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tv   Bloomberg Markets Americas  Bloomberg  October 1, 2018 10:00am-11:00am EDT

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guy: and i'm guy johnson. ge boots its former ceo is the company says it will miss it profit guidance. let's go to abigail doolittle. abigail:. we are taking a look at the ism manufacturing numbers for the month of september. the survey had called for a reading of 60 but came in at 59.8. a very high reading despite the small miss. anything above 50 says the economy is expanding. not a lot of influence in the major averages. the buyers are out in this -- on this monday. it's the best day in about a week and a half on the news of the new nafta package and a lack of d.c. drama. investors are bullish.
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underlying the position is bullish, eight of the 11 sectors are trading higher. it is a risk on day as a start to the new week. let's take a look at the s&p 500 automobile sector with gains up 1.5%. it's being helped by ford and gm. looking at tesla, is not a component of the s&p 500 at a big rally after friday's decline. it do with the fact that elon a lawsuit with the sec over his going private speech but you on muska and pay a $20 million policy but this removes and overhang of uncertainty. this has been an interesting
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chart. despite the volatility over the last two months, it has been bullish all the way. once the resistance here was taken out around 250 or so, we have a new range that has held on each time. it suggests the entire range could go to the upside with a $420 per share. we will see whether that happens. the lower moves have been a buying opportunity. the bulls are in charge today. vonnie: thank you. general electric shares are surging after the company name dolores -- named lawrence culp as ceo and president. he was in acquisition expert. will he have to be a divestment expert now? already have a plan and
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pray -- in place that's aggressive. they're looking to spin off their health care business and and divest in some energy we could see some other device to chairs. at this point, i think it's primarily an operational story like how you get these businesses like power businesses performing better to the company can start to do well again. >> that makes it sound straightforward. who iswe've got a ceo out on his year after a year. why is flannery gone? happens to make this take place? share prices were down pretty hard. >> that's what it boils down to is that the stock price went down because the communication with the street has been poor. with the differences
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larryculp is that he is a proven act -- proven operator. he had a good track record at daniher. he has already operated guest displayed generational -- operator capability. up the this may wake ratings agency given that ge may have to change its capital structure. >> it's totally strange. today's announcement that thickly with a lack of earnings and cash flow for this year will make them reassess their business risk and perhaps take it down a notch or put a credit watch on it. with that be an
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opportunity for people who like to hold the debt of companies like ge? at the bonds, i would look at the full capital structure. it's already trading tight and there is no opportunity there. about thetalking bonds that are 20 years or 30 years as preferred where they trade quite wide in terms of relative, about 60 basis points or even high quality ddd. if one is bullish, that would be a spot that would be interesting. ge worth more than its current valuation? does a parts valuation on this business? does it have a conglomerate discount and how big is it? >> a lot of people did it back before we got the breakup announcement and the general conclusion with that -- was that
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this is not your typical story where all of these pieces will be valued more than the whole and you just break them up. this will require a lot of hard work. there is a lot of execution and things that have to go right. ge needs to help their business to retain a high valuation and get good prices out of his baker hughes energy shares. it's not a hell mary that will save the company. this goes back to you need to run these businesses better. one thing that has been most shocking is the degree of the lack of business plan and the opportunity to cut cost. guy: when we think about the company and you look at the business,rts of the these are businesses that need to be run better but what about the gas turbine business? are there specific issues that
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investors are discounting that will provide problems going forward? is not easy but where are the weaknesses right now? i don't think breaking it up as a possibility when you look at their capital structure. on top of that, their liabilities are the largest at 20 $9 million and they have whatever off-balance-sheet risk in terms of leases. to terms of leverage so breaking it up is not a question, it's about fixing it but when you look at that, it boils down to the power business where they take a $23 billion write-down today. they need to have more disciplined there and move toward more of an aftermarket is this profile which is what larry daniher when he was there. caroline: vonnie: the stock has taken a massive beating. given that this may
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impact >> the dividends? i think the dividend was already at risk. when ge announced the plan in terms of thinning out the health care business, they have said they would identify dividend policy for the remaining company at that time those actions were taken and i think that was interpreted to mean there will be a significant cut. some of these credit rating concerns into account and the right down on the austin deal, that power write-down will play into overall notions of credit worthiness. that raises further questions about how much cash there is to go around and i don't know that the dividend be the priority for new management. vonnie: we will wait and see. thanks to both of you. guy: let's take a look at first word news. president trump has
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gotten the trade deal he wanted. the u.s. and canada have agreed to scrap the 24-year-old north american free trade agreement and include mexico in a three-way deal. calls forchanges it u.s. farmers to have more access to canada's dairy market. experts willn auto be affected by u.s. tariffs and foreign cars. the president will make remarks in the trade deal less than an hour from now the white house. you can watch that beginning at 11:00 a.m. new york time here on bloomberg tv. in china, manufacturers are feeling the pain of that escalating trade war. one measure of new export order fell in september to the lowest level since 2016. the manufacturing purchasing managers index came in with an estimates. theresa maye mister is preparing to make a significant new brexit offer to the european union. the talks are stuck in how to avoid the need for custom checks on the border between the u.k. and ireland. u.k. would back down on its opposition to a check on goods moving between the british
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mainland and northern ireland. in return, the entire u.k. would stay in the customs regime. the nobel priest -- p prize in doctor atas gone to a the university of texas. they were honored for their discovery of cancer therapy. global news, 24 hours a day, on air and on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. guy: thank you very much. up, france's largest automobile maker will join is to talk about the impact of tariffs on his company and we may talk tesla. the ceo is coming up, this is bloomberg. ♪
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guy: live from london, i'm guy johnson. vonnie: this is bloomberg markets. i'm vonnie quinn. theresa may preparing to make a brexit compromise on the irish border. that's according to a senior government official. this story is really moving sterling early in the session. let's get some details. let's go to the tory party conference in birmingham. over to you. this story around ireland is moving the gilt market. does it make it easier to do a deal on brexit? that's the question. let's bring in the executive chairman of the resolution
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committee. ireland,ew flow around this is just breaking news. do you sense it is possible to get a deal? this takes a slightly closer to getting a deal. does that still seem feasible? there are some very serious ministers who would still be committed to get some version through and they will have to further negotiate something in brussels. they have only done the first half of the process and then have to bring into the house of commons which would be even trickier. people around her are still trying to get some results. >> the chancellor was talking about getting a deal on brexit, they said there would be at brexit dividend based on
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agreement? maybe paying down debt and more money for the public. damaged and we have not run as rapidly as we should have done given the overall problems of the economy. the chancellor could be saying is given all the uncertainty, anything that removes the uncertainty and showed we have a would be better than the current situation. something else he referenced was that brexit did not happen in a vacuum. he looked over the last 20 years and said when you look at the market economy, there is a difference between the way people thought it would happen and the way it had. is that part of what you're looking at? absolutely, it's shown that
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especially since the crash, wages, median earnings, have not performed at all well. the problem began before the crash in the parts of the country where the economy is not doing well and one of the reactions to brexit have been to force people to contemplate that this does not affect people the same way across the country. it would be great if we can get back onto a domestic agenda to tackle that sort of problem. >> is it difficult for other things other than brexit to get into u.k. policy? do you get the year of people the same way especially in the shadow of brexit? as soon as you go through the efforts like we did are the livinglor, you realize
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standard and low-paying jobs and better prospects for younger people are spreading around. ways thatthe kind of you tackle the grievances that lay behind the brexit vote. i find that government and opposition want to hear from people like that. >> where coming to this conference with a lot of talk about division, more than we have had the past. you must be able to put this into context for an international view. >> it's inevitable that a party conference becomes a kind of beauty parade of leadership candidates. that is part of the politics of this week. on the other hand, i can sense a recognition that domestic policy inters and i very much hope the main interventions for
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ministers, we will hear more on domestic policy. in british politics, it's a very turbulent time because brexit is a crosscutting political issue in labor and conservatives. there are people who think it's and peoplehing to do in the conservative party think it will enable them to boost capitalism and others who think the eu is a high economic risk but that doesn't fall neatly on party lines. it makes party conferences more turbulent. is boris johnson going to go for leadership? >> i think he's really very active. members of the conservative party are brexiteers. he has a fantastic line of direct communication.
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he's very out and active. >> thank you very much for your time today. executive chair of the resolution foundation. thank you very much indeed. for the irish issue, it's swirling around the birmingham conference. compromiselity of a means the ftse 100 is trading the u.k. real estate stocks is trading down. the british prime minister says she may put in a for attacks on foreign buyers of british property. we will talk about that in this program. this is bloomberg. ♪ this is bloomberg. ♪
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vonnie: live from new york, i'm vonnie quinn. in london, i'm guy johnson.
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this is bloomberg markets. love is surging today, up 16% now after reaching an agreement with the sec. the settlement states that elon musk must resign as chairman within three years as the company pays a combined $40 million. the two independent directors and a chairman, how doesn't and a pen a director and the chairman get chosen? it's a regular process were the board will have to find candidates and then they will get a vote at the annual meeting and confirm anybody who will be up for reelection. it's a typical process. it's typical for the shareholders. this could be the perfect scenario for them. and thel keep elon musk
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power of the brand name his creativity and his vision but you might get somebody sitting on his shoulder to make sure he does not do these crazy things privateking about deals. on paper, it's a perfect deal but in practice, it might be different because you still have to get these new shareholders in have to decide who the chairman will be. it is just promoting a director any of busiest and board any of the or existing board members, it might not change anything. they have not been able to rein him in. how do these current directors, given they are so on the side of elon musk, they have not just been able to rein him in but they are supportive of him. will they end up choosing
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another elon musk type? >> yes, and that's the risk. at toughnt to get outside director who will rein him in, if you do that, it has to be somebody elon will listen to and respect. the chemistry of moons up -- who ends up getting chosen will be important. is, will elontion musk listen to anybody? is there somebody who can do that question mark has he learned from this experience with the sec? in addition to this settlement, we had him in emailing that they could be profitable this quarter and may need to make a hard push and they are close to profitability and is putting that out in an email. he's talking about profits so he did not put it on twitter which is good. he's still putting it out there and a lot of emails leak out of in the background
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and keeping things under wraps which is what the sec wants. anybody want that jake? ?- that gig i suspect it will take a while to change the behavior you have been talking about to gain trust of others within the company. on would you want to take that responsibility? >> that's a good question. you have seen a lot of executive turnover at tesla so everyone -- every time they hire someone new, i ask the same question. leave all the time after a short tenure and the answer is, as dennis tesla is an exciting company in the stock could be a big moneymaker. someone may say i will be in the middle of something exciting, a revolutionary disruptive company and will work with someone like elon musk who people regard as a brilliant genius and it could be a massive payoff.
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the downside is exactly would you are getting at which is you are working for the ceo who does not really like working for anybody else. you will have to try to bring in somebody who might just go off after ambien and red wine and tweet something at 10:00 p.m. at night. it's a job it's a tough job with a potentially big reward. guy: we will have to leave it there. talking about tesla. you wonder why the sec settled as quickly as it did. maybe there is still more to come. this is bloomberg. ♪
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♪ guy: live from london and new york, i am guy johnson alongside vonnie quinn.
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the first day of the fourth quarter. let me bring you some highlights from around the world and europe. i just want to highlight what is happening today. bouncing back, but not recouping the massive losses. early in the session, it was a little higher. the cable rate is the exact opposite. the pound is picking up pace. we see the possibility of some sort of copper mice coming out of london on the irish border. that sent the pound higher. there are a bunch of other reasons why. the turkish lira also starting up on good form. up by 6.1% against the u.s. dollar, which is sinking. i come back to the reasons why the market is low in london. easyjet is trading low. trading down by 13% today. also lucky for the irish with that 13 number. they have issues with oil
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prices, labor, that is for easyjet as well. all of those big u.k. housebuilder trading as well -- u.k. housebuilder's trading as well. vonnie. vonnie: it is time for a bloomberg exclusive. has a show car that resembles the coop from 1965. carling cannot is standing by. i am very happy to be joined citron.eo of thank you so much for being with bloomberg tv today. we have donald trump speaking 20 minutes from now, that this new trade deal between the u.s., canada, and mexico will replace
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nafta. encouraging for psa to come back by a canada? >> we are now preparing for a u.s. come back, and of course this is part of the framework that we need to know before we make the final decisions which we intend to do within the next few months. so we are eager to listen to president trump on this matter, and of course we are darwinian. we adapt to the conventions in which we operate, and of course we will adapt our strategy to the conditions set by the u.s. administration. we are eager to listen to the president. >> you said that psa would come back within the next 10 years. could that accelerate your plans? carlos: i do not think it will accelerate, because we want to fix it properly. we want to learn about the u.s.
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consumer expectation, and we are already operating in terms of mobility services in order to learn and understand this market as precisely as possible. we will go step-by-step. we are now preparing what needs to be done in terms of manufacturing. we have already started to prepare the engineering of our products to the u.s. regulation-compliant. it is all under planning. we need to synchronize the different parts of this business model to make it happen, and that should be done within the next few months. >> do you see relief in the short-term -- we see relief in the short term. how will the newest volley of tariffs affect your production or prices? most of oury, production is for the european market in china for the chinese
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market. of course there is some cross manufacturing across the world, but we think we need to produce our costs close to the market where they are bought. we believe manufacturing our cars nearer the final destination makes sense from a business model and environmental a customer and from expectation standpoint. it is quite natural to do so. for a global company like ours, we are very sensitive to terms of wealth creation worldwide. it is better to have lower tariffs than higher tariffs. it creates less attention and greater collaboration between communities, but as i said, we are darwinian. we will adapt. >> do you think you will be forced to increase prices on some models? experiencedlready
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this kind of situation in other parts of the world. areinstance, when we selling cars in latin america most of them are sourced in europe. we constantly adapt the pricing not only for variations but for tariffs, so we are used to adapting. the final consumer is going to be the victim of those price increases, because our job is to make our company sustainable. that means ensuring that for each project we launch, we make reasonable profits. there will be some adaptation on the cost side as well as the revenue side. >> you are showing some futuristic prototypes for -- forc prototypes electric cars here at the paris car show. will there be a bigger market for this, given the difficulties encountered by tesla at the moment? carlos: we see there is a strong
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correlation between the wealth of each country and the market share of electric vehicles. we see that electric vehicles are developing in countries where the gdp per capita is reasonably high, which means that we all need to recognize likesustainability is food -- it is just necessary. it is something we can see. there is a strong correlation between the gdp-per-capita and the market share. >> what is your take on the difficulties of tesla? do you think that elon musk that takingtweeted the company private was a mistake? carlos: it is not for us to the ceo of aing big company like psa means we have to take responsibility, and
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there are rules we need to respect. industry,ghly complex highly regulated from many different directions. and of course, being knowledgeable about those regulations is part of our job, and any of us can face challenges. as human beings, we can make mistakes. that happens. we need to move forward. iran was youry, biggest foreign market. you had to pull out of iran over the summer because of u.s. sanctions. do you now want to include this new barter system in order to go around dollar transactions? is that something you will use to sell some cars in iran? carlos: i think it is good for europe to have a very clear position on this matter.
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of course being a european company, we have to take the best out of it. at the same time we need to recognize that europe so far did not have a very strong face in this matter, and it is better that we wait for this to happen. if that happens we will decide what we can or cannot do. the initiative is on the european union's side. , thank you sores much. psa.s tavares, the ceo of very interesting what he had to say about the new trade deal between the united states, canada, and mexico. bonnie. vonnie. began: garrett motion
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trading on the u.s. stock exchange today. we are joined by ceo and .resident olivier are you disappointed by the trading in the early part of today? excitingit is very day. it is a recognition of a company that can stand on its own feet moving forward because of our maturity and operation. gpx no longer has the half of the honeywell balance yout behind it, but what do plan on doing to convince shareholders that you can, indeed, aspire to great things on your own? we need to recognize
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that we are a technology company. now have even more opportunities to get our story moving forward. where not the classic auto supplier. we have been pioneering technology for the past 60 years, working on turbochargers. olivier, talk me through how the business is going to evolve. we have been talking of a lot about tesla -- we have been talking a lot about tesla. they have better cars, reliability, all of the things that will be the future of automotive technology. how does a company like you make the transition? how quickly can you make it? olivier: for us as a company, vehicles.ll kinds of
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it is great for us because the will come from hybrid vehicles. that is fantastic for us. it is an opportunity to put new technology on those vehicles. i thinkg to batteries, it just shows that there is a cross issue for the time being and we will see huge growth for the industry. the vast majority of those vehicles will be internal combustion engine. guy: how quickly does that happen? how quickly does the powertrain get electrified? make co2you can regulations by just putting a little electrification on a petrol powertrain.
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10%? 20%? 30%? the quickly does that process unfold in terms of coming from a little hybridization to a lot of it? olivier: so when you look at the 70% more once we hit or less hybrid vehicles, that is a big deal. the speed of the automotive industry is a big deal, but we are moving really, really fast. i want to ask you about today's story. has been named ceo of ge. what do you make of that, and will you have competition to reckon with in terms of turbochargers? olivier: i will not comment on ge's particular issues.
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i want to ask you if you are disappointed that the stock is trading down 7%. where do you feel the fair value is or this -- for this stock? olivier: we have a lot of churn into investors on the first day of trading. we have been selected to be part of the s&p 600 small-cap, so we willof trading. something settle down as we announce more about the business. guy:business. olivier, can i talk to you about supply chains and trade and the deal between mexico, the united states, and canada? how big of a deal is that for your business?
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you worried about how supply chains will be affected when we see how things are going? what do you make of the deal done with mexico and canada? olivier: this is obviously something we are following very closely. when you look at us, we are a global factory -- we are a global company. we pretty much produce in the region and for the region. producing in china for china, south america for south america, europe for europe. so far the impact is insignificant, but we are obviously monitoring very closely the diplomatic implications. olivier rabiller, thank you so much. the president is going to be speaking shortly.
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breaking news out of london. the royal mail. people are putting letters into those post boxes, and royal mail is angling for a major restructuring. 500 million pounds and 550 million pounds. the stock going lower on the back of this. 6.9% is a pretty decent sized move. more on what is happening in the european markets in a few minutes time. this is bloomberg. ♪
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♪ 42 minutes to the european
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close. live from london, i am guy johnson. vonnie: this is "bloomberg markets." president trump is expected to make comments from the rose garden at the top of the hour. the last minute terms of the trade deal setting up ratification of a new nafta, so to speak. coy, whoned by peter nabe conference. peter,e the differences, between nafta and this new agreement? : the differences are not this indoor miss -- are not that enormous. how therd to see
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changes that it been made will justify such a radical reappraisal. there are changes. one of the big ones is that more auto content will have to be from north america rather than outside of the other countries to qualify for free protection. a bigger share of which have to be made here. one other one that is important is chapter 19. this is something the u.s. wanted to get rid of, canada wanted to keep. canada one on that. there were a series of compromises that amount to a more modern agreement. overall, i would say a somewhat better agreement, but not dramatically different. note peter, given
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the president's language about nafta, this sounds like a win for canada. basically nothing has changed. peter: there are some things. canada made the dairy concession, but you are right that canada got would wanted in -- got what it wanted in the resolution of the dispute mechanism. another thing it did not get was, trudeau hoped trump would remove the steel tariffs. he did not do that. it is the subject of ongoing negotiation. there isuto tariffs, some carveout for canada and mexico. if there are new tariffs around quotarld, there will be a allowing mexico and canada to continue shipping cars to the u.s. at the current tariff rate. we will beeminder,
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taking president trump's comments at the top of the next hour from the rose garden. looking forward to hearing what the president has to say on this looking forward to hearing what the president has to say on this very subject. but us go to the cme. -- let us go to the cme. we are into the fourth quarter. let us talk about oil prices. what is the set of going into the fourth quarter? how is the market position? >> i think the market is position for higher rates of energy. we have seen a nice increase in energy prices since the end of july. it is been a steady increase. supplies are coming down just a little bit. recounts are flat. supply issue is going to allow prices to carry
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higher into the fourth quarter. going to get to $100 on brett? >> yes. i am not sure when. target is $90, and that is the end of the range we saw in 2014. we have a shot at $100, but that is six months off or so. of out terms of the kind of the money stuff, how far up our people positioning? if i think oil prices are going higher, if i want to buy out of the money calls on energy assets, where is the market going? paul: it is starting to cluster at the $90-$100 area. we sought tons of articles -- we saw tons of articles talking about action pricing. it is at the $100 level as well.
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expectation is that we get to $100. the disappointment might be once as we all know, demand goes up the supply begins to show up. it will be tougher to get to $100. guy: in terms of the position what arei and brett, we going to see going into the fourth quarter? widerthat has been going for a long time. we have supply issues in the united states, and opec has done a very good job of controlling supplies to this point. so we can see that continue to be wide, if not get wider over the next three months to six months. guy: i am sure the president is paying close attention to all of us. paul nolte, thank you for
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joining us. vonnie: the stock of the hour is normally a bank -- nordia bank. there are they have made it clear that it is all about getting a level playing field. how big of a piece of news is this, kim? good afternoon. it is two pieces of news today. we've not had so much excitement in nordic banking since the end of the quarterly crisis. huge deal for both sweden and finland. the reason for that is, helsinki in the eu. this becomes another systemically important bank for the eu to manage, but it also
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has an asset base twice the size of finland's economy. how comfortable are the fins with this? kim: i think being part of the eurozone makes the finnish more comfortable than being outside of it. kim, will people be moving their desks? will there be consolidation and headcount reductions? im: only two people are moving to helsinki. the ceo and the chief compliance officer. our thanks. we have some breaking news. further news on european banks. a standard chartered bracing for a possible slaying on iran actions. $1.5
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to bender, we're going taking comments from president donald trump at the top of the hour from the rose garden. he is set to be speaking about the new canada and mexico deal, which he has termed usmca. couple ofabout usmc days ago, and has now come to fruition after talks last night. the dow is up 1%. the s&p is up 7/10 of 1%. those comments live in a moment. this is bloomberg. ♪
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guy: 30 minutes left in the trading day in europe. from london, i am on -- i am guy johnson. vonnie: and i am vonnie quinn. this is the close of "european markets." ♪
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guy: here are the top stories we from bloomberg and around the world. trading up. stocks rise and the u.s., canada, and mexico flinch a new trade deal to replace nafta. the president will be speaking shortly from the rose garden. reengineering. ge dumps john flannery and names larry culp. stock leaving on that news. and, as london looks for a .ompromise on the irish border let's talk about where we are in the european markets. less than a half an hour to go. we are seeing a significant turnar


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