tv Bloomberg Markets European Open Bloomberg August 30, 2018 2:30am-4:00am EDT
good morning. this is the european open. we are live from our european headquarters in london. and i am guy johnson alongside matt miller in berlin. matt: despite another fresh record for stocks, gains in asia evaporated. futures are pointing to a andtive open in europe across the pond. the cash trade is less than 30 minutes away. down under, the aussie and the kiwi take a beating as weak data
races the chance of their central banks of staying on hold for a long time. the peso is pounded. president macri surprises the markets and his people with the needs moneygentina from a credit line as soon as possible. it is not just argentina. the turkish lira and the indian rupee both slide sharply against the dollar. matt: less than half an hour away from the european open. let's look at futures. we had, we saw some gains in into laterisappeared sessions. we see now european futures are pointed down. down 1/1050 futures of 1%. a look at the u.s. 10 year, we had a big jump in yields on
tuesday, not much, a grind noter yesterday and today, much movement. you can see 10 year yields unchanged, 2.88% from today's trade create what do you see in the gmm? are the chinese markets down. stop -- stock moved fizzling out during the asian session. let me talk about what is happening here. the marketsay as were surprised, as the country was surprised by the televised address talking about needing money from the imf to stabilize the situation but it is not just the argentinian peso. the rupiah trading down, the indian rupee, go to the gp on your bloomberg and take a look u.s. inr. for the indiana rupee under pressure. the aussie trading down by .3 of
5%, weak data there but also weak data in new zealand. the confidence to be evaporating. story. china related both currencies feeling the pressure at the moment. the aussie dollar trading down by .3 of 1%. there is a firm fx focus this morning. >> u.s. president donald trump is in talks with canada to overhaul nafta -- has said talks are going well. earlier canadian prime ministers justin trudeau said he -- his government is trying to meet the same deadline. his foreign minister signaled the talks are progressing well. >> i feel that both parties are coming to this stage of the negotiation with a lot of goodwill. that is what canada is bringing to the table. we understand each other's
conditions and what both sides need very well. donald trump has accused china of undermining u.s. efforts to pressure north korea into giving up it's a clear reference indicating a trade were a starting to exacerbate geopolitical tensions. the u.s. president called a trip off to north korea by secretary of state mike pompeo saying there has not been enough progress in talks aimed at denuclearizing the korean peninsula and he would return after u.s. traders -- trade disputes with china were resolved. [inaudible] rallied to its highest level for three weeks yesterday despite minimal evidence of any thaw in the frozen brexit negotiations. finance -- the finance minister of france said it could not --
britain could not have its cake and eight it as it quits the eu. >> you cannot be in and out. thecannot be out of european continent. and being a full member of the european member -- union. you do not have the same position, the same rights, and the same advantages as the other member states. juliette: 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. this is bloomberg. guy and matt. matt: thanks very much, juliette saly in singapore. asian stock gains, we have been talking about disappeared despite another fresh record from the u.s. counterpart as trade and geopolitical issues
cymer and the dollar tip tire but is that -- tipped higher but is that a chance to get in on a down trend? joining me now is mark cudmore. we have seen over the past two dollar weakness. is that set to continue? there are indications that might be the start of a down trend. these are market indicators rather than a shift in fundamentals. the dollar shekel, it seems like a skipper but it is one of the best lead indicators of the dollar. it is not just coincidence. it shekel trade is dominated by the u.s. on the import and export side and capital flows are dominated by the u.s. the dollar shekel tends to leave the big dollar moves, all the major dollar moves for the last 20% plus rally, the slump in 2017 at the rebound
this year, all of them were led by dollar shekel. of.roke its therefore implying there is more downside to come. it is being validated that the has broken -- that its uptrend. the two best indicators are saying that we are due for sustained dollar weakness. when you put that into context back of a on the flattening yield curve and we have the dollars cnh topping out. there are a lot of market indicators saying the dollar index is set for a new dollar downtrend. you have continuing weakness in the emerging markets. the rupee is trading lower, the turkish lira is trading lower. that came continues. -- pain continues. mark: i remain worried about the
turkish situation. the crisis will not and until they hike rates aggressively so on lira role -- will remain the backside. you have other markets like argentina also weakening. india, argentina, lira, spreading contagion and causing weakness in the rand. be nearing -- we might be nearing the end of the broad weakness. overall the em complex might be coming to near the end of the pain particularly as it looks like the dollar might be starting a downtrend, that might be one of the dominant factors. month-end flows can dominate things and they can be dollar supportive so you might have a dollar bid until tomorrow's close, that will weigh on emerging markets but next week is a different story. wcrs if i look at the
function, who has done the best and worst of the past year, i see grouped along with some of losersrging markets here, turkish lira we know that story, the brazilian riel, all the indian rupee, indonesia rupee doing poorly. you see the norwegian krona and the swedish krona among that group. doing so poorly? >> it is interesting because the swedish krona has negative fundamentals happening. the housing market, the political uncertainty, there is the fact that there are gp negative real yields. it seems to underperform or than expected. this is exiting from a large position. that someone is
trying to [inaudible] maybe the flow will be over and maybe it has sold off too far. it is hard to know where the flow will be finished but it does seem like an extraordinary flow going to that market in the last few weeks. guy: elections are coming up, worth paying attention to maybe. does the market care about argentina? the argentinians are making a lot of headlines. you are looking at the story and there is virtually no interest in it on the bloomberg. in what people are reading on the bloomberg. it makes headlines, yet no one cares. argentina iswhy the reason. mark: argentina has been a broken market for a number of years. it was relevant last century but
there are too many crises into many years. the people do not have [inaudible] most bank traders cannot touch it and many specialist funds cannot touch it. generally macro traders will not go near unless they have a risk appetite. very few markets can trade argentinian assets. it has become like venezuela, there is interesting stories in terms of the specialists but it has no real impact on the rest of the world. there is no real contagion, so it is a bit more of a humanitarian story which is why it is newsworthy but it is not a market story and that is why most market systems will not be rocking this morning. they will be morning -- worried about the smaller weaknesses in more relevant emerging markets like the rand and the rupee. debate thisthis morning, i do not think the rand is moving that much.
matt: welcome back to bloomberg markets. this is the european open. we are 15 minutes away from the start of trading. before we get there, let's go to singapore for the bloomberg business flash and juliette saly. juliette: nigeria has ordered for banks including citigroup and standard chartered to return a $.1 billion it says was illegal ex-pat treated by mobile phone company mtm over eight years through 2015. the wireless operator refuted the claim. fined $60will be million. it was ordered to participate in the refund. ford has seen its credit rating krut -- cut to one notch above junk by moody's. citing a restructuring plan that could take years to complete. downgraded the company citing the erosion of for its global business division and the turnaround plan that could cost
more than $10 billion in the next three to five years. samsonite international says the trade were between the u.s. and china is damping sentiment among chinese consumers. the world's top luggage maker said that will play into slower sales growth in its second-biggest market. in another sign of the fallout for that tit-for-tat tariffs. quickly move into the second half, we will be into the high single-digit range for china. i see consumers feeling some of the impact to trade wars which is hot in the news today. i think it has some impact to consumer confidence in sentiment. hutchison australia said it will merge with tpg telecom in an attempt to better challenge market leader telstra him. strom.
$3 billion is being resent from the deal and bill -- will be there and t by the two offshore giants. that is your bloomberg business flash. businessralia investment dropped, despite the economy showing stronger growth. the kiwi dollar is also taking something of a beating. confidence in new zealand extended its decline with sentiment about the general economy sinking to its lowest level in a decade. froms finnerty joins us singapore. on disappointing data but the kiwi looks to be the real source of pain here. >> definitely, no two ways about it. they both had disappointing data but the kiwi, the business
confidence outweighed the data. -- they willing cut rates. one of the criteria [inaudible] so we had this negative trend for nearly a year, business confidence and today was a fresh low. the market is sinking and a rate cut, it may not be imminent but if this trend continues there will be more pressure to cut. particularly if inflation does not pick up. ont: we have the rba meeting tuesday. i have the rba page up here on my terminal, you can type in rba go to get the data. what is the data that is going to affect the outlook?
notd: today's data was positive for the rba. disappointed about the animal spirits that it is often referred to in terms of. even though -- the actual next 12 months will be higher than expected so the rba can take a positive from that. employment wage which is related to wage growth. that is the key they are looking for and the other fact, we are looking to monitor or focus on is data at westpac had the rise in mortgage rates. that could have an impact on consumer demand and sentiment. if that starts at downturn that has an impact on the economy and we will see how dovish or hawkish the rba treats that westpac hike yesterday. more than the data today.
it has been weighing on the aussie. guy: how much of this is about china? inid: china is an impact that will not go away. there is potential for brexit deal,e nafta trade president trump wants to play hardball with china. 200 billionional dollars in tariffs looming and the background. with the aussie and kiwi, [indiscernible] particular.ie in ishink until that trade talk resolved in a positive way, the aussie will be under pressure and if the tariffs are imposed in addition to hundred billion that would expect to weigh on the aussie dollar in the near-term.
matt: thanks for joining us. david finnerty joining us out of singapore. we are minutes away from the start of stock trading in europe and in the u.k. we will take a look at which stocks you want to watch us closely at the open, including vodafone after it was downgraded i -- i make america. e bank of america. the open is nine minutes away. ♪
guy: six minutes to the start of cash trading. let's talk about the stocks we will be watching. a bit of a telecom theme. at vodafone.oking >> they have been downgraded and bank of america saying this competition in europe which is weighing on vodafone. they do have this deal with liberty global, one of their big partnerships in the u.s. which was a positive. bank of america commented on such a telecom, they upgraded the german carrier. they are saying that the netherlands is a strong area for deutsche telekom area they have also commented on kpn. is a standout
market. positive for kpn and budget telecom but negative for vodafone. week --is going on with [inaudible] generate most of the revenue from construction. they did add customers, they are smallest- france's telecom unit. higherd see shares move at eight. calls, one seen some do 3%. that could be a stock that ends up moving. plenty of stock stories coming up. we will see a lot of stocks going ex dividend particularly at of the u.k.
guy: minutes until the start of cash trading this thursday morning. euro-dollar, kind of flat right now. foreign markets and the aussie and kiwi. we are about to get inflation data out of germany. the number comes after lunchtime today. we are looking at an italian auction today. euro-dollar trading 117 .02. chinese markets are softer overnight. down around 1% going into the close. 77.71 on oil. grinding out. the records continued to be made. up by another .6%.
futures, a mildly negative start to the day. a few ex-dividends worth paying attention to but trade continues to dominate. the end story continues to dominate but the dollar remains the dominant theme. morning, 75.63 is where london is out of the gate. you will see much movement today. maybe a little negativity, but there are a few ex-dividends stocks worth paying attention to. i'll give you the fullest in a moment. to open softerd this morning. a continues to be the outperform or in europe this year. the luxury sector continues to drive back. pernod out with numbers a little earlier on. down and the cac will deliver similar numbers. matt miller for the sectors. are downot of sectors
this morning, understandably. on the imap, it is mostly red. are down, consumer discretionary stocks are down. energy is taking a hit, which is interesting. oil prices don't have huge moves, but they are pretty high with nymex crude trading at almost $70 a barrel. in any case, the cream -- green is few and far between in a day that will see most groups fall down. look at whatke a is happening on the mrr. anne-marie brought us a story surrounding -- that stock is jumping this morning. a fairly solid session out of france, which will help the french market again. u.k.,y canada out of the electric components having a solid day. on the bottom end of the market, elect a is down out of sweden.
iugd ug out of the u.k. -- out of the u.k. it is trading a little softer. that itant to check hasn't gone ex-divs in. hammerson has gone ex dividend. got trader, i think you've hammerson going ex dividend, intercontinental hotels going ex dividend this morning. matt: all right, so there is some ex dividend, but not big companies that could move the markets around too much'they are opening lower, european markets after the gains in asia evaporated in the afternoon session despite another record from u.s. equities. joining us in the studio in berlin is the cio for germany at ubs global wealth management.
max, thanks for coming in. appreciate your time this morning. u.s. stockabout this record. we haven't seen huge gains this year, but we are looking at an that is i guess 19% -- is that the only game in town? are you seeing more people diversified in class and focusing more on just this one asset? hasertainly year to date been an extreme outperformance of the u.s. equity market. largely due to the growth differential, which has opened up year to date in a macro and micro economic level. that outperformance has been extreme and we also think that more likely than not, it will not last but in the short term, we would think u.s. equities will move higher, specifically because what we are seeing is very strong earnings growth.
guy: when does this change? because a lot of people have a portfolio that has diverse if acacia and within it, equity diverse if occasion around the world, some japan, europe, some united states. they are just sitting there looking at their statements and the u.s. is just going to outperform once again by significant degrees. does that need to reverse at some point? what do you do with that? maximilian: it is not unlikely it will revert at some point but what you need for emerging markets to catch up is parity on trade. second, weakness in the u.s. dollar and largely, important to the european market, higher interest rates in europe. matt: let's talk about
technology because we have a great story showing how much the market is short the big tech names. i've got quite a cool screen here that hillary put together for us which shows the number of members trading above their 200 day moving average in percentage terms. the s&p 500 in blue, the nasdaq in white. why do you think the market is so short these stocks that have really been the engine for the -- the rally that broader bull market we have seen over the past nine years? maximilian: i think this chart illustrates our thinking because ultimately, what we have done before that gap opened his after nine years of being overweight u.s. equities, we have neutralized our position. what we found at the beginning a growth but no longer discount. breadth should widen out.
this makes sense to us and will continue. it is good for the overall market because a lot of client said at the beginning of the isr, morrow breadth narrowing and what we are starting to see is this, which is good for the overall rally. guy: we have seen inflation that out of saxony, germany posting 2% inflation print. the search for yields still exists within europe. isn't that part of the problem? we have negative rates? is a completely artificial environment and the u.s. feels like a more normal market right now and you can also explain it that way. the europe story versus the u.s. story. one is abnormal and it is not the u.s.. it is europe? abnormaln: what is when we are talking about monetary policy, we are still in the early stages of monetary cycling in europe and in the united states.
the united states, for example, re-rates are still in outright negative territory. in europe, we look at three to four years behind the united states and its economic cycle. when we think about interest related areas, it is due to credit cards only becoming positive in europe in 2015 while it became positive in the u.s. in 2011. likely thanmore not, it will take longer to gradually move to a more normal environment in europe if we are actually going to move to a more normal environment in the near future. guy: thank you very much. he will stay with us. maximilian kunkel, the cio of germany at sea -- ubs. the johannesburg market, we talked about this through the morning already, ntn is facing a big call from nigeria that it will repatriate money. ae nigerians are ordering
refund. the telecoms group is really suffering on the back of this. at one point, it was down 18%. it is now 16%. latest bring you the news on this and continue to follow the share price and the news you need around it. sector but a different move. beougue trading sharply, up by 4% after 20,000 mobile customers in qt. this is bloomberg. ♪
guy: 11 minutes into the session. european equity markets, going nowhere fast. some interesting stock stories worth focusing on. annmarie hordern. of theie: bouygues one biggest gains on the stoxx 600. out with earnings that beat numbers. they confirmed their outlook in their mobile unit. they added customers, which is pretty big considering they are the smallest french mobile company. could be adding to the stock gains this morning. dansk a bank down .4%. departmenteasury money laundering.
under some pressure and vodafone as it downside, down .2% is downgraded by bank of america, citing competition from the likes of italy and spain, as well as citing the depreciation of the turkish lira. matt: thanks very much. saiddent donald trump has talks with canada to overhaul the nafta are going well. expressing optimism the two countries could reach a deal this week. >> they want to be a part of the deal. we gave till friday and i think we are probably on track. we will see what happens but in any event, things are working out very well. prime minister justin trudeau says his government is trying to reach an agreement with the u.s. this week but says canada won't sacrifice its goal of getting the right deal. kong, bloomberg's senior international editor jodi schneider.
what are the main issues being hashed out? is this all about no? it is partly about milk, yes. that is a huge part. there he products are a huge part of the canadian economy, but also part of it is the insistence of prime minister trudeau and people in his party that there be language in the agreements, and now in nafta, that sets up panels to consider anti-dumping cases. arbitration panels. butounds a little wonky, this is really something they are insisting on and say if they don't get this, they can't find a deal. it will really be who blinks. the u.s. or canada, perhaps over this provision. guy: we've got this friday deadline. what happens if we go past it? what happens if we don't get a deal? what happens if talks don't go well? jodi: this is a deadline that
the u.s. trade representative robert lighthizer and president trump has had -- have said they want to bring this to the u.s. by friday.gress if it doesn't happen, it is unclear what will happen. it would be increasingly hard to get this through the u.s. congress, perhaps not this year at all. maybe even delaying it will hurt them because the midterm elections are coming in november. the u.s. badly wants to do this, but they are doing it only with mexico making it a bilateral agreement will cause a lot of obstacles. they want a trilateral agreement, but wilson -- canada sign off? matt: jodi schneider, talking to us about trade. still with us, maximilian kunkel , cio for germany at ubs. me ask you, as someone in
germany, what do you think about this trade agreement going on over there? is it going to create a trade bloc that further isolates the north american trade? maximilian: i don't think so. ultimately, what we are seeing is clearly a move toward more regional trade agreements, unfortunately and moving more and more away from global trade agreements but a complete isolation would be too extreme in our view. guy: what impact does it have on europe? europe looks like it is getting caught in the middle of all this. so it does have an impact on europe, but i guess first of all, we shouldn't forget that ultimately, what mr. trump wants to focus on is what is close by. on one hand, canada and on the other hand, the relationship with china. are notnd other areas of that great importance when it comes to trade. europe gets caught in the
middle, obviously, and we also see that european growth is likely going to come down from what we previously expected, largely due to further weakness we could see with regard to the your -- china story as well as the u.s. not growing as fast as we previously expected if trade tensions continue. matt: i am looking at a chart of german carmakers and this is a year to date that shows it has been a rough year for all of them. we know when we look at the stoxx 600 that automakers -- not just german -- have had a tough time. are they going to benefit or lose out from this trade deal? is he going to affect the way german carmakers trade because every time we hear something about a new nafta, we see moves in these stocks? maximilian: the first thing we have to think about here is is this only about trade or
something else? i would say it is also about metals emissions in germany, had an impact on the auto sector. when we are looking at trade, of course it has an impact. if you are looking at german automakers and the eight -- amount of cars produced in germany, it is only 34%. the rest is being produced largely in china but also the u.s. and other parts of the world. anything happening over there is really impacting them. matt: hillary is our chart master here. she is in charge of all the charts and she is on my case all the time about colors. she has colors we have to use, but i change them a little when i am talking about cars because i have to make mercedes silver. that is their color, the same is true of bmw. the bavarian blue. only thing in, the could come up with is a pink fuchsia.
just to explain. sometimes these colors correlate to very important racing history. guy? guy: i think i can just about see her. she is standing up and shouting at the screen as you try to mess with her models. , cio forn kunkel germany at ubs global wealth management will stick around. will france and germany work together for a stronger, more independent europe, but does berlin agree? berlin, not on the same page as paris when it comes to the future of europe. we will discuss that next. this is bloomberg. ♪
matt: welcome back to "bloomberg markets: the european open." quickly looking at the world map, you can see there is not much going on throughout europe. blue means there is not above or below 1/10 of a percent in those countries. spain, france, italy not showing a lot of action. down .6%e u.k. ftse and the dax in germany, .4%. today is the day to look for big moves in european equity indexes. we do want to talk about europe, guy. guy: we always want to talk
about europe. specifically. guy: i know. politics continue to dominate what is happening. talked about italy a great deal. we will talk about brexit over the next three months as it starts to get quite interesting, and we've got the 5 -- german finance minister peaking at an event in frankfurt, giving the keynote address. this is the conference on the transformation of the financial industry. i'm sure headlines will be breaking but he is currently speaking. that seemsis tension to be growing between the germans and the french. bloomberg spoke to the french finance minister. he told us of his need for the country to work closely with germany. for anre fighting independent europe.
an independent europe means you sod to have financial tools countries will be able to make trade with whatever country they have decided to choose. that is exactly what we wanted to build. it is difficult. it will take time while thinking of new solutions, but i am convinced that at the end, hand-in-hand, france and germany will build a stronger europe. an independent one. one that will be able to face the difficult times we are facing now. altogether, we are stronger. france and germany, and all the 27 member states. when we are together, we are stronger and we are independent. finance french minister. pagelooking at the front of the international edition of the financial times.
germany calls on macron's eurozone budget proposal. feels a little different, doesn't it? globalian kunkel of ubs wealth management still with matt in berlin. our germany and france on the same page? probably more on the same page than other members of the european union, as well as the eurozone in broad terms. in the think they are negotiation phase, trying to pull things together, but also collaborate rather than trying to confront each other, which is what some other members of the eurozone are doing. matt: speaking of the other members, i've got the italy-germany 10-year spread and it looks dramatic from the chart. now, we are almost up to a 300 basis point spread. oruld investors be worried does this present an opportunity for the return we are always chasing? maximilian: we have seen quite a
few clients who have to invest in european sovereign bonds because they see it as a buying opportunity. it clearly reflects the confrontational stance we are likely to continue to see from this newly formed government in italy. don't forget, if you are looking at past experiences such as -- populist parties seem to further gain domestic support if they are more confrontational. we are likely to see an easing over time and that is why particularly continued ecb support thomas some seat a buying opportunity. matt: what parallel can you make between greece and italy? greece is the lehman brothers of the troubled european peripherals, surely. we have learned our lesson. we aren't going to let them get that close to failure again. also, a different scale in terms of the problems. maximilian: i wouldn't make a comparison other than the
political element i mentioned on how populists act in certain cases. proceed ines europe an environment where it is three years behind the united states. it will struggle to raise interest rates. it is held together by extraordinary monetary stimulus generated out of the ecb. is europe working? majorlian: so, europe has fundamental problems. you are thinking about not fully functioning baking union, no fiscal union, labor is not as flexible as capital and on the other hand, you have any cb which is setting rates -- an ecb which is setting rates for diverse member states. what we are also seeing is europe is growing quite nicely above trend. for example, if you are looking
matt: down under. the aussie and kiwi take a data shows central-bank staying on hold a long time. the peso is pounded. the president surprises the markets and his people with news argentina needs money from its $50 billion imf credit line as soon as possible. plus, the turkish lira and indian rupee slide sharply against the dollar. good morning and welcome to "bloomberg markets: the european open." matt miller in berlin alongside guy johnson at our european headquarters in london for what feels like a special fx edition of the european market
open. guy: yeah, kind of a struggle today, isn't it? the corporate news is there. back end about this -- of august. things will be exciting in september. some corporate stories stand out. up 5% on better consumer numbers, moving the stock to the upside. beltway trading a little higher out of u.k. as you have indicated from an equity market point of view, we are not going anywhere in a hurry. the market is down .4%. let's talk about the bond end of the market. a few ex-dividends in there worth paying attention to. hammerson is one of them, gam continues to be a story. the unwind is having a portfolio affect spreading out from gamp. a swedish company who does medical equipment, the numbers
were mixed this morning versus guidance. guidance is staying where it is at the moment. iliad down 4.8%. let's get a first word news update with sebastian salek. sebastian: donald trump has had talks with canada to overhaul nafta are going well, expressing optimism the countries could reach deal this week. canadian prime minister justin trudeau said his government is trying to meet the same deadline. his foreign signaled talks are progressing well. >> i feel both parties are coming to this stage of the negotiation with a lot of goodwill. he certainly, that is what canada is bringing to the table. we understand each other's position and what both sides need very well. sebastian: donald trump has accused china of undermining u.s. efforts to pressure north
korea into giving up its nuclear weapons, indicating a trade war with aging is starting to exacerbate geopolitical tensions. a tripsident called off to north korea by mike pompeo, saying there hasn't been enough progress in talks aimed at denuclearizing the korean peninsula. the u.k. government has told the eu it must compromise on its position on theresa may's plan or risk a no deal brexit. the pound rally to its highest level in three weeks yesterday. same time, france's finance ministers said britain couldn't have its cake and eat it as it with the eu. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more .han 120 countries this is bloomberg. guy: so much cake. i wonder what the exit cake actually tastes like.
it has been something of a selloff during august. the peso, down 7.3% to a record low. the imf will consider argentina's call to spread this first meant -- disbursement. the televised address took the traders and the country and little bit on the hot -- hop. bloomberg's emerging markets reporter joins us now. did it catch everyone by surprise? could a guesswork -- get worse from here? >> it could. if you look at foreign markets, option traders are still pessimistic on the peso. the happened was that president tried to pass this off confidence but the market took it as a sign of desperation thein attempt to delay fiscal pruning the government
has to engage in. it sent the exact opposite messages that he was hoping to send. between the rest of emerging markets is really low. is getting isolated and being targeted for a selloff. things could get really ugly now. matt: you know, i would ask what a country liker argentina or turkey to restore confidence in their currency, but the list is long and i am guessing a lot of it will just be time, right? srinivasan: absolutely. made of promises have been in turkey and argentina and now, it is time to see some action. particularly on the fiscal front. the problem in both of these beyondes has gone monetary policy. the focus is on fiscal policy. they need to cut spending, raise
revenue and bring balance to the .overnment finances the dichotomy between the hawkish monetary policy and this tendency to promote growth with looser credit and so on from the government has kind of created this structural imbalance which will not go away very soon. at least the market wants to see some political willingness to act. neither country is showing that and that will be the breakthrough the markets are waiting for. guy: can we talk a little bit about the indian rupee? the chart is quite amazing. it is a very aggressive move and it just continues. how much of this is about the broader em story? how much of this is something the central bank can control through intervention? it is not something we talk a lot, but maybe we should talk about it more. the macro economy. are thegoing on and
authorities comfortable with what is going on at the moment? srinivasan: both the government and central bank of india, -- rupee does move sharply like this. demand, and so on. the underpinning logic for the selloff is dollar strength. what has happened is we are focusing so much on turkey and argentina, idiosyncratic stories, and that is distracting from the big problem, which is dollar strength. india got hit because of its current account deficit and its dependence on oil imports to some extent. but it is an economy that is growing and a strong economy. imports are its powered by reserve. the leader in india has a reputation of being a reformer. he is more communicative.
mood, not toferent be confused with argentina and turkey. if anything, it makes the indian rupee more attractive going forward. matt: thank you so much for us. bloomberg's srinivasan sivabalan talking to us about emerging markets, especially currencies which are one of the big themes of today's market. still with us, maximilian kunkel , cio of germany at ubs global wealth management. dollar strength on these pairs as most are priced this way. i think this is the most interesting thing to take away from it. this is the bloomberg dollar index over the last year to date and you can see the strength we gained. we all felt that. since august 15, we have started a down trend and it looks like that may step -- stick. maximilian: if you look at what has been driving the dollar, it
is not rate differentials, it is clearly the growth differential which has opened up year-to-date relative to other economies. as we are starting to see that growth differential slowly , we more thanking likely see a consolidation period and the dollar weakens against other currencies because that growth differential is starting to narrow. guy: is now the entry point into e.m. or is there a better one coming? we talked at the beginning of the show about this massive outperformance of u.s. equities, particularly against emerging markets of late, which has been unusual by any standard. what we are seeing at the moment is this is a good time for clients that sit on the outside position of u.s. equity performance to rebalance some of that toward emerging markets because the long-term story in emerging markets continues to be a solid one.
in the short-term, dollar strength as well as uncertain the about trade may weigh on emerging markets. anger-term, we believe it is very important element in any portfolio. matt: i want to bring it back to this chart. it is amazing we see u.s. stocks at an all-time high, trading 18 times future earnings with the strength of the dollar. european stocks come only trading 14 times earnings. why this differential, and will they come back together? maximilian: it is quite unlikely it will come back together because the differential is due to the sector composition of the two different indices. on the one hand, the united states is long disrupting sectors and europe is long disrupted sectors. have a massive divergence in return on equity development over the last few years, which has favored the u.s. versus europe. matt: i hope hillary doesn't mind the chart color issues, but
it is obvious that europe has to be blue, right? japan is red and the u.s.. maximilian, thank you. maximilian kunkel, cio for germany at ubs global wealth management. he will join us on radio, so our viewers can turn into listeners on london dab digital at the top of the hour, or type radio on the bloomberg. guy: absolutely. let's talk about one of the most read stories, africa's largest mobile phone company, the stock is down to a nine-year low. nigeria's central bank has ordered a refund of 8.1 billion dollars. it alleges mtn illegally moved money out of the country. mtn refutes the claim. we are joined from nigeria. paul, give us background on this. has: this is an issue that
dragged on for a while. lawmakers' bank and allegations against mtn allegedly repatriating money about 2 -- first serviced two years ago and lawmakers cleared mtn last year and most people thought the issue had been buried. but this statement from the central bank and the eu's very powerful language saying it was going to "slam" the banks that out these $8.1y billion of transactions it says were carried out illegally. paul, which banks have the biggest exposure to this? paul: four banks are implicated. citigroup, standard chartered,
the local unit of south africa's standard bank and diamond bank, a local entity. the fines come to about $60 million. the biggest issue is what happens with this $8.1 billion the centralim that bank is saying has to come back into nigeria. it is a bit unclear who is meant to provide that cash. be mtn, as if it would but the central bank hasn't said that. there are questions that have been left unanswered in the central bank statement. great stuff. again, interesting questions that need to be answered but a massive market reaction. paul wallace, joining us out of lagos. movers in europe. here is annmarie hordern.
matt: all right, imo going to pick it up from there. we are having technical issues, but will get you the stock stories with anne-marie very soon. later today, i want to point out we will be speaking to berkshire hathaway's ceo warren buffett. you can see that interview live at 4:30 p.m. london time with the oracle of omaha. this is bloomberg. ♪
guy: welcome back. the stock of the hour this thursday morning, bouygues out of france. i think this is stocks of the hour because we have bouygues on one hand and iliad on the other. trading to the upside, one of the best performers in europe. 4.6 percent. it is adding customers to its telecom business and that is the big takeaway we are seeing this morning. 448,000 new customers added in q2. it is also reiterating free cash flow of 300 million euros next week. the construction business isn't doing too badly, either. you can call it a conglomerate. what is interesting is we saw a little earlier on, bouygues is
trading higher. iliad, a competitor seems to be taking market share away from, is a big loser this morning. that is driving iliad to the bottom end of how we see the market trading. bouygues is trading on decent volume and outperforming peers. there aren't many buyers out there. versus two cells. -- sells. matt: good to get a french stock of the hour. the themes moving the markets today with dani burger. what have you got? dani: looking at our stw. have a down day, but we lot of three month target price change percent and momentum, as well as rsi. these are long short strategies. it is the short leg carrying these higher. stocks that haven't had a good price change falling today,
helping these factors. on the downside, let's here because the short leg is helping boost some of these factors and you aren't going to see that short leg benefiting. .4%, ad return down sentiment indicator. value also down, continuing to decline over the last few months. want to take a look into the charts to focus on another strategy i particularly have been interested in as of late. that is long and short volatility strategies. these strategies are pretty interesting because this will be the first year both sides of the volatility bet have colin, or at least are on pace to fall -- fallen, or are at least on pace to fall. the last five years, we had a consistently calm market that helped volatility strategies. short volatility doing poorly in february and long volatility getting crushed in the remainder of the calm market.
goldman says that environment is going to persist, making these strategies to -- giving these strategies a difficult time for the remainder of the year. guy: dani burger, and our markets and quant's reporter. next, battle of the charts. sebastian salek playing annmarie hordern. look at that. summer is back. the problem is, all the tourists by big ben are a little disappointed. this is bloomberg. ♪
guy: welcome back. it is that moment. battle of the charts. sebastian salek going head-to-head with annmarie hordern. a latin american vibe running through all of this. sebastian: argentina is the big story today but i would argue it is so much more than the peso and this is the best way to show it. the white line is argentinian bonds, spread versus treasuries. at the highest level now since back in december of 2014. also crossed the ecuadorian spread for the first time since 2015. this shows what is happening in argentina. it shows why the president is asking for quicker access. this circle is where he took over. the cost of argentinian bonds
have only gotten higher through that time. thes trying to fend off second -- recession his treasury is warning about and that is getting more expensive. you are talking about argentina, the peso is the only game in town. this is the one-day percentage, the second time this year we saw the peso plunge. last time was in may. this is on record since the peso was floated in 2015. this as the president is asking for more imf reimbursement in order to fund the 2019 budget. it was meant to bring a calm to investors, but back clashed in his face and saw the peso plunging. it will be interesting to see what it does today. out in thee pointed studio, i think it is the charts that win this one, which will cheer up hillary clark. i will give it to sebastian.
because of what we heard earlier on from mark cudmore, which is that argentina is an untradabl markete and the comparison with what is happening in venezuela and some other markets, ecuador, kind of makes sense. it highlights the fact that argentina is a frontier market and the fact that you can compare one to another shows it is a tough place to be. as we say, the charts are the winner. but sebastian wins today. absolutely, but sebastian has done a good job presenting that chart. not that anne-marie didn't, but the presenters also have a big hand in what you think of the chart they put on the screen. you can access those by looking at gtv go on your bloomberg. we will put both charts, not just the winner. what i think is a fascinating
chart, really a beautiful chart. this is german unemployment going from 2012 till now. declineteady and stable in german unemployment. the reason i show you, we are getting breaking numbers out of the german economy. nosek prize, down 5.2%. -- no price to anybody, down to 5.2%. awe of this chart. we will be speaking to credit suisse' ceo tomorrow at 4:30 london time. you have to get up incredibly early if you want to see this interview, unless you are living in a different time zone. by the way, speaking of 4:30. in the afternoon, we will be speaking to berkshire hathaway ceo warren buffett. you can see that interview this
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