tv Bloomberg Markets European Close Bloomberg November 12, 2018 11:00am-12:00pm EST
guy: here other top stories we are covering. michelle says the main elements of the brexit -- are ready. the pratt -- pound jumps on that report, but does theresa may have the numbers to get it through parliament? takee commission ready to it online? a bitter taste. reports say the fda is looking at restricting sales of menthol cigarettes. the stock is heading for its worst day in 19 years. let's take a look at how the european markets are performing and show some numbers. down by 8/10 of 1%. 112 withading with a concerns surrounding italy.
the pound got knocked on the brexit story against the dollar. that seemed nation trading. then we got the italy story kicking in. , 1.2867 on a rope that the brexit negotiator says we are pretty much there now. you have to worry about the math in the house of parliament's and whether -- houses of parliament. bat.there is we are trading down by 10 points 10.23%,ad towards -- here is abigail doolittle. >> take a look at the selling pressure on this monday. the dow, s&p 500 all lower down
for a third day in a row. take a look at the semiconductor index down, both of the tech indexes having the worst days since october 24, that was the worst for the tech indexes and of course for the nasdaq it was the worst months since 2008. the sellers are clearly out for these indexes, but it also has to do with something in the apple supply chain. let's look at the movers. apple on all of the averages but much bigger to the nasdaq, down 4.7%. another supplier not on this board absolutely plunging. cutting the second quarter view on signs of weakness around the iphone. we have been hearing these reports about apple in terms of that disappointing forecast for the holiday quarter plus some other apple suppliers, another day of weakness. let's look at what's happening
for the charts. --is a must in a bear market almost in a bear market. the last high not even on this chart. range really brings it to the downside. in the last hour we were talking about nasdaq and whether this was likely to produce a move to the upside or downside. this chart really supports that because we have the near term uptrend telling you even the near-term are out now. this is a bear straight to the downside. by the weekly charts expected to stop that will one week moving average. it is also bearish for ge. earlier below eight dollars per share trying to defend that right now. this as investors are losing confidence that they can turn itself around even with a new
ceo. , on levelresting since march 9 of 2009, that was around the time of the turnaround, the inflection point higher for the u.s. market. we will wait and we will watch with interest. gathering a lot of interest in terms of what people are watching today. let's turn our attention to what people are watching the u.k. even as british and eu negotiators inched towards the , euro filesgement in parliament seem poised against that deal. partyoices in the labour are calling for a second referendum, including the mayor of london. isprime minister may negotiating with the european union is at the very best a bad brexit deal and the worst as we could be in a situation where there is no deal whatsoever.
in those circumstances i would say she should give the public a vote for the first time on whether to accept those negotiations with the option of staying. leader hasr indicated he believes the brexit cannot be stopped. let's bring in our u.k. politics reporter. we seem to be inching towards getting a deal. is difficult to sort of believe that until you see it on paper. the big story is once we have a deal, does the prime minister have the ability to get it through the house of commons? that is a big question. colleague put out a piece last week showing she probably does not, it is going to be difficult for her. it is clear some lawmakers have
come out and said which way they are going to vote. on friday, boris johnson's brother resign saying he couldn't support a brexit plan and would vote against it. it is hard to know at that moment when you go to the ballot box and cast your vote and make that decision, some feel -- some don't know how they would vote. and waiting to see what the outcome of the deal actually is. guy: pretty difficult for her to go forwardand waiting that poin. what happens then? brown was giving a speech where he said there should be an option for mps to be a to send theresa may back or send someone back to brussels to try and renegotiate the deal. but she would be in a very weak position in the circumstances. for our u.s. audience, can you talk about the level of stress on the ground in how much you think this deal could get done, sometimes it feels like to
step forward and one step back. todaywe have heard michelle say a deal is getting closer and it is. we are very close to a deal. a few weeks ago i think we were in this division where the brexit secretary went to brussels and people thought a deal was nearly done and it fell apart at the last minute. that really a hard to say we are any closer to a deal now than we were back then. the key thing to think about this week is the u.k. government is desperate for a deal in november because otherwise they will have to start invoking no deal preparations like stockpiling medicines and food. if they want that they have to know by this wednesday if they are going to be close enough to withdrawal text to make those preparations for the november summit which would allow them to sign the deal. guy: thank you very much.
let's continue the conversation and take a look at how this is playing out in the markets. sterling on a three-day losing streak. luke hickmore joins us. and joins us from edinburgh. what we have just been hearing is that it's going to be difficult for theresa may to get this through the house of commons even if we get the deal, how does the market therefore position around this? do they focus on getting the deal bits or the inability to get it through the house of commons? >> it is about the house of commons. the fact we will be presenting a deal looks increasingly likely this week and theresa may seems to be anbang unstoppable movement to getting it through her cabinet and getting it in the house of commons. i think up until the last few
days i think the mass was in -- math was in her favor because who wants to be in the lobby with the hard brexiteers. anyway,re a remainer why would you go in the lobby with the hard brexiteers? it's got levers and they're now, it is easier to vote against it then it has been all the way through this process. tomakes it really hard figure a you want to do for investment, sterling is gone from 132 to below 127 and then all the way back, that is tough. i think for us we are not taking risk,, too much political you could end up on the wrong side of it very quickly, it -- if a deal gets done, sterling is going up. we could be hitting 132 or 133. it is going to be higher and if the deal doesn't happen, the opposite scenario happens and it
is quite stark now either way. how bad with that move on the downside be? blackrock, rupert harrison used to be close suggesting a bit like tarp in the heady days of the financial crisis. the market would force the politicians mad, the sterling would actually crushed and as a result of which, the politicians maybe give a second bite of the apple they be able to go back and vote on the deal again. how significant would that be and what of the enough to frighten politicians? luke: i think to frighten politicians in this case it will be absolutely very significant. the only way through for the prime minister here is if people really believe there is no deal, if they do not agree, then there is no deal.
if they believe that, it may just make them waver and going to the yes lobby. so for her to come back after a vote that is no and say we will revisit and it's fine just because it moved a little bit, i don't think it will take some -- if we see 1.20 or below that, if we see the eurosterling, that's the point i think we get pulled back to the table and at that point we are talking about inflation coming back in quite an aggressive sense. it will be a pristine environment for u.k. domicile assets. there's going to be recession talk back on the table for next year. those kinds of environments will bring the government back to the table and re-think whatever deal might be possible between now and march. but time is getting very tight. taylor: how do you invest around ?his uncertainty
you're not making calls on sterling. at what point are you are -- are you a buyer? luke: if we do get that ultimately awful scenario in the short term of sterling down, i think that is a decent entry-level. but when we get down there it may feel different, it may feel still too early to get in. i'd hate to use the term uninvestable, because sterling assets of the end of the day we are going to get through whatever happens in march of next year, five years down the line the u.k. will still exist. what we are looking for is mixed price assets. things have fallen to far too something banks are to keep a close eye on during this. if the market is stressed at all by really serious about no deal
brexit, sterling banks could be an interesting way to get back in without taking those inherent volatility from fx markets we are seeing at the moment. taylor: you talk about inherent volatility in the fx markets, we will switch over to debt. are you looking at u.k. government bonds? are you looking for the down in terms of the credit spectrum? deal there is a risk here we see the u.k. credit rating impacted again, we have come way off the aaa many years ago and there is a risk we see another notch down. we could see yields go higher. we are currently in the camp that still does get done and want to be clear on balance it does get through parliament as tough as it might seem from here. we are quite happy being a little bit short duration in gilts.
you don't need to take a lot of risk in any of those u.k. macro assets at the moment until we get some firm signs we are going to get somewhere rather than continue to talk about it. hickmore,at was luke plenty to talk about. you will stay with us. let me check in on the bloomberg first word news. >> more grim news from the california wildfires. another six debt have been found in the northern part of the state. 29t raises the death toll to matching california's record for a single fire. more than 6700 homes and other buildings have been destroyed. almost 150,000 people remain evacuated and high winds are again in the forecast. the trump administration reportedly is trying new tactics to limit intellectual property theft from china. the u.s. will use export controls, indictments and other
measures. the program was launched with a crackdown on chinese semi-conductor countries accused of stealing technology. pressure is mounting on theresa may to abandon her brexit proposal. she could face a catastrophic defeat in parliament. her brexit conservative lawmakers have joined forces with the democratic unionist party that props up or government and they are vowing to reject a deal that could treat northern i learned -- northern ireland definitely. -- differently. opec and its allies are raising death laying the groundwork and are talking in a most year-long expansion with saudi arabia leading the way's annual export a half million fewer barrels a day and that is putting pressure on so-called opec -- two act before the policy meeting. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.
taylor: from new york, i'm taylor riggs. guy: in london, i am guy johnson. taylor, let's talk about the markets right now. a couple of hours ago my colleague spoke to the head of the german financial regulator, this was his take on the risk of the market faces right now. >> what really worries me is
that we have such a high number of concurrent potential risk with the higher degree of , let it be a trade war or anything like that. it is a relatively high number of things going on which can make geopolitical or anything like that, but in unknown combination of all of the above might trigger a real problem. guy: german regulators are paying attention. i'm sure luke hickmore is paying attention to those as well. let's talk about italy for a moment. in some ways they have been remarkably stable over the last couple of months with the spread to germany circa 300 basis points. simply, why?ut it been i think people have
cleared out of a lot of their -- if you are looking at something and thinking about what will push this, you need sellers to exist and increasingly that market has come down in terms of saying who is holding it and it is domestic holders. got their own reasons for holding it whether it is regulatory reasons with the banks or they are just looking and saying i know this company, i know this government, i know these bonds of these levels. the marginal sellers seem to a been cleared out until we get more news going through in terms of the fiscal budget and clearly that will be quite interesting story tomorrow. taylor: we have been talking about mixed price assets. bear with me while a make a pivot. i want to ask you about ge. we've had a lot of stock reaction.
a pretty low eight handle on the shares. debt i know something to a credit guy we are down to $.80 on the dollar. are you a buyer of this stock, the debt, or neither? i'm not a buyer of any of those. from a credit respectively been underway for a long time and we moved to the sell recommendation which means it is aggressively underweight. the movement in credit the last few weeks has been -- just today we are seeing bonds which have fallen off a lot. six points lower in u.k. ge credits, a massive move, but still prices if they are minas, maybe a triple b minus. the sales have something left yet before we look at that as a potential investment it is not fully displacing all the problems in the power business yet. the amount of financing they
need in the ge capital business as well just could weigh on these bonds longer yet. investors to not give john flannery a lot of time. needs moree new ceo than a year, how long do you give the new ceo before investors get more frustrated? luke: you give them enough time to come up with a plan which you can buy into and we haven't seen that yet. if we get something from them that looks comprehensive in terms of disposals, focusing the business into where they need to be and importantly getting back to what ge does and does well, which is innovation in the industrial space, we might be back on track again. none of that has happened yet and today's news from ge doesn't give you a lot of confidence either that they are really finding it hard to predict where the revenues are going. and we are quite happy being underway at the moment and we're certainly not anywhere near turning that away in the
short-term. guy: do you like any of the industrials right now? i see ford teetering on the edge. we have problems in the european auto sector. is anywhere industrial-strength you like right now. luke: at the right price we do. for example the deals we have seen in europe's credit market look cheap. we are invested in general motors as well. i think they could be playing the electric vehicle boon that is just about to happen in china , gm is a good place to be for that. is a few that are quite interesting. even businesses in the packaging area who have their problems as and weok to be mispriced think a really good asset going forward. as always it is about the right asset at the right price and
really on -- stocks really under pressure today. let's look the numbers on where we are sitting. , in some ways the pound. the taxes were the real pain has been felt. some of the industrial technology stocks as well with an update, the market didn't like what it had on that -- heard on that call. we await news tomorrow of what is going to be happening with the italian response on the budget battle with brussels. let's show you individual names. british and stock of the hour, down on the idea that maybe the fda will look to limit sales or ban menthol cigarettes.
this is an industrial technology industrial technology that builds chips. an making anbang -- making acquisition. the market think that was expensive and still ruminating on whether or not this will bring decent benefits. we will see. the stock getting knocked today. ares take a look where we some of volume has been light today. u.s. equities are open. the last 30 days, volume a little light in europe. taylor: back in the u.s. you are seeing a bit of a red on the screen. the selloff has gotten worse. 500 off more than 1.5% led by the selloff in tech that
continues to be the story. infotech index off more than 3.5%, eight of these 11 sectors are in the red for today. more on tech coming up next. save havenf the assets, the bloomberg dollar index up. leaving a small increase here in the fix. that was a 19 handle and is now a 20 handle. a little bit of that cell up pressure comes, you are seeing this start to take up. selloff, thehe big fix was a 30. vixnt to look as well -- was at 30.
i also mentioned a stronger dollar story and that continues to be what we are seeing. a stronger dollar against some major g20 currencies. catchings, those are as they come in a little bit there. we are continuing to see oil climb higher of about 2.5%. that is your u.s. markets. let's talk about the selloff in some of the assets moving on both of the -- both sides of the atlantic. let me first of all start with you. the market has taken a turn over the last hour. any idea? -- any idea on the catalyst? >> a lot of the metrics i look at, taylor don't get too freaked out. that is starting to get a little
worrisome. if you look at the spread between that and the vix, it's at its highest level since 2004 and the real-life volatility i think is starting to concern people when you have these giants that were leading the market and then start to sway wildly, it is tough to be on the other side of and it is clear its premium over even just normal stock, pretty much hitting records now. it is tough to go into those names with conviction when you know how much they have the potential to move the market and they are swinging so much. intoanything i can read the elements of what we are seeing today? eightting knocked below and trending back above that now. today, is there anbang -- is there an
amalgamation of idiosyncratic stories that turns the tide? >> it is obviously a holiday session and in that sense it is thin. and it is towards the end of the year so people are closing books , especially as -- swings around a bit. it is a little bit more sensitive. we haven't gotten over the october shakeout. we haven't quite had that stock buyback affect people were expecting and explain why october was so poor. we had a nasty comment from jay powell, we haven't had the wind back from that. thenll see what he says but i don't expect he will roll back. expect him to roll
back. all the conditions are there. taylor: i want to talk about tech as we look at the s&p 500. offthe major categories are and then tack is 3.5% lower. what is going on that makes tech the driver lower? luke: the biggest thing we can point at the selloff, the simplest is sometimes the past. after rising rates and fears about the length and advance of the global economy, tech is seeing a huge re-rating. it is pretty much now at its lowest levels of 2018 and that is getting chopped down throughout this selloff but if you look at it, it is hard to draw that line in the sand. where does it end because the lowest tech premium of 2018 is also the average for 2017 or higher than most of 2016. if you are concerned about
earnings power or how long the cycle will last, are you going to pay that much more for a netflix versus a staple that you are pretty confident, that's why i think disney was possibly a catalyst again for netflix is a competitor talking about ramping up any success it has had already. i'm wondering if walmart will be the same for amazon. taylor: i like you talked about earnings because that really leaves try some of the fundamental moves we have seen. their earnings were ok, the market is unimpressed. it?hat because they are just ok and we need to see blowout quarters. luke: it is less about the actual earnings in more about expected going forward. it is a copout but i think that is what it is and that combination of strengthening u.s. dollar is now kind of added to this fears of global growth
story. it seems to be more supply than demand driven. whenever you see oil going down, puts her on yields and makes them more concerned about deflation than inflation. its probably -- if you get turn in fiscal stem in this -- chinese fiscal stimulus, you'll season growth. guy: let's talk about that european political story we face. italy one of the stories and with what is happening with brexit. there are all kinds of stories swelling around london. with the popped comment a deal is close. in some ways that is not good news for theresa may. with the politics so divided down in westminster, she needs a little bit of fear here may be
in the pound, maybe to translate to westminster. suggestnk for -- to something is happening in u.k. politics is extraordinary and it shows the european union are prepared to -- theresa may. i think we will find out in the next 24 hours whether or not there is a proper result in a cabinet. and whether there is a serious push back and the lack of flexibility they have shown. equally a small move for the eu here to do amazing things for theresa may. , but it isay not see quite clear the europe's trying to put the pressure on the u.k. to accept the deal. clearly ireland and the backstop is what solves it. can they work around it and create a sidebar deal? i don't know. but that's will will have to get
theresa may -- what will have to get theresa may through this time. the nightmare scenario is the cabinet walks away. attention torn our what is happening in italy. italy is the most prominent case of the moment in light of the political tensions. the strong market reactions to political events have created new concerns in parts of europe. although it has been limited, it remains our possibility. guy: what happens? >> what is going on in italy is not easy.
there are problems with some of the banking staff and the will ontion, so this italy and the eu budget is not going to end very soon. ,aylor: interestingly enough italian bonds have been outperforming german and spanish bonds. does this mean a lot of the risk is already priced in? >> in short, yes. and ahas been a shakeout lot of this is already known, so what is new year? it's a tough month for italian bonds. buybacks are coming through. a lot was already based in and we do have an auction this week. it should go ok, but it is coming towards the end of the year. .t will be another key test taylor: thank you. and was marcus ashworth
thank you as well to luke, our cross asset reporter. i want to check in now on the bloomberg first word news. courtney is here. courtney: the most destructive fires in california's history could cost insurers and homeowners at least $19 million, that is on par with the destruction caused by hurricane michael. northern andn southern california have killed at least 31 people. more than 6700 houses and buildings have been destroyed. are making it tougher for firefighters to contain the blazes. in florida, the senate and governors elections have gone for recounts and that has gone -- the president we did the democrats are trying to steal both elections. but he offered no evidence. tosident trump's demands
play porter wall may spill -- spoil congress is plans. they return for a lame-duck session hoping to avert a partial government shutdown. the president insists on ruling out he may insist on wall funding in exchange for funding registration 2 -- funding legislation. bigger bonuses are coming almost for everyone on wall street. stock traders, money managers and even being counters should mergers but if you are and acquisitions, sorry. that is close to an annual report released. the among other things it says equity traders should get a 20% bump. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm courtney donohoe, this is bloomberg. guy: thank you very much. if you have wrapped up your day
2.5% it really interesting. i take a look at the s&p 500, nine out of the 11 sectors are off. everything else is off less than 2%. tech is off more than 3%. it is the correlation with trade and we saw over this weekend trump getting a frosty in paris and distancing himself from other world leaders. i think markets are looking at that and look at that as a potential further risk in trade and global trade tensions down the road. look on myake a bloomberg, volume is light. is that down to the holiday or is that anbang -- an indication the market is not convinced of the selloff? just we think they can can say they are convinced. i would attribute it to the holiday.
a lot of regional banks are closed. a lot of them go on a skinnier staff, canadian banks are closed as well. overall in north america i think we are seeing low volume on the holiday. taylor: i want to talk about some inflationary pressures we are feeling. lower, we are a bit higher today. how do you reconcile that between inflation -- inflationary pressures but loyal -- lower oil pieces? prices lowerk oil because they supply issue, an oversupply issue. opec potentially addressing that in the december meeting. still a long way off and still a lot of things to go from there. we will see with the participation in opec is for lower supply. is based oner
energy and now that we have seen oil drift off into a bear market , i think we can discount that number and what happens with epi, all the -- cpi. that should not push the fed in any direction whatsoever. fed, jaybring up the powell speaks late from a london perspective, any suggestion he will try to calm things down? vince: i think it will be steady as she goes. i think ease days -- he stays away from market hiccups. equitysome major selloffs between now and wednesday, probably not going to sort ofut there is some catastrophic selloff i could see him making some comments but i think he will stay away from that and not delve into that space. guy: thank you very much.
guy: live from london, i'm guy johnson. taylor: this is the european close on bloomberg markets. time for the bloomberg business flash. starting with private equity firm and sometimes activist l.a. for $5.7 billion. businesses online including billing for health care providers. over in switzerland, prosecutors are investigating rhetoric wedded siu's see unit failed to stop money laundering. the case is tied to a asset manager. people like credit suisse and of the asset manager are suspects. credit suisse denies any wrongdoing.
a painting to the artists young for $29.6sold million. the anonymous seller was the last ceo of merrill lynch before it merged with bank of america. that is your bloomberg business flash. guy: let's talk about the stock of the hour, shares in apple supplier are heading for their worst day on record. they have dropped by around 30% after the company -- sales. kailey leinz is here with more. they talked about one of their biggest customers having a situation where they will cut back on demand. the biggest customer is apple. can i draw a line. >> the markets clearly drawing that line. sharp -- a chart or we
can show you the next customer. you can create -- in kuwait this -- equate this cut to a drop in apple demand. this is really due to apple obviously a very important customer for them. you what some other names are doing in intraday trading. price target cut from citigroup on some of the weakness in the iphone xr. these have been struggling since apple reported on november 1 and they forecast up,ek holiday period coming this is suggesting weakness broadly in iphone demand. an up --here are also
other analysts talking about that weakness we seen. >> longbow research had a note earlier this morning saying iphone demand in china. china is a very important market for apple. 20% of the revenue for 2018 coming from china. analysts saying there "the iphone 4 is showing cracks there." heavyweight,tech apple in turn dragging down the tech sector which is dragging down the broader market. balance of power is up next on bloomberg television. joining the program is former virginia governor terry mcauliffe. i want to take a look at the markets here, we are seeing some the screen with both the dow, s&p 500, nasdaq and the vix .
the vix still seeing a 20 handle. you want to look at the 30 handle which is where we were when the markets bottomed out in february. we are still seeing a 20 handle which is still higher up. we take a look at the s&p 500 red,rs, nine of 11 in the everything less than 2% except for tech which is off more than 3%. we have all of this and more coming up. this is bloomberg. ♪ this is bloomberg. ♪
"balance of power," where the world politics meets the world of business. .resident trump's armistice day getting the price of oil also onm london, m arrest thomas prime minister theresa may's is appearing cabinet. let's start with you over in london. tell us exactly what happened when the president came over. start with what president trump actually said and did. >> well, you know, the most dramatic story or the one that caused a twitter storm is the thing he didn't do, which is to go commemorate, a ceremony to commemorate the deaths of u.s. marines in world war i. that was on saturday. it was raining, the white house said there was not enough visibility to put the helicopter up. that was basically not a good