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tv   Bloomberg Markets European Close  Bloomberg  February 8, 2019 11:00am-12:00pm EST

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trading day. i'm guy johnson. vonnie: i'm vonnie quinn. this is "bloomberg markets: european close." guy: european equities finishing on a down note, a big down day yesterday. so down, but european markets down seven tense of 1%. -- .7%. weakness in the italian bond market. strength in the german bond market. 0.03%,n ten-year at awfully close to zero. 0.3% today.another opposite in italy, vtb bond btpad widening out -- spread widening out.
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the company pushing very strongly against allegations being made against it, wirecard. stop is still up down 50% over the last few weeks. vonnie: in the u.s., deterioration for markets with and the s&p 500 down .8%. down.c is amazon in the news -- we will talk about that with tim o'brien down 2.25%. mattel up -- we 27% -- up 20% aa blowout quarter. everything outperformed at the toymaker. global investors facing a string challenges.n
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sebastian mallaby, senior fellow for international economics at the council on foreign relations. he is the author of several books. welcome, let's
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is one thing the voters wanted, and they are getting it. britain is the opposite. 52% of the people voted for brexit and they thought it would be a clean break with the your bureaucratic. you have the whole system literally un-american and i do not mean that as a compliment. the prime minister has lost activision --ial activism. they discover that britain could revoke its withdrawal. all of this is more chaotic than
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it used to be in britain and i don't the british people like it. i don't think they are getting that they voted for. vonnie: we will dive into britain in a moment. if they are saying the economic experiment has been working, is that by accident? does president trump need to continue the fiscal stimulus or will the political system take a sharp turn? we are looking at a slate of candidates for the 2020 election area of views. trump on: you have the one side and on the democratic side, we have moved significantly to the left. policy you canx get after the 2020 election, if you are a business, and
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uncertainty must be a dampening affect on what you do. on trump, there are problems with his fiscal strategy being unsustainable and heightened inequality, but on the notion could push the economy, that is the surprise. are unsurprising things working out badly and worrying. morning, what spooked the fed? sebastian: you had the worst month for u.s. markets that you had since the 1930's, a very big correction. financial conditions for andnesses were tightening, the question is on the face of it, january was a good month for the s&p 500.
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it came back with the best january since 1990. you might say, the market went down and the fed pauses, the fed should undo the pause. but looking beyond the stock market and taking into account other measures on capital, it is tighter than it was before the correction. that is why the fed has stuck with the course and why it is right to do so. guy: do you think the market has a clear idea of the reaction function of the fed? you say it reacted to a down drop in the s&p. is the s&p the only indicator you need to look at? it would be worrying if the fed was only reacting to her the s&p was. that would be a bad situation. you would get a bubble. .hat is not where we are at
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the fed is pausing because inflation has not shown up. companies have not pushed prices up, even though wages have come up. that gives the fed a reason to pause and be data dependent. it is not just the markets, luckily. vonnie: obviously, you are one policy.xperts on let me quote you something from a story today on the federal reserve. that is essentially, a soft landing. of course i cannot find the quote now, but can this federal reserve with all the expansion ofand news conferences and everything chairman powell has initiating following a yellen fed that was are you getting way more transparent, can it complete the same objectives that paul volcker was trying to complete?
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volcker wasaul incredible when you look back at what he did because not only did he not tell people what you was going to do, he would often had -- say oned fake thing and do the opposite. towardmoved greater -- transparency more and more. chairman powell is dialing that back. there are more frequent press conferences but less clarity about what it will be. it is like, we are going to pause and we might change our minds. that is why the market has responded dramatically to the singles in the market when it went down and thought the fed would tighten and tighten. when it would pause, that created an uplift. the market is getting used to a new regime under chairman
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powell, where there are more press conferences, but less openness about what he might do next. is the market analysis as smart as it used to be? is there an effect where more experts?ink they are as clerk people were days, specialists and the market would leave it to the specialists. sebastian: this is like a version of the facebook question -- is more communication necessarily better communication? there is more just noise or does it have signal in it? communicationmuch a different fed board members and too much market reaction, you can't control it. you can't say, hey, there should be fewer newsletters in wall street. with thet on investors
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interpretation of every wiggle and the fed position, maybe in the end if fries our brain and we don't get wiser. vonnie: we are just getting sebastian mallaby. courtney: jeff bezos is accusing the national inquirer of trying to blackmail him. threaten to publish pictures of him and woman who wasn't his wife. there are reports that there is an immunity agreement over the tabloids efforts on behalf of president trump's campaign. the inquirer publishers leave it acted lawfully but will investigate. president trump reportedly will step up a crackdown on huawei and other companies.
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according to politico, the president is expected to sign an executive order and in china's use -- the use of chinese equipment. another sign that germany's government may be seeking a merger between deutsche bank and commerce bank. there was signaled support for a champion in the banking industry. bloomberg has been used he has been pushing support in the export economy. 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 courtney donohoe. this is bloomberg. ♪ guy: courtney, thank you very much. looking at europe markets, 18 minutes away from regular trading. most of the main sectors trading lower. the auto sector most under pressure, dax underperforming.
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betweende tensions china and the u.s. getting dismal, and that is priced in with the wirecard factor as well. we will continue to keep you updated. this is bloomberg. ♪
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guy: live from london, i'm guy johnson.. vonnie: live from new york, i'm vonnie quinn.. this is the european close. let's get a check of markets. sessionlower for the today and the last three days. lower for the week as earnings come out, missing on forward guidance, putting pressure on
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fundamentals. a 10 year yield coming in at three basis points. you have doves across the globe after the fed meeting a few weeks ago with jay powell saying they will pause a little on the rate hikes. looking at the ten-day chart of the 10 year, we can see where we have been. coming back down to 263, and the fed pause signaled a rally across 10 year yields have seen across the globe. looking at earnings, positive earnings across the sector. there is some good news out there, in retail companies. columbia sports having a record after strong q4 results cold weather. skechers getting a price target upgrade from 36 to 32 -- 236 from 32. y up 26% on a- cot
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licensing deal. taylor, thank you. still with us is sebastian mallaby. is a senior fellow at the economics -- for the international economics at the council on foreign relations. we have downgrading growth for the eu going forward. ecb.der your views on the you think the ecb will raise rates at all the cycle? sebastian: it is very hard to see how they can do that. if they would like to normalize, i think it is hard. aggressively, you cause the recession you are
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trying to avoid. i do not think the ecb could raise rates in the near term. i am worried by the slowdown in europe and also the politics around the slowdown. if you look at the way france ishdrew from italy, which unprecedented in the second world war, that should the populace government in italy and conformists in france have hit rock bottom. if we had a problem with the italian debt market and you needed to have europe coming together to deal with it like it did after 2010, i do not see that political will to collaborate at the top level and help each other out. that is the most worrying thing. guy: do the italians have a point? europe needs fiscal stimulus right now. ae rules do not allow it come
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but you only have to look at the united states to see what the impact of fiscal stimulus and the positive growth numbers to make the case for europe. sebastian: you can make a case for fiscal stimulus. you don't have to go to the current government to's that being made. the italians have been making that for a long time. you don't not have to, chronic a factory product. there is -- you do not have to call macron a factory product. that kind of talk is very damaging. stimulusthem on the maybe, but not be mad need music around it. vonnie: you just talked about the chaos that is coming almost u.s. like in britain. what will happen to theresa may? sebastian: on the question of
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you'll see that maybe they will extend it. there is a 20% chance of crashing out. like lehman brothers, you don't plan to crash out but you get to the deadline and you haven't figured out something that saved you from going over the cliff. there is a 30% chance that the parties shall more unity and the hardline paris, --. purists will support theresa may after all. you have 60 or 70 members of the conservative party in parliament who have been voting against the government quite consistently. of 310 or or 70 out whatever it is. brexit and mp's pro 200 are not. the majority does not like
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jeremy corbyn's position on brexit. they wish he would support a second referendum, but he has not been doing that. there is disarray on both sides. if you could put brexit behind you, which is not going to happen fast. let's predict out a couple of years, conservatives are more united than labour. with jeremy corbyn, there is a huge swing from his politics to the other parties. ,onnie: looking out past exit do you see somebody emerging as a likely candidate for the next prime minister? someone.s. to see emerging as a competitor to president trump? do you see any democrats that of announced being that? sebastian: i think the next prime minister will be another
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conservative, not theresa may. some pointep down at and then there will be another election and that will be won by a pre-brexit person. it could be somewhat elect the foreign minister. theink that will happen and conservative party will win the election against jeremy corbyn because he is so far to the left in may prove unelectable. verypect it will take a brave republican to want to challenge an incumbent president trump'sth 3% growth and command of social media. who would do that to himself or herself? it feels like a suicide mission. it may happen but i doubt it will be serious. i think trump runs again and gets the nomination and then the democratic side is wide open. i think it is very interesting that there has been some boomlet
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for sherrod brown. if you think about the history inwhere he has been viewed the democratic party is anti-trade and anti-globalization as his signature theme, but at the same time is smart and reasonable. and a are a centrist democrat, you might say is this guy can make the -- when the midwest, maybe he is the right man despite the fact that i don't like his trade policies. guy: one final question. going back to the u.k. -- if there was a hard brexit, how should the bank of england despond, and what kind of this goal room for maneuver with the government have? englandn: the bank of and fiscal authority will want to be supportive of growth. the constraint on that support will be the exchange rate. you can't risk a collapse of sterling. that would be terrible for
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confidence. it could certainly start to saw the currency sparling too fast. england will be as close as it can be without spooking foreign exchange markets. vonnie: it is always fascinating to speak with you, sebastian. thank you for joining us sebastian mallaby, senior fellow for international economics at the council on foreign relations. this is bloomberg. ♪
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vonnie: it is a risk off day, with the dow down 1%. s&p 500 dow .7%. -- down .7%. the nasdaq down .5%. is up year treasury
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2.60%. we will talk a lot more markets in a few moments. this is bloomberg. ♪ talk about what is happening in europe. lineing on the dax, a key to have gone through because it is a head and shoulders formation. we have gone to the 50 day moving average. this rally we have seen for the german market today coming very much unstuck. it will be interesting to see how it go into the close. negative position for the german market. ♪
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to go, have 30 seconds the german market is the focus today, as you can see a bright red german market. and we also see some losses in france and of the ok, not doing
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too badly relative to counterparts. but we do have some fairly bleak numbers out of germany, below the 11,000 mark, the neckline and the head and shoulders. wildcard is one of the many reasons for that. and we are picking up a little in the afternoon. so let's dig into the movers. the while story is front and center in terms of the stock story. we will show you what is happening. this is the move i want to highlight. this highlights what has been going on in this incredible run this stock has had, but it is down 50% since the highs were hit in august. so a big move to the downside. although, the company is pushing back strongly. we need to reiterate that. in terms of other moves, we will walk you through what we have
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going on. we see weakness in terms of the italian bond market, strength in the german bond market. the spreads are widening out. and volume is ticking up as we have come to the regular -- the end of religion writing. this is -- of regular trading. an the downsided -- and the downside is being reinforced today. vonnie: the 10 year treasury yield, two point 63%, down three basis points in the last session. and the fx a little bit directionless. but we are looking at stories going on, like the canadian dollar continue to weaken as oil prices weaken for a fifth day, 1.3281 right now. the australian dollar is another way to look at the story. there is weakness built into the australian dollar today. 1.0970, trading a
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tiny bit stronger today, but pointing to pretty directionless markets. gmn, other asset classes. mostly happening in equities today. obviously, you can see that going on with the equities. the australian dollar is showing up there. the canada dollar is a stronger, which is interesting to my because it was weaker thanks to oil. and you can see the hydrocarbon indexes pointing red, where you have other commodities in the green, such as steel. potentially a trade deal being done, but it does not look like this month at least. guy: theresa may is in dublin trying to get the eu to budge on the backstop provision of the withdrawal agreement for brexit. she will have dinner with the irish prime minister a little later. now will get insight on this. our chief economist at the european policy center joins us now.
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good afternoon, how do you rate the chances of a hard deal brexit right now? >> good afternoon. i think that we have a very high chance of a hard deal brexit, even if we did get a deal it is a relatively hard brexit at the moment. but the chances of no deal are increasing every day. guy: there are those in brussels that are beginning to worry that the eu will get the blame for you know deal brexit, do you think that is fair? what impact will it have on the eu going forward if that were to transpire? fabian: i look at is almost certain that if there is no deal, there would be a strong attempt in the u.k. to blame dublin and brussels, to blame anybody but the u.k. itself. that is a worry, but the reality is the european union cannot move on the backstop. they are very good -- there are
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very good political reasons and institutional reasons why we need the backstop. and it is, after all, what the u.k. government agreed, both in december and in the withdrawal agreement. vonnie: what economy in europe are you most concerned about these days, and we will add the bearish economy as well -- the british economy as well? italy has gone into a recession, and there are doubts about germany, so where are you looking most closely? fabian: i think what we are seeing across europe is a very strong headwind coming from the global developments. i think that the biggest worry for me as germany. yes, growth is still going, but germany is the motor for the rest of the european union, so any slow down will have a big effect on all the other countries. top of that, i think what we
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are going to see in the next few months is the impact of brexit starting to really come through. we see more and more companies now making plans for leaving the u.k. or reducing investment. reducing employment. so i think we will see weakness in the u.k. economy. vonnie: what are the currencies priced for? shock,euro priced for a perhaps if the german economy we see even further, or in impact from brexit scenarios, is the british pound priced correctly for brexit? fabian: i think it is extremely difficult to say what the correct price level would be like. i would certainly think that if we have a no deal brexit, then we will have a further weakening of the pound. potentially quite a dramatic weakening, but the bank of england would then intervene. for the euro, we have a very complex economy.
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it is not just germany, which determines where the euro is going to be in terms of exchange rate. but certainly, if we have a thespread movement in economy, that will put downward pressure on the euro. guy: let me ask a question about the breakdown in relations between rome and paris, and to be honest the deteriorating relationship between paris and berlin. what is the impact of this kind of drop in friendliness at the center of the european union going to have in terms of economic impact? if the italians try to push it when it comes to the budget, do you think others will push back harder as a result? how does this manifest itself? fabian: i think it is not helpful in terms of getting new agreements done. there has to be a certain level of trust between the european
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partners, there has to be a way of talking to each other without escalating it. europeane end, the union will continue to function. this is not an existential threat, this is not something which will stop the european union from carrying out day-to-day business. but when it comes to areas where we need agreement, that will slow down things when it comes to the european union budget, for example, it will take longer probablya compromise, much longer than would be useful in terms of getting this into place. guy: thank you very much, fabian. vonnie: l'oreal shares closing higher. this as there are concerns about a slowdown in china. we spoke with the ceo. >> why not, because there is a
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strong appetite of chinese consumers for beauty products, for luxury beauty products, and so far we are seeing no slow down at all. >> other companies are, like caterpillar with bulldozers, apple with iphone. >> different. >> what trends are you seeing in china? >> we see a strong demand. it is true also that there is something called the lipstick affect, which says sometimes when people do not want to buy expensive items, they are happy to purchase a lipstick, skincare, a fragrance or something like that. go, we think that this stron growth could continue. >> i know you said you have nothing impacts from the trade war, but what about some of the weaker data out of china? when are you expecting a slowdown to your company? >> we are seeing it. there is no reason at the moment
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to be worried. obviously, if there is a slowdown, we will adapt. >> you do not see it in 2019? >> for the moment, nothing. and we keep investing. one of the reasons also maybe why we do not see a slowdown is we have been investing for many years. l'oreal paris is the number one beauty brand in china, it is the number one luxury brand in china and we are number one in makeup, men's care, skin care. >> and it is your number two market now. when will it be your number one market? >> it will be certainly, but the u.s. is still much bigger. but, you do not know, maybe 10 or 15 years. vonnie: that was the ceo of l'oreal. now we will check in on first word news. courtney: the trump administration warns the european union that the traded truce agreed to last summer is
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in danger of unraveling. the u.s. ambassador to the european union tells bloomberg goodthere have been understanding that once existed. eu retaliated against u.s. tariffs with their own tariffs. the feud between france and italy could put business at risk. the crisis began when the premier of italy visited with the leader of the yellow vests protest movement near paris. retaliatedpresident by withdrawing his ambassador to italy. the first casualty could be a $10 billion high-speed train between the two countries. they say they will not go ahead as long as the italian coalition is in power. and oil going for its worst weekly loss in a year. new york oil futures are down around 4.5% for the week. the u.s. output has a state at record levels and pessimism about the prospects for global growth has hurt demand.
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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? guy: thank you. the european markets are closed for the week. we did see a little bit of a dip during the auction process, we have finished lower, the dax in particular. it has gone through the 11,000 mark. do not forget to tune in if you ore getting into the car int digital radio where you will find a bloomberg radio and ine cable" show, jon ferro new york and myself in london. this is bloomberg. ♪
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guy: live from london, i'm guy johnson. vonnie: in new york, i'm vonnie quinn. this is the "european close." guy: time for this talk of the hour, let's talk about mattel, heading for its best day on record. up 22%. the fourth quarter results blowing past expectations. kailey leinz, what is going on? kailey: this is their first earnings beat in three years. earnings-per-share at four cents, the average analyst was expecting a loss of $.14, so a big surprise to the upside. and it did well on gross margins , 46 pointer percent -- 46 pointer percent. -- 46.3%. hasbro missed in the fourth quarter, had its fifth consecutive quarter of revenue declines. this, as you can see here on the
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bloomberg terminal, a lot has to do with the bankruptcy of toys "r" us. both have been under pressure since that happened. i should say that both companies did say they expect the effects of this to dissipate going forward in 2019, but it appears from this quarter that mattel is having an easier job than hasbro. vonnie: both companies were hit by toys "r" us, one bouncing back better than the other. kailey: when you look at mattel, their brand did well. with hasbro, they saw declined in almost every single brand a segment. and their franchise brands are all down, so that is a big divergence, where the actual toys are. i should point out that mattel will be giving guidance here at the toy show in new york next week, so analysts' eyes really turning toward that. vonnie: mattel is the stock of the hour, thank you for that. breaking news on amazon. lower,ck taking a leg
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down 3.75%. this as the washington post reports that amazon is reconsidering its new york headquarters site. if you remember, there had been a long consideration of potential headquarters for amazon.com, they were going to choose two areas, one of those was going to be in queens. but now they are reconsidering the plan, following a wave of opposition from local politicians. this according to two people familiar with the company, who spoke with the washington post. we will continue to follow that. obviously, new york politicians had been delighted to welcome the headquarters, which was going to house 25,000 employees, but there were also questions over just how much in tax breaks amazon would be receiving. and it shows that people at the top are working today at amazon, because the other story is that the ceo is accusing the national enquirer's owner of trying to
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blackmail him. we are joined by timothy o'brien. it is a phenomenal story that broke yesterday and it is at the intersection of politics, business and media that this story has a landed on the lap of somebody that owns the washington post, is the richest man in the world and is currently in a feud with the president. did you do the right thing? tim: that is for jeff bezos to the side. i think what he did was smart. he was being blackmailed by the national enquirer. oddly enough, it had already run a story about his extramarital affair based on photos that apparently were stolen in some fashion from jeff bezos. and then the national enquirer came back, once he launched an investigation into how they got the photos, and said we have even more photos. so if you do not stop the
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current investigation, we have more stolen photos we will publish. so he said, i will get ahead of this and he wrote a blog post detailing what they had and he said he would keep on with the investigation. he pointed out that he has founded one of them was a valuable companies in the world, that he did a from scratch, and he is incapable businessman -- he is a capable businessman. guy: what are the implications of this? tim: i think that there is clearly implications, i do not think that there are implications long-term for amazon, i do not think that there investors or employees will be readily the cage to have jeff bezos removed. this is really more of a saudi arabia, washington, jeff bezos, national enquirer, president donald trump phenomenon in which you have a lot of money, power and politics colliding. and i think there is a reasonable case to be made here
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by jeff bezos, a lot of this about character assassination because he owns the washington post. vonnie: it is a little bit of an irony that a newspaper is blowing this wide-open, some stories of nefarious journalism, which the publication he is publishing has been accused of by the president. and the president has responded. we will read the tweet that the president tweeted this morning regarding this. "so sorry to hear the news about jeff bozo. will bey, the paper placed in better and more responsible hands." jeff bezos has come out and said, a side effect of my power is some people think i am in a feud with them. he has said he does not understand why the president has it in for him, but he is going to investigate this.
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the american media get so skittish about what jeff bezos is trying to uncover? tim: american media's publisher, he is a confidant of president trump. we know that he has information about president trump's extramarital affairs, and that he weaponize the national enquirer's coverage during the 2016 election to -- just in the service of trial. donald trump sees the washington post as an enemy. againstald trump tweets someone, he is usually back on his heels and being defensive. it is interesting that melania trump brought a young boy to the state of the union had been bullied about his name to make a point we should not bully other people, and in this twitter posts the president is making fun of jeff bezos and his name. all of that aside, the other
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thing going on is president trump does not like the coverage in the washington post, but one thing to remember about the coverage in the washington post and elsewhere is they do not routinely go out and purchase stolen information and publish it, and prior to publication threaten targets with assassinating their reputation if they do not play ball with them. that is what the national inquirer does and that is who the president is aligned with. vonnie: it is a phenomenal story that the publisher of the washington post is getting to expose this -- tim: on social media. vonnie: exactly. tim o'brien, thank you for joining us. i want to reiterate that amazon a few moments ago is reconsidering coming to new york, according to two people who spoke with the washington post. there has been a lot of backlash politicians looking
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at what was being offered to amazon and now amazon is reconsidering one of its choices for its new headquarters. the stock has been down all morning, now down 2.6%. this is bloomberg. ♪
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vonnie: it is time for our global battle of the charts. you can see these charts on the bloomberg. it is a transatlantic battle today. in new york, jessica summers. jessica: take a look at the oil market. we can say that u.s. crude stockpiles as the key storage hub, pushing oklahoma to a ties level in more than a year. not a lot of demand for crude right now. they have been facing some unplanned outages. but in the bottom panel we can see the impact it is having on the market. wti prompt thread moving deeper into -- and showing weakness. and this spread will likely continue further to weaken if we
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see a buildup of inventory, which we will probably see as it goes through the spring. you can find my chart at gtv . vonnie: full of information. guy: i will talk about dr pepper into what it is signaling, and what the market setup looks like. if we finish out and positive form, it is going for its best weekly run since september 2017. bigcoming up against meaningful market blocks. the first is the georgia day moving average. -- is the 200 day moving average. thing are getting tricky for coppers. i think you can see this. we have pumped up against this level time and time again, as you can see come all the way back into 2018, into the beginning of this year. we continue to bump up against this level. it will be interesting to see if
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copper gets through this. the double be difficult. this is usually seen as a useful indicator when it comes to a global economy into the fact it is open against key levels is only adding to that story. vonnie: you can see his chart on the bloomberg as well. you guys make it so difficult to choose a winner. i'm conflicted, but i really liked jessica summers's chart and she gets first prize today. come back again, guy. markets are lower today. "balance of power" is next. this is bloomberg. ♪
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>> i'm jason kelly in for david
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westin and welcome to "balance of power. " we are moments away from that on crop inventories, the first new numbers that traders are getting into months. numbers were not released in january because of the shutdown. emma has those numbers. emma: we are just waiting for the numbers to come through, as you said they are from the usda, the crop survey. this was delayed because of the government shutdown in february. the numbers we are looking for are the ones to do with his soybeans, because those are the ones that could be impacted by the trade war, we know they are impacted by the trade war, but we want a sense of how much. they are just coming through. we have the world numbers, we are looking for the u.s. ending stock numbers for soybeans. we are still waiting.

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