tv Bloomberg Markets European Close Bloomberg May 4, 2018 11:00am-12:00pm EDT
vonnie quinn and this is the european close on bloomberg markets. ♪ here are the top stories we are covering. come equities rally in america and europe as u.s. unemployment falls to a near two decade low. talks between the u.s. and china on trade have an agreement to resume negotiations at some point but little else. but then the will take control of -- have a look at european equities 30 minutes away from the finish of the friday session with stocks up for the third day and five. 22 stoxx 600 companies reporting today, the companies the industry groups -- indices that
are gaining with greece down and others rising on track for six weeks of gains, the best run of march of 2015. sterling is eight days of declines. against the dollar, worst run since september of 2015 with bond yields rising. it is a bit of a banks, earnings shares missing out on the trading gains that boosted softshell general. toporked to restructure management after the surprised exit of the investment banking had feared the french franc with lower than expected results in its main trading businesses, underscoring the challenges for the person charged with taking over.
responsibility -- shares down. hsbc announcement of a $2 billion share buyback not enough to placate investors with costs rising at a faster pace than revenue in the first quarter. revenue and profit in the time largely matching expectations with some analysts expecting a $4 billion buyback. their new chief executive scheduled to unveil the strategic plan for the global behemoth. shares off the lows of the day, returning to france, bnp paribas with its wall street rivals in the first quarter with revenue from debt trading tumbling, trading inclement, global markets division falling 15% versus one year earlier and sales from -- sales plunging, outweighing a 19% rise in equities. debtaribas blaming the trading slump on tepid demand for our clients for rates and foreign-exchange dealings. growth and corporate and investment bank is a central part of their ambition to
increase revenue and approve -- improve profitability. day,s off the lows of the down 1.5%. 90 minutes into the u.s. session here in julie -- session. julie: stocks dramatically high with all three major averages at the highs and the session with the nasdaq up and apple, apple is having a strong week. the strongest in a couple of month. appearingl market is to catch on now. apple shares now at 3.4%, trading at a new record. this comes as the news that berkshire hathaway bought an additional 75 million shares of the company in the first quarter , that news in an interview with warren buffett on cnbc. , itou look at the bloomberg is technology in the top spot of the sectors in the s&p 500.
it is broadly green with only energy down and consumer staples, the worst performing group on the year is rebounding in the session today, along with consume in a desk consumer discretionary. a broad-based rally. earnings winners, the best person is performance in the s&p , fairy cycle, a medical waste management company, after the earnings reports that beat estimates, analysts say the company is bottoming out and it will improve. engaged in ais fight with activists shareholders and has made peace with them, it is unveiling a plan to accelerate is transformation, selling off more divisions with earnings and sales topping estimates. up withboratories shares 5.4%. cbs under pressure to merge with ,iacom, at the same time business is doing well with online efforts offsetting
declining viewership's at its broadcast networks. the u.s. dollar, currencies, the dollar having its best week since the first week of december . the bloomberg dollar index at its highest point of the year. the rebound continues. first round of trade talks between the u.s. and china comes to a close, little progress made with the countries agreeing to keep talking despite major demands on both sides. economicsasia correspondents has more from hong kong. >> two days of trade talks between china and the u.s. officials finish with little to show by way of progress. the u.s. presented a lengthy list of demands under chinese about how to shrink the large trade deficit between the nations. the headline take away from the u.s. was a demand that china cut the deficit by 200 billion by 2020.
other demands include protection for intellectual property, the man's around specific measures to open up china's market to u.s. firms, and some interesting demands around china dropping its claim that it should be considered a market economy. the u.s. also requested of china that did not reciprocate or retaliate against the u.s. measures with no tariffs. or other measures. economists reacted by saying it is a pretty tall order to get china to sign up to those demands. it indicates how long this protest will be. resented -- presented a list of demands, the top of which was a request for a dropping of an investigation, section 301 investigation into china. a request that chinese companies are treated the same as others and national security reviews. the overall take away from economists as we are at the
beginning of a protracted trade negotiations. area collapses with resurgent confidence in business, the euro helping the austerity fadeaway. the region faces challenges. let's bring in alexis gray of vanguard. let's start with this chart, this is opposite pmi services manufacturing, the cop positive today falling to the lowest -- composite falling. are we writing -- are we right to look to the data and not get too upset the fact we came off the highs from 2017? >> they slow down any data in the last couple of months is in part due to temporary factors, the weather, a cold snap, and perhaps or permanent, you have to consider the euro area was growing at double been rate by the end of last year at 2.5%.
that would be difficult to sustain. some of this will be more permanent but we should get a slight rebound in the second quarter data. mark: are you feeling as relaxed on growth as you are about inflation with the inflation data, core rate, failing to move above 1%, hugging .6% the best part of years. will this cause consternation within the quarter was of the ecb? alexis: we will get a rebound in the inflation data which may be affected by the weather and the timing. it is a bit of a headache for the ecb who will want to finish qe by the end of this year based on the fact that the economy has unreasonably good momentum. this is a global issue. we have seen weaker inflation data in the u.s. and other parts of the world because of technology, globalization, and so on and so forth. by the end of the year, we will
have enough evidence that inflation is trending upward and that should be sufficient for the ecb to say enough with qe. what happens when the federal reserve continues to raise interest rates, does it put a fly in the ecb life -- point man -- appointment? , the fed ise world a large and influential central bank, you have a great deal of stimulus coming out of the bank of japan. in total, we are in a highly accommodative environment and i do not think that should deter the ecb from their own pathway, which is, if the economy has reasonable moment and the gap is closing, it is time for the emerging stimulus to be withdrawn. and to think about potentially raising rates to the end of next year. vonnie: what happens between now and then with the rates? we should be seeing the 10 year part of the curve go higher in yields in the u.s., if the fed
raises rates. yet, you will say it will take a while before rates come up in europe. moment, thet the market is pricing in perhaps another two or three interest rate hikes in the u.s. and several more next year. that seems right. unless we get deviation from that, no reason to think it should shift. there are some risks. not least is the tension between china and the united states on trade. we could see some substantial deviation in the past. -- path. mark: the bank of england next week is the big one, expectations that disappeared of a rate hike. would you be brave to forecast a rate hike next week? >> no, not least because the market does not believe it will happen on a do not think the bank of england would want to surprise. given we have had weaker inflation data and very low growth in the quarter, the bank
of england would have a conviction to put a hike and right now but we will need to wait and see how much that is because of temporary factors, the weather, and perhaps if we do see a rebound, the bank of england -- mark: are you troubled by the growth? >> it is surprisingly low. when you consider how fast the europeans are growing and the united states, it is unusual to see the u.k. so far behind. you have to think it must be related to brexit uncertainty. mark: great to see you. alexis gray, senior economist at vanguard. vonnie: let's get to the first word news with courtney donohoe. >> a time and place has been set for president trump's meeting with the north korean kim jong-un. the president says the does will be announced soon and he was withdrawing u.s. troops from south korea will not be on the table. president trump supporting the national rifle association, the president's fourth speech in a
row to the group's national convention. the nra spent $30 million in support of the president's 2016 campaign. after the florida shooting, the president suggested new gun control but backed off under pressure. the u.s. job market rebounded last month, employers added 164,000 jobs in april and march figures revised. the unemployment rate is below 4% for the first time since 2000. 3.9%. downgame -- gains slow your -- slowed down. global news 24 hours a day, on air and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney donohoe. this is bloomberg. mark: coming up, elliott management trying to take control over telecom italia's board. what it means for the future of the company. this is bloomberg. ♪
♪ york, i ame from new vonnie quinn. mark: live from london, i am mark barton counting you down to the european close in 15 minutes. elliott management beating out vivendi to take control of the board of telecom italia. governance.re what were the opposing visions, vivendi versus elliott? what were they peddling when it came to different philosophies? >> when elliott first disclosed its stake about a couple of months ago, it was stressing the fact that, number one, telecom
italia share performance under the stewardship of vivendi has not been great. they felt that with more independent board, they could extract more value. ,hat would probably involved according to them, shifting strategy, perhaps doing asset sales. and figuring out a strategy for the sale of the phone carriers grid. -- fixed line red. -- grid. how much of a bone is this to the biggest shareholder of vivendi? >> vivendi is the biggest shareholder of telecom italia. it has slightly less than 25%. now, they have had control of the board. we are in a situation with his company's biggest shareholder, has time directors on a 15 member board.
they have said they want to find a compromise. area of common ground is the chief executive officer. both sides, elliott and vivendi support the ceo. we will find out if he is confirmed as ceo next monday when the new board convenes to consider the top management at the meeting. vonnie: i found it interesting that iss and glass lewis have recommendations on the european company. without the support of, i , tell us thes background? without support, elliott would not have one. >> a key element to the story, and italian state lender, it provideswned,
loans to build up infrastructure, investment in the country. they bought a stake recently. less than 5%. they sided with elliott. they are looking ahead. the eventual sale of the stake in this company's fixed line network, they want to be a decision-maker in the process. for them, it is an important investment. that did not sit well with vivendi which criticized a decision that had a state-owned entity taking sides in the outcome of a private company. vonnie: is it correct to say that it was two different approaches. elliott wants to sell assets, vivendi wants to hold onto assets and invest in more. elliott won and we will see the best teachers -- divestitures?
>> not quick ones. elliott has said publicly in their campaign that they wanted to use asset sales as a way of reducing the company's debt. that is still quite high. however, for example, selling a stake in the fixed line network valued anywhere from roughly 15-16,000,000,000 euros will be a complicated equation. the italian government, we get a new government and they will want a say in how that operation is carried out. onnie: our thanks to dan liefgreen. elliott did he more active in europe. european banks fall behind come a slump in trading hitting the lenders, not the u.s. fears. we find out why.
♪ a little bit of breaking news live from new york, i am vonnie quinn. that is mark barton in london. breaking news -- united technologies, a holder of the stock wanting to split the company into three with the share price rising on the news of 1%. there are other activists involved. they say a split would unlock more than $20 billion in value. hs -- mark: hsbc is down after costs rose at a faster pace than revenue and suggested it would reinvest excess capital it generated in the future. the european biggest bank returning money to shareholder
and a $2 billion buyback. we spoke to their cfo. >> $2 billion worth of buybacks, in addition to a dividend we announced. that bears out the overall balance sheets strengthen hsbc and the strength we see in terms of our markets. and investmentce managing editor is here. hi. they knew chief executive -- the new chief executive, big job on his hands? >> yes, the quarter was not as strong as he would've liked. wanting to get ahead of revenue growth. pressure building on him to deliver a plan, a new strategic plan for the firm that will be able to generate more growth while keeping costs in check. some of the moves we have heard, he is thinking about shrinking
be -- shrinking the bank with -- growing asset management, more fee generating business, theoretically, when margins -- earnings fell because of the 10% drop in revenue. let's talk about the prince lenders. what is going -- france lenders. what is going on from revenue from trading? >> they both failed on the fixed income front. mark: tapeless figures for equities first. >> european banks, the ones with major trading platforms, they have had a really difficult quarter. the u.s. banks have been going
ahead. reignites investor concerns that european banks may be dedicating themselves for a global trading model may not be what they should be doing because a quarter where the americans did well but europeans did not. mark: earnings overshadowed by the shuffle at the top, coming up on thursday. where does that leave socgen? >> they have gone into the new strategic plan months ago with management. they have changed because of five of the top deputies to the ceo. it reflects the fact that the person pushed up over a month to the a clear successor man trying to redraw the top light of management below him. questions about who is potentially the next to succeed him as he has been on the job 10 years.
some clarity is what investors are after. mark: thank you for joining us. our finance and investing managing editor appeared more breaking news? utx, up 1% tx -- stock price and still up close to 1% on the news that dan loeb is looking for the company to split into three and says that would unlock more than $20 billion in value. dan loeb is not the only activists involved in united technologies but in this letter to shareholders is getting more vocal about his wishes in the company. this is bloomberg. ♪
stocks finishing the friday session higher with tech and basic resources and oil and gas and construction and material leading the advance, sending the gauge higher for the third day. stoxx 600 rose 46 consecutive week, best since march of 2015. a busy week for earnings and economic data, culminating and eurozone pmi data. the eurozone looks set for further weakness in may. if you look at april data, private activity slowed or a third month in april and the composition pmi, the volume of manufacturing, services, the flash estimate of 55.2, the lowest since january of 2017. the drive was because of services and the gauge dropped more than initially estimated, 54.7, manufacturing in yellow and services is blue and cop as it pmi am quite. -- cop as it pmi in white.
composite pmi in white. interesting data in the airline industry today from iag, eating estimates on the earnings front. more interesting was the comments by norwegian air which editors projected to take over proposals from iag because they undervalued the company appeared iag has considered its options on how to proceed. 4% revealed if it bought the stake in norwegian, discussions which is struggling with a stretched balance sheet. iag earlier posted earnings that beat, a bullish outlook. the white line is norwegian,
earlier fell as much as 13%, the most since july. shares, in the wake of the revelation that iag has increased or not a stake in norwegian, initially surged in the days in april after the revelation by 72%. 5.8%. in iag today up by fascinating to see how that proceeds. bmw shares down 6/10 of 1%, boosting profitability and the automotive operations by record sales of the model five series sedan, all sitting the negative currency headwinds and increased technology spending. the world's second-biggest luxury carmaker in the midst of a record rolled up with new and refreshed models to recapture the sales lead in the segment from daimler unit mercedes-benz. bmw down 6/10 of 1%. mark: jobs -- vonnie: jobs today
in the u.s. with the dollar strengthening. 2.77 is the number to watch. and this is the dollar versus the sterling. yuan, i knowhinese the chinese talk about their basket of currencies and the reference rate versus the basket. it is important to look at the reference rate when it comes to the u.s. dollar, given we do not have any progress on trade talks. steven mnuchin leaving china last night with no progress being made, the promise of more talks. 2.96, slowly going higher against the 10 year yield after it went down to 2.93 and change after the jobs report. closing in on $67 a barrel for crude, but it earlier in the session. global macro movers, the dollar strength impacting emerging-market currencies, as our -- people also nervous over
trade talks hitting the mexican peso and turkish lira which is a different case. the renminbi as well. the peso had a terrible day yesterday and bouncing back a little bit today. a quick look at commodities. soybeans are a little bit in the doldrums on the idea that so much uncertainty over trade. mark: the cloud of gloom supposedly around theresa may's conservative. some officials in the british government ponder extending the brexit transition. our london bureau chief is here. these local elections meant to be the time for the sitting government is punished for its ills but not so the case. >> that is the headline and we have to be careful about looking
too much into them we get a lower turnout here half the amount of people that vote in the general direction. labour party should have been doing better if they are a government in waiting. a lot of these big counts in london, they were staking a claim to did not happen. they lost one counsel in north london to the conservatives. seemingly on a backlash against anti-semitism and their party. the surge of support last year during the election seems to have hit a wall. that is the take away. the two parties are close with the bbc extrapolating what the national vote would be and this results in a hung parliament. britain is very divided. no swing one way or the other. theresa may has to be happier because normally the incumbent government takes a hit in these elections. midterms. they are holding on. theresa may having a better morning. mark: let's talk about this never ending transition period.
what is being touted? >> no decisions have yet been made. the theresa may cabinet met to try to decide on what customs arrangement they want with the european union. that broke up with no decision. with no proposal from the british government, it seems like there would be no alternative but to extend the time further into the future. before the real brexit takes place. that may be what the british ask for what the europeans have to agree to that. we know that britain ask for a two-year transition, that was shortened at the way -- at the request of the europeans who said it has to finish in december of 2020. a given it would be granted but we have to get more clarity for the government about what customs arrangement they want. away fromone year brexit and we need an agreement
by october. vonnie: david, i am curious about these local elections. was this vote and underlined of support for theresa may, a positive vote, where people came out to offer their support of theresa may, or a comment from the electric that there was nothing to vote for, apart from theresa may and the curve does -- conservatives, jeremy corbyn not showing leadership, the labour party with a net gain of 37? david: it shows the country is divided and there was a low turnout, indifference. nothing really changed, not that many council changed hands and the status quo stayed. as i said, the surge of support for jeremy corbyn does seem to have hit a ceiling. that is significant. ,he u.k. independence party that was the party that had so much support in 2016. it forced david cameron to call
a brexit referendum. the party has collapsed in this vote, losing nearly all of their counselors. more than 100. we debate brexit and the details, the public cap already made up their mind. the decision has been made and the reason to nuke it does not exist. vonnie: there were 4000 seats up for grabs and we do not halve the hole count yet. given that it looks possible for theresa may, does it give her more strength within her cabinet, her own position, as opposed to the opposite faction? >> it is interesting, what counts as a good result? not losing as badly as they had feared. what thetrapolate national vote would be, we have a hung parliament with no one with the majority and the tories would lose a few seats, more than they did last year at this time. it cannot be a triumph for
theresa may and will give her no-confidence that she can call another election and hope to regain her lost majority. it is a bit of a lukewarm answer for all the parties. it does not reflect how deeply divided the numbers are and the rest of the country is. mark: how does theresa may find a compromise to keep the pro-and anti-eu factions of her party on board? it is by magic. tim roth wrote a wonderful piece , theresa may fight for her brexit plan with checkers lock in/ you -- lock in. this is a checkers lock in good -- lock in. >> it seems to have worked in the past as prime minister's banging their heads together in her country retreat until they come up with an answer. she did that with some success last year and this is an option.
london andt of locked in a room and do not let them go home until they decide question, donion we stay or go? plan, then -- her big officials in the government telling us today that the plan is not yet dead. she wants to soldier on with her proposal and getting them locked in is probably the strategy. we have lots -- lock ins in the united states, somebody told me that appeared. >> president trump one not interview with robert mueller that's will not interview with robert mueller come he says he would love to meet with him but he has to listen to his lawyers
and says if he thought it would be fair, he would over rice his lawyers. today's of trade talks between u.s. and china have ended in beijing with no sides either -- much to show with it, china's official news agency says they agree on some issues but said there were major disagreements on others. the big question is whether the u.s. got enough wins to delay tariffs on $150 billion of chinese products. for the third time this week, argentina has raised its key interest rate. the argentine central bank boosted the rate by 675 basis points to 40%, the highest in the world. the peso has dropped 17% this year against the dollar and inflation running at about 25%. in hawaii, the volcano has spewed lava into the sky and into residential areas after a big earthquake. authorities have ordered some neighborhoods to evacuate and one said the law that was a curtain of fire. -- lava was like a curtain of
fire. global news 24 hours a day, on air and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. vonnie: coming up, battle of the charts. can the dominant dollar take on the alumina roller coaster? -- aluminum roller coaster? we will see. this is bloomberg. ♪
>> the largest labor expansion on record because we came in and had aulated the banks and big tax cuts. recovers sometimes run out of steam. , since theic of that president was elected, 900,000 people have reentered the labor force and gotten a job. we have continued to grow the economy at a healthy pace because people are coming back. people who were discouraged because they could not find a job in president obama's economy have reconnected and that is the smoothing through the ups and downs. interest in labor force participation over the last year. street,conomists on the they see an economy, labor market with full employment and the labor market is high and inflation pressure must be coming out the other end. the administration, we are
looking for a supply-side response. why will we get that? what do you see any data in quarter one? >> we see it in the data. with a big spike in capital spending in part because people wanted to get some stuff in before year end because of the tax cuts. september with a higher rate if they submitted last year. capital spending went up. the capital spending boom is happening and in wages, we have more than 6 million people with raises that the employer said where because of the tax cuts. , if the last three months we had another three quarters like that, it would be 4% for the are, the highest rate since 2006. some people pointed
that there are signs of problems, labor supply, shortages, and backlogs of factories in terms of orders and can they get things out. do you not see the supply concentrates? >> when the unemployment rate gets low, it will be hard to find workers. what firms tend to do is invest heavily in capital to increase the productivity of the workers they have. the tax-cut was timed perfectly because at the moment when firms need to invest in capital to make their own workers doing well, we gave a tax-cut to get going capital spending. imf, cbo, they have jacked up their forecast to around 3%, what we said last fall would happen after the tax-cut. capital spending boom is in the data and wage growth is in the data. the reason we continue to grow is because of the 900,000 people
who everybody gave up on before president trump was elected who reconnected them to society and found a job. vonnie: kevin hassett of the council of economic advisers. battleime for our global of the charts where we look at the most telling charts of the day and what they mean for investors. we need a belt. -- bell. joe starting things. , for the past year talking about trade. will we get tariffs on aluminum? not much happened when we did. out of nowhere, a u.s. treasury note on early morning april 6 and the crisis arose. it went up 30%. in the space of one month, a 30% rise, a bull market. a 12% fall the cause, right after that, the u.s. treasury , thewe have to give oleg
russian billionaire who owns the largest -- second largest aluminum producer in the world, the ability to divest from his company because people do not want to do business with a company that is currently under sanctions. when they come out with that, a 12% drop in a sideways move. right now, people are not sure what will happen. vonnie: that was phenomenal. thank you. full wrapping up all of the events on the week regarding russia sanctions. let's go to across the pond. >> a very simple concept, 200 a moving averages, useful in determining where an asset has been and where it will go. emerging-market currencies, the 200 day moving average may see more pain ahead for call just because we saw more selloffs that started in eastern europe and ended with record lows for currencies in turkey and argentina. the other half of the story is
the dollar strength, coming up against its moving average. that signals a huge hurdle for the dollar to get over and convince investors that yes, the u.s. economy is powering ahead. that is the question, because of the jobs report. taxes, these parts of the market, going to go in opposite directions but who will determine the direction, it depends on the 200 day moving average is more resilient. check out this chart at g #btv 5067. mark: i gave a tie yesterday and was told off. traditionally joe would win because he is a first timer that i will shake things up. foot and haske her been away for six weeks. how? jazz dancing? the song she broke her foot to
was "proud mary." i asked tina turner or creedence clearwater? she says green clearwater. -- creedence clearwater. vonnie: i agree with you on the creedence point but trying to picture jazz dance to creedence clearwater revival. i imagine it was brilliant. we will go on your twitter account to see if there is a picture of you jazz dancing to creedence clearwater revival. >> i will make sure there is. vonnie: my winner is joe. they control room has spoken, joe is the winner. congratulations. this is bloomberg. ♪
vonnie quinn mark: i am mark barton in london and this is the european close. vonnie: china's online retailer -- alibaba got more money from new businesses and better targeted online advertisements doubled.s in one unit they forecast revenue will grow more than 60% next year. here to tell us more is kailey leinz. >> this was a blowout quarter for alibaba, blowing out estimates across the board, 61%, the eighth straight quarter they have posted revenue growth's of more than 50%. billion worth of merchandise, $105 for every person on the planet. 617 million monthly users that are active, that driving the sales number. they forecast more revenue growth next year and see revenue growth of 60% coming in 2019.
a big part in the clouding -- cloud computing business which grew 102% this quarter to a record. mark: what is next for the company? >> they still need to work on profit, growth is great and very strong. it has been consistent, but profit come in the cloud computing business, a grew a lot but it lost maker. not the case for their peers like amazon and google. online cloud computing is a profit driver for those companies and not the case for alibaba because they had to invest in networks and systems to get growth. they need to figure out how to make money. they are investing in other businesses, jack ma pushing to the offline to deliver meals to customers at homes and a retail footprint in stores. they plan to continue that.
they want to establish their retail footprint. they want to invest in other strategic businesses. it might weigh on margins. drop a 10 percentage point in margins this quarter and they say this is not a one year plan but a consistent plan. vonnie: thank you for all of that intelligence. interview, ixit will join the new york fed president bill dudley sitting down with matt winkler coming up in the next hour on bloomberg television. in the meantime, look at how markets are doing as we are past the halfway mark this friday. this is bloomberg. ♪
president trump lauds the jobs report by says u.s. has to bring fairness with trade to china as the delegation says more work needs to be done. , we talk withise outgoing new york fed president taylordley with on appeared -- john taylor. as president trump goes to , weess the nra and dallas fromto the representative florida where the shooting took place. what happened to all that talk about gun control? ♪ shery: two days of