tv Bloomberg Markets European Open Bloomberg November 9, 2018 2:30am-4:00am EST
i'm in product development at comcast. we're working to make things simple, easy and awesome. anna: welcome to "bloomberg markets: the european open." i am anna edwards from the european headquarters in the city of london. fed unmoved, policymakers leave rates unchanged but stay on course for a december hike. the dollar holds its gains. wti crudeream fades, heads for its longest losing streak on record after entering a bear market. opec and allies meet this weekend.
relationship building. goldman sachs's lloyd blankfein said to have forged ties with indonesia's sovereign wealth fund. it is friday morning and we are less than half hour away from the european cash equities session of the week. this is the picture across equity market futures right now. you are expected to go weaker at the start of trade. the asian session has been weak, so after the fed, asian equities selling off and the expectation was the fed would continue its rate hike path, but maybe some thought the fed would give more language that acknowledged turmoil in markets and other headwinds, but it was an unchanged fed. as a result, we saw a little risk and version on -- risk aversion on asia. had to do that the chinese story with regards to bank lending to the private sector. there are a few reasons to selloff, it seems. let's look at the gmm and we see
the selloff in the asian session and weakness in the south african markets and elsewhere. also, some weakness in currencies in the asian session. the south korean won, for example. .3%,ritish pound, down flirting with 1.30 on the downside. we have seen strengthen the pound, morgan stanley talking about buying the pound, selling the euro with optimism around the brexit deal. all of that has been building, but the dup parliament is with theresa may, pouring cold water on her latest plans by gmail this morning, taking the edge off the pound. that's put up the other side and look at what is going on in bond markets. midterms, seen in the quite a lot of activity in bond markets, flattening of the curve in some places. the italian bond market also a focus for us as they were yesterday focused on the tension between brussels and rome.
nothing on the gmm, possibly positive. oil side, suggesting the big moves we have seen retreating for a moment, a positive breath in oil markets but we have touched bear market territory under vti. retreated amid a slowdown in china and policymakers' steps to avoid it. treasuries edged lower and the fed left rates unchanged at its latest meeting. the u.s. central bank stayed on course for a hike in december risk -- despite jitters in markets and a critical president. joining us, mark cudmore, our mliv strategist. good to see you. let's start with the fed and what we heard from them, or rather what we didn't. a colleague writing an opinion flagging it is the things the didn'tt -- the fed mention that is perhaps of interest to markets.
they weren't too bothered by the market turmoil in october. mark: i think that is right. the only thing we are looking for in yesterday's fed statement, there might be some reference to the new political paradigm we find ourselves and the statement a everything that happened in october and showed the new fed put is still quite far away from the market. that emphasized they are on track to hike rates. this is a base case and on yesterday's program, we warned it would likely be the case that we see the dollar bounce a bit. it would set back to be exuberance post midterms. it was a base case reconfirming minds that they are too quick to get carried away post-midterms. is time to take it more slowly but the environment is constructive. anna: we are factoring in what we heard from the fed and this news flow from china with regard we see this asld
a limit on the amount of lending allowed to happen to the private sector in china? i have heard a lot of people worried about debt levels in china, so that could be a good thing that equity markets taking it as risk off. i think people are concerned about how much state intervention will, whether it will cause more harm than good, and whether they are too proactive in trying to stimulate the economy, yet still controlling the deleveraging drive, these contradictory goals they are trying to manage. this is worrying to people. is the measureit itself that is alarming, but there is a risk it goes wrong when it is executed. anna: today, we are asking this mliv question around the oil price. whatuestion of the day, oil price would hurt credit and equity markets. it was you making the point on the mliv blog that it is when we start to see companies in the oil space cutting back on that
this has broader implications for other asset classes. colleague mark cranfield, but he was saying that is where we see the broader impact. and that -- expenditures slowing down with the lack of investment with oil prices falling new and no investment themes worthwhile in the sector. there is a broader concern among the space. we saw in 2004, the median started whiting -- widening out. they can move a long way before they do impact the equity market, but eventually, people get concerned about the credit market. given the lending in the u.s. over the last few years, people will get worried. of room yete a bit carried the pace of the decline is very alarming, and if it continues, it will become a problem soon but just because we have seen a 20% fall in over a month in oil prices doesn't mean
we can expect it to continue at this pace. even if it comes a little lower, it will be hopefully a slightly slower pace. people need to watch this metric. anna: apologies to mark cranfield for the confusion. think you very much, bloomberg mliv strategist. you can have your say on our mliv question of the day. get in touch at bloomberg tv. let's get a first word news update with debra mao karen debra: -- debra mao. years before goldman sachs arranged the bond deals now at the heart of a global corruption scandal, lloyd blankfein personally helped forge ties with malaysia and its new sovereign wealth fund of according to people with knowledge of the matter. both solomon and his predecessor have said the scandal was the work of a few rogue employees. goldman said it believes the proceeds from the debt sale or for a development project.
a spokesman declined to comment. set for its longest stretch of declines on record after entering a bear market with investors awaiting a weekend -- meeting of opec and allies. futures in new york are slipping for a 10th day, extending a dramatic plunge that had prices down over 20% in five weeks. the oil slump has been exacerbated by a u.s. decision to allow eight countries to continue importing from iran. producer nations will weigh possible output cuts when they meet in abu dhabi sunday. the owner of an irish stock exchange wants to move to brexit -- brussels after brexit. ireland currently relies on u.k.-based firm to settle trade. but according to euroclear, the company that owns it, once the u.k. leaves europe's single market, it probably won't be able to continue providing that service. global news 24 hours a day,
markets: the european open." 19 minutes till the start of equity trading on bloomberg tv. let's have a business with debra mao from hong kong. telecom italia has -- competition has kept -- telecom italia board of directors is set to have approved a nonbinding offer for nextel of brazil. a bid could shore up the italian company's position in the fragmented brazilian market where competition has kept prices low. telecom italia has abandoned a debt target and is to write down the value of assets by around 2 billion euros as it comes to terms with growing competition. disney jumped in late trade after fourth-quarter sales and earnings beat projections fueled by movies and theme parks. those businesses continue to grow as bob iger tries to steer his largest division, television, toward a new future built around streaming. eiger -- bob iger says they are still waiting on some approval for the $71 billion purchase of
much of 21st century fox's assets. bob: we are still going to -- through the regulatory process. a lot of process has been made there. we announced a couple of days ago that we gained approval in the eu. there are still some countries that we are waiting for approval on and we are in the middle of that process. back in june, we said it could take as long as 12 months to close and we are increasingly more optimistic it will occur meaningfully before that, but we are not saying specifically when. -- remainedmont weak. to one point one billion euros in that six months to the end of september carry a recent decline in switzerland's watch imports has kindled concern about a shutdown in the industry. that is your bloomberg business flash. anna: debra mao for us in hong
kong. years before goldman sachs arranged the bond deal now at the heart of the global corruption scandal, lloyd blankfein personally helped forge ties with malaysia and its sovereign wealth fund. prior to this, bloomberg scoop, we spoke to the new goldman ceo david solomon. b state --ed the 1md scandal in his interview sunday. is obviously very distressing to see two former goldman sachs employees went so blatantly around our policies and so blatantly rope the law -- broke the law. whole matter seriously and continue to work with the authorities as the investigate it. >> two of the people involved, there were three. two named by the justice department. two of those people, one who pled guilty and the other, who
was said to know about the scheme, were goldman partners and were in the investment bank that you ran for 12 years. these were your guys. how does that make you feel? the investigation is ongoing. i feel horrible about the fact that people work that goldman sachs -- it doesn't matter whether it is a partner or entry-level employee, would go around our policies and break the law. unacceptable. there is not a lot more that i can say other than we continue to cooperate with the authorities -- erik: as i would expect. david: absolutely. couple ofe might be a other things you can say, and i will try. there is an investigation underway. clients, andders, employees want to be certain that neither you nor lloyd blankfein or the management team had any reason to expect
illegality or breaches of goldman's compliance practices in connection with the account. can you offer those assurances unequivocally? david: we take compliance in our firm extremely seriously. he always have. we have been around for 150 years and how we control the firm, the velocity and volume of transactions that move through the firm is of huge importance to us. goldman's current ceo david solomon speaking to bloomberg's erik schatzker, ahead of the most recent revelations. solomon and his predecessor say the scandal was the word -- work of rogue employees. believed the money was for projects. erik schatzker joins us now. great to have you with us. you, speaking to solomon on this very subject.
he canere limits to what say, weren't there because this is an ongoing legal process. fascinating to see these revelations around lloyd blankfein in 2009, many years ago? there is only a limited amount of information david solomon can share. you heard it in the excerpt of that interview, ongoing investigation, investigation underway. i did ask him directly if he could unequivocally assure us and his shareholders and his employees and his clients that neither he nor lloyd blankfein or anyone else who holds a senior position at goldman today was aware or suspicious at the very least of any illegality. he didn't address that directly. i would have liked him to address that directly, but it might have given us more context in which to understand this latest development, the knowledge that lloyd blankfein participated in that 2009 meeting.
it is important to emphasize that meeting took place in 2009 because the bond deals that are ,t the center of this scandal at least the money raised in those bonds deals, it was diverted to other places, took place in 2012, 2013. anna: important to make that point because this goes back many years. a correspondent in hong kong earlier made a valid point there are few ceos who wouldn't take a meeting with a prime minister of a country. that might be the broader context, but this raises more questions that it answers. -- than it answers. erik: of course it does. what did lloyd blankfein no then and subsequently. as with any scandal, it is about who knew what when when you are trying to establish knowledge at higher levels of a firm. we know the former partner who pled guilty to charges by the
justice department was involved, obviously. we don't know to what degree in easierorts to procure treatment by prosecutors who else he might implicate. that is unclear. is there reason at this point to believe that either blankfein or solomon was aware that goldman's compliance standards and practices were being breached? no, we don't have any reason to believe that. we do have reason to wonder why. goldman made $600 million in fees off of these deals. we did the math. it amounts to a 7.7% commission on bond deals that would under normal circumstances, according to our data, generate a commission of 1.3%. that kind of thing should raise a red flag at goldman sachs. we would like to think that it did. we don't know whether it did and if it did, did someone somewhere
beyond those who have been implicated in this scandal say, let's look the other way. $600 million is a lot of money? anna: erik schatzker, joining us with the latest on the goldman sachs story. we continue to track that. the opening of markets in london and beyond. in europe, we will look at stocks to watch, including allianz. reporting third-quarter operating profits that beat the highest estimates. these are live pictures of london. the cfo will be there, ready for brexit. this is bloomberg. ♪
anna: good morning, everybody. this is "bloomberg markets: the european open." seven minutes till the start of equity trading in europe. from around the newsroom, stocks we are watching. .e are looking at allianz danitory around ridgemont, burger is focusing on telecom italia. >> i am looking at allianz. they reported numbers for the third quarter with a beat on the operating and the highlight of the asset management business which saw inflows of 15 billion euros compared to outflows in the second quarter. earlier, we spoke to the alley and's cfo about the business performance when it comes to the asset management unit. if you look at the
performance in the pimco funds, over 90% of the pimco funds at benchmark. that is a strong indicator of the quality of the business. definitely a performance of pimco. in our bottomted line with asset management contributing 10% growth in operating profit. anna: let's come to ridgemont. what is the latest there? >> not such a good day for ridgemont and the rest of the luxury goods industry. ridgemont reported bad one h results that mr. cross several metrics. across several metrics. a pretty bleak outlook on the conference call about growth in china and investors are very sensitive to any negative comment on china growth. the key engine of growth for all luxury goods companies, so we
expect the shares to open lower. hemont has-- ric -- probably down and other peers, as well. we will keep an eye out on that. anna: dani burger, telecom italia. dani: investors will get their chance to price in some bearish news that we learned yesterday. telecom italia is not only abandoning their debts target, but they are taking a $2.3 billion write-down. it has a lot of competitive pressures here. vivendi, the largest shareholder, called it a "stabilizing for share prices." anna: lowering profit guidance in germany due to legal provisions. the second profit warning in four months. we will watch that story as it unfolds. keep an eye on vaping companies, certainll be limited in
anna: less than a minute cash.from trainings the fed -- cash trading's. the fed sticking to the cause. wti is now in bear market territory. wti is the one that met the standard first. let's have a look at the chinese markets. there's concern about the amount of lending bankings can do. the fed is staying course, despite criticism from the
president and despite turmoil and markets in october. the pound weaker against the dollar. that drop driven by the dup pushing back against the latest news headlines that a deal could be close on brexit. this is the picture. we are expecting to be weaker at the start of equity trading day. that trading day gets underway. let's have a look. expecting to go weaker, really picking up from the post fed trajectory we've seen cloud in the asian market -- plowed in the asian market. we are down .4%. the thinking and asia seems to by ae fed was very unmoved range of factors that it could have been moved by and could have flagged concerns and didn't. we did see weakness in the asian equity session. as we see in europe, that is picked up, ibex down .7%, cac
down .6%. my guess is this is not going to be a sector specific story. this is probably across the board. we are read pretty much across the screen. based on broader themes of the fed, the ftse mid is down .6%. let's have a look at what we are seeing on the stock specific this morning, the mrr function on the stoxx 600. let's have a look at what that tells us on the equity markets story. we've got london moving to the upside. not a host of names we were flattening before the start of trading to the upside. let's leave the upside there and go to the downside and have a look. leonardo is in there, the defense business. the every day numbers came below
evidence. not many stocks gaining, as you saw on the last graphic. leonardo is down 2.5% thereabouts. slower,see kerry moving down by over 5%. it was trading much weaker in the johannesburg session. telecom italia opening up in negative territory to give you a few of the earlier movers. we get across the stocks we are watching. let's talk about european equity markets. they open lower after stocks in asia retreated with he was futures pointing lower and dollar holding gains overnight. the u.s. century bank stayed on course to hike in december despite financial markets and criticism from president trump. joining us on set is global
market strategist at jpmorgan. good to see you. put in context what we heard last night. they remain unmoved despite criticism from the president, market turmoil. they stick to the rate high-tech -- rate hike half. environment, it remains independent from the market perspective and political perspective. we don't see that anywhere in the world. we do think the situation in the u.s. economy clearly wants a tighter policy. we see a lot of central bank with tightening or on hold so the easy monetary environment is definitely over and there will .e an inflection point anna: reassuring, but not risk on. the fed put a little more
distance. vincent: we have not reached yet the pain level for risk assets. we're convinced we need to be risk assets and we need to get more hedges in portfolio. the time to be full risk on, but not the time to give up on equities. there are reassuring items. the earnings season in the u.s., like elsewhere, was pretty good, obviously much better in the u.s. than in europe, but europe has shown reassuring signs in the banking sector. it's true, november, still a lot of risk. we know have more clarity, but still many uncertainties in your, brexit -- in europe, brexit. these are the elements more concerning to me than the simple fact monetary policy is normalized in the u.s. and interestnce rate policy, 2017-2018 story and
we leave it behind. what does that mean for u.s. assets? does that mean you want to be away from those? vincent: not yet doing need to see the affect on the dollar. we see the dollar strengthening again. as long as we see it strengthening, it will be a negative element for emerging-market on top of trade talks of trade war, which is hurting emerging markets, hurting emerging-market economies. exports are slowing. we have the taiwan export yesterday. we see chinese currency reserve. there are worrying signs in emerging markets due to the extreme of the dollar, and due to the trade policy of the u.s. government. but it's u.s. policy but our
problem,. like the dollar in the past the u.s. economy and markets is better insulated against those risks and i don't think we've reached a level of interest rates which would hurt company profits. we see more headwinds in 2019 that in 2018, earnings risen. this will hurt margins. financial conditions are unlikely to remain as easy as today, so in terms of earnings expectations, they are lower next year than this year. anna: and a genex 3.1%. a quick rate in the united states, one analyst at schwab suggesting that this bodes positively, if you can use that word, for average earnings. but it will go up 4% on the back of rate >>. that's going to be punchy as far as wages are concerned. does that suggest the fed is
behind the curve? vincent: i have the impression the fed is doing what it should do given the circumstances. we haven't seen a buildup of inflation sizable at this stage. ue we see whether we get this fall, which would be normal given the economic circumstances. but it has taken time to get to this. see.ll the outcome of the election, probably less likely than it would have been with a full republican leadership in the u.s. tax cut 2.0 is unlikely next year. much more stimulus to the he was economy is less likely than before, meaning there is less results of massive surge of wages next year. anna: thank you very much. we've got a few stocks we're
watching this morning. richemont down more than 6%. ubs also weaker. the cfo saying market dynamics are favorable, talking currently about store opening pace to slow versus the previous years. this is coming from the richemont cfo. a host of stocks we are watching for you this morning. this is bloomberg. ♪
anna: good morning. this is bloomberg markets, the european open. we are 10 minutes into the trading day. trades down this morning by .5% following a negative session in asia. dani burger has stock movers for you. dani: since it's a negative day, i'm going to stick with negative stories. starting off with richemont, down 5.5% after the company missed first half estimates, came in at $1.1 billion versus what analysts thought $1.3 billion. retailers were especially weak, troubling to investors because others had solid earnings. thyssenkrupp one of the biggest losers, down 6%. at what moment today -- one moment today, the biggest loss in two years. there is a legal provision over
whether they colluded in price-fixing. telecom pricing in negative news after the close yesterday, down 3%. they are taking off a big right off. they are no longer a monopoly. much,thank you very sticking with the negative theme that's driving markets on the day of the fed meeting. let's talk about oil, another downward moving story, set for its longest stretch of decline on record after wti entered a bear market. it rattled producers and opec said it may cut output last year. the group meets in abu dhabi sunday. joining us, stuart wallace, bloomberg's executive editor. and still with us is vincent juvyns from j.p. morgan asset management. your reflections on oil and bear
market territory. does this happen fairly quickly? stuart: very quickly. it depends on what perspective. anna: that's what matters. stuart: yes, this is good news for half of the world, deflationary pressure. it's going to bear market in a short space of time. but it does pose a headache for the opec ministers weekend in abu dhabi. what do they do? we are anticipating early signs of a u-turn in policy, second u-turn in a year. they got furious tweeting from trump. they couldn't find customers. the reversed course and reverse course again and probably now will reverse course again. they are supposed to be the swinging supply, so they are fulfilling that role. what they want is stability and they are not getting that. anna: they are not getting it at the moment. is it still as positive for the global economy when we see weaker oil prices?
i ask this because of the role the u.s. plays in the global oil market. saw a big run off and drop down in oil prices. the oil was in such a big producer and it was almost entirely a consumer story. now the u.s. has a different role to play. vincent: volatility is not good. indeed, half of the world is happy with oil price. if you look at the situation in france, there's a huge demonstration of people complaining about the rise of fuel costs. it's really starting to -- anna: a month or so behind. vincent: a social issue, really. a lot of european consumers, this will be good news. we continue to support the domestic story. from a market perspective, it was more supply driven then demand driven, the fact they sanctions,oth
probably one of the main factor in the last couple of weeks. not too fundamentally essential. it is weaker than expected. anna: was it the iran story that pushed is up there, realization of the waivers? what happened? stuart: that's exactly right. and to your point, the political pressure has been intense and the iran waivers were far more numerous than anticipated. that came down to political pressures in india. and so as a consequence, the trump administration was incredibly tough. they came to the realization there were going to derail the global economy. anna: we are asking the question on the markets like log -- markets live blog. what oil price would hurt equity markets? it is interesting to ask when oil prices start to hurt other asset classes. theady, we seen in india
equity market there stood out as a gainer because they are a big consumer of oil. with oil prices weakening, there was optimism in the broader equity market as a result. what impact do you expect this to have next, this weaker oil price on other asset classes? vincent: we were discussing whichcost -- costs benefit from higher oil prices. most of it will suffer, so that will be something there will be less of a margin entering next year. -- i mentioned france and europe. they were in great difficulties over the summer. we saw the current account deficit widened significantly. the u.s. consumer, there was pressure from the administration
to get oil prices down. you see from a consumer perspective, this was hurting also u.s. consumer, which became a political issue ahead of the 2020 presidential election. anna: one of our colleagues writing this impact on assets, once we see companies in the oil on radiushe reflects periods where the oil price got weaker. that was a key thing for when it became real. any signs they are coming back on? stuart: there will be some. i imagine you are getting nervous. having said that, i don't think we saw any major players massively ramp up. the pressure around -- capx. the pressure around it, we have been very pressure. it's a perfectly reasonable position. i don't think they are in the same situation.
nonetheless, they are going to be cautious. i argue they arty were. -- already were. anna: good to get your story. we look ahead to that meeting over the weekend in abu dhabi. and vincent stays with us here on the program. up next, theresa may edging towards a brexit deal. glitches keep emerging on the issue of the irish border, dup throwing cold water on her plans. more on that next. this is bloomberg. ♪
anna: welcome back to the european open. we are 20 minutes into the trading day, a negative session developing across europe, down .5%. the ftse also down .5%. will u.s. futures point lower, as well? let's focus on brexit now. u.k. brexit secretary dominic rob is expected to meet with his eu counterpart michel barnier to form agreements on tuesday. but the irish border remains a point of contention. expectations of a no deal are ramping up with bank of america spending $400 million preparing for a hard brexit. we know what the dup things
about any signs -- thinks about any signs of the no deal. thes talk about -- top to -- talk to the global market strategist at jpmorgan. give us your latest thoughts on what we will achieve and when and how you are preparing for it in regards to brexit. vincent: we are ease -- always believed a deal would be achieved at some point. they were negotiating in the middle of the night. anna: late-night suffers. -- suppers. tooent: both regions have much to lose not finding a deal. we need to find a solution quite rapidly. europe, companies in and i guess in the u.k. also, are not investing in their business. they are investing time and
money in preparing themselves for a possible worst-case scenario. it's really hurting companies, economies, and we need to put a stop to the situation. i that in belgium, tied to the u.k. a lot of smes large-cap are paying millions to prepare for this worst-case scenario. it's not an ideal situation. we need to move forward. i hope by the end of november and next week, we will have clarity. anna: it will be interesting if we do get a deal, less money going to consultants, but more time and bandwidth across europe to think about investing elsewhere. i've got a chart that shows key currencies since the brexit vote. this goes back to 2016, of course. in the yellow, we've got euro pounds, one of the big winners of the night at the brexit vote
as we wait for brexit to become a reality. just how much up or downside do we have here? morgan stanley is talking about selling euro against the pound. as we start to see the pound gaining a little bit of ground, expectations a deal could be coming through. how strong could the pound get? vincent: hard to forecast such a fixed movement. by christmas in london, it will be much more than today. anna: is that close enough to the deadline? christmas? that's three months below the deadline. vincent: if we believe the news next week should lead to a reaction in a fixed market, and there's still a decent premium on the pound still suffering from these insurgencies. there's a good upside for the pound, definitely speaking, if we have a deal. anna: are there other assets? clearly the big story there has
been the global players cushioned from the brexit policies and gaining from translation fx in currencies. vincent: definitely european assets, as well. the european story doesn't look so appealing, given these ongoing negotiations and the fact international investors don't stand where europe is heading to. having clarity on this issue and will we need clarity on the other issue, is what, -- as well, is what will make them come back to the u.k. and others. anna: how much is this weighing on your mind at the moment? it was somewhat expected we would see a conciliatory tone from the italian government over the recent tellings off from brussels. and we don't see that. do you see them getting together on the budget? focus --hard to forecast on the details.
the finance minister in europe will be quite tough and they need to be quite tough so they are taught to reactivate the exit efficient procedure. it's not a major issue for italy. i don't think financial penalty will be applied. if we get back to 12 months ago, we were all very enthusiastic positive. emmanuel macron and angela merkel both agreed to move forward more integration and so on. today we are far from this goal. we are trying to avoid the integration again. we are better equipped to deal with suffering crisis, but italy is indeed near the stages of writing. i do not see things and proving. i'm quite concerned today. we don't like european assets for this particular reason. it's hard to sell the european story of broad. anna: we have elections next
anna: said unmoved. unmoved.ers -- fed the dollar holds onto its gains. crisis at thyssenkrupp, falls the most in more than two years after another profit warning. and relationship building. goldman's lloyd blankfein is said to have personally forged ties with malaysia's scandal hit sovereign wealth fund. good morning, welcome to bloomberg markets, the european open. i'm an edwards in your -- anna edwards in european headquarters in london. this is the picture across the
equities space, mixed bag to the upside. interesting to see him. brands here despite the ruling from the fda in the united states about children having access to vaping products. we see them going higher. thyssenkrupp is down 7.8%. still business and other businesses over in germany taking can ask to its forecast -- axe to its forecast once again. richemont down six points i've -- 6.5%. they reported numbers. they are moving along with richemont this morning. proceedings down another percentage point this morning. debra mao joins us from hong kong.
debra: a few stories to update you on. years before goldman sachs arranged of global corruption scandal, lloyd blankfein forged ties with malaysia's company. the scandal was the work of a few rogue employees. goldman said it believes the proceeds were for development projects. a spokesman for goldman sachs declined to comment on his behalf. oil set for his longest stretch of decline after entering a bear market. investors awaiting a weekend meeting of opec and its allies. futures in new york are slipping. it drives prices down over twice 5% in five weeks -- 25% in five weeks. it will allow eight countries importing from iran. they will weigh possible output
costs when they meet an avid dobby sunday. the -- abu dhabi sunday. the movement of irish shares to brussels for brexit. island currently relies on a u.k.-based firm to settle the trade but according to euro --ar, once the your feeling u.k. leads to the european market, it probably won't continue that service. the pipeline process -- project has been blocked pending environmental review. it's a further setback for canada's decade-long push to build a conduit to deliver crude from alberta across the u.s. an alliance of campaign groups filed lawsuits against the u.s. in march of 2017 after donald trump gave approval for the project. factory inflation in china slowed for a fourth month while consumer prices steadied among
sluggish demand, making life easier. roseecond largest economy 3.3% in october, matching the forecast in a bloomberg survey of economists. the consumer price index rose 2.5%, signaling early inflation pressure from swine disease and sweating now eased. global news, 24 hours a day on air and at tic-toc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. anna? anna: thank you very much, debra mao in hong kong. stoxx 600 down .6%, ftse also down .7%. we are seeing a substantial loss across european equity markets, ftse mid down just shy of 1% after a session in asia that was weak the day after the fed stuck to its tightening bias.
they are both down sharply after unfavorable news flow. telecom italian scrapped its target and plans a write-down. thyssenkrupp given a profit warning. both of them are under considerable pressure from activist funds. telecom italia in the form of elliott management. capital elliott, but that owns 14% of thyssenkrupp. though with activists at the door pushing for change, what lies ahead? let's get more on both of these stories. we're joined by benny in berlin. talk us through the ftse group story. let's start with that. a surprise for markets. it must the, judging by -- it must be, judging by the stock market reaction. benny: the market is down
sharply this morning. to some degree, sort of kitchen sinking by the new ceo deal. he was the cfo previously then came in as the interim ceo after they demonstrated its top brow. i know he's the new ceo. is taking a hard look at possible write-downs and that's what is depressing the outlook, which they scrapped and the stock price where he has that's one of the key demands is a split of the company. ayssenkrupp will split into more industrial part of the business and into the better-known steel part of the business. that was a key demand from the company. but clearly, there is more to do. anna: telecom italia, they are scrapping debt lines and conducting a write-down. what is the latest? benedikt: again, this is
evidence that there is a long-term play for elliott, this company. there's no quick fix year. the ceo has been under considerable pleasure for -- pressure for a while. elliott to control the board has said yes, we back this person. probably nobody better to do the job now, but he's somebody trying to clean up the company. a lot of debt weighing on telecom italia, and trying to make operational moves. he's looking at brazil, for instance, to see if he can make acquisitions. he's thinking about fixed line business. these are small steps and a great leap forward elliott might be wanting at some point that's eluded the company so far. we are seeing that in stock prices this morning, down sharply. anna: do we sense that activist investors are getting more from managing europe these days? or are they just more active
than they have been previously? there's a lot of ceo interviews where we have to site pressure from activists as of late. benedikt: that's absolutely like. -- right. we've seen more from activists slightly. they are not quite as aggressive as elliott, but elliott fairly active in germany. they've made a couple of investments. there's an example of nestle. they made a play and is make shareholder. he's tried to shakeup that business. it's not as easy to pull off change over here. boardy cases, you have a split between worker representative and capital side to push for aggressive change takes longer. if anything, companies are noticing that the quickchange they might have been able to realize in the u.s. isn't as
easy to pull off in europe. anna: thank you very much, benedikt kammel joining us. more in common that might look at the fed. very similar market caps. let's talk about the stock of the hour, ubs richland -- in switzerland. they are being sued. group, sold tens of billions of dollars worth of mortgage groups, making false and fraudulent statements to investors about the loan, according to the u.s. justice department. that's what they had to say in a civil suit filed on thursday. this it relates to 40 of those securities that the ubs sponsored or offered, according to federal prosecutors in brooklyn. in new york, we look to ubs for a response. but stock is weaker in this
the day after the fed, equity markets moving lower. it stayed on course to hike in december despite the financial market and a critical president. economic activity has been rising and job gains have been strong. the fmo sete stated its outlook is one of gradual rate hikes. the dollar extended gains after the decision was announced. joining us to look at our markets -- bond markets, tatiana. very good to see you. they give for joining us. your initial reflections on the fed and what it means for your ,ortfolio, gradual increases reaffirmed i suppose after yesterday. tatiana: yes, this is what it really comes down to. i think the market is trying to tread very carefully around this because i think it can go two ways. one is the u.s. economy
continues to be strong, unemployment low. inflation is really where it's meant to be going higher. so then it the fed only focusing say we seedo they may be global economy is going slower and there has been artificial growth pulled forward by the tax cuts and we want to manufacture a soft landing and not a recession. and this is really, we will have to see next year, and get clarity where this is going. anna: whether the fed dashboard can land things smoothly will be interesting to watch. your strategy with regards to credit markets. what is it you think is a good buy at the moment? tatjana: you have to look differentiated when you go into credit. and you also need to see what you are trying to achieve. for me, for instance, time always looking at generating
returns for low volatility. that's my objective. and so for this market where a lot of people are worried about volatility and there may be more concern about where they can get returns, that is what is on most people's minds. so now, how can you use credit to do that really? and at the moment, the way may personally, unconditioned to say i want u.s. treasury risk despite the risk treasuries could move a little higher in the near term, because it is a nice tool for risk management. so that when risk assets are selling off, you hope the treasury will help you stabilize your portfolio. european high-yield, and a lot of people are concerned about the european landscape with the political uncertainties and brexit is often mentioned, the
european high-yield's are sold off a lot in the course of this year. and they have been relatively proven in the funding behavior. there is value there,.but you need to pick your spots anna: are you expecting to see more businesses in the business space ? i've got this chart that shows a percentage of gdp. the level of defaults is not. rates are, by historic standards, relatively low. what is your explanation why we don't see more corporate's in trouble? tatjana: even in europe, we're talking about a slowdown in growth, but we are not talking about a recession. defaults are extremely low, lower than the u.s. some of that is because european companies have been far more cautious in taking on additional leverage.
u.s. companies have been more forthright. like was said earlier with thyssenkrupp and telecom italia, there are more shareholders in to u.s. which try to say, more share buybacks. this has been funded by debt. it's more of a u.s. phenomenon than a european phenomenon. we can't see default rates going up near-term. then in terms of global economic growth, it's strong enough to keep going. there's always retail suffering, but generally no. the other way we see defaults is companies are becoming too optimistic about growth forecasts. aowth forecast is not coming reality -- becoming a reality. then it's not matching debt levels. and that could be building up. we've seen some of that happening. some of the growth models have
been relatively benign. if there is not coming do, then in the coming years. anna: we spoke to megan greene earlier this week and she was saying this is the most likely cause of the next recession, the nonfinancial corporate debt. if you look at it, your assets are above levels from the past three recessions. this is a warning sign for her. i want to ask about leverage loans. there's been a lot of interest. because of rising interest rates and how loans attract. -- track. investors are spooked. should they have been spooked? is there still interest there? tatjana: i see the benefits in terms of your overall construction, and it's a nice part of the puzzle. but we definitely see, when we talk about corporate behavior, it is dominated by private equity firms, and they do take
it vantage of the dumond for the -- demand for the asset class. they have disappeared and leverage keeps creeping higher. anna: a lot of people are warning about that, janet yellen even. tatjana: and that is definitely the case. you see most of that in the low-level market. i would assume over time, as we just mentioned, defaults could be creeping higher. seetime, you would probably more in the market than the high-yield market. anna: thank you for your time this morning. portfolio manager. let's take a look at your mid-cap movers. dani burger has details. dani: shares have been up almost 1% early in the day, now just turning negative, down .3%. they reported results that mostly were in line, though uninspiring.
analysts say it shows signs of life because their foreign sales were higher by more than 8%. investors seemed to think otherwise, down nearly 1% in shares. then jcdecaux also falling more than 4.5%, on pace for its worst day since may. this is after they had a slower forecast for growth in the fourth counter. they cited tough comparables and softness in the china metro-rural this. ubisoft having sympathy pain. activision reported a weaker -- their peer activision reported a weaker side. all of this is hoarding -- hurting ubisoft, down lowest since november. anna: let's remind if you are a bloomberg terminal customer, you
alex is going head-to-head with dani burger. alex, you can start. alex: brent crude moving to a six-month low and is no better time to talk about crude. what is underpinning this move lower, take a look on the left-hand side. 10 consecutive declines in cpi crude oil, including today, the longest losing streak ever. what has changed? we've had this cocktail of bullish input. opec cutting production, strong global growth, geopolitical risk. take a look at the last few weeks. opec production higher. geopolitical risk deflated by iranian sanctions. this record run is hardly surprising. where does it go next? opec meeting at the weekend and we will get clues from their. anna: opec meeting at the weekend.. we will be all over that on saturday. dani, what do you have?
dani: i'm looking at one of the midterm trades thrown into question. let's look at u.s. markets. companies with more exposure have really taken off since the midterm. if you look at my chart, white are the china exposed companies. look how they outperform the s&p 500 and immediately when they get into november, you can see the white outpacing the blue. why do i bring this up? not only is the surprising because well trump and xi get along? because we also have the gridlock in congress that might aid this, as well. see declines in asian -- we've seen big declines in asia shares. this may translate into this trade reversing. anna: fascinating. i'm not sure the outperforming is decisive yet. i'm going to go with the oil one
because we are in bear market territory, big red letter day, if you like. bear market territory for wti. brent also threatening for big figures, psychologically important for the market. thank you to both of you. if you want to look at all the charts, gtv is the function to use for that. let's update you on the pound. we see the pound touching session lows. 130 in a little bit just over 130 and change. could it go below 130? quite possibly. they are warning they won't support current brexit proposals. they are saying the current eu plan would break the union, reference to the backstop over island. we could see a cabinet meeting taking place over the weekend. if we do see that, mufg says to watch for unity in the cabinet.
♪ francine: the fed unmoved. unchanged but staying on course for december hike despite a critical president. oil enters a bear market. wti crude in its longest losing streak on record. and relationship building. goldman's lloyd blankfein is said to have personally forged ties with malaysia's sovereign wealth fund. ♪ francine: good morning, if you are in europe and good afternoon if you're in asia. welcome to "bloomberg surveillance,"