tv Bloomberg Markets European Close Bloomberg November 2, 2018 11:00am-12:00pm EDT
i'm guy johnson. vonnie: i'm vonnie quinn. i'm guy johnson. vonnie: i'm vonnie quinn. this is "bloomberg markets." here are the top stories we are covering from the bloomberg and around the world. talk of a tree do between the u.s. and china sending stocks soaring in asia. europe is still up. the u.s. is down now. the early cynics may have suggested the president was trying to talk about it as a way to get stocks rallied into midterms. if u.s. price action is anything to go by, it's not working. yes we are getting some wage inflation, topping 3%. should a december hike from the fed now be baked in? italy's pmi data shows the biggest slow down in four years. we will -- take you live to rome. let's go to the marked to show you what is going on. european markets are higher and
the dax is leading the charge, up by .9%. it was up significantly more earlier on. the dax is probably the index with the most exposure to the result,conomy, and as a up by 1%. the auto sector, this is a trade the dax is leading the charge, up bystory, up by 2% today. european autos pricing in that rapprochement between the u.s. and china. it's out yields come despite the pmi, we are moving in a more positive direction in terms of italy. is iag.r story it is the british owned airlines. sounding positive about their business going forward. the market liking that. let me highlight what happened earlier on in asia once
bloomberg broke that story between the talks between china and the u.s.. the nikkei was up 2.5%. chinese markets up by 3.6. the hang seng was up 4%-plus overnight. yuan.o saw a bid for the 6.88. it has been fascinating watching the trajectory of this story fade into the u.s. session. let's talk about that now with abigail. >> topsy-turvy after three days of gains for the major averages. we have the major averages now lower after being hire earlier on better-than-expected jobs report. that apple report weighing on major averages, especially the nasdaq. best week since march at this point on the weeks rally. the return of volatility not
entirely surprising. if we look at the s&p 500 over the last five years, we are looking at a sideways trend. that tells us a battle between the bears and the bulls. second, the range of cell does not matter, it matters how it breaks, to the upside or downside. the fact that it is at the top of an uptrend suggest sellers could be taking control. we also have the 200-day moving average starting to round down. areas of consolidation, breaking to the downside. another bearish pennant as opposed to the bottom. we could see the s&p 500 dropped to the bottom of that range, lower,2500, maybe even if the range breaks to the downside. droppingres really about 6.5%, on pace for the worst day since january 2016. gave a after they
disappointing holiday outlook. this is weighing on the apple suppliers and a big drag on the major averages, especially the tech heavy nasdaq. vonnie: on that the income of are asking a question. was the trader and rally in asia session new hope for stocks? here is how some of our guess reacted. progress ofthe approach, let's grow the pie slightly toward the u.s., that is positive. the market was not sure how that was going to go. if it turned out to be similar to the renegotiation of nafta, the market would take that positively. then we could focus on fundamentals. >> the issue is sentiment. economic reality has not deteriorated too much but sentiment has had a 180 degree turn. now with the hope of some sort maybede talk restarting,
the talks between principal and principal leader to leader at g20, the market is finally having a breather. and presidenti trump come out of the g20 locking arms, skipping out of garden -- not the rose garden. you would pay money to see that. that is not what anyone expects. probably some rhetoric around we have agreed to negotiate at some point. >> expectations are so low right now. seen asussion is positive because there hasn't been any talking up to this point. on the other hand, when you look at the nature of the dispute come is very unlikely to get a serious breakthrough anytime soon. joined now by the
amount friend, and drpm group founder. used to advise the white house. think the how you president is viewing the china talks. the asian markets today but the idea that we are getting a little closer to a deal, that we make it one of the g20 stocks roaring off of the back. president negotiates like a property deal. everything is on the table. i think he connects the reification of the korean peninsula, which china would play a huge part, with the trade talks. he uses the trade talks as a means to nudge them toward helping him remove the nuclear issue from north korea. the midterms were he knows he will lose the house, and i'm really change that in the next few days, the second half of his term has to be characterized by foreign policy victories, and that means deal
with the korean peninsula, trade deal with china. that is what he is setting the stage for. guy: short-term, you don't think the timing of this -- we have seen the news over the last 24 hours, that it's been talked about, stocks have gone up in asia. that was designed to provide a little bit of a fillip to the equity markets going into the midterms to help him out a little bit. e, but it will not make much of a difference. it is an important signal as to what to expect in the second half. you won't have a congress that he will be able to work with as he did before. towill be natural for him your event is focused toward the one thing that everyone thinks he has abandoned, foreign policy. that all makes sense, particularly if we have a divided congress, but i'm wondering, if that is the case and he tries to go to foreign policy in the run-up to 2020,
and he needs china's help on north korea, what does he give china on trade in order for it to be a wind for china? including things, dropping the confrontational hostile approach. say we haveo do is come to an arrangement. look what happened with nafta. basically, they renamed it. approach, rename it, change a few marginal brings, and then you have a deal. this is a president who is all about announcing a deal. what the substance of the deal is, that's another story. right now the market is hungry for deals on whatever. that is what he needs to do in the second half, deliver. china would at least want a rollback of some of the planned tariffs, no? >> if you get a deal, probably some of them will be.
guy: let's talk about the u.s. economy and the data being generated out of it. payrolls starting to come through. plusarket has a 70% probability that the fed raises in december. do you think the markets are underpricing the fed? >> i think the market overestimates the impact of those rate hikes. we are operating from such a massive level of liquidity, historically unprecedented. duties hikes tighten liquidity conditions, or are they just confirmations that the economy is stronger than before? i suspect they will act more as confirmations then determines to the growth picture. also, inflation is picking up. that means investors have to get out of cash. somewhere, they will go to bonds, they will go into equities. rate hikes may improve
the equity landscape, ironically. guy: we need to talk about what's happening in italy, in the u.k., and its relationship with the european union. pippa malmgren will be staying with us. let's check in on the first word news with courtney donohoe. >> as we have been reporting, mike pompeo says government will get temporary waivers from u.s. sanctions on the import iranian crude. eu nations will not receive waivers with the sanctions set to go back into place monday. the countrys receiving exemption said they would reduce imports 20. steven mnuchin says the u.s. is intent on stopping global funds from flowing into tehran. israeli prime minister benjamin netanyahu says the killing of a saudi journalist paul khashoggi was a horrendous act but he thinks the situation it's to be
dealt with in a with a dozen undermined the stability of saudi arabia. netanyahu called iran a much bigger threat to the middle east, noting israel this year took part in multiple investigations of alleged plots to attack opposition figures in europe. removed turkey from its official list of sanctions list. the treasury department lifted sanctions on to turkish officials targeted in retaliation for the country's attention of an american pastor. he was released last month after two years of confinement. heroin, fentanyl, and other opioids continue to be the highest drunkard in the u.s. in 2017 from opioid related overdoses across the country. federal officials are also concerned that methamphetamines and cocaine use are rising in areas not known to be hotspots for those drugs. global news 24 hours a day, on-air, and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries.
selloff which felt like it started with apple. just beginning to broaden out a little bit now. you have the market down by half of 1%. the hang seng was up over 4.5% overnight. to see this turnaround is fascinating. it looks like apple was the catalyst. fascinating to see him broaden out into the tech sector, broader market. us, former advisor to george w. bush, pippa malmgren joins us now, also the co-author l a book, "the leadership ab." how would you describe the italian leadership right now? >> they are a populist leadership and we are seeing this in many parts of the world. their whole position is they want to bring power back to the domestic level and not seed it. guy: will it work?
another piece of data, gdp was flat. onay we have a contraction the pmi, manufacturing sector, sub 50. biggest slow down in four years. has been the issue across the board. making money in italy is not easy. we areyment in italy, still hovering around 40% on a climate youth. the dissatisfaction they have will remain. popular as it will not go away. the question is can populism fix this? the answer is we don't know yet. they are going to try. i think markets will remain negative. the economic performance cannot become very positive as long as we are in this uncertain environment. does austerity go away, does the european project as it's been in vision, written into legalese, if not law of each country, go away? open.h directions are
it's such a controversial subject where we are now, particularly in light of brexit negotiations. i have long argued the populism to lead to brexit is the same thing we are seeing unfolding in various parts of europe, italy being the most predominant example currently. we should not be surprised if they push in the direction as we currently see of resisting the relationship with the center, with brussels, saying we want to make our own rules, have our own structure. i don't think they will turn around and take the opposite position. like thet does feel old guard is getting a role, including with angela merkel announcing her retiring from the chancellorship position. have you heard any good solutions for the border issue, which will end up being the sticking point? >> i cannot say i have.
it is a negotiation, which means the only people that know what is going on is the ones in the room. we can speculate, there are lots of rumors going around. what i do think is whatever the outcome, the british economy is not going to suddenly disappear. this idea that it suddenly sinks into the north sea,, guy, as you were saying, the irish sea, it doesn't work. this is highly competitive. i run a robotics company here in the u.k., i can see it's competitive. the structures matter. i'm just saying there will be a highly investable u.k., no matter what outcome we get. vonnie: how positive can it be? guy: if you get a soft brexit, when will the investment story be like? i'm not sure what anybody means by hard and soft anymore these days. it was like y2k, this event that ended up not happening. importantly, the sovereign
wealth fund, pension funds around the world are saying we still see a highly competitive economy. down, theg goes assets are less expensive, very dynamic, leading in artificial intelligence, strong in the creative industries. most of them don't see much movement of financial services to the continent because of the legal framework. fundamentally, i think we will see they continue to bet on the u.k. and we will see the foreign direct investment numbers not as bad as people anticipate and maybe even quite good. up a thank you for joining us. the founder of the dpr him group. g tv allows you to browse all of the charts on bloomberg tv. key analysis and save your favorites for future analysis. this is bloomberg. ♪ s is bloomberg. ♪
guy: live from london, i'm guy johnson. vonnie: i'm vonnie quinn. this is "bloomberg markets." alibaba reported results, results.ourth-quarter we spoke with the vice chairman. hitched tossarily the economy and the consumption trends because what we are doing is digitizing not only our own platform but also the traditional retailers platform, enabling our retailers, partners to capture more customers. joining us now is emily chang, who spoke with the vice chairman earlier today. there are a lot of one-time items. the move to brick-and-mortar which is squeezing margins, also regulation becoming a bigger deal in beijing. that -- is this a structural
change in the winter consumer buys things in china? emily: of course there is a lot of weakness in the chinese economy, which we have been discussing, and they opened their called talking about global macro economic uncertainty. as for the margins given the investment in off-line services, he believes those investments will ultimately pay off and turn a bigger profits. generally, the argument is nobody can compete with alibaba as a platform. iny have smaller competitors food delivery but there is no company that brings everything that alibaba does. however, they did warn about the weakness in the broader economy, future isve alibaba's not hitched to the chinese economy but something that certainly we are watching and something that they are certainly cautious about. any hints as to have a 11,
singles' day, will go? emily: they are expecting yet another big singles' day. -- it is always sort of a litmus test for the consumer. alibaba argues that chinese consumers have less debt and u.s. consumers, so even in the midst of a weaker economy, those consumers will still be spending. of course, it remains to be seen, against the backdrop of these trade tensions continuing, or as bloomberg is reporting, possibly resolving, if president trump has asked his officials to draft an agreement. vonnie: alibaba has been ramping up its exposure to businesses like food delivery. anymore plans for m&a? shares are down about a third since january. it would be more difficult, but with these companies, that doesn't seem to be a concern. emily: alibaba will continue
these investments in off-line. that is a big part of their strategy, merging the national with the international. that is something that we will continue to see from alibaba. we have to remember the chinese economy, consumer operates very differently from, for example, the u.s. and sumer. in a way there is an integration of online and off-line there that exists in a that is different from the way westerners use the internet today. we can expect them to continue to invest. certainly in their e-commerce platforms but also this big, physical retail presence as well . vonnie: thank you. stay tuned for that interview, it will be playing throughout the day. markets,heck on u.s. we are lower on all three major indices. .4%, s&p downn .6%, led by apple, which is down 7%.
you also have intel down to present. banks, really across the board. the nasdaq down 1.2%. crude oil, we got some news about the waivers for countries on iran sanctions. the eu will not be a part of that, according to secretary of state on pao. you have a stronger you want today. potential for a china deal, at least on relations. the vix is down a little bit from where it spent most of the week. this is bloomberg. ♪
futures were pointing to a positive start for europe. we then got that positive start. the dax was flying, the auto sector was a real driver of that. the dax is still up to only by .6% right now. optimism that we get some sort of a deal being done between china and the u.s. italy, we had some bad data on the manufacturing front. doesn't seem to have much of an effect on yields. finance ministers meet on monday. iag finishing the session, heading toward the close flat. they came out with a positive story early on. i mentioned that asia story. think about where the u.s. session is now, where it was. up by 2.56%. the hang seng up by 4.21%. the chinese yuan, much more
positive. coming back down again. an incredible turnaround we have seen in the u.s. session. i guess we can all probably point the finger firmly at apple. vonnie: here is the picture as it stands right now. at the vix index, lower than it's been for most of the last few sessions. still above 20. showing some tremors of tension out there. we have moved on. markets to some of the that guy was looking at -- ok -- we are back to the cross asset check. crude oil down two thirds of 1%. guy, you mentioned the asian currencies. move on to the oil conversation. since june.owest
opec increases production. american stockpiles swell. stephen schork of the short report joins us now over the phone. we heard from secretary of state mike pompeo a little while ago to reporters.ing he says the level of exports from iran will be reduced by one million barrels. that is before sanctions even kick in. what is the desired level of reductions? was the lastation time that sanctions were there against iran, we saw production out of the country -- exports cut and have to to just about one million barrels a day. waivers thato the were granted this morning, we can continue to see significant cuts in iranian exports.
they were already down dramatically over the summer to approximately 1.5 million barrels a day. certainly, i could see, even with regard to the sanctions, falling even further. 300,000 at the onset of the sanctions. vonnie: some of this was not a surprise. some of the european countries will not be among those -- >> i'm sorry, you broke up. vonnie: was it a surprise that the european union that they will not be a part of the country is having an extension? >> i think this administration put her cards on the table, so i don't think it was a surprise with regard to the waivers. the real surprise, markets that these waivers are in the offing. we had to consider that since the summer.
we had a speculative bubble in oil prices. the brent contracts for january rallied 22% from its summer lows, so we rallied during the week's demand part of the year in anticipation of the sanctions going into effect. we peaked at the beginning of last month. ist 22% rally, the market not giving back 60% of that rally, inclusive of today's lows. i don't think it was a surprise. these sanctions were well signaled in the spring. the fact that we decided to rally was just wall street going into this with a good amount of the marketing to bid higher, they got their bubble, and now that is being deflated. guy: let's talk about that bubble being deflated. we have broken a 16-month uptrend in crude. the chart on the bloomberg will show this to you.
we have broken that uptrend, now deflating. i have seen outliers but some are talking about $50 a barrel. how low do we go? >> based on the model we run, we do a lot of quantitative modeling here, we are certainly in an area where if we are going to find support come in better occur here. from a technical standpoint, if we look at the year to date, this year's lows, highs in the vti, very key numbers. numbers, 62.35. are currently below that. if we don't hold, the markets will trade on the psychological numbers. going to see the market want to break $69. our models show on the lows, oil could go down between $59 and $56 through the next quarter. i want to reiterate, if we are
band, wem a elasticity are testing the bottom of the market at this point. part of the 16% selloff in the market over the past month also coincides with the weakest demand section of the month. we are in turnaround season. europeies in northern and north america are buying fewer barrels because they are shutting for maintenance. maintenance season is winding down and crude oil season is about to pick up. when we look at a market with a significant correction, now into a reasonable level, putting demand back into the market, i suspect to see a lot of support in this area. guy: if the dollar rolls off,yuan picks up, euro, how would that change the equation? is a significant contributor given that bitcoin has yet to surpass the u.s. dollar as the world invoicing currency.
as goes the dollar, as is the case, so go commodity prices, albeit in the opposite direction. if we see any weakness in the u.s. dollar going forward, which of course now lowers the price of oil in the euro, you will see that is a significant support on the mental oil market right now. say that the euro is moving higher, dollar moving lower, that is another box to check for the bulls for support. vonnie: monday, the reimposition of sanctions. the intention is to curb their nuclear ambitions. a long time for the previous administration to come to a deal you then part of that was a reduction of 1.2 million barrels of oil. will it be successful, is this a good play by the trump administration? >> i think it is.
you really have to question making a deal with a country which is only one of four countries that the state department less as an official state sponsor of terrorism. make up 50% of that list. striking a deal with a country that is -- that our state department has been saying for the last generation supports international terrorism, and then to turn around to make a nuclear deal with that country, was a bit overly optimistic. i'm not saying anything controversial here. does not have the best intentions for any of its neighbors, be it israel or the sunni arabs in that region. bringing that country and its nuclear ambitions to a halt, regardless of a republican or democrat in the white house, is a desired goal. vonnie: stephen schork, coming to us from pennsylvania.
thank you. guy: let's get a first word news update with courtney donohoe. >> president trump wants to reach a deal on trade with chinese counterpart she's in jinping.i he has asked officials to draw an agreement. multiple agencies are set to be involved in the drafting of the plan. havee u.k., police launched a criminal investigation into allegations of anti-semitic hate crimes within the opposition labor party. they are acting on a dossier of information given to the london police chief. the file detailed 40 five cases involving discriminatory social media postings by party members. german chancellor angela merkel visited warsaw today. officials want germany to pay billions of dollars for damages inflicted by the nazis during
world war ii. the prime minister welcome merkel ahead of the ceremony. polish officials say germany owes poland up to $850 billion in damages but germany insists: has no legal basis for those claims. new details about the crash, line there, casting more doubts on the airline's claim that they attempted to fix the problems. the fuselage has yet to be recovered after crashing in the java sea monday. authorities say the pilot on the plane's previous flight on sunday from bali requested to return to the airport not long after takeoff for reporting the problem has been resolved. several passengers on the trip have described the problem as a terrifying loss of altitude. global news 24 hours a day, on-air, and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm courtney donohoe. this is bloomberg. you, courtney.
jessica summers. been under pressure lately, so i wanted to look at how hedge funds are viewing the content -- commodity. in white, we can see money managers bullish bets on wti, right now at the lowest in more than a year. at the same time, the price of wti falling 11% in october, continuing its fall into this month, concerns over demand and rising supply weighing on the benchmark. one more thing to look at, total fund positioning on wti. the lowest since 2015. that is because hedge funds are really not attracted to the oil space, showing they are not very interested right now. on the other hand, some say this is a buying opportunity. crude is at a bargain price and oil is set to rally with the sanctions kicking in this month. you can find my chart on the bloomberg. very timely and
fantastic presentation. --have -- next we have did i mess up your name, elena? go for it. >> today is a jobs day. nothing better for anaconda is there to talk about the labor market. we saw a really positive readings on the headline. if we look at the details, they also indicate a lot of strength in the economy. look at prime we age participation rate for men and women. the blue line represents participation rate for prime age men, whereas the yellow line shows participation rate amongst prime aged women. dig deep into the details and really look at the chart very closely, you'll see that women have been closing the gap
between men and women. the gap is represented in the lower panel of the chart. you see that it's been shrinking for quite some time right now. interesting news from today's jobs report was that this gap hit the lowest reading ever in the october jobs payroll. newsis very encouraging when you talk about gender inequality in the labor market. vonnie: i think that is a phenomenal chart. while i think jessica's chart is phenomenal and timely, you lena has not been with us for a while , for the simple reason that she gave birth to her son. i think today we should give her the win. guy has a vote as well. guy: i will not disagree with you on that front. i also think it was an amazing
chart as well. when we talk so much about gender inequality and the need to close that gap, data that actually says that is closing is phenomenal. maybe it could close even faster as we go forward. all of this despite my temptation to make our producer be the final arbiter because that would be unfair. absolutely, 100%, i agree with you. this is bloomberg. ♪ this is bloomberg. ♪
which stagnated in the same month, according to the latest data. manufacturing weakness weighing on the euro area, certainly weighing on the euro area. kevin costello joins us now from rome. the bad data is mounting up for the italian economy. yes, that's correct. the data is not pointing in a good direction. the italian government had been hoping for stronger figures but those have not materialized. the manufacturing index was quite below expectations. now the government will have to figure out what it wants to do because, as you know, the government must answer the european union by november 13 on what it plans to do with its controversial 2019 budget. vonnie: just a full week to get something off the ground. --t does the deputy premier what is the deputy premier up to? >> he has made it clear he will
not back down. he is taunting the european union commission, you could say. ,e is not taking any steps back and he is trying to organize a huge anti-brussels demonstration on december 18, to tell the eu what italy's government really thinks of brussels policies. finance ministers will come together on monday evening to talk about what is happening in the euro zone economy, eurozone finance ministers. we have already seen a number of northern and central european finance ministers voicing their concerns about what's happening in italy. i assume italy will come up? >> yes, it will be there for discussion. as a matter of fact, the finance minister is likely to be there to defend the government's plan. as you mentioned, there is the letter from the 10 finance
ministers pushing back against italy's plan, but you have to remember the government is taking this a different way. they are saying all of these objections are showing their path is the correct path because the other ways got italy into trouble over the last few decades. vonnie: is there any room for maneuver? obviously, the data is now coming in so weak, that gives the new government more leverage. at the same time, there is no ability in the treaties of europe to allow for more leniency on the part of one country. how do they solve this? >> that is correct, the eu will want to see things black on white as to what the government plans to do. there have been indications that the government would like to wait and see how spending goes, adjust things as they go along the year. but that is really not the eu way of doing things.
at one point, somebody will have to back down. in some ways, if i were italian, i would be pulling the germans. talking about this from a purely data point of view. if you look at the data in europe, we are seeing a slowdown in the german economy. a german economy that is manufacturing driven. is it therefore not unsurprising that in germany slows down from a manufacturing point of view, italy will do the same? , inhe euro area troubles fact, will add to the italian troubles that you saw the euro area, gdp was what below expectations. as the euro area runs into trouble, it will hit italy also. italy is even more vulnerable because it is trying to come back from the ground it lost during the financial crisis. it does make you wonder how another italian will end up
reacting to all of this, mario draghi. december will be interesting. have a great weekend. on theostello joining us latest italian data in rome. reportingarbucks better comp sales in the u.s. and china, sending their shares to their best day in years. growth, four percent, same-store sales, china, 1%. last quarter they were negative. gaining ground now. a lot of it has to do with a couple of things. in the u.s., new menu items, these new egg bites which everyone loves, new menu items that were put into place at the end of howard schultz's tenure. kevin, -- sorry, romain, we have just seen coca-cola by a be
coffee brand in the u.k. is the competitive landscape changing for starbucks right now? >> sort of, but you have to think of starbucks really taking itself as ad seeing restaurant, differentiating itself what you can get at the grocery, areas that other folks are moving into. it's been lucrative, that is why coca-cola is moving into this space, other big package food company is trying to move into this space, but starbucks is ubiquitous. china, 3300start in stores, planning to have 6000 by the end of 2020. anyone even one the periphery with that kind of reach. they are doing well in a lot of emerging markets. even here in the u.s., it's still a very strong brand. vonnie: certainly strong today. the stock is up almost 10%.
thank you. romaine bostick with our stock of the hour. let's check on u.s. markets and the vix. a leg lower for the dow, s&p, and the nasdaq, down 1.2% in spite of those positive stories. the s&p being led lower by apple, down almost 7%. kraft heinz having a majorly difficult day in the s&p, dow 9%. some good stories out there. brands up 14%. this is bloomberg. ♪
>> from bloomberg world headquarters in new york, i'm david westin. this is where the world of politics meets the world of business. carl riccadonna on continuing jobs and weight growth. from washington, president trump's willingness to move on trade disputes. and tina davis on reports of relief coming for some countries on those iran sanctions. let's start with carl riccadonna and those jobs numbers. better than expected, you say not to overreact. >> we have to the october gains in context of what happened in september as well. september was revised lower. we can see there was definitely a hurricane impact in a data in september and also october. october was a payback from hurricane florence, also a negative impact from hurricane matthew. we are hearing a lot of noise, we have to take a step back and look at a broader trend. when we do that, we can see an economy that looks pretty decent, pretty