cryptocurrency. after reaching a record high of $19,500, it has lost more than half of its value. this comes about government ,egulation, viability, hacking and to concern it's just a bubble. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. matt, anna. matt: thanks very much. a losse bank has put out for the third year in a row, a full-year loss and a fourth-quarter loss of more than $2 billion on revenue of $5.71 billion.
the loss was slightly narrow. the revenue was also less than the street was looking for. i little bit of a mess in that case. it seems costs have climbed. for example, quite -- paying employees has climbed. that could be good news for bonuses for bankers at dab. the problem is litigation costs continue on and they are expected to rise in this full year costs are expected to rise in this current full-year and john cryan isn't having luck in getting revenue to grow and probability to turn around at the bank -- profitability to turn around at the bank. watch for deutsche bank to be him over at the open. an lateralk to john cryn and how he thinks the business is developing and when he thinks he will see a turnaround. anna: you are going to be
speaking to john cryan in and in the last couple of weeks or so talked about a third phase to what he's trying to do. thatesting to see what means and what detail we get around that because he has spent a lot of time trying to take costs out. what is the third phase entail? you still have to have people work at the banks, robots are not ready to run it yet. i think it's been a real disappointment to investors, as well. let's bring in mark cranfield from our mliv blog. i'm not sure if you saw the deutsche bank numbers, but it's interesting it trades less than half of book value, the worst performer on the 500 banks index. it's really tough for john cryan to turn this around because treading revenue continues to drop. that's not specific to deutsche bank. treading revenue has continued to drop for banks around the world, hasn't it? mark: you are absolutely right.
deutsche bank also has an additional potential problem, that this chinese company, which is trying to dispose of assets quickly, holds a decent amount of deutsche bank shares. there is an overhang there that people are worried that originate will need to sell holdings, as well. that's an issue they need to deal with. anna: it's interesting to look at the bank has specific issues to look. john cryan was talking about that earlier. as appreciation of higher interest rates in the ecb filters through to markets, that could move things for him. it will also move for the sector. treasury yields still close to recent highs ahead of the jobs report. that will be the focus as we look into the european trade. mark: putting people are looking for anything to do with wages. indications in
the data we saw yesterday that wages are beginning to take up in the united states -- pick up in the nine states and we have been told there is nothing to worry about and if wages start to pick up in a tight labor market, that could send inflation higher very quickly. that's something to watch out for. -- expects apts strong number anyway because the american economy is doing well. strong year and 2018 will be thanks to the tax cuts for the large companies in america. wages is something to look out for, any sign of inflation. the way yields are rising so fast, investors are thinking there is a risk that the fed may not have even raised interest rates quickly enough. let's see what the new fed chairman has to say because possibly, this idea that 25 basis points every quarter maybe is just not enough. maybe he has to go stronger than
that. it interesting, the mantra from banks around the world, cigarettes global growth. -- synchronized global growth. copper is up today, people call it dr. copper does it is good at measuring the health of the global economy. tell us about this copper move and is a related to the equity correction we have seen of late? mark: i think one thing that is reassuring for people who are looking at a medium-term basis for the help of the global economy, copper is still in good shape. that's a sign there must be good global demand going on. the expectations we had run the world bank and other people that 2018 would be a stronger of growth, it looks like that is playing up. even though we are seeing short-term volatility, it's still in good shape.
so as oil prices. that tells you there is still demand going on on things reasonably healthy. haveesn't mean we can't equity markets getting weaker in the short-term, but if we look ahead, we will be reassured by that. in two weeks times, we have the chinese lunar new year holiday, which is a break for markets. it could be choppy for a couple of weeks and possibly improve after that. anna: thank you for your thoughts, mark. you can follow like market insights from the team at mliv . shell is the closest it's ever been to becoming the biggest oil company. exxon mobil reports later. we discuss what to expect for that business and the broader oil sector. this is bloomberg. ♪
♪ this is bloomberg, the european market open. we are 15 minutes away from the start of the european equity trading day, expecting weakness this friday morning on equities. let's get a bloomberg business flash with sophie kamaruddin. sophie: china's drafting a proposal to allow gambling on hainan island's in an unprecedented move that will reshape the country's territory and transform the economy. according to people familiar,
government agencies under a party reform group headed by president xi sinking is considering allowing online gaming and sports gambling. apple has quelled investor concerns with results showing demand for the iphone x and pledged to put its cash flow to work in buying back acquisitions. 796 inerage price was $ the crucial holiday quarter, up suggestingarlier and people are gravitating toward the iphone x. amazon shares jumped in trades after results reassured investors its investments are paying off. a $1.9ome came in at billion, a record for the company. they beat estimates. $789profit included a
million benefit. that's your bloomberg business flash. anna: thank you very much. let's talk about the oil sector. shell is the closest it's ever been at overtaking its rival. exxon mobil reports later today and its earnings are expected to be less than shell. joining us now is check wallace. -- let's get this cleared up. how are we measuring the size of these businesses and just how far behind is a shell? -- is shell? guest: the one thing is the profit. they have a reasonable chance of being close to each other. there's a chance that show could overtake. there is -- shell could overtake. there is a good profit number. it's a moment that will mark the transition but it's more important what will happen in
the past couple of years. it has been going on for two or three years. would it work out? yes it has, so far. but cash flow is somewhat disappointing. exxon hasn't been in that game. nothing spectacular. it's rapid show growth, exxon has been flatlining and they are getting close. reducexxon won't have to debt at the rate investors want to see shell doing it. will investors in exxon be getting more money back from the rise in oil prices that investors in shell maybe expect to now that they have seen flows from yesterday? guest: we will wait and see rather than make a prediction, but that's a fair assumption. cash flow numbers for shell were disappointing and we saw that in that selloff in equities. there are armies some investors
thinking they are not getting the terms of they were expecting or hoping for. when exxon, it has been steady growth in dividends and a very reliable care of returns to investors. shell has been more haphazard because they have to contend with large acquisitions and offal oil prices, as well. the market is still raising exxon higher than shell, but it's profit number we are looking at and that will be interesting for us. matt: you had a great story out yesterday putting out shell is making as much money with $50 oil as it was with $100 oil as far as profitability is concerned. his exxon going to be able to shine the same way in that regard? stuart: i think so to some extent. one thing that can be said in this industry, they probably exceeded most people's expectations for how far the have been able to cut costs. a year ago, we were talking
about increases in service cost, rate worry we would slide back into the debt problem. it has been quite surprising. the racing of the shares, the way people are trading, that is now in the market and the expectation is that it will continue. anna: also struggling to keep up with the rise in oil prices we saw from goldman. thank you for your time this morning. stuart wallace, blue bricks editor of energy and commodities. minutes away from the european equity markets. , we look at the stocks to watch. deutsche bank and companies heading for the apple story. this is bloomberg. ♪
♪ back to bloomberg markets, the european open. just about eight minutes away, six minutes even from the start of trading here. let's get our equities team on set to talk about stocks to watch. totsche bank has indicated open lower than the previous market, disappointing loss and revenue and really disappointing credit-rating numbers are it -- credit trading numbers. this used to be a powerhouse. guest: that's exactly right.
were incredibly strong have become areas they are showing in or miss debt -- enormous debt. their third annual loss. they promised things will get better and better and it doesn't seem to be materializing. anna: let's talk about the companies that supply apple because apple the story turned out to be a good where -- a good one. price rather than volume. response will be interesting depending on what they supply. guest: for apple, everything is great to a certain extent. the higher price indicates people are more willing to buy a $1000 phone, which is fantastic for apple. for suppliers, it will depend on what they make. everything looks great, but if they are exposed to older
cheaper iphones, things maybe not looking so good. anna: let's sue the fracking power is. like: you have companies dialogue and ans. they had a great week. we'll have to see whether that has an impact on them. is quite reliant on revenue to move. matt: what's the story with astrazeneca? withw they came out earnings that beat on tax benefits. the fact we are looking, the market wants to know will happen this year. , pretty goodeneca 2017 beat. they are looking to rise a little bit. the main thing is looking into 2018. they are predicting the levels rise. they are facing a lot of generic come rotation -- competition. their drug has faced generic competition, but they are doing better now.
hard medicine is doing now, new respiratory medicines. they are making good headway on that. anna: the rollouts are superfast. how that's been impacting the company. , they for yesterday increased how much they are going to do in terms of rolling out -- across the u.k.. they increased the amount of involving the rollout by 50% in 2020, which is a lot. the results are pretty good. it is obviously a good thing, the revenue is a little light. shares are slightly lower. anna: thank you very much. we will see what friday holds. bloomberg news reporter. you can get the latest stories from our equities team by going to first go on bloomberg. it is also available to subscribers via the mobile app.
♪ welcome back, we are less than a minute from the start of the european equity trading day. it is jobs day in the united states, so we will be keeping an eye on that. ahead of that, where will the european equity markets settle? the story out of asia has been negative. euro-dollar is on the screen, 125.11 is where we trade. flirting with $70 a barrel for oil. further earnings coming through from the oil makers later on index in this is the the united states the other day.
to see a little downside coming through, about .4% weaker. the ftse 100 could be a mover to the upside or a little more resilient. fx markets are doing their bit. we will see bread european equity markets open up. we will see if the uk's market is more resilient. deutsche bank affect perhaps coming through. somethingecting weaker coming through on the german market as a result of deutsche bank. in terms of the sectors we will be looking at, technology. a conversation about whether the apple suppliers would be week. is a little more resilient than the rest. by ibex down, the cac down .4 percent. -- the unitedwas
states has been the focus rather than the technology story, where there was room for brightness even if we saw disappointment from the likes of alphabet. let's get the open underway and have a look at the sectors. this is the picture on the european equity markets by sectors. . financials loom large. consumer discretion going lower, industrials moving lower, consumer staples moving lower, health care moving lower. as we expected, there is a financial move lower, perhaps as a result of deutsche bank. looking for some of the apple affecting individual tech names could be interesting. as we were saying before the start of the trading day, it will depend to what extent they are able to work with the higher pricing from apple and get a piece of that for their business if they are suppliers to the apple engine. let's see where we are opening up. the cac down .3%, the ibex down
.3% and the dax taking more time to open on these markets. waiting for that. let's have a quick look at what is moving around on the markets and individual stock names. numbers out of bt, astrazeneca and there is matt miller who has joined us. this is what we are seeing across the markets at the moment. and negative picture coming through. perhaps we have the mr screen for you. a few movers to the upside, up by 3.3%.moving a return of cash to shareholders could be of interest. a few oil supplier businesses in there, as well. the oil price looks a little stronger when we checked in earlier today. a mixed bag of movers to the downside. caixabank is in there.
thatk set of earnings from spanish bank and the stock is down by more than 2%. that's the picture across the equity markets right now. to the be looking ahead jobs report later today. one of the big factors will be 180,000 and 4.1%. matt: i am looking at the spanish jobs report. we were looking for a number that was 52.5 and we got a number that was 63.7. the spanish unemployment level a netet change -- as change, not as strong as we have thought or maybe stronger depending on how you look at it. 63.7 is what we got, the survey number was 52.5. unemployment has been coming down pretty drastically of late across the nations, especially of frankfurt,re
germany where i am. as equity trading gets underway for the last day of the week, let's bring in our guest. the cross asset strategists at commerzbank. max, let me ask what you expect to happen this morning as you get a disappointing report from deutsche bank. there is red across the industry groups. what do you expect from equity trading? the last we have seen three days is a mix of sentiment and technical driven setback. it is natural to see that after such a strong start to the year and a relatively strong finish of last year. you have seen some people taking chips off the table. i wouldn't be surprised to see that continuing today. will that become a major setback? i'm not sure because for the u.s. earnings season, it is too strong, i think. the: when do we focusing on
-- when we focus in on the moves today, the jobs report, deutsche bank, how is the market positioning for the jobs report? are we waiting to be impressed or disappointed? plays don't think it major, but for the dollar, it doesn't play much of a role on a headline number. what does play a role nowadays is the average hourly earnings. if they surprised at the downside, we could see a bit of a reversal from yesterday and the day before, particularly on the long end of the curve, which could move lower. on the other hand, if we see an upward surprise in average hourly earnings, there could be a potential we see steepening particularly in the treasury curve. -- markspoke to met cranfield today and he suggested maybe the fed is behind the curve, what will we see on wages? jcas told by somebody that -- at jpmorgan that this is what
i needed to focusing and focus on the eci. there are questions about whether the fed needs to stop focusing on the tightness in the labor market. argue that the fed is a little behind the curve, especially if we argue with traditional measures like inflation and the tightness of that is onerket, thing. more importantly, it is not only about the fed, but about what kind of repercussions that has on the treasury market, the dollar and equities. at the moment, it is very much a correlated market. what you see in treasuries is being priced in equities and so on. the biggest successes we have seen so far this year in have of industry groups been, aside from auto parts, financial services, banks, the insurance industry. is this all explained in the rising rate environment? max: i think partly and partly,
a tax reform story in the u.s. but not in europe. hopespartly a story of for rising rates, for example, in the eurozone. i don't think that could really in -- continue much in the eurozone. when we have sector preferences, we do prefer financials the most right now on a global perspective. however, if i need to differentiate, i would be more willing to go into u.s. financials where i see the potential for some positive surprises from the inflation side for the next couple of months. that is a three to six month review where the euro, the opposite is the case. anna was saying, tightness of labor market, maybe that starts to come through now. on the other hand, the dollar affect is coming through and a effect.f favorable base in the euro, the opposite. stronger euro, unfavorable base
♪ welcome back to "bloomberg markets: the european open." i'm matt miller in frankfurt. we are 10 minutes into the trading day. it doesn't look good if you are long equities today. let's get the details with nejra cehic. nejra: let's start with the banks, deutsche bank the climbing, fixed-income trading slumping, revenue declining to the most in seven years in the fourth quarter. that number missing estimates, 1.4 billion about a dollars charge related to u.s. tax reform. we are down 5.5% on deutsche bank, on the flip side, don bank and a-- danske
buyback program, targeting higher cash for dividends for shareholders. that is gaining 2.7% and finally, astrazeneca. earnings revenue will rise in 2018 for the first time in four years, but the 28 team core eps net missed estimates which is why we may see the stock decline 1% right now. apple, out of and amazon reported earnings, the stranglehold on the market is getting stronger. tech stocks amount for 17% of the global stock market, the biggest weight since the dot-com bubble. let's bring into the conversation dani burger. max kettner is still with us. technology, what superlatives do we attach to
technology nowadays? everyone gets nervous when talking about the strength in tech. dani: we couldn't have picked a better day to talk about this. some bank pain, as well. highest since the tech bubble. currently, financials still have but tech isweight, creeping up there and after these behemoth report earnings, we are likely to get closer. one thing to also keep in mind is during the tech bubble, the weighting of tech shot up quickly and now it has been a perhaps signifying how our economy is changing and relying on these companies more. on a manager level, part of the reason it is so hard to be the only have awhen you few companies really dominating and pushing the index is up higher, how in the world are you supposed to be the index if you
are -- unless you are overweight those companies, as well? matt: what has been driving the gain in weightings? the ever-growing market caps of these companies? dani: that is the biggest part. if you look at facebook, apple, amazon, which isn't even included in the tech companies, microsoft, google's -- they are 10% of the gains we have seen so far this year in the msci world index. those four or five alone are really pushing it higher. spread, it is getting awfully close to us having tech be the sector that dominates global equities. anna: your thought on the technology sector in the raft of reporting we had this week. excited you get about the tech sector with its current evaluations? a research give you typical answer. we are overweight techs got --
tech stocks but if we wrote our market outlook for 2018, we noted tech as one of the main risks. whatever is going to happen, i am always right. aside, what you can see right now and that is also over the last couple of weeks, tech was dominated by momentum. up until yesterday evening, what is the best-performing sector since the start of the year, tech. buyers, buyers, tech there are a couple of thoughts and worries. the earnings picture is tech bubble sort of style while it is only priced into forward earnings and so on, but when you look at simple measures like the forward earnings and realized earnings, it is quite stable which means it is not only forward earnings and expectations are up eight --
upbeat, but earnings fulfill what is expected. that is encouraging. if you lookose historically, it is not that a superto have top-heavy index with one or three companies making up a huge part of the weighting. dani: you are right. this is pretty standard and it has been better than it has been in the past. one si i recommend is a study from a qr -- aqr. it looked at the past and this is very common. another important thing to keep scale, on a global emerging markets tech, alibaba, tencent contributing.
back, but it is important to note that should earnings disappoint and something happened to these companies, the wider global equity picture will get someone ugly because it is so reliant on the gains from these socks. anna: -- stocks. anna: you are not too worried about current performers as well as -- what is the risk? i think the risk is not on the fundamental side, but a pure market risk. when you look at these factoring indices, a lot is dominated by factor investing -- factors like quality, growth, momentum. the heaviest weight is always in tech. when you have a genuine 6% setback in tech and these indices need to adjust their waiting lower, they have to sell more tech and the tech goes even lower than some investors will
-- de anna: the dominance of tech. max: if we have a setback, these strategies have to adjust their waiting lower and it could get a little downward spiral. any: do you see similarities between what we are seeing now and what we had going on in 1998, 1999 with the internet bubble? does that not concern you? max: not really, because in 1998 this was i do remember the days when i first got into contact with equities and i do remember there were a couple of companies that were really only and not anye fundamental or sound business practices. that is not really the case nowadays. you can argue with, let's say, if i tell my 95-year-old grandma
, facebook is something that adds value to our everyday lives, she will doubt it. but it is a business that does create -- or have a viable business model. that is a stark difference to what we saw at the beginning of 2000. anna: where in tech excites you? we talk about it as one big sector and don't make us feel the tech bubble. is it still the hardware around phones like the iphone x and the pricing they are able to achieve or cloud computing? what excites most? max: the semiconductor hardware and that is really where you that isbe because related to the cryptocurrency cycle, whether you have a good view on that is a different question, but it is also something where you say that is most exposed to the cycle and the cyclical aspect of tech, so that is probably where you want to be. anna: in european tech, where
are you seeing most interest at the moment? we talked about apple suppliers in asia after the apple earnings and there are some in europe, as well. what is exciting investors to talk about in europe? revolvingoes end up around the emerging markets picture. when you have such a heavy index. one thing i wanted to comment on, you mentioned quant funds. momentum just these chasers, it is asset managers in general historically have a overweight to momentum because it works. it is maybe incidental and not necessarily taking the specific factor, but to make it worse, you have market cap indexes that by being market cap, they will be overweight these mega-cap technology stocks. i am always one to defend the quants. needder to get what you
for your clients come you have to be overweight these tech names. really great stuff. thank you for joining us. dani burger covers quan's. fromettner stays with us commerce bank. it is groundhog day in frankfurt for john cryer after three straight years of losses. can the ceo of deutsche bank turn the german lender around finally? it has really underperformed its peers in europe and around the world, no matter what measure you look at. the stock performance has been weak, its price has been less than half. we will discuss that next. this is bloomberg. ♪
♪ welcome back to the european open. let's check out where we are on the european equity market scene. looking negative, way down by deutsche bank. outperformance in the london market, but not by much. technology and banking a real focus. matt: deutsche bank shares really weighing down the dax, really weighing down the stoxx 600 today after the bank reported its third consecutive .nnual loss
fourth-quarter revenue declined 19%, the lowest in seven years. a big miss. bank's largest source of revenue has slumped 29%. however, john cryan still says germany's biggest bank is on track to producing growth again. deutsche bank had its own issues, but across the banking industry, there has been a problem with revenue drying up. there is not a lot of trading out there and fall has not been has not beenol existent. max, do you see this industrywide problem of dried-up trading, especially in bonds, ever turning around? max: i think with the regulation come in the beginning of 2018, probably not. it will increase transparency, as was the aim, but i don't
think it will need to massive increase of trading volumes. as you said, for an increase of trading volumes, we need a lot more volatility and we are not talking about two months volatility spiked, but something .ore structurall historically for that to happen, you need a genuine rate hike cycle that also surprises markets. it is not what we have seen in the last two years by the fed where every single hike was basically prepared to the utmost extent and didn't surprise anyone and had no real effect on volatility. don't see that, i can't see trading volumes picking up. matt: all right, thank you very much. we appreciate your time. max kettner in london, cross asset strategist at commerzbank.
♪ matt: 30 minutes into the trading day with your top headlines from the bloomberg. deutsche bank declines. the ceo faces shareholders after reporting a third consecutive annual loss. can he turn around europe's largest investment bank? setting a hard line, liam fox britain cannot enter a customs union with the eu post-brexit, further complicating -- theresa may's negotiations. all eyes on the u.s. jobs report this afternoon. traders will pay attention to signs of wage growth. will it be enough to shake off
the recent retreat inequities and treasuries? welcome to "bloomberg markets: the european open." formatt miller in frankfurt deutsche bank today. i will interview john cryan later. anna edwards is in london at bloomberg's new headquarters. anna: i am, and 30 minutes into the trading day. , global returns on the stoxx 600. generally, weaker. on the equity% markets. where is the weakness coming through? where is the brightness would be the better question. this early february friday morning, we have seen one sector in positive territory and that is oil and gas. shall giving its numbers yesterday, exxon is later. next week, bp and took how. we also see the oil price headed higher this morning. perhaps that is what we are trading on. to the downside, health care. interesting banks are not the
biggest losing sector. we do have banks down around .5%, in their broad swath of sectors moving to the downside. health care, a defensive sector, moving down. .9%. astrazeneca is a stock to watch this morning. here is sebastian salek. >> the bank of japan has announced its first unlimited sincen's rate purchase july, seeking to assert control over the yield amid a global route. the offered to buy tenure notes at 0.1% and expand purchases for the second time this week. 0% with itget is stepping in twice last year to debtn unlimited amount of when the yield crossed the 0.1% mark. and the social democrats have a
-- agreed on education policy even as large differences remain. after four hours of talks, the general secretary of the christian social union said negotiators remain willing to compromise. the parties are closing in on a deadline to complete talks by sunday. they have given themselves two more days. donald trump has decided to allow a publication of the republican memo arguing the fbi abused surveillance powers in its russia probe. that is according to a white house official. the move is likely to ratchet up the warfare over special counsel investigation of the trump administration and the 2016 campaign. bitcoin has slumped to the lowest level this year amid mounting concerns decreased regulation and viability. after reaching $90,500 in mid-december, bitcoin has lost half its value. that as it is way down by expectations of more government oversight globally, fear of
price manipulation and hacking, and lingering concerned it is just an asset bubble. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you. the u.s. are awaiting january jobs report, out later today. the consensus among economists is for an increase of 180,000 in payrolls following a gain of 148,000 in december. joining us now, rupert watson. .reat to see you happy jobs day. let's talk about the jobs report and what the story is in the united states. about it isry really the wages we need to focus on and in terms of the fed conversation, inflation and where bond yields go, that will be important. rupert: unfortunately, i agree with your previous guest. anna: that is allowed.
rupert: it is all about the wages. we know from multiple sources that the u.s. has created a loss of jobs, -- a lot of jobs and re was a bad number, that would be bad weather or seasonable. all numbers will be on the eight -- eyes will be on the wages. inflation, which the fed is focused on, but also because where we are at this stage of the cycle with unemployment close to the lowest and 50 years and also likely to go lower. we are at this stage of the cycle when wage growth would normally pick up. haven't seen a huge amount of that so far. of signseen a number wage growth is picking up, whether the anecdote from things 'ske the beige book, walmart
announcement or other companies that have announced wage increases partly in response to the tightness of the labor market and partly explained in response to a benefit from the tax cuts. how do you expect that to shine through? politically, that is clearly important to this administration. we have had a number of to comcast,om apple you mentioned walmart, jpmorgan, oring they will raise wages give out bonuses because of the tax reforms. will we see those numbers come through in wage growth? are people going to be watching for that specifically? rupert: absolutely, but whether it comes through in the january numbers is much less clear. they tend to come through at different points in time. me personally, when we get any wage increases or changes, they always come through in the month of march. different companies implement
wage changes at different times of the year but it must be noted that most people, if they are getting an increase, do get an increase in the first three months of the year. average hourly earnings, wage numbers more generally, both coming out today and the next couple of months will be extremely important. matt: by the way, with regards to the headline number, which economists are looking at much more important data coming from the bls, but the headline number at the end of the day tends to move markets. ,'ve heard that the bls itself that the margin for error is 200,000. it is really a guessing game. how important is the headline number that tends to move the equity markets? rupert: from my perspective, not important. the 180 thousand consensus is always 180,000 i
think. the headline number of 180,000 is the difference between two very large numbers over 150 million and therefore, as in the size of the labor force, therefore there is scope for ofsive error because sampling issues, bad weather and a host of other things. i personally don't pay much attention to any one month's number. if you get a big upward surprise, a big downward surprise the following month and vice versa. focusing on the three-month average is important and i think particularly at the moment, it is worth focusing on on the wages numbers. i would add one final thing in relation to it. ae payroll numbers are measure of how many jobs there are out there and there is a host of other data that measures the same thing or similar things like jobless claims and a host of surveys. with all of them suggesting the labor market is strong, if the
payroll number came in at 50,000, that wouldn't be believable but at the same time, if it came in at 300,000, that wouldn't either. anna: there are many ways to measure the job story. in terms of what it does to asset classes, this is 2017 on the bloomberg. it shows where the 10 year yield and the 30 year yield in the u.s. has been heading. 30 yield -- 30 year yield pushing up 3%, the 10 year close to 2.8%. if we get strong wage growth, how high du see and how quickly do you see yield going in the u.s.? rupert: the selloff has been -- reasonablyred measured. when you have big selloffs, they tend to happen significantly and dramatically. rallies have long, slow
whereas this selloff over the last few months has been fairly benign and fairly slow-moving and perhaps explaining why it has gone up. i still think the yield curve is too low and there is nothing like as much priced in on the short end the next few couple of years, but also thereafter. it is not as extreme as it was. there was a time last year when the market was pricing in that the fed wouldn't get to 2% for several years. now the market is pricing that the fed will get to 2.5, approaching 3% in the next couple of years. i think there is a bit further to go. i think the fed will roughly follow the dots. there is a bit more two-way risk. i do think yields for 10-year will get to 3% this year. matt: rupert watson of mercer will stay with us. deutsche bank shares right now
market open, we are 43 minutes into the trading day. u.k.'s international trade secretary says it must not enter into a new customs union with theeu after it exits trading block. liam fox spoke to bloomberg during a three-day visit to china. >> it is difficult to see how it customs union is compatible with independent trade policy. following behind a bad so we have to be outside of that to be able to take advantage of those growing markets. anna: still with us, rupert watson at mercer. what assets are being twisted and turned i greg's it and to what rate the interest rate story and mark carney. rupert: there are different bits within the u.k. markets so quite a large number of the biggest
companies are international companies that happen to be british for historical reasons, that trade off largely what is going on in the global economy and the value of sterling. and we saw the sharp fall in sterling following the referendum, all the big international companies went sharply higher, the domestically focused companies didn't. bit of that as we see the twists and turns of the brexit debate and sterling has gone up the last year or so. some of the big exporters have been undermined and a lot is a currency effect. anna: does that seem sensible to you that we re-rated sterling to these levels on a changing expectations about where interest rates go, an expectation that the boe can focus on the inflation story and not worry as much about growth as it did last year. is it too early?
rupert: some of the strength of sterling against the dollar is because the dollar has been week against everything else. the dollar has fallen sharply against the euro and even all thethe yen, commodities currencies and even emerging currencies. it has been a weak dollar story the last 12 months. sterling against the euro has recovered a little bit. much -- been much stronger back the euro. the brexit story remains unclear what is going to happen and it remains unclear as to whether that means sterling will push higher or lower. anna: as we heard from the trade secretary, not just ruling out being in the customs union but being in a customs union. when you look at u.k. stocks and the ones you like or don't like, are you picking on where their international exposures come from at the moment?
ones that aren't geared to the u.k. economy or are? what are you sifting for? we outsource the management to who we see as the third-partys management. we aren't involved in picking individual stocks or sectors. we leave that to the fund forgers, but it is folly anyone to have a strong degree in confidence in any currency market. someone once said the fair value of the currency was when it was halfway between being extremely overpriced and extremely underpriced. i think that is probably fair. i think it is a slight mistake to overly focus on direction of currencies for your equity views. anna: look to the strategies that you like, as well. thank you, rupert watson. tune into dab radio. rupert is headed there for the top of the hour. matt miller and i will also be there, talking to rupert.
we will get further thoughts from him on bloomberg radio. matt: i look forward to that. you can also tune in on sirius xm in the states or on /radio.rg.com still to come, how batteries have sparked a cobalt frenzy and what that means for the future of electric vehicles. we go into hyper drive next. this is bloomberg. /radio. still to come, how batteries ♪
europeans is the market open. the autos industry is changing at its fastest rate in decades and demand for new technology is having a huge impact on markets. bloomberg is launching a dedicated coverage of the industry, called hyperdrive. there is more on bloomberg.com/hyperdrive. joining me in the london studios, our senior reporter in energy and commodities. he is here to discuss how demand for batteries has sparked a cobalt frenzy. program.ve you on the why is cobalt a problem for the electric vehicle revolution? a problem or opportunity? >> a problem for the carmakers. there is not enough of it. we did a story you can find on the bloomberg.com/hyperdrive site. if every car in the world was
replaced by tesla model x tomorrow, it would need twice the cobalt reserves in the world. there is not enough to provide ,ll of the ev's cars like tesla volkswagen are planning to build, at least not under the current amount of cobalt they are using. matt: jack, we have a viewer question. if you are wrote in with the ib function and wrote, there is more than enough cobalt in the deep-sea to electrify the planet. is that true and are we going after that? jack: yes, that is true. there is a lot of cobalt as a resource in the pacific ocean but deep-sea mining is a long way away at the moment. that technology and indeed the cost of it is enormously high. yes, conceivably that is possible but realistically in the next two years or even
decade, i don't know that is going to happen. --t: so is it too difficult is this going to kill the ev revolution, the fact we can't get the cobalt we need? jack: the short answer is no. prices going up sharply, so more than doubled in the last year. you can see carmakers from volkswagen to bmw, tesla and others are going around to cobalt miners, particularly glencore and others, trying to secure cobalt supplies for the next 10 years to produce the cars they are planning to build in the first stage of the revolution. they will be apple to do that and the price will be higher for cobalt than it has been. the next stage, what will happen is carmakers have got to start using less cobalt and that requires research and as you can imagine, the price of cobalt has
tripled in 18 months. they are trying hard to use less cobalt in the batteries. anna: to save the money and not have to find the stuff. that is what cars are doing on the research side and locking in supply. our any of them trying to go down the supply chain to own the supply? who stands to benefit from that big rising prices? jack: the producers stand to benefit from a pretty small group of minors and the tibet -- democratic republic of the congo where most of it comes from. not only is there not enough, but more than half is coming from one country already at risk and one that has not got a history of stability. the main people who stand to benefit are the miners, glencore the largest, but eurasia , other keyroup
producers. those are the people who stand to benefit. come insee carmakers and buying stakes in mines, we are are really seeing that in the lithium industry. haven't seen it yet in the cobol industry. we may well start to. carmakers like vw are saying owning a stake in a mine is one step too far for us. anna: depends on how quickly they find an alternative or a way of using less. thank you for joining us, jack ie.hie -- farch matt: our stock of the hour has to be deutsche bank. as the stock falls in frankfurt, in biggest drop we have seen almost a year, since july of last year. a 6% drop of deutsche bank shares.
i want to give you a couple of analyst reactions. goldman sachs isn't impressed by the report. they see broad-based weakness, the investment bank underperformed u.s. peers and pointing to further franchise erosion. morgan stanley also weighed in with an equal rating on the stock. they call the fourth quarter results weak despite the preannouncement and rising cost target. costs remained elevated as guided in the corporate and investment bank but it was the private and commercial bank that disappointed according to morgan stanley. you see the trade -- shares trading down. weighing on the indices. i will go over to deutsche bank's headquarters in frankfurt and sit down with cron -- john cryan later this afternoon. an interview you don't want to miss on bloomberg. right now, we are headed to radio. francine is up next with
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