tv Bloomberg Markets European Close Bloomberg May 7, 2018 11:00am-12:00pm EDT
vonnie quinn. this is the european close on "bloomberg markets." mark: here are the top stories we are covering from the bloomberg and around the world. wake up call for nestle. the european giant bedding $7 billion on starbucks after struggling with products like nespresso. the politics of disobedience. the former greek finance minister has a new political party, aiming to the -- aiming to be the next prime minister of greece. could it be europe's next headache? and we will sit down with germany's ambassador to the united nations. his take on relations and what is coming up with the iranian deal. monday bankoday --
holiday in the u.k., but stocks are rising elsewhere, as you can see from the first column here. wonderful function on the bloomberg, which tells us volumes are 50% below their 100 day average. we come off the back of the 50 consecutive -- 50th consecutive week. sterlingrences except falling against the dollar. sterling rising for the first day. bond yields the climbing. wti above $70. we are talking to mr. varoufakis in a moment. greek's biggest banks emerging unscathed from -- the national bank of greece, also, surviving the test adverse scenario, which pitted them against a fresh recession.
almost 20 billion euros of funds set aside to shore up lenders is now free for other purposes. bankis the ftse asset index, a measure of greece's biggest banks. on the eighth anniversary -- anniversary of the bailout, luck, is trying its raising money on its own in the future. august 20 is the exit day. a lot of uncertainty still surrounding how easily athens can return to normalcy. a big question is will greece get debt relief? the euro area has agreed see's the terms greece faces on some of its -- has agreed to knees the terms greece -- agreed to ease the terms greece faces. debt ratio far exceeds
the euro area average. very quickly, the quiet -- the final chart is e.m. earnings. analyst expectations for emerging-market equity earnings peaking a month ago before its pre-week selloff, which deepened last week amid renewed turmoil from argentina and turkey. 90 minutes into the session in the u.s. how is it going? julie: steady as she goes. all major market averages rallying. it has something to do with oil prices. crude oil holding above $70 as we await a decision on the iran nuclear deal from the u.s. by may 12, although traders and analysts starting to talk about whether a pull out from that deal is already priced in at this point. we are seeing a list for oil and gas companies, producers in
particular. range resources up 6.5%. marathon, apache, devon. above $70, are these companies going to riskase pumping and increased supply putting pressure on prices? one of the numbers to watch -- the rig count. the blue bars. oil prices in yellow. we have come way down as we saw the collapse in oil prices. up,we see the price go back are we going to see discipline within the oil and gas industry? we have not in the past, so we will see what they do this time. we are watching retail also today. the chelsea group, which had coverage of amazon and then suspended it now has coverage again with a buy rating and a 100 $19 price target.
the analyst over there is saying the company will capture or nearly 10% of total retail sales in the u.s. by 2020. a lot of that increase will come in the grocery and food areas. we are seeing pressure on department stores. nordstrom, the department stores in the s&p 500 are having their worst day in about a year and a half. mark: thanks. nestle getting age-old. the swiss food giant will spend $7 billion for the right to market starbucks products. deal johnson calls the historic, while mark schneider says it is a great day for coffee lovers. shares of air france are in freefall, down the most in 16 years. the government warning via airline -- warning the airline will disappear if labor sites continue. let's talk about this
nestle-starbucks deal. tell us about the mechanics. what does nestle actually get for its money? >> it is almost easier to say what nestle does not get. they do not get physical assets, they do not get a stake in starbucks. what they do get is the right to distribute starbucks coffee around supermarkets and wholesale. massive global reach. they can push the starbucks product through these supermarkets and other outlets. it is an asset they did not really have. nestle is well known for nespresso pods and nescafe, but they did not have the beans. theiris a return from consumer back to roast coffee. the question is how to get back into the market -- do it with the existing brand, via an acquisition, or partner up?
they have chosen the last option as a way to grow. they had taken arguably one of the biggest rand's there, in terms of coffee, teamed up with starbucks. in the future, they will be able to market these products in supermarkets around the world, particularly the u.s. that is a market they have to catch up. it also europe, where starbucks in supermarkets is not really present. there is a lot of growth on both sides. vonnie: some analysts say it may be a little late. it also seems like a lot of money. analyze the price for us. benedikt: that is right. it is a lot of money. north of $7 billion. one of the biggest acquisitions yet and nestle's more than 100 year history. nots a company that does typically do massive acquisitions. they like to fill in little pockets, where they have weaknesses. --is rare for them to this to do this kind of acquisition. investors like it.
it is a bit of catch up for them, but the market is moving. j.a.b., another big coffee company, have been on a big acquisition spree, by more than $30 billion worth of coffee assets over the last few years. by teaming up with starbucks, it gives nestle that extra jolt. they can break out of second position, particularly in the u.s., and can try to become one of the leaders. mark: let's talk about air france. leaving, strikes, the finance ministers adjusting the company may not have a future. who would want the job of chief executive of air france-klm? benedikt: good question. you would be hard stretched to imagine what kind of job ad they would put up. left, but he is not the first to leave. his predecessor also left because of strikes.
two ceos quit their jobs after a relatively short time. the latest lasted two years. there have been pictures of other executives literally having their shirts ripped off by angry workers. so you ask yourself who on earth would want that kind of job? a couple of names floating out around their. febregier. he used to run out this group -- abbas group. it's too soon to say. the company is trying to find its way. janaillac, the ceo who just quit, has not properly left yet. the question is where do they go from here? the company is in a real mess, and we have seen in the stock price, down as much as 14%. vonnie: airlines are notoriously volatile in terms of stock. oil prices have a lot to do with
where airline stocks go as well. presumably, they bounce back, if air france gets its act together quick? benedikt: that is the question. can they put things back together again? we have seen it across europe. british airways, even ryan air, have their share of dysfunction because of labor strikes. but they managed to find these breakthroughs. air france has moved beyond that, and some role will probably fall to the government -- what will the government do. a bit of a litmus test for macron, the president. does you just watch it unfold. as he step in in some form. he probably cannot just let this play out without any kind of action. so getting the tone right, finding the right balance, taking a step back to being involved, helping the company -- that will be important to watch in the next couple of weeks. mark: thanks a lot. the good for m&a in bloomberg's
europe. benedikt kammel. vonnie: let's check first word news. courtney: the president tweeted that democrats do not want gina haskell, his embattled choice for dredger of the cia, -- choice for director of the cia, because she is too hard on terrorists. a split overling higher oil prices with saudi arabia. of 60ays a suitable price five dollars per barrel, where of the saudis want the price closer to $80. the u.s. is threatening to restore economic sanctions on iran could threaten exports. vladimir putin has been sworn in for a fourth term as president of russia. he called for international cooperation, stability, and
peace. to a was reelected six-year term in march with 77% of the vote. global news 24 hours a day on air, and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm courtney donohoe. this is bloomberg. vonnie: thank you. lots more coming up on "bloomberg markets." next, the politics of disobedience. former greek finance minister yanis are focused joins us -- yanis varoufakis joins us. we talk the hour, with germany's ambassador to the united nations. at 6:00 p.m. eastern, we will speak with larry robbins. this is bloomberg. ♪
mark: live from london, i am mark barton, with the european close a matter of minutes away. am vonnie new york, i quinn. yanis varoufakis is back. the former greek finance minister just launched a new realistlled european does it. -- european realist disobedience front. joins us here in our new york studio. welcome. tell us about this new party. what does it stand for, where will it be a presence? greek political party. event the great depression of ideas and this
sort of delusion that things will get better if we continue to do the same thing, which is propagating our nation's great depression. it is not just a great political party in the sense that we have a movement. we call it the european spring. we have partners as well as our own organizations in france, italy, denmark, poland, portugal. there getting together in 2019 parliament elections. vonnie: what is the core political policy? it is not an anarchy of an best movement. yanis: no. get irrational things done, you have to say no to madness, which is being imposed from the center, from brussels and frankfurt. for eight years now, europe is in denial that it is in systemic crisis. we keep repeating the same mistakes. vonnie: you said say no, but specifically to what?
the whole european project -- yanis: absolutely not. we say no to madness. the business as usual of the establishment. keepe as an example -- we creating a bank -- bank of stay, bank of corporation, bank of families and -- families. as if it was a problem of inequality. we have to say no to this. the basis of our program -- think of it in terms of the new deal. roosevelt's new deal in 1933. energize idle savings from the private sector. the imbalanced between savings and investment. large savings and low investment
-- this produces the same crisis, in different ways, in different countries, but systemic crisis. mark: what is going to happen to the debt? euros coming to exit day, august 20? we are eight years on from the first bail out. what's going to happen to this big debt load? what is realistic when it comes to this debt burden? yanis: i am afraid it is not going to get paid lead everyone knows that, and everyone is pretending it will be paid. when you have unsustainable debt -- you know this better than anyone -- you need to restructure it, and you need to do it rationally. wall street does it every day. debt to to restructure make sure the largest part of it will be repaid in the end. we have not been that increase. if you look at the discussion of
debt relief -- increase, they are talking about relief. what they will do is allow the greek government, for the next decade, to reduce the payments, supposedly increasing the payments, with interest, in the future. you are effectively making the debt have year, less sustainable, but giving the greek government opportunity to repay less of it. in other words, extending and pretending. mark: what do you do with the banks? if you are prime minister -- we had the stress test results. that was good. elephant in the room is the nonperforming loans, which are nearly 50% of total loans, the highest in europe. how do you resolve the problem that is the npl's in the banking sector? -- i amet me remind you sure you are member, but the audience does not remember. greek banks went bankrupt three times in the last seven years. have been recapitalized three
times. just before they were recapitalized, in other words, went bankrupt, we had stress tests that they passed with flying colors. these are political exercises by the european central bank. as you put it, when you have nonperforming loans more than 50% of the books of those banks, what kind of capital base are you talking about? so the answer is what we need to do is create a public bank, park most of those deep red loans, nonperforming loans, in there, have people who live in these houses a rent to this bad bank, wait for recovery while reducing taxes so the tide lifts all boats. when house prices reach the valley of those debts, then we can talk about it again. we can have new loans or savings on these houses. vonnie: you said you want to win
over the one million voters who do not vote. what did you learn from your last experience running increase that may help this time, to get out new voters? yanis: if you tell people the truth -- my only one promise, when i was on the campaign trail, was blood, sweat, and tears. i never promise anything in terms of high wages. pensions. we need to end the bankruptcy. the only way to do this is class with the establishment in thepe, which is extending prolongation of these banks. if you tell people that truth, if you're not populist -- not try to do all things for all people -- it is possible for the electorate to respond maturely and give you the support to do the hard things that need to be done, which may not seem popular. vonnie: stay there. we will come back and speak more with yanis varoufakis, former
mark: we are back with yanis varoufakis. we always ask a question about brexit. given we are less than a year away from the big exit day, is the probability greater we are going to see the cliff edge scenario, order you think britain will remain close to the e.u.? or do you think britain will remain close to the e.u.? yanis: neither. the cliff edge will not be contemplated by theresa may. on the other hand, it is it how you define "close." oppositeay is moving to the norway solution. she should be moving towards single market membership.
she is moving towards a kind of customs agreement. not a union. when you have the united kingdom economy depending so much on the logici cannot see of having the customs at union, which leaves out the service sector were and benefits the germans, and not the city of london or the british services sector. it leads to a mutually disadvantaged -- a disadvantageous movement. vonnie: what do you make of the trend of bilateral is am now? the reason is a negative one. throwing out world organizations, intercontinental organizations, in favor of the domestic and one-on-one relationships. where does it end up? yanis: with greater global instability.
i am a left linger. i am a supporter of not aization -- i am great support of globalization but internationalism and free trade, which may sound strange. globalization is about the freedom of capital to move around, while people are locked behind great walls between the u.s. and mexico. what i would like to see is a situation where nafta would be renegotiated on the basis of imposing on mexico a higher minimum wage. that is the best way of serving the interests of african and american workers. -- of mexican and american workers. vonnie: yanis varoufakis, thank you. ♪ mom you called?
boiling in the advances. oil leading the advance. relatively good library insurance business, significantly higher investment. shares rose to their highest on record, the stock has risen 12% this year. analysts don't see any further upside in the next 12 months. i know that because i have looked at our an hour function r function.
62% hold, 22% cell. -- sell. close, your 10% at the the chief executive resigning on friday less than two years after taking over at the home of biggests airline. bernstein analysts saying this result is the worst possible outcome of the valid, leaving the company with no chief executive, no labor contract, and an ongoing dispute, likely emboldened. mayor minister granola runo la mare.
nestle and starbucks joining forces to rejuvenate their coffee empire. pay starbucks up front in cash just over $7 billion for the rights to distribute starbucks food service channels. shares in nestle are up 6.1%. vonnie: as you mentioned, there are some holidays in the world, so we are not getting a completely accurate picture of markets this week. dollar,eeing a stronger maintaining last week's rebound. peso, 19.41 now.
at 2.95.10-year yelled this is something to watch, this might change as the fed might get more volatile this week as we wait for donald trump to make a decision on iran. let's take a look at macro movers. 3.5% as trade talks continue. news foreing worrying argentina, which we obviously know about. in terms of currencies, the lira is weaker along with the peso yuan.e mark: i searched the building under every cranny, i found someone brilliant, the perfect person today to talk about the
markets. thank you, christine. let's talk about the probabilities, bring this up, the probabilities of a rate hike, no change, not going to happen. interesting. the hike probability, interesting, from pretty much certainty to pretty much very unlikely. >> mark carney has gone on. he has earned the moniker of unreliable boyfriend. he strikes again by saying a couple of weeks ago that when the odds of rate hike in may were near certainty, he says it is not such a done deal. you see a big plunge, and we are down near 11% this thursday. mark: you say it is mark carney's fault. we had your colleague in the on carney.and he was
the data has turned. is it fair blaming carney? is just teeing off of the data. bankuld look for a central to start hiking just when the data is turning. we could blame it on short-term factors, but it will look john when you have the central bank hiking rates when you have had a soft pass in the data as of late. you cannot blame him for pushing that rate hike later in the year. mark: does that buy into the hawkish hold scenario put out there by toronto dominion's? inthis idea is taking root markets these day and giving some of the pound bulls and rates bears more to hang onto.
if they affirm that this thursday and say they are not going to do it this time but keep the hope out for later this year in august or later, that is bulls inpe to these pound and bears in rates. mark: why are italian assets impervious to what is going on in italy right now? >> that is just a testament to the hunt for yields that is on in markets right now. you have italy, the spread is with germany at the lowest level since 2016 even with all of this election saga with the lack of the government. it really just seems like the investors assessment of a time assets are independent of what
is happening politically. that is not to say that will not be a factor later on, especially now that we are getting calls for elections as soon as july. mark: thank you for coming in on this bank holiday. markets are still trading around the world. we are grateful for christine. cognizant technology solutions is following this morning after forecasting lower-than-expected. joining us with more is taylor riggs. explain. taylor: this is surprising because often when we talk about tax reform, we talk about the benefits. this company is seeing a different shift. they went back and looked at a new version or implementation of the law that would hit their net income harder than they thought due to a foreign tax credit they can receive. they revised down
earnings-per-share. they also lower their next quarter earnings-per-share to 1 09 from 112. they raised the lower end of their guidance for revenue. we can break it down by business segment. you can see health care is their second-largest by segment. that has been a key push. in orange, the financial service companies are really making a push to cloud computing. vonnie: how is the data the services? cloud computing has been good for them. you have these companies choosing to spend their i.t. budget to go to the digital sector.
this company gets 20% of their revenue from digital. they are competing against large companies, some more traditional and some more focused in cloud. that is going to be a big space for them because it got beat the margins -- you cannot beat the margins of double-digit growth. on first word news. courtney: donald trump has lashed out at former senators a john kerry on the iran nuclear deal. president trump said the u.s. doesn't need john kerry's possibly illegal diplomacy. he also said john kerry created the mess in the first place. negotiators from three nafta nations try again to come up with a revised deal. a number of contentious issues remain, the u.s.
threatening to impose tariffs on steel and aluminum from mexico and canada. volcanoi, the kilauea has destroyed more than two dozen homes. 7000 people have been forced to evacuate. this is one of the world's most active volcanoes and has been sinceting continuously 1983. 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. vonnie: thank you. the white house has confirmed that they will ask vice president pence -- a courtney did push to build -- coordinated international support to isolate the caracas regime. this is bloomberg. ♪ berg. ♪
♪ ourie: it is time now for local battle of the charts -- global battle of the charts. you can find these charts on the bloomberg are running the function at the bottom of your screen. matthew.e now is >> we just got the the jobs you friday.report on we growth in the restaurant sector is starting to roll over. one year ago, it was near 5%, and now it is near 4%. we are the first look at
consumer price nation on thursday. -- inflation on thursday. that is the yellow line. restaurant price inflation has been around 2.5% this cycle. cyclical highly industry, it is one of the sectors of the economy the fed will need to see an acceleration in inflation if they want to get overall inflation higher towards 2%. it is not clear how things will shake out ultimately, you will be important. vonnie: fascinating chart. we used to look at cell phone bills and how they were interbreeding negatively to inflation, and now they are adding to inflation. thank you for that. mark, it is your turn. classese e.m. asset looking shaky now that the
dollar is rising and we could see more rate hikes from the u.s. fed. the risk premium has jumped to the highest level in 16 months. look at what happened in 2015 when china devalue the yuan. that is one percentage point more. we could reach those levels. investors have raised short positions to a 14 month high. in bond has lost $1 billion market capitalization so far this year. a wonderful story from a bloomberg reporter, she says ratesion from higher u.s. is entering emerging markets via least and you and spots them talking about turkey and spots,na -- immune
mark: live from london, i am mark barton. vonnie: and i am vonnie. this is the european close on bloomberg markets. advisorerkel's security 2005 to 2017, christoph heusgen, currently the german ambassador to the united nations. thank you for joining me. let's begin with the iran deal. if president donald does decide not to renew, how does your response -- europe respond? christoph: we hope that the president will not cancel the deal. it is a good deal. it will prevent iran from going nuclear having the bomb so to speak. we hope this will
preserve. it does not have anything to say with iran's behavior in other fields. we think that iran with regards to its ballistic in the region and syria -- vonnie: even if the president does not sign or makes some different kind of arrangement, will the eu stick with this deal? how will that work for eu companies? christoph: the deal had two parts. the one part was that iran would give up its nuclear program. on the other hand, they would have economic benefits. that is not materialized to the degree that the iranians wanted.
at this stage, it is too early to say what would happen if, from the american side, the waiver that the president has expressed will not happen. vonnie: what would you say to chancellor angela merkel if donald trump should not sign the deal? christoph: i am no longer the national security adviser. it is important to me that we keep iran from enriching and , and we have to do everything to preserve this. we do not want to see a situation where the president may say it is over, no waiver. then iran suddenly enriches uranium and becomes closer to the bomb. this is what we wanted to prevent.
this is the objective we will pursue. engaged in any has campaign for a nonpermanent seat on the security council. washer germany have that seek? - -- seat? christoph: in 2017, we were the second highest donor to the yard right after the u.s. -- to the u.n. right after the u.s. we also have a very specific approach to the topics that are on the agenda. we believe the un security council should deal much more with conflict prevention. needs tority council do more with conflict prevention. vonnie: it sounds like you are agreeing with nikki haley that perhaps the u.s. pays too much of the dues and that other countries are not paying their fair share. you just made here that germany
is paying more than its fair share. christoph: we believe the u.n. is a very important body to preserve for peace. there is a lot of money going there. the budget of the u.n. is half the budget of the city like san francisco. for this to have 100,000 soldiers worldwide, i think it is money well spent. if you were to take the place on the security council, you would be taking it away from israel, belgium, and germany are up for it. christoph: we are in a competition. this is the case every year. we are glad that there are more candidates than positions because this allows a debate. you can present to the membership what you stand for, and when you are elected, you have legitimacy. vonnie: some might say it is more important for israel to get that seat. what would you say?
christoph: we are in favor for a stronger role for israel. we have israel in the west european group. we support israel. germany went to the security council every eight years, and we stick to this rotation. we believe you have to be reliable in what you do. about what iso us going on with north korea. how do you view these developments? who has beenke you national security adviser and now sitting at the u.n., how do you react? christoph: this is wonderful. i am from a country that was divided, east and west germany, and in 1989, germany was reunited. to see north and south korea again talking to each other, getting along, and maybe at some stage having the same development as germany, this is fantastic. this is a dream come true.
we hope it all materializes the way we want things to develop. vonnie: finally, i have to ask you about u.s. german relations. does your administration in germany feel like it might get easier post-midterms to deal with president donald trump? christoph: first of all to say that german-american relations are excellent. with the u.s. due to germany by airlift,ith the berlin the berlin wall, you help us tremendously with reunification in 1989, so for us transatlantic relations are always important. we work very hard to preserve this strong link, which i think is a very solid base and something we should preserve the future. vonnie: thank you. glad to have you back.
--at is christoph was given heusgen, former national security adviser to angela merkel. mark: have a look at what happened to european equities today as you saw stocks rising for a second consecutive day. it was led by oil companies with wti rising. still rising in the u.s. as well. it is a quiet day today. it is a bank holiday. this is bloomberg. ♪ ♪
we're watching this hour. president trump lashes out at critics, including john kerry. if he refuses to certify the nuclear pact with iran, what happens next? the president has found himself in aggressive sidekick as rudy giuliani take to the airwaves, sounding out on everything donald trump and robert mueller. the next round after negotiations start today -- of nafta negotiations start today. can i deal get done? ♪ david: saturday is the deadline for president trump to decide whether to pull out of the iran nuclear deal and reimpose sanctions. boris johnson is in washington this