Skip to main content

tv   Bloomberg Markets European Open  Bloomberg  June 22, 2018 2:30am-4:00am EDT

2:30 am
guy: welcome to "bloomberg markets: the european open." we are live from london. i am guy johnson. matt miller is off today. the cash trade is less than 30 minutes away. drop in vienna. opec and allies agree to pump an extra million barrels a day despite opposition from iran. the opec ministers are arriving. we will take you to vienna. a landmark deal to extend maturity on greece's debt is agreed.
2:31 am
now?inable for airbus is warning a no deal exit will see it pulled the plug on the u.k. still circling the pound like they were in 2016? less than half an hour till european trading this morning. i think he will see a mildly positive start. the dow down eight sessions in a row is called higher. s&p futures called higher. there doesn't seem to be a clear sense of direction. maybe stability is enough at this point. we are keeping an eye on china and what is going on there. let's look at the gmm and the treasury's story. this is where the u.s. 10 year is, a two-day chart. we continue to be roughly 2.91.
2:32 am
we are watching what is happening around the world. the e.m. selloff continues, brazil got hammered yesterday. europe was under pressure, as well. the german dax down as we saw the daimler story come through. pound got a bump up yesterday from the story out of ink of england, the chief economist voting for a rate hike, but we are two years from the votes. we are trying to figure out where we are. the pound is kind of at the same level it was two years ago and you get the sense the sellers are out there. renminbi continues to be a story of debate on the market live blog at bloomberg this morning on whether this is a currency showing stein -- signs of stability or there is further weakness to come. oil is the main story. brent trading39, at 74.01.
2:33 am
let's get a first word update with debra mao. debra: greece's euro area creditors struck a landmark deal to ease repayment terms on some of the nation's loans in an effort to ease its mountain of debt and clear the way for it to exit the lifeline that has kept it afloat since 2010. the debt compromise comes after months after acrimonious talks and just as athens is set to end its bailout program in august. a deal that has long been seen as a key ingredient in the country's successful return to economic health and foray back into financial markets. opec and its allies have reached a preliminary agreement in the face of strong opposition to iran to boost production by a theoretical one million barrels a day. although the actual increase will be smaller, as several countries are unable to raise output. in a night of drama, the monitoring committee reached an agreement despite the raining -- iranian oil minister walking out and predicting opec won't reach a final deal when it meets formally today.
2:34 am
>> the consensus comedy overwhelming majority -- one million barrels easing -- the cuts were 2.8, whether it is a nominal figure, what is actually delivered to the market will be a smaller number. debra: did you k's chancellor has said he is no enemy of exit as he slammed eu's proposal for cross-border financial services after britain leaves the bloc. during his annual speech in the city of london, philip hammond confirmed higher taxes rather than the so-called brexit dividend would be needed to boost nhs funding. malaysia's prime minister has said the ringgit's fair value is the same as the peg established in 1998 in a controversial move. asked in an exclusive interview with bloomberg where he saw the
2:35 am
currency's fair value, he said 3.8, more than 5% stronger than its current level against the dollar. he discussed the appointment of malaysia's new central bank governor. not through corrupt practices. when land was bought by the central bank for 2 billion ringgit, what was wanted was to -- the central bank did not need the land. what was wanted was to give money to the government. debra: global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. annemarie: --this is bloomberg. losses,an stocks paring trading mixed amid the global trade story. the yuan falling to its lowest level since january against the
2:36 am
dollar. plus, we are about to get eurozone data -- flash pmi data out of germany. mark cranfield joins us now. let me start with the data. could we see a euro squeeze if the data is stronger than anticipated? mark: it would have to be very strong to get the euro to squeeze on the back of that, particularly after yesterday, when these italian people were talking about their anti-european views on that. of euro is getting a little the balance today because some of the asian currencies are doing better, but the outlook is still pretty dodgy for the area. it would need very strong pmi numbers to help it there. it also got a boost from the greece deal, they got a longer-term debt arrangement in place but the immediate term for theis still cloudy euro, particularly with u.s.
2:37 am
rates likely to go higher again. aboutet's talk a little what is happening with the chinese currency. there seems to be debate among your team as to whether or not ghe chinese currency is headin for some more trouble or whether or not actually, as your namesake mark cudmore says, there is still strength there. where do you sit? we are looking at it from different angles. mr. cudmore is looking at it on a basket basis, but i think he is wrong. basket will weaken. at more gains into the u.s. dollar where the trend is clearer. that is where most of the speculation takes place. if you look at the forward market comedy options market, what people are doing with volatility. they focus on the dollar and that is where the biggest impact is. it gets the most publicity.
2:38 am
on the broader basket, the euro makes up a big part of that and even on that side, there is no particular reason the yuan should strengthen too much against the euro because daimler just mentioned the fact that china is not going to be buying too many cars, so that affects the exchange rate. there are a lot of things in the mix, but the dollar against the cmy will continue higher until the central bank in china make it clear they want to contain the trouble, which they haven't really done so far. guy: how do people trade the pound? people were caught off guard by the decision to vote for an immediate rate hike. we are two years on this weekend from the vote. we have airbus talking about a complete walk out of the u.k.. is the risk still to the downside for sterling? mark: it is pretty ironic. two years later, the low on the day straight after the vote was on a 130 to handle.
2:39 am
here we are on 132 again and the outlook is still patchy. the u.k. still has a lot of work to do to get an agreement in place to make an exit smoothly. political situation still looks unclear for theresa may. she has won a vote this week but she will still have trouble the next time a vote comes on. the economy is not doing too well, the data is pretty weak on that side. the case to raise rates in august for the bank of england is pretty slim. even though the economy has voted for a hike. the short-term outlook for a pound -- the pound is in good. and on that cheerful note, let me talk about the end of the quarter. about to come up to the end of the half, how much are we assessing a portfolio -- reassessing of a portfolio will be happening in the next week? mark: quite a bit. people will look at the first six months. january was spectacular.
2:40 am
particularly if you were involved in equities, you had a great start to the year. that went very quickly and if you are lucky, you are back to near flat. some people have been down for the first half. it is pretty tricky, when you look at what is ahead. the state of politics, the uncertainty of a trade situation. it is hard to make big market calls the next him few months -- next few months. it is a difficult situation for portfolio managers in the second half. guy: absolutely. thank you for spending time with us. mark cranfield from our mliv team. you can follow the team on mliv on your bloomberg. oil ministers raising output despite iran walking out of the meeting. we take you live to vienna next. this is bloomberg. the market will open in 19 minutes' time ♪ -- time. ♪
2:41 am
2:42 am
2:43 am
guy: 16 minutes till the start of european cash equity trading. let's get a bloomberg business flash. there is debra mao. sharp is raising as much as $2 billion in the public share sale. it will be used for research and development.
2:44 am
-- since fox bought the company in 2018 and injected money for capital investment. cleared thenks have first hurdle of this year's stress test. the fed found all 35 lenders examined could withstand a severe economic downturn. goldman sachs and morgan stanley came closest to the edge. it is the third straight year every bank exceeded the minimum capital the man's, a sign of increased comfort with reviews that once triggered headaches. the trump administration wants congress to remove the federal charter for fannie mae and freddie mac as part of a lane to release the mortgage giant from u.s. control. the two companies, which have been under u.s. conservative ship its 2008, could have markets challenged by new competitors under the plan. any rivals would be overseen by a government entity with power to approve guarantors, change regulation, and make sure participants are capitalized. that is your bloomberg business flash. guy: thank you.
2:45 am
now to opec and there was drama last night in vienna. iran's oil minister walked out of the meeting, predicting a deal won't be reached when the cartel meets. that came as the saudi minister said this was to produced production. increase production. easing, the current was 2.8. it is a nominal figure, meaning what is delivered to the market will be a smaller number. guy: let's go back to vienna and join manus cranny. manus? manus: good morning to you. we have the head of market research and strategy at j.p. morgan chase. you share the view that a
2:46 am
nominal increase of one million would equate 600,000 barrels of oil on the markets? do you agree with that conservative estimate? up the stage for a much tighter market than we anticipate. we do believe will be tightening in the third quarter. however, the nominal one million half -- ithe second looks a little more conservative to us because the lines go down moreon as there are barrels in the market. countries will release those barrels, what happens to china despite the sanctions? all of that calls into question whether we will have more oil in the second half than what opec, particular saudi a -- saudi arabia is implement in.
2:47 am
manus: you have china -- u.s. exporting to china, so if you have a trade war, does iran just pick up the slack and send their crude to china? it looks-- abhishek: like a possible route because importing highs of half a million from the u.s.. relief in oil could be one for them. iran could be a possibility and i guess that is why keeping iran completely off the table because of sanctions may not necessarily be correct as we enter the year-end. we could see irani and oil find its way into chinese markets. manus: i think you gave me some of the scratch card numbers. going into the second half of 1600ear with some saying
2:48 am
million extra barrels. weerto: -- abhishek: probably have to bring it forward despite knowing the physical markets in the third quarter. prices, having one last hurrah in the third quarter might come off in the fourth quarter and i think that correction is toward $63 an fourth quarter before recovering after -- after that toward the end of 2019. manus: christine lagarde warned about dark clouds over the global recovery. we had the synchronized growth in january. here we are with trade wars. to what extent are you concerned about a full-blown trade war and the impact that could have on demand? morgan, wet j.p. haven't had massive revision on the back of that. however, we do recognize that
2:49 am
dark clouds are developing and a trade war could be a key factor that really impacts global economic growth and definitely when the oil product demand growth. he said the customers, the customers, the customers. abhishek: absolutely. that is playing in his mind but i would also say, in opec's mind is the fact that the supply side they have a good idea on but the demand side is the dark cloud developing and if we saw impact on demand because of trade war issues or even the higher oil prices we have had is likely to affect quarterly business at some point. what happens to demand in 2019 is going to be important to opec. manus: one of the major dislocations in the market this week has been in emerging markets. that is where there is potential
2:50 am
second round affect coming from emerging markets on the demand side. that worries you. abhishek: absolutely. on the emerging markets side, what we are concerned about our file oil prices, which has been raised in india and china. what we are not noticing is the currency impact. the em currencies have depreciated quite a bit and for a consumer -- you have high oil price, weaker currency and i think that is what opec is confronted with. 2019on the demand side and than we had the supply-side coming back. manus: great to see you this morning. getting off the plane and being with bloomberg. i am headed in. it is all eyes to the front. two microphones for the rise of one.
2:51 am
anne-marie and i are in there. watchingok forward to with keen anticipation. should be fun viewing. that is coming up. we will take that live view. we are minutes from the market open. up next, some stocks we will be watching. all stocks in focus today. we look at total, shell, bp and others as the opec meeting gets toward its conclusion in vienna. eight minutes from the start of cash trading. this is bloomberg. ♪
2:52 am
2:53 am
2:54 am
guy: six minutes till the start of european trading. let's figure out what we will be looking at. sam instead is covering oil stocks, nejra cehic looking at airbus after the latest warning from the aerospace giant. how will oil starks -- stocks trade at the start? sam: opec will dominate the day again. you have got to look at the oil and gas index down the last three days. oil is up, so it will likely rise. majors, but the mid-caps. a lot of oil producers in london getting a little boost today. guy: airbus has said this before. why is this different? nejra: it is talking about the prospect of a no deal scenario for brexit. airbus saying it may pull its
2:55 am
u.k. investments in the "catastrophic event the country leaves the eu next year without striking a brexit deal." about 14,000 people in britain, manufactures wings in the u.k. and said this late thursday that if the prime minister fails to broker a deal, it would lead to severe disruption of u.k. production. airbus would be forced to "reconsider its investments in the u.k." and its long-term footprint in the country if it tumbled out of the bloc without a deal. in terms of a transition deal, that is still a position of concern for airbus. absolutely, and then the supply chain story, as well. thank you very much. we are working our way towards the market open. we are four minutes from. you can get the stocks you need on first go and the mobile app. at the moment, europe is called a little higher by .3% in
2:56 am
aggregate from the stoxx 50, the ftse is called higher, continental market, .1% to the upside. we are awaiting news from opec. that is the dominant theme. this is bloomberg. ♪
2:57 am
2:58 am
2:59 am
of cashgo until this. trading. what you need to know? greece areeal with good with the 1:16 handle this morning. the nikkei overnight trading and negative territory, down .8%. oil is the main story, trading nearly 74. we pushed higher in the last several hours and we await news we are about to get the premeeting scrum taking place. the s&p yesterday down by .6%. dow down eight straight day in a row. 50 about .3%.
3:00 am
just a little bit, not by much as we come into the final week of trading this quarter. payingr of stocks attention to this morning is the oil sector we are focusing on. let's take a look at where we are coming through this morning. .2%.tse 100, at market makers will mark those stocks a little higher. all expected to post similar numbers. tough week thus far but we are expecting a friday start on a positive north. .3%,'s the ibex, up getting more from the ftse 100, about .2%. expected to come through about .3%. this will generate the function for you, the bloomberg 500 for
3:01 am
your. -- for europe. at the moment, looking mixed. financials looking reasonably well. the stress test yesterday. what we are also getting, and i want to update my screen. i want to tell you what is happening with french data because we are getting a little bit of a push higher on the euro right now. euro spiking higher, no trading 116.59, france june pmi 56.4, forecast 34.3. the june manufacturing number 53.1, forecast 54. what you are getting is a little bit of a squeeze higher in euro-dollar right now, which i to't know, we were talking mark and he's of the numbers would have to the significant that are. i think it's a little bit better on the fresh data.
3:02 am
there does seems to be holding up. the company number trading at 55.6, up from 55.2 and 54 points with the survey. let's take you back to the screen. some of the banks are trading a little bit higher this morning. you are getting an oil study coming through. aib trading higher, as well. there are ex-dividends on the downside. i don't think the individual names are as interesting as the aggregate picture we are seeing. there are some of the losers. european markets are open. they are higher. it's not been a great week when it comes to equity markets. asian stocks did come out of the gate lower, then traded mixed toward the close. global trade story front and center. than the backdrop with monetary
3:03 am
policy, hawkish in england. the ecb pointing in that direction. we will wait to see what happens. the fed seems to be holding court at this point. joining us, patrick armstrong, cio. good morning. we are coming toward the end of the quarter. , the end of the half. has the last week fixed the narrative that you kind of felt in the last quarter? patrick: last week has been dominated by trade, i guess and movingtoric and tariffs from threats to being implement it in june. -- implemented in june. we still believe in cyclical visioning is where you want to be right now. we think the world economy is expanding. it's not as strong as fourth quarter last year, but it still expanding. guy: you go into the next half on the front foot? patrick: europe cyclicals is
3:04 am
what big trade has been this year. it's really lagged versus u.s. guy: that for my next question was. patrick: it's not worked out that technology in u.s. is the place to be. a big part of the investment framework is what you pay and it's not matter in the last talk months. the 1000 growth is outperformed the value by 20% of the last 12 months. if you care about valuations, you've not been rewarded and that's going to matter. europe cyclicals are cheaper than u.s. cyclicals and the growth is an incredibly different. guy: that last bit is different than what people have been saying in the last few days. the u.s. just feels different and terms of economic trajectory. patrick: consumer feels more confident, his assistant feel more confident. it's part of the american psyche to be confident, but tax cuts
3:05 am
led to a strong earnings differential. we seen bad fates over the end of this year and by the time you get to q4, the tailwind of cyclicals fitting from tax cuts is going to be in the numbers and that's where europe is going to have an advantage. the tax cuts are a big win for cyclical companies in the u.s. on a comparative basis. guy: is it just the tax cuts that made a difference? six month ago we could have had the same conversation. europe is going to continue to be better. indices you good have on bloomberg about cyclicals. it outperformed in both regions, but in the u.s., technology is the difference. the stocks have done incredibly well. i don't know if it's driven by the economic differentials as people chasing the growth coming from long-term sustainable technology and innovation. that's the valuation differences
3:06 am
have gotten more pronounced, not on the cyclical aspect of the growth, which has been there but not as dramatic. guy: how may times is a going to work moving forward from air? patrick: difficult to say. we went to the yen for the first time in a long time. that's a currency that if we are wrong on growth, that trade war starts economic growth, the yen will be a big beneficiary. we are short sterling, long yen our position on currencies. within the u.k. will face significant headwinds likely seen from airbus. as the ceo, why do you want to make big investment decisions in the united kingdom when you don't know the rules you will be playing by? there's going to be so much apprehension about making much capital commitments in the united kingdom. and so we get into an endgame where we don't of the rules the company is going to be playing by.
3:07 am
the u.k. will be lacking in the g10, for sure. andr currencies, the euro undervalued currency but the interest rates are so low and quantitative easing will be going on for the remainder of this year, i don't think you will have a strong rally in the euro despite as being more upbeat on the economic growth. guy: i only point this out because if you are a u.s. investor, the s&p has done 2.85% so far year-to-date. if you are a euro investor, you've done nearly 6%. there's a big currency factor in the mix. we carry on with that conversation in a moment. patrick armstrong will stay with us. a next, we will bring you the stocks we will be watching. all stocks certainly in focus as we watch invest -- evidence unfolds. that's next. this is bloomberg. ♪
3:08 am
3:09 am
3:10 am
guy: 10 minutes into the trading day, the oil story dominating. the story out of vienna getting. let's get the latest with annmarie hordern, who is there. annmarie?y -- annmarie: i'm in opec and reporters have been lining up for the past hour or so. they are getting in line early for a chance to get a first
3:11 am
questions. i think the iranian is going to be very much a very difficult table to get up front and center. it's going to be very difficult meeting guy. the iranian oil minister left within 15-20 minutes of the jm mc kicking off. he had said he does not think they can reach an agreement today. he seems to be very upset about what has taken place in vienna. someone briefly that was fixed waning about the nominal figure they are going to put on figure actually means for the market 600,000 barrels. are not moving much because citigroup says 500,000 is already priced in. most analysts think this is priced in. what we want to know is, can there be consensus? but i sign up for the deal or not? -- will they sign up for the deal or not?
3:12 am
guy: this can't be derailed at this point in time? annmarie: yeah, most analysts .ay the russians are more oils coming into the market. the fact is, this has gotten very political and is going to get more nasty in that sense on the geopolitical front. there is going to be a deal. even if iran was to veto this and they agree for more of a hike, they could release their own communique i. guy: yeah, that would be an interesting development. we are preparing, i'm sure you are preparing definitely, for that scrum as they call it in the room behind you. we look forward to the results with kaine anticipation. and report and on the ground -- and record and on the -- and dernrt and -- annmarie hor
3:13 am
on the ground with manus cranny. it's been a fairly flat story in europe. feels calm today, feels a little flat today in terms of what we're getting. no obvious sense of direction. the rest of the week has been dominated by the trade story, but we are seeing low volatility, not getting high volumes being generated. the market is sitting back and waiting and watching. maybe it's waiting for the development out of vienna to give us a sense of direction. we had some french data that was better than expected. the euro squeezed higher on the back of that. patrick armstrong is still with us. can still as oil where it is now, what does that mean? patrick: i think that is what they are trying to achieve. production increases need to come. you're going to have another billion barrels of oil in demand the end of the year.
3:14 am
you need more production to keep up with that. even if we do have a novice -- modest slowdown in economic growth, margins are already slowing, you need more production. the market is in deficit. guy: what is that come from? a lot of countries included within this million barrels a day, some of those will struggle to make those numbers. patrick: that's the whole thing. that's for the increase production is going to come. it's been amazing over the last 18 months we've had opec cuts, 100%. parts come from saudi arabia and a lot of the other opec countries don't have the excess capacity. they couldn't produce much more than they already are. they cut production issues that made. issues higher-than-expected russia, saudi arabia are the swing factors. shell is going to come on, but inventories are higher.
3:15 am
guy: is equity the way to play this? patrick: i think so. we on brent oil, contracts on oil, cheaper than spot prices. but european integrated oil is a safe way to play it. you are getting a 5.5% dividend yield on total, all those companies. we are selling call options on exxon. every month. that gives us 10% yields on that strategy. premiumade at 50% versus the european integrated companies. 7.5 tbd on total, 11 on exxon. 2% of theoney, but money option every month, we are generating premium from that. if exxon is going to fly and we lose money, it's hard to see total not participating. it's a good carry strategy. to stickick is going
3:16 am
around. let's get some the top stories with nejra cehic. nejra: airbus has been one of the front and center stories. it's a story worth talking about because airbus said it may pull its u.k. investments in the catastrophic event of a no deal scenario with exit -- with brexit. will we are talking about is airbus making wings in the country and employing about working thousand employees in the u.k. -- 14,000 employees in the u.k. the concerns there from aerospace manufacturer, stock is up 1% at the moment. beeper bank out one of the best anca one of theb best-performing stocks at the moment. impactseeing a positive on bper shares today and the sox
3:17 am
team in bn are watching the oil company. up 3.5%, one of the better performances on the stoxx 600. seems to get better as the oil price moves higher as we look on to what is going on in vienna. guy: we will bring you the latest live from brussels. that's next. this is bloomberg. ♪
3:18 am
3:19 am
3:20 am
minutes into the session, euro spiking a little bit higher. we are 10 minutes away from some german data. these are the pmi data we are getting this morning. the french data are a little bit that are, but that's enough to push -- a little bit better, but that's enough to push it. greece's creditors agreed to landmark deal. it was ease the claimant -- repayment terms that would come to an end of the bailout for now. , bloomberg's jones hagan. it's been better than anticipated. did greece get a good deal here? jones: i think so, and i think
3:21 am
the euro area in general is happy to be close to closing the door on this whole long saga. the main thing here is that greece still has a mountain of debt and it's going to need to finance that going forward. it's very important for greece and the eurozone in general to have this be sustainable and i think that's what the eurozone feels like it got in place now. they extended the maturities for 10 years on almost 100 billion euros of debt and they give a grace period of 10 years for the interest on that. i think they are preparing for greece for the end of the bailout program and that's going to happen in august and they are hoping things will go smoothly as we get to that. we can park greece for now and i guess i can understand why the eu would want to park greece for now because they got other issues did deal with it, trade certainly one of those. it goes into place today.
3:22 am
what effect he we are going to see in terms of their affect on the eu economy? i.e., we are imposing sanctions on the state, what effect will that have? the amount that we are talking about here is 2.8 billion euros of food imports from the u.s. into europe. and they are trying to send a political message. this is directly in response to the metals tariffs that trump imposed on the eu and a bunch of other allies, as well. they are trying to send a political message. the idea is that they are targeting what are considered iconic american goods. levi's jeans, harley-davidson motorcycles, kentucky bourbon, and they are trying to say ok, these other things that are going to hurt the u.s. the most. but at the same time, the eu was saying we deserve the right to
3:23 am
do more. they are waiting to see what the next move trump is going to make on trade and they are ready to respond to that, as well. guy: which do you think is going to be the more dominant thing to come out of the leader summit of we are about to get? is a going to be trade or migration? you think they will get close to a deal on either? jones: i think migration is going to dominate the summit next week. on have a special minisummit sunday in brussels to prepare for that. they are trying to get all the countries together. typical with the eu, they are having trouble in doing that. but they need to come up with something because the refugee crisis is wearing its head again and the have to tamp it down. there has to be something on that. in terms of trade, it depends on what happens in washington. the leaders are gearing up, anticipating something more. trump has said he's looking at
3:24 am
cars and raising the tariffs on european cars coming into the u.s. if that happens, the leaders are going to get together and figure out even more retaliatory tariffs that they can put on. this comes in the context of the u.s. and china going back and forth with tariffs, as well. i think for the global economy, it's not looking good at this point. guy: great stuff. thank you very much indeed. joins hate -- jones hayden joining us out of brussels. patrick armstrong joining us. the story out of europe from an equity plan of you over the last half year has been, short the banks, you had an incredible quarter. the trade was, the banks were going to be the high beater on the european recovery story. the fact that banks are autumn in terms of the sector -- bottom
3:25 am
in terms of the secretary of what is economically right now? patrick: part of it is the economic situation, part of it is what is happening in italy. talking about strategies with their debt and the commission of the debt is people are worried about, almost crating utility functions out of the banks and italy, risks you have with the populace government. i think a lot of those are going to fade. they were incredibly cheap and they got cheaper. the french banks are our preferred stocks. they suffered as much as anywhere else, really. they got some exposure to turkish that. -- turkish debt. the emp is probably the winner. the ubs moving away from it. yield, trading bluebook value.
3:26 am
and ifks are very cheap i'm right about cyclical growth not being materially disruptive, banks are going to be a huge benefit. guy: deutsche bank is now 40%. 18%, abn amro's down. the numbers are dramatic. patrick: and the german banks have a lot of issues. i think i would be buying bonds right now, but i would be buying equities -- wouldn't be buying equities. that's just if we get past trade wars. if trump is just getting through november midterm elections, it's a winning strategy or him politically to talk of trade tokenand if we get some gesture where china says we will buy more soybeans, more oil, he's not going to commit to things. it's not a real when, but it's a political when.
3:27 am
guy: patrick is going to stick around. we will talk about the emerging markets. jim stocks -- pm stocks slumping. we'll talk about that next. this is bloomberg. ♪ what's a gig of data?
3:28 am
3:29 am
well, it's a whole day's worth of love songs. 300 minutes of baby videos. or, it's a million chat messages. a gig goes a long way. that's why xfinity mobile lets you pay for data one gig at a time. and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today.
3:30 am
guy: 30 minutes into the trading day, these are your headlines. drama indiana. -- drama in the end. we are the -- drama in vienna. we are live in the room. british jobs very much up in the air two years on from the brexit vote and airbus is warning a no exit is warning they will pullout. pound notrcling the like they were in 2016. good morning. welcome. you are watching bloomberg markets, this is european open.
3:31 am
i'm guy johnson in london. matt miller off today. some of the banks having a better day but very radio syncretic -- very idiosyncratic. wood group trading higher. this is an oil story. i think this is a little murky. some of the european peripheral banks are trading higher today. q ex dividend stocks to bear in mind. let me show you the numbers. i want to talk about the gdp and pmi numbers. i'll put those up and while there are appearing, i'll talk about germany doing manufacturing, which comes in at 55.9. that's the low forecast. the germans are galatian rising to 55.9. that's higher than anticipated. it may be a squeeze on that.
3:32 am
we have seen euro trading higher on this flesh state we are getting from the eurozone. let's get the bloomberg first word news update. greece's euro area creditors struck a landmark deal to ease repayment terms on some of the nation's loans in an effort to ease its mountain of debt and clear the way for it to exit the lifeline that has kept it afloat since 2010. the debt compromise comes after months of acrimonious talks and just as athens is set to end its bailout program in august. a deal that has long been seen as a key ingredient in the country's successful return to economic health and foray back into financial markets. opec and its allies have reached a preliminary agreement in the face of strong opposition to -- from iran to boost production by a theoretical one million barrels a day. although the actual increase will be smaller, as several countries are unable to raise output. in a night of drama, the joint ministerial monitoring committee reached an agreement despite the iranian oil minister walking out and predicting opec won't reach a final deal when it meets formally today. >> the consensus, overwhelming
3:33 am
majority it recommends one million barrels easing -- that's today were 2.8. that is a nominal figure, what's actually delivered to the market will be a smaller number. >> bloomberg has learned that the economic council contacted former u.s. government officials and china experts in recent days to gauge chances of high-level talks in the next few weeks. battle them up with a for others and the trump administration. the uk's chancellor has said he brexit as hef slammed eu's proposal for cross-border financial services after britain leaves the bloc. during his annual speech in the city of london, philip hammond also said that higher taxes rather than the so-called brexit
3:34 am
dividend would be needed to boost nhs funding. >> as the prime minister said, taxpayers would have to contribute a bit more in a fair and balanced way to support the nhs that we all use while delivering on our physical commitment. >> 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. guy? guy: thank you very much. emerging markets right now, rising tensions are moving a headwind for assets. em stocks slumped. currencies are weakening for the seventh day in eight. meanwhile, malaysia's prime minister confirmed the appointment of a new central bank governor. newold us his hopes of the post-holder of that office. it's been approved by the king. >> what qualities do you think the next central bank governors
3:35 am
should have an much of the priorities be? >> certainly not corrupt. --tainly not exiting corrupt guy: let's carry on the conversation. patrick armstrong joining us still. how are you position on em? patrick: we've got linked bonds and higher oil prices, continued economic growth, and you had pretty weak current sees as a on --op on -- currencies currencies as a backdrop. guy: central banks are raising rates in many countries. patrick: you are getting a 4% real yield right now on inflation linked bonds and you've got rates that are being used to support currencies. currencies are not responding to rate hikes either. i think inflation is going to pull through right now.
3:36 am
i could be happy with long bonds but inflation linked bonds are the battle way to play -- better way to play it. say, exactlying to what i was going to say. you are going to get a positive pickup. what you think about the equity bond relationship? patrick: we don't have equities. i'm starting to look at selfies asia and china. if trump focuses on china tariffs and rhetoric, the rest of asia could be beneficiaries, as well. it's an area that's underperformed, hundred 4%, and i don't think -- under 4%, and i don't think global trade will be impacted by basically perceptions and worries, but it's not going to fall off a cliff edge. we don't own them yet. guy: let's circle back to the beginning of the conversation, the outperformance from u.s. tech the gap between u.s. tech and global tech is absolutely
3:37 am
enormous. patrick: china and the u.s. are the only tech companies rallying. guy: but even the chinese, chinese equities are getting beat up right now. you don't have to go out of tech. you just have to look outside the u.s. tech. patrick: it could make sense. we like semiconductors across the world. capital spending is going to be part of the consequence of global growth. tax cuts is cash-rich and semiconductors is a good, cheap way to play tech. i don't like the stocks going from slightly expensive to quite expensive. those are the big companies. it's not cheap anymore. guy: i just wanted to talk about this chart again, finish up where we started. this is right back to sort of 2007, 2008, msci excluding the
3:38 am
u.s. it,u.s. has just killed absolutely outperformed. and i get the question has to be, do those lines kind of reach and verge at some point -- we converge at some point -- re-converge at some point? patrick: i think they have to reconverge. it can go from two to five year periods where it doesn't matter very much and the price you pay for assets shouldn't matter. last few years, it has not matter. they had favorable dynamics of the economy in for them, but it has to be gravity. expensive stocks that have had above normal earnings growth are going to revert the multiple gps and conversely on europe that have multiple because of political issues, a convergence will act as gravity and we will
3:39 am
see catch up from the rest of the world. cyclical growth is impossibly it because the rest of the world is more significantly geared. guy: great to see you this morning. patrick armstrong is going to be joining bloomberg radio live on london dab digital radio. carrying on the conversation. this weekend sees historic change in another market, the degree by saudi arabia's king solomon. comes into effect sunday. here's a look at how the decision could benefit the country's economy. >> it's a first for a country known for its conservatism. starting june 24, women in saudi arabia will be allowed to drive. the decision represents not just a turning point for women, but good health transform the saudi economy. the first boom could be to audi makers. 3 million drivers could enter the market the end of the decade according to research. the benefits don't stop there. more drivers will need more
3:40 am
licenses and more driving schools. and the increase in traffic means more pressure on infrastructure, not to mention more parking, maintenance, even insurance. according to bloomberg economic insights, the decision could be worth $90 billion to the saudi economy by 2030. like many parts of the crown prince's plan, not everyone is happy with the liberalization. there's still a long way to travel before reaching saudi's vision 2030. interesting weekend on a number of fronts. up next, we bring you the stocks we are watching carefully in europe, including an online retailer. a judge ruling the states can hit internet companies delivering without charging tax. ana result, that could have effect on aesop's business. this is bloomberg. ♪
3:41 am
3:42 am
3:43 am
guy: welcome back, 43 minutes into the equity market session. let's look at the mid-cap movers. details of nejra cehic. nejra: if i asked you what the best forming stock, you might know the answer, i didn't. it actually the danish medical equipment maker, and the.
3:44 am it said it would miss its 2020 revenue goals. and dropped 10% yesterday. reason,'t seem to be a but i'm guessing it's the momentum from yesterday, seeing ambu as the worst performer, down 6.7%. at this point, it's been the best-performing stock on the benchmark in the past decade. looking at royal universal, it raised its outlook, helping beer sales in europe and integration into it's a telling acquisition. higher, upng unibrew 3.8% --d asos down 3.84%. retailers don't charge tax to the customers, morgan stanley came out saying this could hurt said theyd asos has
3:45 am
will probably see a modest but workable impact. asos'initial reaction seems to be on the downside. guy: thank you very much. iran's oil minister walked out of the meeting, predicting a deal would not be reach. this is opec plus. that meeting is about to start. the saudi's energy minister said the consensus was to boost production. joining us now to discuss all of this, the managing director from pull twice. great name. let's talk about the surprise over this opec meeting is not that we have a rise in production. i think most people anticipated that. i think it's the iran story and how iranians feel about it. they walked out of the meeting. did you anticipate it would be this acrimonious? guest: we didn't. one of the objectives that
3:46 am
wanted to reach was to maintain the oil price, which they are going to do by increasing production, 500,000-1,000,000 barrels a day. opec spent a lot of time and effort in the past three or four years to get into the spirit of cooperation and we thought that at the end of the day, the same time and effort could be put in place and all of the opec members would come around to a deal where there is some sort of increase. guy: is there a price i can put around marking -- walking out of that meeting? brian: our sense going into the meeting was that there was a five dollars to $10 premium meeting and venezuela, what happens to iranian production, there are some concerns in libya with new conflict. i think this reduces some of that you political premium, but the longer-term implication is if opec is not going to cooperate, they are not going to be the central bank in the oil market, we are going to see more crude oil price volatility. guy: one million barrels a day. how much of that israel?
3:47 am
there are -- is real? there are plenty of opec members cap doubt. the million barrels per day is largely real, if you include from opec and saudi arabia, and russia will probably make up the balance. guy: where do you see prices going? are they going to stabilize? where is brent going? brian: we think prices are stabilized a bit. maybe you see geopolitical premium come out of the price, maybe some downside. if you differentiate brent and cpi, over the next 12 months, you are looking at an eight dollars-12 difference, were you are not getting what is being produced in the u.s. guy: you bring up issue of the pipeline and the biggest issue for the oil market is not vienna, but the ability of the
3:48 am
u.s. cannot get more oil into the pipe and out the other end. and that's to your point about the spread between brent and the vti, could even widen out further. how wide could that get in terms of real terms? and you and i were talking before we started on air, you like the pipeline companies for that reason. brian: we do for sure. how wide can he get? anywhere between $10 and $20 a barrel. it could be even more in the permian base in midland texas, pressing $10 behind. that speaks to the need before tickling capacity. the reason the net is wide is because the marginal barrel has to be put on track, which is much more expensive. , it's a great opportunity for them. essentially they are able to buy
3:49 am
crude at a significant discount. you are able to buy at a $20 discount to what the world market is able to buy it at. you pick up an additional $20. in addition, globally, refined product demand to use to be strong. refiners are in a great position right now. guy: so is worth acquiring them, as well? where do you start from? other price for that right now -- are they priced for that right now? brian: they've had a great run. they are of the most. we think this differential between brand and wti midland is likely to take longer. you are probably looking at the back half of 2019 before that is spread barrels again. refiners continued to benefit over the next couple of months. i don't think it's priced into the stocks today. guy: you could argue the saudi's
3:50 am
are doing what they are doing because they want to put aramco away. they need the price to be where it is to get them away. what then? what saudi arabia wants at the end of the day is a stable price where everyone whether everyone wins, it continues to be strong demand globally with her -- or over the next decade, as well. $70 to $80 a barrel is what they are going to target and the producers are likely to make longer lead time investments into that more stable environment, as well. guy: thank you for coming to see us. managing director implementer joining us from tortoise. how closely have you been following this week's news? knowledge against the clock, against the colleagues, and against the whole of the bloomberg universe. the bloomberg news quiz, quiz
3:51 am
go. have a go today, see how you get on. this is bloomberg. ♪
3:52 am
3:53 am
guy: will come back. you are watching -- welcome back. you are watching the open. you can find this on gtv . nejra cehic kicking things off. botc go. nejra: i have to say it's a
3:54 am
little unfair fittingly against the great kristine aquino, but i will do my best. we were talking about trade wars between the u.s. and china. one place where the u.s. seems to be winning is the equity markets. if you are watching the shanghai composite closely, it's on the cusp of a bear market. china already in the bear market. we know the u.s. has been outperforming. if we look at stocks overall, it's been outperforming chinese stocks for 10 months and this means the u.s. stocks on the priciest ever relative to china. if you look at the s&p 500 versus the shanghai's composite price, investors willing to pay almost twice as much for u.s. stocks than for their chinese counterparts, which begs the question as to whether this premium has gotten to stretched. too stretched.
3:55 am
kristine: i'm looking at the volatility skew for different stock markets and it's not actually showing a lot of worry. that's a level of bearishness and the measure for euro stocks and the s&p 500 and the hang seng also below the 2018 high. for all the stocks, there's not a whole lot of worry and volatility markets. keep an eye on this. in my the world cup pushing it up volatility in -- pushing up volatility. guy: i think you win because i want to make my life more miserable. kristine aquino wins into the weekend. stay with bloomberg television. up next, it is surveillance. but i think it can be donated for what is about to happen in vienna because we are about to see the final pre-meeting press conference turning into a scrum.
3:56 am
it's always what happens. we've got manus cranny in the room, annmarie hordern in the room, both the voices in this oil debate, iran walking out of the meeting. it will be fascinating to see how this one develops. this is how european stocks are positioned going into the weekend. not been a great week for european equities. volatilities still remain relatively low on an implied basis going forward. we are going into the last week of the quarter and the last week of the half. european banks have had a horrible half year. european technology stocks with seen in the united states have outperformed. that's what's coming up next. i will be joining the radio team. mark barton and i bring you the latest headlines. if you are watching on bloomberg television, francine lacqua is up next. she will be taking you through the first hour of surveillance.
3:57 am
then she will be joined by tom keene who continues the debate for opec output expansion actually means. going to be a nice weekend in london. this is bloomberg. ♪ two, down, back up!
3:58 am
3:59 am
our phones are more than just phones. they're pocket-sized personal trainers. last minute gift finders. [phone voice] destination ahead. and discoverers of new places. it's the internet in your hand. that's why xfinity mobile can be included with xfinity internet which could save you $400 or more a year. it's a new kind of network designed to save you money. click, call, or visit a store today.
4:00 am
opec decides to boost products and despite strong opposition from iran. the trump administration is split over whether to restart trade talks with china. and airbus threatens to pull their u.k. investments in the event of a no deal brexit. welcome to "bloomberg surveillance." let's check in on the markets. here is what i am looking at for


info Stream Only

Uploaded by TV Archive on