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tv   Bloomberg Markets Americas  Bloomberg  November 9, 2018 10:00am-11:00am EST

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taylor: stocks falling for a second day and crude oil slides into a bear market and concerns rise over the chinese economy. more on that in moments, but i want to first turn to abigail doolittle breaking down economic data. abigail: we are looking at consumer sentiment. the luminary reading coming in with a small beat at 98.3 versus the survey at 98. this relative to the final reading for october. all of these near all-time highs. so the effect on the markets, very little. these were the declines we were looking at into the print. and the dow down a half a percent. but the s&p 500 and nasdaq down for a second day in a row and clearly technology with the nasdaq underperforming.
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a today chart of the nasdaq, we are looking at the decline. see if it stands out. down over the last two days, the worst two days stretch. the worst month for the nasdaq since 2008. it tells us the rebound rally we have seen recently giving it back a little bit. and as we get into the bloomberg, we can see it even more. a six-month chart of the nasdaq. sidewayse basically a trend, telling you the buyers and sellers are in a battle. for much of this time during the summer above the moving averages, but then on october's volatility taking out the moving averages. nasdaq down below the 200 day moving average again, suggesting there could be an air pocket of buyers. this case scenario on this pattern, a move lower for inverse head and shoulders, then higher, or maybe we see this move to the downside. an inverse head and shoulders pattern, typically you see those
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at the bottom or closer to the top of a multi-year bull run for the nasdaq. and fair some of the movers on the day, let's take a look. to the upside, disney is up 2.8%, beating the top and bottom line. 2019, they are talking about the streaming product. and a 14.4% -- a huge bear short interest there. this is a short squeeze. and to the downside, yelp plunging, worst day ever since 2012. they missed estimates for the third quarter. and then skyworks solutions, the apple supplier is down 9%. they beat the fiscal fourth quarter estimate, but weakness is leading to on the apple complex. and finally speaking of weakness, oil is down first half day in a row, record losing streak. down 11.7%. and of course, from its october high, down more than 20%.
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an official bear market on supply concerns for oil. guy: in some ways, the oil story leads into the breaking news we have gotten. vw said to be pulling investing in the ford autonomous partner argo. the company that was created effectively by a person coming out of google and uber. ford already invested, investing $1 billion over five years. vw and afford nearing a framework agreement to join forces on electric and self driving vehicles in capital intensive areas of reshaping the industry. as part of the pact, vw may invest in the self driving partner of ford, argo ai. this according to people familiar with the discussions. ford spiking on the news, which is interesting. there is a sidebar story on bloomberg at the moment on ford and its credit story.
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ford is picking up on the back of this news, definitely. we do not see a similar reaction and vw. facing a much tougher day-to-day, industrials in germany trading lower. byford up, vw trading down three point- -- 3.83%. let's take a wider view of europe. the stoxx 600 down by .5%. session iny negative china and that came into what we have seen here in europe. the oilil was saying, story is front and center. and now we have a 60 handle for brent. and this is the russian market, this falling a response to that story, down .1 .0%. we have a meeting taking place surrounding the oil story this weekend. and we also have some producing numbers out of the united states. stronger than what the market
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was expected. and things are tough in china, this morning trade will have a meaningful impact, and rippling through into stocks like tiffany, it is watch as well -- ch as well. ch as well. taylor: guys, stocks are dropping worldwide as oil continues its march downward, and parts of the chinese economy are starting to slow down. one person watching these is ed hyman, vice-chairman of evercore isi . i want to start with oil. that is the big news today. if it continues for 10 straight days, that would be one of the longest streaks of losses. what do you make of oil, and supply issue or problem with demand because of a slowing global economy? frackingitely -- the has been miraculous. but i think it is also a demand
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issue. and for this morning, i think it is a china issue. so i think that china is weakening. that do 21 companies business in china and every weekly survey them. that survey, which has been as high as 70, it has for the second week been below 50 and was down again this week. and there are plenty of other weaker economic news. the ppi was a little bit soft. and so, china is slowing. think that is one of the reasons that energy prices have been down. before i forget to say it, let me add that gasoline prices will drop $.40 in the next four weeks. that will produce two zero cpi's. the u.s. cpi will be unchanged month-to-month and probably unchanged in december.
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taylor: how do you look at that? one way we are looking at oil, i am looking at the oil and dollar correlation starting to come back and be positive. is that something you are looking at? how closely are you tracking the correlations? ed: i mentioned china as the force, but the dollar strength is also a force. when the dollar goes up, oil tends to go down. and the dollar going up as a drag on the u.s. economy. a majornyway, it is factor on oil. and oil is a two edged sword. you will get -- so inflation is low, consumers are benefiting. and the consumer sentiment index is high, as we heard, and you cannot make that up. so there was another one, the famous bloomberg consumer comfort index was up again this week. so consumer confidence is pretty
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good. that point, toe go a little further, gasoline prices will be coming down. that will be a boost for the consumer. to what extent are lower oil prices a boost for the economy, it depends on which part is due to supply and which to demand, but there is an offsetting factor, oil can be a tax, it can be a tax tough depending on your point of view, which one do you think it will be as it comes down? ed: i is to think it was always good. used to think it was always good. and then it came way down in 2016 and the economy weakened. the u.s. is such a big producer, when oil comes down you get a ripple effect on the negative side. so i do not view it as a major force up or down right now, but it will produce some low inflation readings, and that
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would be good for the consumer, but that way also it will feed into the fed thinking about what they should do. and if you start to see inflation readings that low, there will be hesitation from that perspective, which is another feedback move. guy: i want to talk about the fed for a moment, i am interested in your take on this -- we will remain a little global right now. you mentioned china a moment ago and what we see today is chinese equities coming under pressure and one of the reasons for that is financials have been down. the financials have been down because chinese authorities are thinking of having quotas for chinese banks to lend to the corporate sector. is that a good idea? ed: it is an example of where a free market system, for all of its flaws, might be attractive. and this could be an example of where trying to micromanage the economy, like this example,
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backfires on them. but acquisition right now is that china is in a whatever it takes mode. and they will try one thing after another to try to keep their economy up. we should also put in that this whole conversation puts pressure on chinese policymakers to come up with something on the trade front. taylor: i want to get another comment from you on china and the yuan weakness. they are importing inflation, and it hurts the consumer and the consumer has been making up an increasingly important part of the chinese economy. how concerned are you about the chinese consumer? ed: i am worried about their economy in general. and on the currency, they seem to have stabilized it, just above the 7 line in the sand. is notbeen there, so it a my radar at the moment. it could come back, but not there at the moment.
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think they will keep tryingi tax cuts and whatever guy was talking about, to try to get the economy up. but it should be remembered that the elephant in the room and all of this is the trade issue. and that is, i think that is the overwhelming uncertainty in the global economy. be very, we will interested consequently, ed, in that g20 meeting coming up. as we said, let's talk about what is happening with the fed. the fed holding rates in their decision yesterday, and preparing the market for a december hike. but going into 2019, the future is less certain. blackrock's larry fink telling bloomberg he thinks the fed will have to moderate its rate hike path. >> you are on a path of raising rates in december, if anything you have to prove independence. so i think that the narrative
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presently makes it more difficult. higher interest rates will have a more immediate impact on the economy, so i do not agree on the forward rate where people believe the federal reserve will be in a year from now, because i think they will have to slow down there pace. -- the pace. guy: larry fink from blackrock. talk about whether the you -- where the u.s. economy is right now and where the global economy is in relation to it. you do not have a recession in the united states until, what, 2023 -- so i am wondering -- ed: april, 2023. guy: you are very specific. i put that in my long-term diary. atre do you think, we are 2.25% now, where will the rates be at that point? ed: i have a chance of studying
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economic factors and coming up with the most likely day for a recession, which let's just say it is years out. that is also because i made with investors constantly. that -- this is not a topic i get a lot of pushback on. people are starting to think it is a ways out. and some of the factors that argue for that, as an example, would be that once the growth in earnings peak, the s&p earnings, speaking around 25% or 30%, the recession is two or three years out after that. and once the average hourly earnings go up, they will hit 4% and then you get a recession. and right now there is 3%. so i think that the economy today is quite good. say the consumer sentiment would underscore that. i walked through the area this morning and there was so much
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construction going on. that is true for every city i visit. so the economy is doing well. i i think it will slow next year to something like 2.25%, and then it will keep going and i will monitor that every day. guy: but do you think the fed will keep tightening during those years, maybe you see -- ed: i don't think so. guy: it is usually the fed that breaks the economy, right? ed: yes. guy: then you get a recession following on that. there are a bunch of things that could happen, so where does the fed stop? a bunch of other people are talking about a recession in 2020. i have heard people talk about that a lot. they see the fed stopping before that. theso, my guess is that fed -- forget donald trump -- not want aes recession in 2020.
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they know there is a fiscal stimulus -- that fiscal some was could fall off a lot in 2020. i think they might do a better job of communicating that they will be data dependent, as well -- as opposed to being on a march towards raising interest rates. but it is a dynamic situation. and one of the examples of that is the big drop in oil in the past couple of months that has changed the inflation picture. so, i tend to agree with larry that we will be watching the data. and it is a little bit weaker , and inflation is lower, so they could take a breather or call it what they want to call it. taylor: where is the bond market in this? so often we say the smart money goes the bonds, usually one of the first to react. are the bond markets appropriately pricing in the inflation, higher discount rates,, you know, the higher fed move?
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ed: at the moment, i do not -- sometimes i get the feeling the bond market is off. and i would have thought two or three years ago the bond yields would be higher than they are. but inflation is much lower than i thought it would be right now. and there are examples all the time, like disney wants to get into netflix, which means they will have a price war. ford is cutting prices on their small trucks. amazon is always at your doorstep. and walmart will step cutting prices earlier for holiday sales. so i am -- i generally think up, but itill pick hasn't yet. and maybe it doesn't pick up. in that case, the bond yields are sniffing it out and giving you a up, but it hasn't confirmation signal that inflation is not there. taylor: going to the equity markets, is it still u.s. versus the rest of the world? we have seen a little bit of divergence where the u.s. equity markets were the top performers
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and everybody is going into the u.s. equity markets, do you still feel that? ed: it is not in my will house, taylor, but the u.s. looks clear, so much clearer than europe, or china. so i think that the path of least resistance for equities in the u.s. is still easier than for other places. taylor: wonderful. ed hyman, thank you. now first word news. kailey: the president has signed an order denying asylum to migrants entering through the u.s. border. he says he wants people to come through the u.s. legally. this move spurred by caravans of migrants coming to the u.s. at the wholesale level rose at the fastest pace last month in six years. the index was up to extents of a
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percent, there were brought gains in costs of goods and services, and tariffs on china is raising concerns on price disruption. in northern california, tens of thousands of people have fled a wildfire that has destroyed dozens of structures. thousands of people living in the town of paradise had to evacuate. in the u k, a lawmaker for the northern irish party that propped up theresa may's government says the government cannot support this current brexit deal. the reason is that the plans at trait northern ireland differently from the rest of the --treat northern larry northern ireland it differently from the rest of the country. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm kailey leinz. this is bloomberg. you.thank still ahead, money in the midterms. we will take a look at some of
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the etf moves posted the u.s. election, where the cash is flowing with the democratic house. that is next. this is bloomberg. ♪
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guy: i'm guy johnson. taylor: i'm taylor riggs. it is time for etf friday. let's bring in town for a look at how etf's fair to during the midterms. how did this compared to other midterms cycles? >> the magnitude was pretty high. s&p's have not been a run for a lot of midterm elections, i'm using this as a gauge, 27 billion traded of the s&p etf's. that is the highest ever. to give the context, normally 27 billion would be a good day, but we are coming off of a volatile month. so this get to worried -- gets
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buried in a volatility. but they did get a tailwind from the elections. and specifically, the marijuana etf. the elections and a jeff sessions stepping down, that is $97 million worth of trading. that is more than traded in all of october. that was one of the biggest beneficiaries of the outcome of the elections. guy: in terms of asset allocation, where did the flows go? tom: so $7 billion came in to etf's after the midterm, that is a good day. when you see the asset class brag down, one went into fixed income, six into equities. in fixed income, that would into high-yield. that is a bullish sign. within the equities space of the six, what i think is really interesting, almost all of that is u.s. centric. almost none of it went into
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international. a very big focus in the u.s. sector. that 6 billion making up to the u.s. taylor: in the previous segment we were talking to ed hyman and a question we posed to him was u.s. versus the rest of the world, why has this been so dominant in the u.s.? >> if you look earlier in the year, that was always the case. any countryd at that you can buy an etf for, about 40 plus, only one is beating the s&p over the last year, that was israel. so internationally, there is no place to go. the u.s. is one of the better areas to be, so we see that translate into the flows. guy: this was u.s. money, or international money that was going into u.s. etf's? was money flowing out of europe into u.s. etf's, and out of asia? >> u.s. allocators started of picking the u.s. focused etf's,
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so almost predominantly all of it was u.s. early in the year, that was not the case, we saw a relative focus into international focused etf's. guy: great stuff. thank you very much, indeed. tom joining us about the money moving on the etf's. now the biggest business stories in the news right now. let's kick it off, another setback for the keystone xl pipeline project. a federal judge in montana has blocked construction pending further environmental reviews. transcanada has been trying for a decade to build a pipeline to deliver oil from alberta to nebraska. it would then go to refineries near the gulf of mexico. and he regulators will crackdown on e-cigarettes, a senior official at the food and drug administration tells bloomberg the agency will restrict sales of fruit flavors to adults only. the fda has said young people's
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use of e-cigarettes is an epidemic. and for the u.s. -- the u.s. has bought -- investors who mortgage bank securities. the lawsuit accuses -- but ubs said the claims are not supported by facts. two years ago credit suisse and deutsche bank settled similar claims by paying a combined $12.5 billion. shares of -- of fell the most in two years. the company lowered its guidance due to legal provisions. the new ceo trying to move forward with a restructuring plan. trying to clear up the balance sheet. that is your business flash. taylor: i want to take a look at the majors. we are in the red on the dow jones, dropping 6/10 of 1%.
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the s&p 500 off more than that, off about 9/10 of 1%. and the nasdaq is something we are watching. the worst performer, off 1.5%. nasdaq 100, the big tent companies really falling the most. offmost. off 1.5%. some of the biggest losers, some of the biggest winners we should say are in health care, tech, internet retailers. day, this weekend, our interview with the alibaba president, mike evans. that is next. this is bloomberg.
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taylor: from new york, i'm taylor riggs guy: in london, i'm guy johnson. this is "bloomberg markets." taylor: china aiming to boost large bank loans to private companies for one third of new
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corporate lending. shares of the country's lenders retreated today. alibaba, we go to their annual shopping event happening the sunday. the single day extravaganza brings in twice the value of black friday and cyber monday combined. asked michael evans about it. mike: it is not an event that relies exclusively on anyone market, the u.s. or any other market around the world. so we will be working with over to enter countries and regions as part of this enormous event. and so we do not expect anyone area to have a huge amount of influence, other than china of course, so we are not concerned about trade tensions between the u.s. and china as it relates to this event. in terms of the china economy, there is certainly more concerns being expressed today, and some uncertainty about what will happen going forward.
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having said that, an economy growing at 6.5% is still growing well. one thing we talked to people about is we see some softening in the big-ticket items, like consumer durables, washing machines, televisions, and automobiles. but in other sectors of the economy, particularly in things like cosmetics and food and fashion, we still see strong growth. so there will always be some cyclical impact that we will have to deal with. the long-term cyclical trends are what we are focused on. more people coming into the middle class. another 300 million over the next five years. and more of our business incorporating both online and off-line, so that is expanding the pie in which we are participating. we feel good. and 52% revenue growth seems to confirm things are holding up nicely. >> i want to zero in on american
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brands, hugely popular on the platform and generate significant sales. do you expect those assailed the be lower as a result of tariffs on u.s. goods, as well as the dampened consumer sentiment? mike: i do not expect them to be lower at all. there are about 10,000 american brands on our platform. we love them and our consumers love american brands. we are, for this event alone, we have 180,000 brands, chinese and from around the world, who are going to participate. so as i said before, in a single market or brands within a single market, including the u.s., are not going to have a significant impact on the overall result. but we are very excited about the brands participating, whether it is johnson and johnson, or any of the other u.s. brands that will be showing up this year, because their products in particular are in
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huge demand by chinese consumers. >> we are days after the midterm elections, it would be great to get your thoughts on your tradition of the results and how it could impact a potential trade deal when xi and donald trump meet at the g20. mike: the results just happened. they do not get as much play in the chinese market as in the u.s. market. i looks liket both parties did pretty well. i think it is too early to tell how it will affect them meeting together in boris ares. -- buenas aires. >> we have seen tighter regulations impact tencent. what has the effect of been on alibaba and how are you managing that relationship with the chinese government? mike: our relationship with the chinese government is very similar to those that we have with governments all over the world. we have to look at their
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concerns. data is a big issue over here. technology is a big issue in all countries around the world. i has spent a lot of time with governments where we are building our business and i hear the same things from them, the same concerns and questions as it is not china, so particularly special about what is happening in china, other than the fact that this is a big market and technology companies are very large. same for the u.s. was alibaba president mike evans. guy: let's turn our attention to italy. the finance minister insists the government budget will remain unchanged. he said this after meeting with the you are -- euro group's president. >> in these days, the government is working on a response to the commission's criticism of certain points of the budget law. the government intends to
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confirm the main colors of the budget plan. guy: we are joined now by our rome bureau chief. alexander, come tuesday the italian government, is it going to just print off another copy of the original budget and ping it back to brussels? reporter: they might. thye might -- they might be polite and offer some changes. but it is clear at this point they cannot make any serious changes, they will not make serious changes, and that is for a political reason, they have to keep voters happy. this is a populist government. making those changes would impale the government, especially because there are two different coalitions and each one needs to keep promises. so which ones do you cut? they have no option. taylor: what happens to this government? are they able to stay united? reporter: that is a very good question, because it is
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difficult. there are two different coalitions, you have the league party, the northern voters mainly. they want more investments and lower taxes. and you have the five-star, they are younger in the south and they want public money and they want to lower the pension age. so these things are expensive and complicated to do. they come in conflict with the european union. react.ill see if they if they punish italy for its budget. at that point, there could be strong tensions. but there is time to see what happens. guy: it is fascinating. trying to figure out whether or not it will survive the current government until the may election next year that will take place in europe. just to deal with the mechanics of the process, if the budget is returned in a form that is unacceptable to brussels, what happens after that? reporter: well, things move
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slowly. currently, brussels will not be happy, but they said clearly they do not really believe italy's estimates of growth and the deficit. the do not thinky they will be able to pull off what they say. and so they will have to somehow punish italy. but it would happen immediately. it is a long process. the elections will be coming up. this is a lame duck session in the european union. i think that is what italy is counting on. guy: thank you for the coverage. let's go to first word news. kailey: president trump says he has not spoken to the new acting attorney general about the russian investigation by robert mueller. there has been speculation matthew whitaker would try to rein in mueller. he criticized the investigation before he replaced the jeff sessions.
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and a boeing 747 overshot a runway today. several people were injured. the airplane was bound for toronto, but had to return to the airport after take off because of a hydraulic failure. in australia, police say a stabbing attack was linked to terrorism. a man got out of a truck, which then caught on fire. he stabbed three people before being shot by police officer. he died after killing one of his victims. and the u.k.'s third-quarter economic expansion was the fastest in two years. gdp rose extensive of 1% with the economy flatlining in september and october. thisthis as a great prepares to leave the european union. -- as great britain prepares to leave the european union. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm kailey leinz. this is bloomberg. taylor: coming up, best in the business. going to my hometown in california, stanford taking the
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top rankings of schools in the u.s. we are live at stanford, next. this is bloomberg.
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guy: from london i'm guy , johnson. taylor: from new york i'm taylor , riggs all about battle of the b schools. stanford serving thousands in 2013, talking about their experience in the u.s. stanford takes the top spot, beating out wharton and harvard. for more we will bring a carol massar and jason kelly joining us from stanford.
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jason: good morning. we are here in stanford. it is a little early, but we are so happy to have yossi feinberg, senior associate dean, also involved in entrepreneurship here at stanford. that is the key of you guys getting the top spot. tell us how entrepreneurship figures into the curriculum. yossi: it is wonderful to have you here. and obviously, it is great to be ranked number one. >> congratulations. yossi: thank you. entrepreneurship for us is not only a field, it is something we think about holistically as something that captures the mindset of creating new values. it applies in every organization, in every leadership role. this is what we teach and believe in, that our graduates will go on and create new value that will better all of us. spent timeave
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talking about the world being disruptive, so many industries being disrupted, and that includes education. you have had to adapt and change programs to meet the growing needs of companies. yossi: absolutely. it is not only that traditional industries are being disrupted, it is the rate of disruption that is accelerating. you have to be nimble and education is no different, it has to adapt quickly. carol: what have you had to change in the last couple years? yossi: that is a great question. certain things you want to keep. you want to have a scientific, rigorous basis for everything that you teach. but at the same time, you want to make sure that as analytics becomes more central, you equip the students with those new skills. so you have to constantly change the curriculum in that way. carol: i am thinking a.i. and
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things like that. yossi: absolutely. jason: we are here at the heart of interviewer ship -- entrepreneurship and innovation in a lot of ways, and people have a romantic view of two guys in a garage creating something, but you focus on corporate entrepreneurship as well. how do you build a student, essentially, how do you train somebody to be an entrepreneur within a big organization? yossi: i think it combines the openness to new ideas and the drive to create new value. you should think about it in every organization, a leader that has this drive degree new value. that is one of the most essential things. at the same time, it has to be a leader that has empathy and compassion. and humility. so the values become even more important as technology evolves. and we see it all around us now. jason: that is such an interesting point. we spent so much time talking
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about big tech, and you think about how this environment has changed and the big questions that are facing some of the leaders of technology companies, many of whom are just miles from here. carol: social media companies. yossi: that is at the core of creating printable leaders. ciple leaders. people as they come here, the community, it is not just an individual process, it is being part of the community that strives not to do only well, but really do better for the world. not only for themselves. carol: and you talk about global, thinking about the whole world at large, diversity is only important. foreign students are important to stanford. you have many folks here at the mba program, but it is getting
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tougher to process those of visas and i am sure you have seen a slowdown in applicants because of that. yossi: i think there is a global trend in applications from global students to u.s. schools. carol: going down? yossi: yes, it is something that we see. i think in terms of the opportunities, the opportunities are graduates have are so fantastic. and i think the industry is looking for amazing talent, whether it is from overseas or from the u.s. the other part of it, i think opportunities globally are now increasing all the time. and we talk about entrepreneurship and changing, the accelerated pace of change means our graduates are in high demand. jason: one more question. this about networking. it is something that we rank business schools on.
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how do you encourage networking in a productive way that leads to successful relationships? i think that the network is a great concept. and if you think about the network -- the network is not size,bout tis size -- i think s it is about the strength of the connection. twitter is a network in some ways, but it is not where relationships can be built, and especially supportive. i think the strength of stanford andhat it is this openness supporting community that together creates value. and that is what makes the network a star. carol: where do the graduates want to go? used to be finance and wall street. oyou are in silicon valley. where did they want to go? yossi: it goes back to your first question about the changes
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you see in education. and what we see is the traditional career paths for mba's, that has changed dramatically. right now we have graduates that go into more than 300 different career paths. and when you have that, it is really about preparing them with the core skills of leadership. being technically savvy, being scientifically well-founded, and the same time having the leadership skills, having the team community building skills that are going to be applicable in each one of those career paths. jason: great stuff. yossi feinberg here at stanford, congratulations. number one in the rankings. we will have more today from stamford. bck to you. --- back to you. guy: thank you. interesting interview. you can find in the rankings of the best business schools in the
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latest issue of "bloomberg businessweek." still ahead, oil's record retreat. u.s. crude heading for its longest ever run in declines. futures in focus is next. this is bloomberg. ♪
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guy: from london. i'm guy johnson. taylor: from new york, i'm taylor riggs guy: let's pick up and have some time for futures in focus. while extending a run of declines after falling into a bear market, heading for its longest losing streak on record. cme byjoined from the scott. how much further is this going to run? >> we are keeping an eye on it. 60 is a huge level. as you saw overnight, as they broke the level, they had a big spike in volatility. even the options that are expiring today have a hefty
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premium with just some hours left in the day. so the $60 level, we are keeping an eye on that. and the supply increase, seven straight week in a row at a significant level. right now, everything will be due to headline risk. opec, as well as russia, expected to cut output. if we get that headline, you will see another spike in oil prices. if we do not get anything, we will continue to slide and target $58. if it breaks at $58, we have room to run. guy: is opec in control of the market or not? scott: it is looking that way, but it is offset with extra production from the u.s., the highest production on record. and they continue to increase output, so it is a double-edged sword. we will see how this will play out in the short-term. guy: have a great weekend. thank you. there at the cme.
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now the luxury sector. earnings disappointed a little bit early on, but the outlook caused the problem, dragging the stock lower. as you can see. teame joined by eric, our leader for european consumer news. the earnings were down because of a ride down on their supporter, but the outlook statement on china cut everybody's attention. >> we have two different things going on>>. the china outlook, everybody in the luxury industry, especially investors are jittery about the state of the chinese market. there were reports on crackdowns of an authorized imports at the chinese imports. questions about how long this boom that has really driven the luxury sector, how long it can run as economic growth slows and the markets are jittery. and that contributes to the magnitude of the drop today in shares. taylor: it is not just topline revenue, it is the bottom line
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problem as well. they noted the first-half profit missed expectations in part because of rising cost, is that tariff related or are there other higher costs that are causing problems on the bottom line as well? eric: some of the cost issue is related to their effort to kind theake or bear control of retail situation, so they are bringing back some of the stock, controlling the wholesale operations a bit more to create more scarcity in the pipeline. and also then to kind of sell more of their watches through their own stores, rather than third-party retailers. part of that was buying up the big online retailer that they had a stake in, now they have full control of. eventually, that could give them more profitability, the in the short-term it is cost. guy: these are the kinds of things that the chinese tourists
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buy and bring back to china. there was a story a few weeks back, that the chinese authorities were checking people on the way in. is that part of it as well? eric: it is a big part of it. there is nervousness, whether it is investors in these luxury brands, this is something that people have been used to shopping overseas when they travel to paris, london or hong kong, whether they put a watch on their wrist, come back through and there is no problem, but there were reports of crack downs on that. guy: what about burberry? eric: they do not have the kind of growth that like gucci has t, they aren richemon back into the-will digits now, but burberry is in the lower single digits. so maybe they see more steadiness.
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they have a bit more of a turnaround story, which is a different dynamic. taylor: thank. that was our team leader for the european consumer news. i want to take a look at where the markets stand, because we've mostly red for the major averages. dow jones off 7/10 of 1%. s&p 500 looking worse, off 8/10 of 1%. and the tech companies, the nasdaq, off 1.5%. ge on the move. sky works on the move. both are off 7% and 8%. more coming up. this is bloomberg. ♪
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>> 30 minutes left in the european trading day. from london, i'm guy johnson. taylor: from new york, i'm taylor riggs. this is european close on bloomberg markets.
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guy: here are the top stories from around the world. crude conundrum. royal heads for its longest losing streak on record. how will opec regain control of the market? watch out. luxury stocks richemont drags down peers as it warns on slowing demand in china and louisville trade tensions. the irish prime minister sees a brexit deal within weeks but north of the border the dup says theresa may's plan will not work. boris johnson's brother has just quick to government. the pound had a turbulent session. let's talk about where the markets are right now. the stoxx 600 down by .3% heading toward the close. in europe, we have been talking about crude. brent is now back above $70 a


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