tv Bloomberg Markets European Close Bloomberg May 23, 2018 11:00am-12:00pm EDT
in our world headquarters in new york city, i'm vonnie quinn. this is the european close on bloomberg markets. vonnie: here are the stories we are covering. trouble for hershey. an unprecedented -- entering the throes of the full-blown currency crisis. then, deutsche bank on the retreat. from equityull markets around the world, including some in europe. including 10,000 job cuts. president is set to meet with the law profess being pushed by populists for next prime minister. that is all in the next 16
minutes. caroline, what are equities doing? in the last few minutes, 30 minutes of trade, we are seeing a down day. the worst day we've had in the stoxx 600 in more than two months. more than 100 billion -- in terms of market capitalization, all to do with what we've talked about in the headlines. isck out how the dax performing after seeing the german weakness and growth. above, italytly trading on the back of political concern -- individual stories coming out on the banks. we started the day with the report on barclays, a potential tie up between these companies. ,hifts remaining in the green that particular speculation by bloomberg news reporting.
investors and analysts see this as merely having no strategic rationale, but also look at deutsche bank. about one hour ago persaud, we heard they were looking for -- looking to increase the number of job cuts to 10,000 people. then let's have a quick look at the italian bonds deals once again, rising once again. yesterday,reprieve but today, yields are back up. worst costs for italy since june 2016 -- what this means for fiscal discipline in italy. lastly, i want to shine a light on what is the key issue of the moment, the turkish lira. --turkish lira. the biggest weakening we've seen in more than a decade. we will be seeing that much more in the next course of the hour.
fall toe are seeing a the low in the united states, declines not as sharp as they are in europe, that still seeing a slide. let's get a check on oil, 30 minutes after we got the weekly inventory report. we saw a dramatic reaction. oil is sharply, off by .8%. at 5.8in crude inventory million or barrel. the median estimate was a drop of 2 million barrels. we also have unexpected bills in gasoline inventory, proving to be a stumbling block for oil prices, already lower after opec and allied oil producers, including russia, are finding new ways to measure crude stock. these could affect production cuts being made to ease the global glut. we continue to track that.
we are watching earnings hewlett-packard enterprise, the worst performer in the s&p 500, the company put second-quarter earnings that beat estimat. analysts, including at goldman, say the full-year operating target was withdrawn. the company does not have one right now. goldman says the results are just an inline print and guide with reduced margin expectations. that is weighing on share target earnings coming in, and missing estimates because of margins getting crimped because of online spending -- online shopping and initiatives. vonnie: now to turkey. fell down nearly 5% amid worries that the turkey central-bank could or would step in to support the currency. emerging markets investor mark mobius says the pain can spread.
>> there's no question, it is a gentle movement, how the market is down. they are big etfs, now. once those machines start selling, you get a knock on effect and a snowball, so to speak. vonnie: that was -- benjamin harvey joins us. the pressure has been relentless. is their fear that someone will step in, be it the central bank or erdogan? is stuck insh lira a face-off between the president, who has called interest rates the mother of all evil, and the central bank which knows that it has raise rates significantly to get ahead of this rout. everyone seems to be winning this battle and pressure is building for the central bank to call an emergency rate meeting. the next meeting is on june
seven, analysts questioning how deep the currency rout can go until then. , who has beenn absent lately, will make an appearance tomorrow. are we anticipating anything he might say? >> absolutely. i think at this point, the issue is too big to ignore. uncharacteristically low for the past week. tomorrow he officially launches his election campaign. collections are june 24. he moved them ahead nearly a year-and-a-half early. we hope to get indication from him whether he continues to be defiant or opens the door for the central bank to do something. harvey, thankin you for that. we will return to you tomorrow. more insight on how turkey is affecting global markets with marcus ashworth, joining us from
london. the lira is trading at 4.88. as much as turkey is just one scope, andited in potential for bleeding, at the same time, you have to watch it closely. explain to us why. >> is an obviously important .ato partner the balance between russia and america as well. it is not exactly lawmakers impact, a very open economy. it is the reason someone like exchange control, the only other way one can imagine of controlling the lira's plunge, would be disastrous for turkey. it relies on corporate and banks for overseas funding, so when they have to pay debt with income from the turkish lira, it is killing everything. it is one of the largest in the
emerging market world, a functionally big economy that is spread open, but it has this huge exposure to high inflation akd week currency -- we currency. that makes it inherently weak and the government makes it worse. vonnie: the central bank only has a certain amount of reserve. tell us what your outlook is weird japanese investors have begun to see a spread at a bigger pace? margin --e japanese known for taking their big risks. perhaps they waited too long to see what was obvious to the rest of the world. the only person that could stop this train potentially is central bank.e they can step in, and i think that at the moment, they want to, but the president is not letting them do it. y, and it would
be fascinating to see erdogan changes -- who is he asking for advice right now? he is pitting himself against the central bank, and yet it looks like he is going to take on the role of, i don't know, lender of last resort to the turkish economy? marcus: they've had several meetings over the course of the last few weeks. only by 75 basis points, which sort of looked like it might be enough time, but clearly wasn't. 300we need at least 200 or more of a basis point interest rate hike, from 13.5 where the window is now. that is what we need to see, him understanding that to break the spiral is to hike interest rates and get a grasp on inflation. turkey, whichling
is reliant on imports. vonnie: we also have the european union getting involved, asking for fiscal responsibility. what can the european union do, even verbal pressuree? marcus: nothi. it is liant on -- which is onackage other massive boost. ,nd big corporate funding needing to be rolled over. not just banks themselves, costs rising dramatically. to getk would be lucky extended one year financing from foreign banks, but the corporate , the heartbeat of the turkish economy, are going to be struggling badly soon. vonnie: thank you for your fantastic context. it has fallen every day, the lira. erdogan kicking off his
reelection campaign tomorrow. let's check in on the first word news. mike ontary of state pale said the u.s. would walk away from north korea if the right deal is not on the table. he is testifying before a house committee today and says a bad deal is not an option. president trump is scheduled to meet with kim jong-un next month. president trump says the u.s. will probably need a different structure when it comes to trade with china. his tweet comes after the countries agreed to plans to impose tariffs on -- of each other's goods, pulling back on the trade war. stay on thetaly to path of fiscal responsibility. eu leaders are concerned about a platform offered by italy's populist alliance. the eu president urged italy to keep reducing public deficit and debt. global news, 24 hours a day on air and on tictoc on twitter.
powered by more than 2700 journalists and analysts in more than 120 countries. i'm courtney donohoe, this is bloomberg. vonnie: much more ahead. deutsche bank is considering increasing the number of job cuts to 10,000 as part of sweeping overhauls, about 10% of the workforce. we will have the latest. ceo joins david rubenstein. then friday, jerome powell meets 350tharney, the anniversary conference of the -- bank. this is bloomberg. ♪
>> live from paris, i'm caroline hyde. live from new york city, i'm vonnie quinn. the european close is 16 minutes away. shares of deutsche bank are down after reports of cutting 10,000 jobs. sweeping overhauls -- more clarification on this turnaround time tomorrow at the annual shareholder meeting. joining us right now is our finance reporter, nick. is deutsche bank thinking of erasing its employees from? >> it is important to note that in 9000-10,000 announced 2015, the pile that comes on top clear area is probably the global equities business, which they announced is under review. as far as high paid jobs going in prime finance, hedge funds.
they've had a tough time in cash equities, an area which will see headcount go. vonnie: is this much more than anticipated, when you knew that he would decide some major things strategy wise? ick: we didn't have a number not and the bank has confirmed these numbers. we don't have a number yet for how many jobs would be going across the company. there on that. not the level of granularity investors want to have. what they will be looking for tomorrow at the shareholder meeting is whether they give us those details, whether they tell plan or how they turned the bank around. more importantly, how they hang keep upvenues, motivation. it is one thing for these numbers to be up there, but you still have to have motivated
workers generating revenue. that is something investors will really be wanting detail on. vonnie: how long will investors --? i imagine people are receiving, on the one hand, maybe the bank will go down and have margins and other metrics. on the other hand, they want to see where the revenue is going to come from. >> he doesn't have that long of a honeymoon period. he's part of the previous management team, devised the lost strategy. he doesn't have much of a honeymoon period. whether it is quarters or more than a year that we are going to give him, it is hard to say. it depends on how revenues pan out. if he can show costs going down and motivate the staff, that is going to be serving him well. 9000 cuts byrgeted
the year 2020, so this is going to be just a little more aggressive. caroline? fascinating chat. i will bring us back to paris. the world's largest tech startup campus, here in paris. it plays host to bloomberg's senior -- we thank you. >> thank you for being here. caroline: what are you trying to achieve here? >> station f is the world's biggest startup campus. we are trying to make entrepreneurship more accessible to everyone. caroline: particularly in france. it could be a perfect storm with macron trying to ensure entrepreneurship. >> i think it was timed perfectly.
we open less than one year ago, literally one month after he became president of france. the ecosystem has been building momentum for years. macron has really made it a wonderful place to do business, and i believe we see that in the number of international entrepreneurs who choose to be here. caroline: the man behind illyad, billionaire in france. when will we see more --? we are hoping a lot of them will be created here on campus. there are three here today gaining a lot of momentum. you see growing, and one of the problems in france is that the entrepreneurs don't know how to say no. you often have jokes, companies in the u.s. that get an interesting acquisition offer, they actually turn them down. for example, snapchat. we want to see the same thing happen there, entrepreneurs not scared to say no. caroline: it is about ambition
levels, to take a company public. ?hat can -- do we've got mccrone meeting with technology leaders all over the world. -- one of the billion dollar companies here in france. what can he do to make it better? ofi think we've seen a lot great changes. a few years ago, we were talking about funding. there is no longer a funding problem in france. tech challenges, meeting with engineers. resources are here. we are perhaps missing the great exit market, funding to take us to the next level. ,e talk about rogue funds across all of europe -- that is where i think the government should focus. caroline: what about corporate investing? barry o'neill has -- to some extent. seen money come into
france to foster growth in the next generation of tech. >> every corporate on the planet wants to work with starps, they are making these types of investments, being on the ground, helpinstartups. is thatsee at station f one of the programs, there is a huge appetite for it. it is about thinking smart and not having a commercial way to work with startups. really creating something of value. also talksacron about taxable goods. mark zuckerberg is in paris today in front of the european parliament, trying to explain the ramifications of -- how are you getting startups to ensure that they grow at scale and with the ethics to keep consequences at a minimum? that facebook and
cambridge analytical scandal made everyone aware that it does with sociale to do innovation and that type of field, it concerns all startups in any sector. i think that facebook changed the discussion. a lot of companies on campus today are naturally thinking of how can we be more responsible. the ecosystem is kind of maturing, asking itself these questions. caroline: the next generation of tech leaders. it is wonderful to be here. thank you very much, that is roxanne varza, station f director. vonnie: thank you. friday, a conversation with the central bank chief. jerome powell. bank of england governor mark carney, and many more. just look at that lineup. you can see it live on bloomberg tv, listen on bloomberg radio, or watch live on your terminal. ♪
vonnie: live from new york, i'm vonnie quinn. i'mline: live from paris, caroline hyde with the european close a minute away. vonnie: it is time for the latest bloomberg business flash. the latest stories in the news now. target investments took a beating as amazon -- initiatives to drive online sales squeezing target's profit margins. the online store -- digital revenue growth gains. away at tiffany's blew estimates and the last quarter, led by gains in north america and asia. the profit forecast for the year, announced at $1 billion a share. that is your bloomberg business flash for this hour. we are just a few
minutes away from the market close in europe. a look at how stocks are performing, it has been the worst trading day in a few months. ftse is lower, the miners underperforming. dax has beenmany, the underperformer. germany's growth has been less than expected, a slower pace. clearly a concern, keeping a close eye on the banks as well. ♪ our phones are more than just phones.
day in two months. the stoxx 600, oil and gas, minus, all on the downside. ftse up. index, the german outluster growth coming -- expectedpected -- out lower than expected to seeing theot strategic rationale in that particular deal. red.che bank in the letting go of 10,000 people, after 9000 job losses before. this is an ongoing struggle for the german lender as they try to
re-orientate the business. they have the shareholder meeting tomorrow. look at a time bonds. a concern of what will happen -- look at italian bonds. tooncern what will happen the banks. we are seeing a tally on bonds spiking up eight basis points. the highest since june 2015. weakened.h lira at this is the biggest slop one point of the lira versus the u.s. dollar in a decade. concern of turkey. when will we see the central bank take action and how will erdogan continue? vonnie: in the u.s., we are keeping a close eye on oil. pressure on wti crude.
down about $.66. down arude, it came little bit. the spread is interesting because it shows how much is priced into the market relative to what opec might do. iran, venezuela supplies are both at risk. now higher inventories in the u.s. a lot might change in that spread in the next few days. a stronger dollar isn't helping oil either, at least not oil priced in dollars. oil close to $94 as emerging market trends continue to take the fall. and we are back down to 3.01% on that 10-year yield. let's get more on the markets now. the turkish lira in practical freefall, our next guest says instability.posed
turkey is in a central bank job, but maybe not the traditional kind. what happens to the turkish lira and the economy which is so important strategically from a nato point of view? >> absolutely. thank you very much. the key thing about what is happening in turkey is that the country has been ignoring the rising imbalances, not only of trade deficit but a fiscal deficit. the central bank continue to increase money supply dramatically in the hope that a weak dollar and low interest rates would continue to flood the turkish economy with cheap dollars, with foreign investment, with more money coming from outside countries. what happened is what i call the southern stock.
all those imbalances continue to changes.n suddenly it and when it changes, it changes dramatically. with a stronger dollar, with rates rising in the united states, we see how money is coming back from emerging markets into the united states. like argentina, like which haveturkey, increased their imbalances significantly in the last year and a half and increasing indebtedness and dollars, are the ones that are suffering the most -- indebtedness in dollars, are the ones that are suffering the most. vonnie: might it contribute to problems elsewhere in the world? has quite aurkey differentiated factors. the principal one obviously is
the growth and money supply has been phenomenal. dan the imbalances that the government allowed the economy to enter into were very large. but it is a symptom. it is a symptom of emerging markets that have accounted from a 70% of the increase in dollar debt in the last years. at the same time, they have not used this period of low interest rates and weak dollar to improve their economies. what we are seeing, if you look at the list of those currencies that are suffering the most, the ones that e suffering the most are obviously the ones that have entered into the largest imbalances especially in the last two years. and the ones that are sort of maintaining a little bit of strength relative to the dollar are those that had a tighter grip on fiscal and trade imbalances. let's shift away and
look at bonds. i've been looking at the moves in italian yields. focus on italy under expectation over whether this becomes something that is again isolated or this could end up as some sort of contagion around portugal and spain once again. >> so far, what we have seen is that the impact on portugal and on spain is very limited. these countries have actually done their homework to a certain extent, reduced dramatically the deficits, made big reforms in their economies. however, although this is disguised by the massive buying of the european central bank, which is more than the net issuances of the european countries in terms of bond issuances. the risk that we have is that, if the populist government grabs hold and starts to really push the limits in a sort of similar
way toward what greece did a few years ago, it can create a ripple effect into other economies. let's remember that all these economies have done quite well in the last three years. debt,r, large public large unemployment, there are strong challenges to these economies. they have abandoned the reform agenda in order to allow the ecb to do all the homework in many of the cases. i would say that the risks should not be underestimated. caroline: there was much anticipation that the ecb would start to get forward guidance for when they would end easing and that level of support. but when we have germany's economy, the firepower of europe, seeing weakening growth
like we saw today with the pmi, is it more unlikely that we will get that forward guidance? >> yes, i believe it is quite unlikely that the european central bank will add fuel to the fire by giving hawkish messages. i think the european central bank is finding itself between a rock and a hard place in the sense that, if it continues quantitative easing, countries will further abandon their reform agendas. but at the same time, if they stop it, it can create a much larger impact on bond yields because we don't know what secondary demands there are in europe for peripheral bonds when the european central bank is more than 100% of the demand for those issuances. likely, given the fact that the pmi's for europe, the growth in germany, are showing very significant levels
of weakness and definitely much worse than what consensus and the ecb expected, it is very unlikely that draghi will give hawkish messages, in my opinion. vonnie: what about the u.s., we have the 10-year yield at 3.1%. how strong is the u.s. economy? the u.s. economy is much stronger than the european or japanese one. we have seen a weakening definitely of the economic surprise in the united states. but we have to take into account that it comes from a tremendously strong standpoint. the economy in the united states is much better prepared to see the rate hikes. inflationary pressures are limited, not dramatic.
and more importantly, the indebtedness, for example, the s&p 500 has a much lower indebtedness then, for example, the stoxx 600. well we are likely to see is beingwithout significantly stronger, supports a growth of 2% to 2.5% without a question and continued reduction in unemployment. obviously, as unemployment figures go down, we also see a way to pressure improved. it will help the fed take action. vonnie: thank you, daniel. let's check in on first word news. corky: north korea is planning to blow up its main nuclear weapons test site. an international group of journalists i witnessed -- have trouble to the country to see event. it is viewed as a goodwill gesture. it would not keep north korea
from developing more weapons. boris johnson has warned theresa may it is time to get on with it and to take the u.k. out of the eu trading rules as fast as possible. bloomberg had an exclusive interview with johnson and argentina. he has a list of demands for me it is -- for may. figures may be a sign that the u.s. housing market could be held back by higher rise -- higher prices and market rates. sales in the west were down almost 8%. mortgage rates are at a seven-year-. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm courtney donohoe. this is bloomberg. ♪ vonnie: let's bring you live pictures now from the bloomberg law leadership for him -- forum.
what are the chances we have a government by the end of the day? that what we will have is a premier designate. we are almost there, but not yet. they consult party leaders and see what the majority would have and brings it back to the president for approval. afterwards, there is a swearing-in ceremony and confidence votes in parliament. vonnie: we are getting multiple one outlets saying the new government needs a confidence vote tuesday or wednesday and talks with parties on thursday. looks like next week will be a big week for having things settled. bounce, anyny speed hurdles, either in the senate or among the parties? -- both thebump
five-star movement and the conti. party have picked the bumps may come with ministers. concern about the possible finance minister who has been highly critical of the euro. matarela veto a name on the list? that is unlikely. caroline: the market reaction continues to be one of concern. the italian stock market continuing to fall. what are the key concerns in the fiscal situation in italy that this government could bring to bear? >> the joint government program drawn up before publicly naming
includesthe candidate a spending spree, lower tax rates, special guaranteed income for the poor and the jobless, and the measures themselves are a challenge so european union's fiscal rules. there's also concern about the figure ofc onte hymns -- of conte himself. here is a professor but has no government experience whatsoever. caroline: how realistically do you think they can and a to this sort of program and start up bush against the ecb significantly? push against the ecb significantly? any challenges they make against the european union, brussels will reply with the rules and revis attempts to change treaties have failed. look at greece, for example.
vonnie: there was a moment yesterday when it looks like conte would not be the pick. how do you think the discussions went? why did conte and it being the what to enter the president's chambers today? >> there was a wobble because the italian media carried mid--- carried many reports about his curriculum, his studies abroad, the extent of stays, including new york university. all of that seems to have been brushed aside by the very fact that he has been summoned to the palace. vonnie: we can't wait to see the outcome. thank you for your wonderful reporting. later, conversations with david rosenstein, with the ceo of lockheed martin. this is bloomberg. ♪
live from paris, i am caroline hyde. vonnie: from new york, i'm vonnie quinn. time for the latest business flash. will spendnologies more than $15 billion in r&d and capital expenditure projects in the u.s. in the next five years. jetmaker of everything from engines to elevators will also higher 35,000 people in the united states through 2022. united technologies says that it will create several thousand net new jobs. less thanth expected. those has chosen mark ellison as
hasnext leader -- lowes chosen mark ellison as its next leader. food at clothing and marks & spencer missed estimates. cars are getting more high-tech. this is why we are speaking to mr. carlos scone. he is based in paris, run a were no and nissan mitsubishi is a chairman and ceo. i talked with him about what he is seeing. autonomous car is practically everywhere, in the united states, japan, europe, china also. conductivity is everywhere also. . we are testing in the major
markets in the world. when we develop the technology, we want to communicate with the regulator all the time so that he or she can get familiar with technology. so when time comes for technology this technology, they already have a lot of data in mind. caroline: what else is driving growth, suvs, commercial videos -- commercial vehicles? >> this is a trend we are seeing in the united states, in europe, in china, crossovers are taking over, growing the most. caroline: what about your future when it comes to know and nissan -- to renault and nissan? >> you will see more and more convergence between the companies. you will see more and more integration. we have already decided to have common engineering, common manufacturing, common purchasing.
moves more things in common, at the same time maintaining different brands, maintaining different identities. caroline: not in our us for any m&a. is share price of renault one of the worst-performing today on the back of our conversations here in paris. vonnie: well done. such a fascinating ceo always. more company news, senators are announcing a june 27 hearing on the t-mobile-sprint merger. the committee on antitrust cop edition and consumer rights -- and tried -- antitrust committee and consumer rights. it is one senate committee.
it is time for our stock of the hour. tiffany's, shares best since 2001, hitting a record. this out on a blowout first quarter. i? abigail -- why? abigail: a huge rally, beating 37%. the company is in the middle of a turnaround plan. they exceeded estimates. when i saw the huge reaction, my first thought was a short squeeze. but there is a low shortage of shares. so it's not a short squeeze. it is relative buying power. in 7%. we had asia, japan, and the americas very strong. europe is a little bit weak. but the company also announcing a buyback. investors loving it as the new ceo has really vamped --
revamped the jewelry line and redesigning stores, operations for technology. so lots of different factors coming into play. just to take a look at the chart out itstock is taking last previous highs, breaking above resistance, suggesting we could see an entire move of and 100.0 this rally just getting underway. vonnie: thank you. while tiffany's may be up 20%, the dollar is down 4%. the s&p 500 down .25%. $71 a barrel. this is bloomberg. ♪
shery: here are the top stories. president trump makes his presence felt in corporate america. he is promising big things for u.s. auto workers. we will be joined by bob goodlatte and what he says about the mueller probe and the fight over an immigration bill. doubts grow over whether president trump will meet with kim jong-un. mike pompeo tells congress the summit is still on as planned. however, pompeo says the u.s. will settle for what he calls credible steps toward new -- toward denuclearization. ♪ david: congress has passed a sweeping overhaul of bank regulation, a bill that would make g