tv Bloomberg Markets European Close Bloomberg March 13, 2018 11:00am-12:00pm EDT
markets." vonnie: here are the top stories we are covering around the world. u.s. secretary of state rex tillerson fired after a turbulent tenure. the former exxon mobil ceo getting the news just hours after returning from a trip to africa. stocks are higher after u.s. consumer prices continued firm in february. not enough to spark fears that the fed might accelerate its pace of rate hikes. he willident says nominate mike pompeo to replace tillerson. how the state department could change under pompeo's leadership. we want to get straight to abigail doolittle. 19 minutes into the u.s. trading
minutes into the u.s. trading session. abigail: we have a relatively bullish reaction. we are well off the highs for the major averages. the nasdaq has just flipped ever so slightly lower. as investors digest all the news of the day, more uncertainty, similar to what we saw yesterday. we started higher and then finished for the dow and s&p 500 lower. perhaps another version of that. today, it is the nasdaq that is lagging. transports up .8%. airlines trading sharply higher. united continental coming out, raising its view to up 1-3%. that is a revenue view in the airline industry. their pretax margin will be higher. they are tightening capacity.
they may have the ability at some point to raise fares. another tailwind for the airline industry, oil. it has been all over the map on the day. around the time of the rex tillerson news, we saw oil briefly spiked higher. something this could be a positive because it could mean a shakeup relative to policy around iran and venezuela. on pace for its worst day in a week, its second down day in a row. u.s. production could outweigh sup demand. that could be a tailwind for the airlines. let's look at the chips. broadcom trading higher after president trump blocked its huge merger bid for qualcomm on securities concerns. qualcomm down, investor
disappointed that the deal is not going through. intel and micron trading higher. uber bullish -- one chip stock reversing on the day, let's look at amg. shares lower at this point. they had been higher. embarrassed report from viceroy research -- a bearish report from viceroy research. mark: you can see what's happening in germany. a similar decline in paris. yesterday, we had a sixth day of gains. it's all about the spring statement today. was once upon a time the budget. now, it is called the spring statement. to reduce its
issuance to the lowest in more than a decade. dmo plans to sell 102.9 billion pounds worth of gilt starting april. the lowest issuance since the 12 month in march of 2008. higher than the median forecast. tsc europe looking for gil to keep outperforming treasuries. the spread is narrowing today. 150 expect it to widen to basis points over the next two months. the deficit in the current year will be 45.2 billion pounds according to hammond. that's 108 billion pounds lower than the figure back in 2010. s .9% of gdp -- we
are at 1.8% right now. the 2018 gdp forecast was revised up to 1.9% from 1.4%. let's look at the sterling reaction to the budget. don't read too much into the move as a result of the spring statement paid sterling is up by .5%. .t barely moved last week the bar to trade sterling seemed much higher than it used to be. a lot of volatility last year and the year before. sterling might get a brief despite from political news. the conservative party starts a two-day forum on friday.
the big eu summit taking place in a couple of weeks time when u.k. is hoping for some sort of transition announcement. it is the tillerson news that is sending the dollar lower and sterling higher against the dollar today. vonnie: so much that could happen. presidentferred to, trump announcing his decision to fire rex tillerson and replace them with mike pompeo. the president spoke about this major shift earlier this morning. pres. trump: we disagreed on things. when you look at the iran deal -- i think it's terrible. i guess you thought it was ok. i wanted to break and do something. vonnie: the president speaking there as he was leaving for san diego to look at plans for the border wall/ can we assume now that.
, that things will be smoother at the white house? >> i wouldn't expect that. one of the interesting things about tillerson's appointment was that he had relationships with a lot of these foreign leaders. knew putin. mike pompeo has none of that. he would dealr, with other intelligence agencies overseas. i doubt if he's met any world leaders in his previous roles at the cia or in congress. he will have to learn on the fly. what kind of secretary of state is going to be? it will be fascinating to watch. vonnie: he has strong opinions about them -- the iran nuclear deal should be ripped up.
he thinks kim jong-un should go . >> his opinions are much more close in alignment with anesident trump the tillerson. has developed a close personal relationship with donald trump. he is very comfortable with them. he likes the way he thinks. he's now going to be secretary of state, assuming he's confirmed by the senate. there are nominations and confirmation processes to go through. >> there will be tough questions. one of the key issues in the senate for pompeo will be how does he feel about the russian meddling in the 2016 election
and continued efforts to disrupt the u.s. election process? donald trump refused to make a full throated denunciation or even accept the findings of the intelligence community. mike pompeo will be asked by the democrats on the committee how does he stand on russian meddling. mark: if you are sitting in as theresaeet today may reaches out to the u.s., what are you thinking about today's announcement? probably does have a direct line into donald trump himself. they will be speaking today. he said they will speak later today. mike pompeo will be a much more person, much of more in line with donald trump. to the extent that it's proof
that russia did have a role and donald trump acknowledged that today, you would expect to get more support for a hard-line stance against the russians. this is probably greeted with good news. they just got used to tillerson. now, they have to get used to a new guy. mark: let's add rhetoric and remove response. the hard-line rhetoric against pompeo backes up that rhetoric when it comes to tariffs and this constant attack against germany? >> i think you'll find a much more coordinated voice. rex tillerson was a globalist. if there is such a thing. .ike pompeo is not you will find a much more supportive narrative coming out
of mike pompeo in terms of tariffs and a hard-line against our european allies on the whole economic fairness issue that donald trump has been hitting so hard. vonnie: what happens in pennsylvania? >> it will be a close race. if there's a heavy turnout with a heavilyvonnie: motivated the c base -- with a motivated democratic base that there are more democrats registered in that district than republicans. it should be a safe district. i suspect it will be a close race. republicans have poured millions of dollars to support a rather weak candidate. democrats have a former rather conservative democrat, a military man, assistant attorney general -- he is a strong candidate.
it is a local race. of course, if the democrats win, they will celebrate it. if republicans win, donald trump take credit for it. up, before today's white house shakeup, all eyes were on the u.s. inflation report. we will discuss with dominic konstam, global market strategist at deutsche bank. this is bloomberg. ♪
mark barton. vonnie: this is "bloomberg markets." waiting new data that shows the u.s. consumer prices rose in line with estimates in february. dominic konstam from deutsche bank. dominic: inflation is going up slowly. it has accelerated in recent months, which is good news from the fed's perspective. it was worrying low last year. haveof the special factors been announced and some of these things that should have been happening are happening. hawks andfor the doves. the hawks may still be worried,d
doves. but this won't make them more worried than they would have been. vonnie: will the fed increase interest rates more than three times this year? dominic: deutsche bank's official view is they will hike four times. the market is struggling to price that view. they are struggling to price three hikes. made's an argument to be that the market will price for more than it is currently pricing. acceleration fed priced by the markets, one of the issues that happening, the interest rate structure is becoming less supportive to risk assets. whereas last year we could have said look, rates can go up and we will be quite supportive -- we are coming to a turning point ande as rate rises continue the yield curve continues to
flatten, it is less supportive this year. i would say you didn't have to worry about hedging risk assets last year. you have to worry about hedging them this year. the fed acceleration doesn't help. mark: how would you hedge, then? would you say we need to hedge risk asset exposure? what would you suggest? dominic: what you are trying to isge in particular, i think, the idea that the curve flattens quite a lot in 5-10 space. it starts to predict the idea that the fed is going to overkill territory. maydeceleration of the fed fit unfavorably with your view on the economy two years out. we run recession probability models. right now, they are very benign.
suggesting one year ahead, the probability is less than 10%. if you pressed forward to the end of this year and you ask the same question, we think that jumps to around 30%. two years ahead, it's about 50%. that is bad. the alarm bells aren't ringing now. we are in this late cycle phase. the concern would be that you a lot squeezing the curve flatter in terms of treasury yields. release into will aggressive re-steepening because the fed is being priced to raise rates to aggressively. mark: how do you view the chances of the ecb meeting its inflation goal in the medium-term? what does that mean for policy
and what does that mean for asset allocation? dominic: if our euro-dollar forecast is correct, the euro continues to strengthen, the ecb is going to struggle to make its inflation targets. are dependent on where the currency goes. whereby you have a mildly strong currency but this concern around the dollar and what's going on with u.s. policy perceives to be in a tight situation. they should be winding down therir qe. they should be finished by your ear end. can it happen if the dollar euroes a problem and the gets too strong? my guess is maybe the euro
what are people going into the polling places telling you about this newest change to the trump administration? pleased that the president is shaking things up again and others were figh horr? kevin: most have made up their minds going into the polls today. the developments out of washington dominating the news that rex tillerson is out of the administration and mike pompeo becoming the new secretary of state. the developments out of washingtoni want to read a tweem chuck schumer who says "the instability of this administration in just about every area weakens america. we hope mr. pompeo will turn over a new leaf and start toughening up on policies toward russia and putin." the back-and-forth from democrats and republicans continuing on this.
a source close to mike pompeo says he's ready to take over the helm of secretary of state. over a new to turn leaf and fill key spots that were vacant for some time. vonnie: what about today's election? what's the anticipated result? it seems close. kevin: very close. let's pull up a monmouth university poll that shows conor lamb ahead. candidate donald trump carried this district by 20%. d.c. thinkinge in this is a political bellwether. vonnie: let's get back to dominic konstam, global markets strategist at deutsche bank. can you ignore all the machinations and swapping out and swapping in in washington,
d.c.? there's a lot of turnover. dominic: yes. in this particular instance was tillerson's departure, i would separate a couple of things. the extent that this is around the politics of russia andtill', it's important, but slightly less directly relevant to the markets. as opposed to what's going on the fdiiffs, china, flows, which is a bigger issue, but will be slow to play out. fromere's a retracement the globalization policy we've had, obviously, there's concerns that there's more inflation risk. -- do you start seeing countries in asia with
fewer reserves? that would negatively affect the equity markets. whatever is going to happen is happening very slowly. the tariffs are tiny. over time, that is the trend. that's why markets will be more nervous. vonnie: our thanks to dominic konstam of deutsche bank for joining us in studio today. mark: still ahead, much more on the shakeup in the white house today. this is bloomberg. ♪
let's check in on the first word news. courtney: president trump says he made the decision to oust rex tillerson by himself. the president says the two disagreed on iran and other issues and that tillerson will be much happier now. president trump is nominating mike pompeo to replace him. he's a former member of congress. june a haskell will be succeeding pompeo. president trump travels today to opposition territory, making his first trip to california since he took office. he will look at a number of prototypes near san diego. the president having trouble getting congress to pay for that area. inflation in the u.s. keeps creeping toward the fed's target. the consumer price index rose .2% in february. that matched estimates.
prices increased 2.2% over the last 12 months. that is in line with policymaker s' outlooks. the head of the imf is warning about what she calls the dark side of the currencies. says the imfarde can play a central role in regulating digital cash. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm courtney donohoe. vonnie: thank you. let's get back to president trump's decision to fire rex tillerson and nominate mike pompeo. we really just learned about this this morning. tillerson himself learned it from twitter. what have you learned in the last couple of hours from your reporting of what exactly went down? >> rex tillerson took a call in
the middle of the night friday in africa while he was on this week long tour of the continent, literally a 2:00 a.m. call that signaled that his job may be in trouble. he spent much of the rest of his trip through this morning fighting for his job. it doesn'tnk -- sound like tillerson was expecting any kind of a decision today. he was an exciting to be reading about his dismissal on twitter. -- he wasn't expecting to be reading about his dismissal on twitter. we are trying to find out what was conveyed to him by the white house and that call. vonnie: it's clear that this has been in the works for a while. long if theake so president wasn't getting along with tillerson? >> there have been some clear disagreements between tillerson
and trump going back to the paris climate accord decision in the middle of last year and the after thes comments racial protests in charlottesville, virginia where tillerson drew a line with the president over that. other priorities given the way of the white house making these types of decisions. in the last couple of months, it seemed tillerson was on more solid footing. he got his ketum nations forwarded to the senate. -- key nominations forwarded to the senate. with the north korea talks coming up, i don't think many people were expecting this would be the time tillerson would be pushed aside. what attributes does mike pompeo have that may have been lacking from the side of tillerson? pompeo had a huge and
bandage over just about any other potential candidate for the job. he's in the white house every single day briefing the president, giving the president his daily intelligence briefing. there was a clear report the two men have. he wouldn't be afraid to show his disagreement with the president. amount of time last year knocking down reports that he had called the president on. more more was seen as somebody who's views on a range of issues really gelled more easily with the president's. is notnd of relationship something that tillerson ever really fully made with president trump. mark: given there's been a slump in morale at the state department, if you are working there today, is it a sigh of
relief? >> i don't know if there is much of a sigh of relief. people at the state department were pretty frustrated with tillerson's leadership. they were frustrated with the lack of progress in getting key openings filled. that said, mike pompeo will bring an ideologically right ward turn to that agency. probably more concern about administration turmoil and what kind of additional changes someone like mike pompeo who earned a reputation as a hardliner among hardliners, what kind of changes he will bring to that department. vonnie: will the confirmation process go as smoothly as possible?
what will be his first priority? >> they have scheduled a nomination hearing for him in april. the first thing on his lap -- two things -- north korea and iran. the president is scheduled to have some sort of summit with kim jong-un. the white house has said it by the end of may. they were scheduled to make a critical decision on whether to stay in the iran nuclear deal. pompeo has been a harsh critic going back years on that agreement. whether he's confirmed as secretary of state by then or not, he will be informing the president. the two biggest crises are coming to a head over the next two months. mike pompeo will be the man advising president trump on what to do. for more on the tillerson
ouster, we are joined by chris weafer in moscow. how will the tillerson exit be viewed in moscow? chris: i think they will regret it. human though mr. tillerson was very outspoken and very tough talking about russia, he had a long history in russia. he understood the country and the people. that was viewed as a positive rather than a negative. it's also understood in moscow that the proposed sanctions threat has not been driven by the white house, is coming from congress. that is not going to change with a new secretary of state. they will be nervous until they get the measure -- mark: the relationship between the u.s. and russia at a low.
it is certainly at a low. do you see it coming off those lows anytime soon? the repercussions for the investment community. no, i don't of all, see it coming off the lows. it's likely that we will reach new lows. one thing we've heard from the u.s. treasury secretary, that the u.s. is planning to come with new sanctions against russia in the coming weeks. there will be pressure from congress to continue tightening sanctions. that's coming. there's morethat conflict over the nuclear treaty. that could lead to new tensions. of course, this crisis with the u.k., again, that could reinforce the hardline
position in the u.s. no, there's no prospect of relations between russia and the u.s. or the u.k. improving for some time. trump seems to have a strange relationship with russia. kime been speaking with wallace about the president's approach to russia. >> the president seems disengaged entirely. that is, what russia did well before 2016, why they did it and what damage was done. these other episodic headlines around russia are easy and much less consequential and therefore, the president finds it in his interest to side with the world. morninghe came out this
and said if the u.k. presents its findings and it seems reasonable to us, we will condemn russia. why is he able to side with the u.k. on this and not able to side with anybody when it comes to meddling? chris: the whole approach to is beinghe sanctions, driven by congress rather than by the executive branch. if the conclusion of the investigation in the u.k. firmly points the finger at russia with proof, this will strengthen the anti-russia position within congress. president trump will have to go along with that. the statements that he would side with the u.k. and be tough on russia, that's more reflecting reality that will be demanded by congress.
he will not be able to go against that. lookingioned earlier, for funding for the border wall with mexico, some other issues, he will side with congress -- he will have to comply with their demands. onee's another overhang -- reason i wouldn't expect any improvement over the next year, there's already suggestions in the u.s. that russia is planning to meddle in the midterm elections in november. this issue is not going to die away until we get through the selections. hopefully there will be no smoking gun. realistically, you could see further sanctions, further deterioration. vonnie: how does a map of u.s. relations abroad look and three have been four years? -- 3-4
years? where are the alliances? chris: if we are looking out to that period, in the russia context, that would be halfway through president putin's next term. thisrtainly believe that bite the headlines and these comments about nuclear weapons, the focus will be on the economy. people are becoming more frustrated and less tolerant of slow economic progress. i really do believe that the russian government will continue to try to keep bad politics in one drawer and good business on the table. and will continue attracting foreign investment. it is needed. toughlly depends on how
the external political environment gets and how able the kremlin is able to attract investment. what does it all mean when it comes to investment in russia? you are looking to buy some stocks or other types of investments. where should you be putting your money? using first of all, little reaction in the markets to recent events. -- you've seen little reaction in the markets to recent events. over the last couple of years, most active investors left russia to focus elsewhere. funds -- index weighted funds, etc., i don't
see that position changing this year. and watch russia to see how it develops into next year. for strategic investors, the economy has pulled out of recession. it grew 2% this year. thatnies are reporting they made more money last year than they did in 2014. companies are reporting profits, but we see a great reluctance from companies to expand their operations in russia to add more investment simply because they are very cautious about what might happen geopolitically with sanctions. while everybody is happy with the way business is going in russia today, they are very wary and are engaged in a great deal more due diligence and will
to salvage the deal. joining us now, at hammond. -- ed hammond. >> if you are qualcomm shareholders, you feel annoyed about this. they had been quite keen to see this deal go through. they will feel this an disenchanted, even annoyed with qualcomm -- if you are qualcomm management, you are breathing a sigh of relief. you get to keep your job. six of them, the door was have open. the ceo was getting a low number of votes. vonnie: you are going to have to
work harder and maybe implement some of the things that broadcom was going to do. it's now onr not, the management of the board to prove that they are good stewards of this company. they can take it forward and achieve these things. they said the broadcom merger was not a merger they wanted to do. they need to step up and do all those things they promised they could do. mark: does this mean of china has any sort of link to any company looking to take over a u.s. entity, no matter how tenuous, there's no chance? >> you find me a company these days that has any global hook that doesn't have chinese connections. this notion that broadcom is a chinese company is nonsense. it has a legal address in
singapore for tax reasons. their management is almost entirely american. this concept of them being itehow a chinese acquirer, is just hogwash. there's nothing about them that is chinese. burger king has business in china. does that make them a chinese company? of course not. mark: one of my favorite stories --by alex webb today the fear was broadcom would slash rfc. were those fears justified? >> those fears were justified. broadcom is very business oriented. they run a fairly lean ship. qualcomm's innovative.
they built a lot of these products we use today. you let qualcomm be taken over by broadcom, you see some innovation scaled-back. anin, this is such un-american thing to do. it is trump selecting national champions. if you're in soviet russia or asia 20 years ago, maybe. this is america in the 21st century. this isn't supposed to happen. vonnie: thank you for all your great reporting on this. ahead, the chief executive of volkswagen discussing the company's move to supply its electric vehicle ambitions. this is bloomberg. ♪
mark: this is "bloomberg markets ." let's talk cars. w announcing it secured $5 billion worth of battery -- the chairman and chief executive spoke to matt miller in berlin regarding the company's focus on raw materials. >> commodities have always been part of our sourcing procurement. we are not just buying from tier one. we are trying to secure the provision of materials at reasonable prices. we've been successful in that and we will continue that strategy. >> are you going to have to look at new suppliers? you will need a lot more carbon fiber.
we know that you need cobol for the batteries, which is in short supply. -- cobalt for the batteries, which is in short supply. >> we are opening up two new partnerships. regional ones as well. that is on our minds. reliable supplies that offer things at reasonable prices to everyone in the world. in india, there's a new product -- i'm confident that the volkswagen group will be attractive enough, its brand will be attractive enough to secure the future. mark: the chairman and chief executive of volkswagen speaking to matt miller in berlin a little bit earlier. coming up, we are following
stocks. we are less than 35 minutes to the end of the session today. we have drifted lower, as you can see, falling for the first day and seven. check out the currency board today. continues ton consolidate the narrative the fed will increase rates at a gradual pace. euro is up .5% against the dollar. i will leave you with the bond board as we approach the close in 33 minutes. this is bloomberg. ♪