tv Bloomberg Markets European Close Bloomberg February 14, 2018 11:00am-12:00pm EST
-- nedra jra chehic. vonnie: and i'm vonnie quinn. welcome to "bloomberg markets: european close." >> here are the stories we are covering from the bloomberg and around the world. u.s. stocks gain, despite the stronger estimates. stocks in europe, also higher. boat well fores a banks. credit squeeze rise in volatility. jacob zuma is defying the amc call to quit, leaving the country in limbo for now. all right, let's have a look at where european equities are trading right now. you can see that there is a lot of of green across this regional picture here in europe, with some real momentum to those
gains, the stoxx 600 up more than 1%. by more than 1%. the ftse 100 in the u.k., up more than 8/10 of 1%. yesterday it was one of the laggards in the region. overall, we are seeing quite a bit of green across the screen. look across assets, you can see the equities on the left , it is a broad-based rally versus the selloff that he saw yesterday. cpi thatollowing that came in better than expected, we saw dollar strength that had an impact on these currencies. now that is reversed, the euro is bouncing back. we have broken through 139 on cable, just in the past hour or so. in the sovereign bond space, a little bit more quiet.
the treasury 10 yield is up about five basis points. we are quite seeing the size of the moves in europe, the we did see them edge higher, earlier. keeping an eye on these corporate spreads in europe, this is showing the euro high-yield spread hitting the widest since april. this is something to of course keep an eye on, as they see that through into the credit space. finally, taking a look here at the italian election, we got that data, the gdp data out of europe earlier. there was perhaps a bit of concern around what came out of italy. italian assets beginning to waiver ahead of that march 4 election. in white you are seeing that's red, that italian german ten-year spread widening out a little bit in the past couple of days. julie: we have seen stocks in
the u.s. turnaround entirely now. the nasdaq led the way. it is now gaining the most of the three major averages. the semi conductor index is here as well, up better than 1%. we have seen semi conductors volatile, and in this case they are leading the way higher as well on this turnaround. the volatility is coming down in the market, not surprisingly, as we see stocks on the rise today. volatilitye a little in volatility today. the s&p one-month volatility is q's -- qqqhe qqq 's, the russell, in yellow, you tend to see this relationship relatively tight. last year they widened out a bit, but they are all coming , volatility
normalizing to some extent. the question is, how long will it take for it to come back down to truly normal levels. i mentioned that technology is helping to lead the gains. looking at the movers, we have got a's book on the rise. twocompany set to launch smart speaker's by july. shares rising after the followthrough yesterday after an executive spoke at a conference. companyrising, the the -- the company signing ryan murphy, taking him away from 20th century fox. finally, baidu, posting fourth-quarter sales that topped analysts estimates. they plan to post a listing for their popular video streaming service. no details on how that ipo will look. nonetheless, contributing to gains. oil as well, taking a look at the followthrough from the inventories report, crude oil inventories rising less than estimated.
fallen. utilization has that might be potentially good for oil prices. nejra? nejra: thanks, julie. for more on the global markets, verma joined here by said -- sid verma. numbers came in better than expected, the 10 year treasury yield, up. what is interesting when you look at interest-rate risk, many people said to me before around the anchor, the premium. i've -- i'm glad you brought up this chart. that term, premium, still in negative territory. sid: we can see that the markets haven't necessarily priced in a normal price as far as inflated risk premiums. the compensation that they would short-term obligations
remain muted. that has helped to transfer the flight to yield, potentially that we are just relatively normalizing monetary policy. we have a lot of normalization to go. once that reaches positive territory, we could see risk assets and valuations coming back down to earth. more of a repricing than we have seen in the past week or so. -- sid: it's less about the valuation move and more about the speed at which they normalize on the long end. there are lots of dynamics that go into this. not just what we get with inflation, but also inflation volatility. we have seen markets be very sanguine about risk premium.
that the inflation volatility will stay in a locked, stable range. these are big themes we have experienced over the past year, such as economic data being incredibly stable with synchronized global growth that has helped to boost risk evaluations. it's not just where we get on month-to-month inflation. it's more about where we are when it comes to the volatility of economic data, which really is the big question of what the happen this year. nejra: some people saying that inflation risk is one of the well flagged risks that we have at the moment. yeah, i wasnnie: just wondering that if there was a threat that the fed moves in march, that it won't satisfy the market at this point. if inflation data continues to come in hotter than expected. sid: yeah, i mean, i think
markets can be relatively sanguine about interest-rate move timing. but if we get markets questions on the terminal interest rate, the final interest rate past the supply and demand balance in the economy, once markets really question how many interest-rate increases there will be in this business cycle, rather than the timing, we can think that risk assets will be tested because monetary policy will be much more hawkish than expected. have definitely seen markets capitulate, with respect to the market rate interest in the u.s.. hikesespect to cumulative over the business cycle, markets will be relatively sanguine. vonnie: the correct term premium is part of the problem. we already got better than full employment, as we used to know it, in the united states. wage growth at 2.9%. how will we know when is the
correct long-term premium? that's a great question. it cannot be observed directly. there are so many different that come from recognizing long-term data yields. it's not just u.s. fundamentals, it's down to excess global longgs that might anchored data borrowing costs might trigger a fight for yields. everyone has a completely different opinion on where we go with respect to long data treasury yields, but that really is the question. will we get back? will be get a flattening or inverted yield curve? a couple of weeks ago we were talking about a flatter or inverted treasury yield curve. suddenly the narrative is a steeper yield curve. suddenly that is now the big risk. script has kicked off in market narratives. nejra: absolutely, we are
sitting a bit of flattening, the yield curve steepening. much, could ask you more questions, but unfortunately we have run out of time. vonnie: let's take you now to first word news, with courtney donohoe. the young, undocumented immigrants facing deportation, the dreamers, according to republican senator lindsey graham, they have a deal that would provide them a path to citizenship and add funding on border security. authorities are investigating an incident involving gunshots in an suv outside supersecret national security agencies in washington. the suspect was arrested after the vehicle ran into a barrier. one person was wounded in the shooting and taken to the hospital. congressional investigators want to know more about the controversy over rob porter.
house oversight committee chairman trey gowdy tells reporters that his panel is looking into the matter. the white house was given a report last summer that included allegations of domestic abuse against border. he resigned under pressure, last week. in south africa, jacob zuma says that it is unfair that the ruling party is pushing him to resign. they will be holding the no-confidence vote tomorrow. his nine years in office have been marred by scandal, but he says he has done nothing wrong. this is bloomberg. ♪ global news, 24 hours a day, powered by 2700 journalists and analysts in over 120 countries. courtney, thank you. steven mnuchin is facing the senate finance committee right now. he is saying that the administration will continue to work with congress on changes to the tax law. he also sparred with ron white over carried interest.
grassley of iowa, asking the questions now. follow the story on bloomberg. type in tv . a working group has reached bipartisan consensus on immigration legislation, daca, the senate reported. this is the bipartisan group that has come up with this. however, we don't know how far it will get. we will continue to keep you posted on this development. this is bloomberg. ♪
european close is just minutes away. the african national congress has lost its patients with jacob zuma, following his refusal to resign the party announced a vote of no-confidence against him tomorrow, carrying the way for him to assume the presidency. ,e questioned the reasoning though, earlier today. have a listen. >> is nothing i have done wrong. it's policy. what is the problem? i don't understand. if you think they are going to be agreeing on this one, i have a problem with your approach and decision. because i don't agree with it. trading at its strongest level since 2015, 1.8% stronger. let's bring in robert, our .loomberg editor from cape town
he's very convincing and i'm sure he has many supporters. robert, can he survive this vote of no-confidence? know, look, you know, you may think he has done nothing wrong -- vonnie: i didn't say that. robert: the reality is that he has lost the support of his party and a political leader without the support of his party is no longer a political leader. they are going to vote him out tomorrow. unless he resigns tonight, still a possibility. nejra: what happens for the rest of the week? do we understand that rim oppose there would be a new acting president? >> if he does not resign, there is a no-confidence vote tomorrow and he gets voted out.
the speaker of parliament takes over as acting president. it is, likely by friday afternoon we will have a new president in south africa. it took a while. do the ratings agencies have another look at south africa? are all of the geopolitical risks out of the way once he is out of the way? yes, we have seen that already, as i mentioned. there is room for assets to rally further, but a lot of it depends on the mixed budget. investmentsg to the and ratings companies that they have the ability to implement what they need to to get the economy on a new growth path vonnie:. all right, we -- path. vonnie: all right, we should know in 24 hours. robert: -- 24 hours. nejra: volatility lower, we will
♪ live from london, the european close is just minutes away. vonnie: credit suisse, trading rebounds with volatility, paring the most in two months on the news. the ceo sat down with bloomberg, in zurich, and explain how you his taking advantage of recent marson -- market swings. volatility, it creates opportunities. >> if you are on the right trade. >> yes. depending on the people that we look work for. we would have seen that was a key part of the strategy. rose thisrticipation
year. the strategy is really working. joining us with more, barrington pitts miller. very geographic and bank specific? barrington: i think that across europe, through the results season, we have seen a better eat to miss ratio -- better beat to miss ratio. revenues have been a bit higher. clearly, the asset management and private thinking environment has been favorable, given markets until recently, of course. one interesting feature is costs have been elevated. i would argue that that is a sign of confidence from management. they see the revenues coming their way and that interest in income should be rising with better companies beginning to invest and i think that's very encouraging.
clearly, asia-pacific has been a big help to credit suisse. bitie: to move down a towards the mediterranean, $.32 per share. commerzbank, as well as another one with reinstated dividends, are they right to be shorting italian banks now? have twon: you interesting points. one, the dividend. the other, italy. italy, specifically there is an election coming up in a matter of weeks. at the moment the polls indicate that there is no clear party likely to have a majority. indeed, it is likely that there is not even a coalition group that will have a party. in which case, it is conceivable that the five that are pulling the highest could be invited to try to form a government. i don't think the market is prepared for that.
the northern league, i think those headlines would be uncomfortable. in the short-term, i have sympathy with some concern around italy and europe. however, in on the dividend point i think you make it interesting, those companies raising the dividend. what we look at over the next couple of years, current european return is around 120 basis points. by 2019 we think that is about 140. on the basis of that, given a midut somewhere in the 50's, we are looking at a comfortable 5.5% dividend yield. the rate curve gives more help on the income, you could be talking about a dividend yield heading for a seven panel. two times the best we have seen in the last three decades. this is a sector moving into a yield environment. powerfulhat's a
forecast. where are you finding banks most attractive in that scenario? barrington: if we can get through this italian election, looking around the world right now, we are extremely internationaln financials. we have been overweight u.s. financials until the italian elections. this is probably the first year that every driver on the balance sheet is in favor of the banks. we are seeing the results out of asia overnight. improving.dividends across the piece, we are already quite constructive. it is obviously helped by this environment, albeit in recent days the volatility has a particularly help. vonnie: barrington, they're in london, are we starting to see
the regulatory headwinds abate? if so, when do we see the benefits of that come through for banks? yeah, i think we are. although we don't really have the final rules, because they still need to be enshrined in the law in many jurisdictions, ultimately i think that the update suggests we are past the worst. it was probably a relatively benign outcome and we are beginning to see the banks across europe, indeed across asia-pacific begin to indicate that there are -- they are more confident on dividend distribution. we saw that with ubs. credit suisse this morning, still somewhat leverage constrained, indicating that the basil for headwinds are abating for them, too. we have got a degree of the potential for regulatory easing
going on in the united states, also. vonnie: all right, we have to leave it there. thanks for joining us all the way from denver, colorado. the close ofhad to trading in europe, let's take a check on where we are. we are accelerating those gains. the dax is up, the cac 40, up. posting gains of more than 1%. this, even following the whole of gains following the u.s. cpi. this is bloomberg. ♪
bloomberg. looking across the region, it has been a pretty strong day, with gains of more than 1% on the stoxx 600. higher, caping up 40 up some 1.4's -- 1.4%. the ftse has been outperforming, which is interesting, it was one of the underperformers yesterday, closing higher by 2%. overall it is a broad-based rally we have been seeing in even following the u.s. cpi, which initially made weakness come through in the equity session. in europe we haven't really seen any rattling of sentiment. finishing up the trading day, we are seeing pretty much every industry group in the green. outperforming on the upside in terms of industry groups, you've got consumer discretionary, utilities. really, seeing some of those
defensive's outperforming, where they were underperforming yesterday. today, the stoxx 600 is up 1.2%. that's the equity benchmark. i wanted to talk about sterling. we saw dollar strength come through after that data came in better than expected, but the dollar has weekend and we have seen the euro and sterling strengthen against it. here, i'm actually looking at the bloomberg pound index, which tracks the pound against a number, up 3/10 of a percent. finally, let's just take a look to see what's happening in the fixed income space. the treasury yield is higher by four or five basis points. not quite as big of a move in the european yield space, but still higher by one basis points. that is a look at your european markets. taking a lookie:
at dollar-yen, the yen is strengthening today. another 8/10 of 1% stronger. as one of our live writers wrote today, anytime people anticipate that inflation will be hotter, you tend to see the yen rising. we certainly got that with the core inflation hopper than forecast. we just tipped 2.89 on the 10 year. mind you, we haven't reached the 290 level yet. oil futures, rising after the stockpile data showed other bills, 59 to 44. maybe not as much of a build as we were anticipating, sending oil a little higher. let's have a quick check of world markets. nejra, how much of europe was in the green? mostly in the green, except for australia and a number of other countries.
in latin america we are seeing a happy talk market. courtney donohoe has more in the bloomberg first word news. julie: signs of inflation -- courtney: signs of inflation rising by 1% in january, with closing costs -- clothing costs being one of the culprits. meanwhile, the core inflation gauge, excluding food and energy, higher than expected. there is an indication the consumer demand in the first quarter is cooling down. retail sales unexpectedly fell in january. the december sales were revised downward to show little gain. car sales dropped last month by the most since august. senator bob corker is reconsidering his decision to retire. a spokesperson says that he is listening closely to people in his home state that want him to run for reelection. he is a strong critic of president trump, calling the
critic of president trump, who calls corker a coward for not seeking another term. at handler of the champion the westminster dog show says that it will be flynn's final year at the competition, he turns six in march. global news, 24 hours a day, powered by 2700 journalists and analysts in over 120 countries. i'm courtney donohoe. vonnie: thank you. let's get back to a busy day in the d.c. beltway. a bipartisan group of senators has reached consensus on a path to citizenship for so-called dreamers. we are joined now by kevin cirilli, live at the white house. this is the latest iteration of a potential path to citizenship for dreamers. is there any hope from the president, in this susan collins group proposal?
kevin: it may just be what susan collins needs to reach an immigration bill that is -- deal that is supported by the business community. is it enough for the administration, though? the administration is dealing with other controversies, including the chief of staff and the handling of abuse allegations. they haven't been as engaged on the issue of immigration. a key part of the presidents campaigning. julie: -- vonnie: some of the details, we know. and talk about chain migration, which appears to be in there. first and: -- kevin: foremost, the president said that the issue of chain migration was a complete nonstarter and needed to be separated out. theyd, we know that
juxtaposed the budget deal from last week in terms of increasing funding along the border for the so-called wall, as well as extending the obama era principles on dock up for the so-called dreamers, something that progressives would want. either way, look, there is such a narrow path here. it's one thing to get it out of the senate, it's another to get it through the house of representatives. the politics of the house are so much different than the makeup of the upper chamber. vonnie: as you are speaking, we are still hearing from steve mnuchin as well, of course, giving the budget testimony. what are your main takeaways from a we have heard so far? we hear from budget director mulvaney today. this budget, i think the politics of it are really falling on partisanship. democrats don't think it will do
anything and republicans say that it is something of what they hoped for, but in the republican party some are completely up in arms over this budget proposal. that said, the treasury secretary is definitely trying to sell this on capitol hill. but they have a host of other issues. i am sure that he will be asked about them, besides the budget. expect him to get questions similar to what he had a couple of weeks ago regarding market volatility. i know that this is a more existential question, but we have talked about it before. any signs of bipartisanship coming back? is the white house with a bipartisan group of lawmakers meeting on infrastructure. people will be here at the white house, talking about infrastructure.
again, we are living just a couple of months from the midterms. things feel unknown right now. if immigration forgot past, that would be a bipartisan victory. but we will have to wait and see. the bipartisan group of the white house, what message will they take away? could we see more pushback? or will this all be a positive? this comes down to states getting allocated funds from a host of different resources. democrats might be opposed to how the funds are coming in, like a public partner -- public-private partnership. constituents will be saying, where's the money for this infrastructure to revitalize the growth? that will be a focus on much of the conversation, how do they get the infrastructure funds
that the administration wants to see pushed through. kevin cirilli, it looks damp down there today. stay dry. don't forget, there is an interview at 1 p.m. today with my grounds. -- mike rounds. you don't want to miss that interview. johnsonoming up, boris makes the case for a clean brexit. we will tell you what the foreign secretary said. this is bloomberg. ♪
in london. this is "the european close." a series of public speeches by ministers outlined how britain .hould leave the eu boris johnson gave the address. >> brexit need not be nationalist, it can be internationalist. a considerable opportunity. a manifestation for this country's historic national deals. oura: let's bring in bloomberg u.k. glover -- government team leader. what have we learned about the path of brexit from this speech? >> there was a bit of substance, but he might still be interested in the job of prime minister. of the transition, he says fine, is,, everything can stay as
but he has red lines and he is sticking to them. he says we are leaving for a reason, this has to happen. a few other things that were interesting, he tried in an implicit way to say that we need to be chill leaders for brexit and we are not positive enough about it. it was a rather colorful 45 minutes. speechit was billed as a to convince remainders. when asked about a second referendum, he said don't go there. flavia: he is the master of keeping things vague. he left himself a bit of room, a bit of widow -- a bit of wiggle room. he seemed to close the door on that today. he took a couple of swipes, which did not go unnoticed.
nejra: is europe listening? --via: i think that younger ker was listening. when asked about the speech, he said he objected to the way that he categorized him as a person behind the superstate. so, what one must always bear in mind, no matter how weak, they would always rather prefer to be dealing with may. why is there even room for these speeches? the only reason is that there isn't a roadmap yet, right? how is someone like boris johnson allowed to give his personal vision at this point in the game?
flavia: not only could we argue that this is happening because he was one of the key campaigners behind it, but he was in the cabinet. there's a reason she hasn't sacked him yet. he's still there because she needs him. i'm tryinguess what to say is why isn't there a party line or one vision? flavia: that's a very good question. the tory party has been divided on brexit, europe, the role, for 40 years. just because people voted on it does not mean that the government has any more clarity on it. that is clear to this day. despite the fact that she says brexit means brexit, no one really knows what that means. that was the case two years ago and it is the case now. surely, the element of pushing for a clean brexit might
move things forward. the eu always said there would be no cherry picking. flavia: i would say that this speech doesn't do anything to ease concerns about the cherry picking. if you want to look at the substance of it, boris is weighing in on the debate and saying -- listen, there was a feeling, you know, of a modest brexit. everything is going to stay the same, the rules will stay the same and he is saying clearly, no. it could happen for a year and a half or two years, but we have to be able to change the rules of the game. who else will they be hearing from? flavia: i don't know. the big brexit speech might come later. , and othercting fox big brexit voices. hammond has been exiled and is on a random road trip to europe. nejra: interesting. thank you so much.
for thet, it's time now stock of the hour. shares of chipotle, rising after the company that was tainted by foodborne illnesses named a new ceo. he comes from taco bell, most analysts saying that taco bell's loss is chipotle's again. joining us with more, taylor riggs. taylor: investors breathing a sigh of relief. we sat here one week ago discussing chipotle's earnings and investors had said that we were in a wait and see, going through these changes, it was hard to look out into the rest of the year. this is a sort of good way to start the year. most analysts are really confident about the choice. i want to talk about the ceo, who came over from taco bell. the best way that we can measure his success is to look at the
divergence in the share price. chairs, at the end of 2015, that crisis had started and it was a relative underperformance in the last few years. analysts are saying two things .bout this new ceo look at menu creation and look at marketing. morgan stanley said he had navigated food quality issues in the past. rbc said that he took a limitless set of menu items at taco bell and created tums -- tons of options. look at a focus on menu and marketing. exact vonnie: -- vonnie: exactly. his -- vonnie: exactly. his interns created that little taco character on snapchat. taylor: and i believe the
--nejra: this is "the european close." citigroup won its first deal in saudi arabia since returning there after a 13 year absence. they are advising a budget airlines on its ipo. partly owned by kingdom holdings. investsays that it may in an ipo, according to the head of a sovereign russian investment and.
russian banks and a joint to takefund are eager part. saudi arabia plans to sell 5% this year in what could be a record public offering. h&m, forecasting sales at brick and mortar stores returning to growth next year. they are trying to attract shoppers back to the mall into to grab more of a share of e-commerce and that comparable store will keep falling and that online sales should rise 25%. that is the latest business flash. time now for our global battle of the charts, where we take a look at the most telling charts of the day and what they mean for investors. always, you can access these charts by running the function on the bottom of your screen. kicking things off in london, christine. >> it is valentine's day, love is in the air, especially for gold. it had already caught the eye of rate alley oh, when the
billionaire hedge fund manager raised his holdings. confuses as aion hedge against inflation. the correlation is now the strongest since 2015. with inflation expectations in the u.s. set to get ever stronger, will gold follow higher suit? make sure that you download the chart to find out more. vonnie: gold is one of the things you might get on valentine's day, but i wanted to .oint to this chart americans, guess how much you are going to spend on this valentine's day? $19.6 billion. that's on valentine's day stuff.
i thought it was a phenomenal figure. we saw the retail sales data really suffering, but i guess there are some things you can't do without and sending someone a valentines is one of them. an overtone here that nafta negotiations might change the asian. our two partners in the united --tes, one to the north, the to the north, canada, one to the south, mexico, they ship a lot of chocolate into this country. in fact, the figures are 1.4 billion comes from canada. mexico, almost 600 million. that's a lot of chocolate that would be a lot more expensive. anyway, i thought that was interesting. happy valentine's day. i am loving this
valentine's day theme across both charts. it's a difficult decision, but i think i will go with christine. you have tied it back to the markets and fundamentals. christine is the winner. congratulations. [laughter] all right, still ahead, david solomon at 3:30 p.m.. finish up with a quick check on the markets. europe closed higher, more than 1% with that cpi print out of the u.s. higher-than-expected. we saw u.s. stocks take a bit of at 6/10 of 8%.ng the dax, closing up, it really was the ftse in italy that outperformed, closing higher by almost 2%. all right, let's get straight to the president of the united states. there is a bipartisan infrastructure meeting taking place at the white house and we
do have some pictures of that. it will be starting in just a few moments. let's take a quick look at where u.s. markets are standing, as we head towards the middle of the session, the dow is unchanged. the s&p 500 is up one third of 1%. what --aq index is up up 9/10 of 1%. the 10 year yield, two point 891, rising since we got that inflation data this morning. crude oil futures, 5945. this is bloomberg. ♪
goes out, we want them to be able to spend the money, not wait around for many years while they get their permits. $50 billion for rural infrastructure, including broadband internet access. rule communities have not been treated -- rural communities have not been treated fairly. a workforce initiative that invests in our most valuable resource, the american worker. we are doing a lot of that. i had a phone call this morning with prime minister abe japan. number of plants are coming into michigan and other states. we want them to bring in more. and they will do that. he said they will do that. we expect to have some announcements pretty soon. we have a lot of companies moving in, a lot of people coming into the united states. they were leaving and now they are coming in.