tv Bloomberg Markets European Open Bloomberg February 12, 2019 2:30am-4:00am EST
anna: we are live from our european headquarters here in the city of london. i am anna edwards alongside matt miller in berlin. matt: good morning. the markets say place your bets. president trump wants to make deals to avoid a u.s. government shutdown and avoid higher tariffs with china. index futures are higher and yields are rising. the cash trade is 30 minutes away. ♪ anna: good vibes.
investors flock to risk assets off a dose of good news. washington to avert another shutdown. recession fears, curl best joins the chorus of voices weren't -- warning of a downturn in the u.s. and what slow down? gucci drive's growth as the designer reports full-year earnings. we will speak to the ceo about resilience in china. we need to talk about numbers in the car sector. checking out what is going on with the nissan numbers, what does carlos ghosn cost the japanese carmaker and what does it cost the relationship with renault? nissan has come out with expenses, it recognizes expenses ghosne stated carlos
compensation. this is what the issue centers round, did carlos ghosn, did nissan misstate his compensation? basically the main charge that prosecutors's have against him. why he is continuing to remain in jail. third order operating income was 103 point three ¥4 billion, the estimate was for 117.5. missing the street's with third-quarter operating income by quite a bit. nissan will correct its securities reports due to carlos ghosn's payments it says so we will get some restated earnings from previous quarters. right now it is giving us an outlook saying the full-year operating income will be ¥450 billion. it had seen ¥540 billion so cutting its forecast i ¥90 billion. it still sees a full-year dividend of ¥57 area which is
pretty much in line with the yen.ate of 56.89 cutting the estimates for the reporting quarter and cutting outlook for the full year. let's get more with reporter stephen engle and you,. -- daniel,. -- in yokohama. stephen: we are expecting our -- they were wide ranges. we do not know what bill -- what will be the effect on these results. we have been 86 days since carlos ghosn was detained in tokyo. it happened in the later part of that calendar third-quarter, fiscal third-quarter in november 19 when he was arrested. there might be a bit of a leg there but there has been a lot of headwinds for nissan i --
outside of the carlos ghosn tsonga. you had slumping sales in the u.s. where they fell 19% in january, 6.2% in 2018. also sluggish sales in china. you have a lot of questions the sunderland plant. a lot of headwinds which we are going to be putting those questions to the executives that are gathered right now in the headquarters behind me. we are hearing the ceo will be in the room and he will be the one that will be addressing any carlos ghosn related questions. while the cfo will be leading most of the briefing. you ran through most of the numbers, i will reiterate must incomeuarter operating below the consensus estimate and also we are seeing net operating income for the fiscal year also well below. anna: thank you very much, stephen engle there.
let's have a look at what is going on in the broader market story. very topical when we look at what is going on in markets. we have seen rain the japanese session a strong return to the equity fray from the japanese close. of more than 2% which is a stunning move. equity markets in asia getting a risk on bid coming through this morning, not through all the asset classes but that is a feature. features andnto coming out of fixed income. we see some of the emerging-market currencies getting a bid after the dollar had a strong run, today is something different. let's put up the other side of the gmm and show you that money coming out of the fixed income space and in commodities, keep an eye on the boj. gotten the memo with a return to dovishness so they are continuing their tapering operations.
iron ore is weaker following the rally we saw, the tragic events in brazil had moved the iron ore price. let's get an update on these markets from mark cudmore and singapore. see the markets jumping on this narrative around avoiding a shutdown in the u.s. and optimism around china trade and what can be done. there is no news flow around china-u.s. trade but the market is taking the glass half-full approach this morning. mark: that has been the narrative, the stories and headlines on trade have generated optimism even though they lacked concrete details. that has been the theme since early in january. in december people were pessimistic on trade. we were not trading off concrete details. trump made some positive xi --ts that he hopes
hopes to meet xi soon. because the shutdown in january did not seem to affect markets, people did not see the economic data because of the shutdown. people have not been too worried about the shutdown. we might get a deal there. i think the shutdown issue is a concern if it does go ahead. this is an extra positive. market isost of the positive. trade overrides everything else and if there is an escalation that will collapse anything else going on. matt: let me ask you about the mliv question of the day, while responses you're getting and why you are posing a now. when will china default
seriously impact global risk appetite? we have a couple of big ones over the last one for hours. china default are nothing new, right? mark: absolutely. we had these first two big ones of the year yesterday and it is looking on track to be a record number of defaults. should be no surprise. 2018 saw a massive record of defaults but it is a low number. debtf chinese corporate last year relative to 1.1% in the benchmark average. overall defaults could increase by more than 50% and still be in line with the benchmark level of default. it is not a high level but there is other dynamics in play. investors know that china is operating on a massive corporate that level. at some point this will be a problem for the economy and a
problem for markets. many people who are optimistic believe that point is still several years away. you have to be wary that it might come at any moment. it is hard to predict when bubbles will pop. the other thing that is important for chinese assets is sentiment has been negative. and we start getting defaults, that will not help improve that sentiment. there is an increased risk we might get a credit punch in china causing problems for the chinese government to reinvigorate the economy through stimulus. there are two different dynamics of why the headlines are scary even though the overall number of defaults in china are low. .nna: great analysis, thank you you can join the debate and get involved in the question of the day and when do you think the defaults will impact risk appetite? coming up, the chairman and ceo
european market open. 17 minutes till the cash trading open. let's talk about corporate earnings. posting the fastest profit growth and seven years. joining us in london is the chairman and ceo alexandre ricard. with the earnings story, you have given some guidance, 40% percent medium-term, organic sales tile gets -- targets. that will drive success on that front? higher will drive the
end of that bracket is having all the planets aligned so basically seeing a robust u.s. market and seeing a very dynamic indian and chinese market. half, our chinese business grew by 28%. our indian business grew by 24%. listedechnical factors the growth numbers but that is dynamic and that is why we believe if all the planets are aligned we are at the higher end. look do we -- do they aligned when you consider global trade tensions? do things look aligned to achieve your target? aexandre: that is why we have four to seven framework. you always have one or two markets that are volatile. the good thing it is never the same market and that is why having a balanced business across the world from a
geographical mixed point of view is helpful. your stock has done really well over the last five years. you have an annual gain with reinvest dividends of 14.5%. you are beating out other competitors like diageo. what do you think elliott and pulsing or want to see from you and what kind of experience do you think paul singer has in this business that your family has worked in for half a century? the real answer is regarding all of our shareholders, what our shareholders really like about it is the consistency in our strategy and our unique dual leadership exposure to china and india. in both markets, we have a leadership position, a strong one with 45% market share in both of these markets and if i
add to that the u.s. market where we have a good position in global travel retail, where we also have a leading position, these four key markets and exposure with our portfolio brand is what our investors like. elliott is very -- as an activist investing role as well. they want you to cut costs, to overall -- overhaul corporate governance. are those the right ideas, will you talk with them about that? alexandre: i am obviously very open to dialogue with our investors including elliott and we have had an open dialogue over the last couple of months but to be fair, governance is something that has been improving over the years ever since i took over chairmanship and which will keep on improving. governance improvement is an endless process because
opportunities evolve, challenges evolve. governance will keep on evolving over time. as for margin improvement, i started to say the last three by investmentsen to generate topline growth which is now at the top end of industry growth. the next three years will all be about profitable growth. good topline momentum while at the same time rough -- driving operating margin and we mentioned 50 to 60% basis points per annum. anna: how would you character is -- characterize the new style? i have seen it discard desk described as a clash of -- visioned as a clashing and wanting to big -- make big tweaks. what characterization would you
give? alexandre: i would us given the share price performance they should not the unhappy. to start with. i do believe that our equity story is unique and if i take a look at our reference shareholder and if i go back to 1982 when i was 10 years of age, our market cap at the time was 300 million euros and today it is 40 billion euros. that is what i like to call long-term consistent value creation, investing in the right places at the right time to generate value over time. anna: there cannot be many ceos 10 remember the price at years old. is this causing big boardroom tension and a family that has talked about as you have long-term delivery rather than the short-term? alexandre: our board of directors is ruthlessly focused on consistent, long term value
creation. right now, we have a couple of commercial conflicts in europe. it would be easy to sign deals with these clients of hours to boost short-term profits. we believe it is the wrong thing to do so we are currently negotiating on the table, which is fine. it is good for the long term. matt: we are just about to hit brexit here in march 29. to, how am ioing going to get my glenlivet and beefeater here and how is anna afterto get her ricard march 29? have you made plans? alexandre: yes, of course, we have made plans in terms of inventory and logistics. .opefully we will not get there obviously as many businesses,
not all the businesses who would love to see more visibility to get better prepared, but we are prepared. anna: any stockpiling happening? alexandre: right now as we speak. anna: how much, what do plants look like -- what do plants look like? alexandre: we are piling a -- scotch,ck, glenlivet, and beefeater gin which is produced in london and we are importing a few of our best-selling products in the u.k. like absolut vodka. i will make sure that i have a couple of other bottles of glenlivet on hand in case. thank you for joining us. ricard talking to us about his business. we are minutes away from the open of stock trading across the continent and in the u.k.
start of trading. let's get your stocks to watch around the newsroom. covering plus 500 and anne-marie focusing on gucci. what is the story with thyssenkrupp. >> profits plunging the company, blaming economic and political uncertainty. shares indicated higher by nearly 2% on trade gate, that might be the forecast unchanged in this quarter, they put out their details to split into two, something investors have been wanting to see. anna: let's go to joe easton. some negative news at plus 500. they have upgraded their guidance for the last 12 quarters and the stock has risen 280% in three years. they have warned on profit and
revenue. they are seeing changes to european regulations that we knew about but we did not think they were that affected. this morning suggesting otherwise and it could have a big read across for other companies in the sector like ig group and cnc markets. it is a company that has been bullish for a long time and it is a surprise to see this morning this morning. the: what is the story with parent company, is gucci still cool? >> good g is still cool, it is the star of the numbers, 1% above what analysts were expecting and the cfo said demand in china remains dynamic. a strong quarter for them and like we saw with lvmh, the stocks are going higher. anna: thank you.
soon is the word being used. this is the picture across european equity markets. expected to be stronger at the start of the day. equities expected to go higher bouncing off of the strength from the asian center. -- asian sector. ibex getting an early start. up by 0.7%. spanish stocks -- if things do not go the way of the government, we could see early elections. no nervousness around that. keeping an eye on the broader political developments. we will wait for the rest of the europe -- the rest of europe to go into action.
plenty of reactions to earnings from the luxury sector from the manufacturers and elsewhere. financials going higher this morning. of green.hes elsewhere, we see pretty much green across the board. green and health care as well. lifting many ships. dth can see that in the breath of the rally. stocks -- most of the stocks on the stoxx 600 are gaining right now. look at those that are moving the most. -- oil is helping to lift the market. we are seeing some of the banks, hsbc, bnp paribas, adding points
to the market as well as daimle r. german futures were up much higher than u.k. futures. i'm going to guess that the dax is doing better than the ftse. take a look at the losers. kering is taking the most points away from the stoxx 600. h is right there on its tail. we are looking at luxury and liquor makers really dragging the index a little bit. 1.4%wise, renault is down in the wake of nissan earnings. rolls-royce, the airplane engine maker, also one of the losers on the day. anna: those are the individual stocks. plenty to talk about this morning. washington deal in said to avert another government
shutdown and optimism over u.s.-china negotiations. let us talk to salman ahmed. let us talk about the optimism we have seen in much of yesterday session and today's session. markets climbing higher. there seems to be talk about what can be achieved on trade. not a great deal of news flow. is the market choosing to maintain the january rally? salman: in january, we took out the extreme recession possibilities. i think we have been hitting new levels in the market. we need a new impetus. latchingre lamp -- are on the need to do a deal. that is where the source of optimism is coming through. at allre you concerned when you look at the economic slowdown numbers that we are
getting here? when you look at things like chinese bonds that default or go unpaid? when you look at concerns for om so many different fund managers in the u.s.? salman: china is going through a slowdown. we also know that there is a which will show up in data especially if a trade deal goes through in the next few months. in europe, things are deteriorating quite quickly. despite the strong balance sheet. i think the next step will be another qe program. things are looking quite terrible in the eurozone at the moment. anna: where do you stand on whether we will see a recession anytime soon? i was reading some analysis that talks about the fact that the market is uncertain's.
. where would you sit on that divide? salman: a u.s. centric recession is low in 2019. the fiscal stimulus is slowing down but still adding to growth. another part of the view is china is seeing a slowdown down and they have already started deploying stimulus. itsecb is done with program, it will not have the firepower and that will split right through. that is where the next source of risk comes through. it is a tricky situation. a late cycle. you do not think the ecb has the firepower -- i want to play a little sound we have from kyle bass warning that the fed also does not have any more arrows in its quiver. >> this point of normalization
should have happened long ago. not now. they are stuck. when we get into even a small recession, we do not have the aeros in the quiver. let us hope that we learn something from japan and negative interest rates. they destroyed the banking sector and have not helped their economy whatsoever. matt: what do you think of that take? points has 300 basis more than the ecb and he is concerned about their firepower. salman: i think i am in your camp. i think those 250 basis points firepower are important. that is a significant amount which can create, for example, and investment state. points is quite a
bit of firepower. i think where the problem starts in the ecb is they have already worked on interest rates. our estimates are that they can butce another 1.3 trillion it will not be enough if the recession is deep. quite far away from the ecb and that regard. anna: we will talk a little more on that european and golf but let us stick with the u.s. for a moment. this chart shows how small caps has been performing. they are outperforming in the u.s. and hong kong. this has to do with the extent of the selling that we saw in december and now the bounce back in january. it is interesting. you mentioned late cycle. and still, we see this kind of performance from small caps. would you expect to see this? salman: it is tricky. we went very quickly through
recession probabilities in december. it was based on sentiment and the view market had about the fed and its market function. and now, everyone thinks that .verything is hunky-dory i think it is something in the middle. i understand that animal spirits, both positive and negative, can take over and that could create opportunities for the market. you: we are going to keep with us. we have a lot more to talk with you, salman ahmed. at lombard odier. thes our guest host for hour. coming up, we speak with harris geordiades. the cypriot finance minister. that will be live from the eu finance minister meeting in brussels. and we will bring you the stocks on the move. stocks 500.
let us talk about what is plaguing the european economy. the eu finance ministers are gathering in brussels today. financial supervision and the conspicuous absence of growth will be on the agenda. let us get to the belgian todeoal where maria towar is standing by. tradehave brexit and tensions. i am be enjoyed by the cypriot finance minister, harris geordiades. i want to talk about brexit ticket off. i am sure you're not surprised. we have a little more than 40 days to go and not much has changed. are we moving closer to a no deal brexit? min. georgiades: i think we should stop the clock. postpone the exit. that is the best i can think of. considering where we are.
brexity expect the -- i really think we should stop the clock. give it more time in order to come to an agreed exit. i am not saying this out of concern for the cyprus economy. european and global issue and we should be sensible about it. when you say stop the clock, do you think prime minister may should cancel article 50? min. georgiades: let us not make things more complicated than they are. let us take more time. let us request a small extension or how much time is necessary in order to get a deal. suggesting that the
decision be canceled. we need to reach an agreement on how to exit. we need more time. that is why i say -- stop the clock. >> the prime minister has said that she will deliver brexit and she will do so on time. brexitey ask for the deal to be extended? should we wait for european elections? min. georgiades: the uncertainty is the worst we can do. economy and for all of our economies. get rid of the uncertainty is what i am suggesting. it is not an issue of making a u-turn. we need to get the issues in place before we execute the exit.
everything can be done in the next 40 days or so. but i am becoming a bit anxious and that is why i really think that postponing the exit is really a reasonable way forward. >> do you get a sense when you talk to your colleagues here that the majority of european countries would agree with you --stopping the clock? is that the general consensus? min. georgiades: there is a consensus, let me highlight that. 27 are holding firm on their common stance. there is an agreed framework. through, thenet yes, i would expect offering some more time would not be a problem. it would be accepted. and that would be my recommendation. >> i want to ask you about your
own country, cyprus. sachs is part of this roadshow. what kind of appetites are you looking at? speakinggiades: we are to investors as we speak and we are on road shows several european capitals. we will probably be making a move in the next few days. i cannot give the details because they have not been decided yet. but we do feel very optimistic. the strongest of growing economies in the eu zone. the banking sector is having success to a significant extent. all of this plays very positively in the investor community. and we shall be talking to the markets very soon. >> in terms of the european
economy, we have seen the slowdowns. the data does not look good. see some economists arguing that there will be a recession, is that too pessimistic? min. georgiades: yes. i think the european economies will continue to grow. the factors of uncertainty are slowing down performance. tendencies inist global trade. a hard brexit without a deal. that is not healthy. if we manage to tackle these political issues, i am quite confident that the european economies will remain on the growth path. >> thank you so much.
matt, some very interesting comments regarding brexit. stopping the clock. back to you. matt: absolutely a big question mark. maria, thank you. maria in brussels with the cypriot finance minister. the top stock stories and for that we go to anne-marie. kering withlk about the 28% rise in gucci. that was not as big as we saw from other luxury makers. investors do not seem to know what they want even with a strong report. up almost 9%. they are going to offset any declines that we see in the carmaking industry. and ending with plus 500, down
40%. they issued a profit warning saying that 2019 will be materially lower than expected. anne-marie onu, the stock movers this morning. up next, we continue the conversation about europe. the egyptian billionaire says the region's politics have never been in a worst state. we will get various investors' perspectives on europe coming up next. this is bloomberg. ♪
to bloomberg back markets, this is the european open. we are 22 minutes into the trading session. strong gains on the continental. not quite as strong in the u k but still green arrows there. finance ministers in brussels. that is after the block slashed the growth forecast for all of the major european economies. europe is in a big mess according to one billionaire. >> in terms of politics, it has never been worse. chinese empire
coming back and the russian empire coming back as well. everyone wants to be an emperor today. the question will be, who will be the emperor in the end? we have all of the ingredients for europe to be in a big mess with a populist movements going around. that itng is indicating is going to be a big mess. matt: salman ahmed, chief investment strategist at lombard odier, is still with us. we touched on this briefly. resort tothe ecb may quantitative easing. i do not think it would be a massive surprise considering the collection of peripheral european doves on the governing council. salman: exactly. and i agree with the comments heard earlier. it is becoming a political
imperative to reduce the threat of recession. populism is spreading quite fast. need to beks thinking about their mandates and what populism will do. a recession would put fire to that. that is why i think this mindset will come through. they should look at the to reduce the risk of recession before it hits. ifngs will get really bad they allow this to come through in terms of the political perspective. anna: what does that mean in the short-term? going to theyields minas. anna: on the horizon? salman: next 3-6 months. the 10 year. minas 16 -- minus
2016. right now, there has been some movement in fiscal stimulus especially in germany. but those are small numbers. into what islook left as firepower. is, of course, the end of draghi's term. he is up in november. he could be replaced by someone -- we are just seeing headlines from him saying that the central banks should interpret mandates broadly. what are your expectations for the new boss of the ecb? ofman: those are the kinds comments i think would be very dangerous. i think the markets will react very badly to this development. the reaction function becomes more narrow.
and we cannot ignore the populism and the political perspective around it. and even if i focus on the comment that the mandate has to be interpreted narrowly, the eurozone has not touched its target for several years. what does that mean? does that mean they should be doing more or less easing? argument you make an for central banks to have the markets' back? salman: we saw it in the fed. anna: is that the breadth? under political pressure but less than the ecb. i do not understand why the ecb needs to interpret matters so narrowly. anna: salman ahmed -- matt: salman ahmed is an investment strategist with
matt: 30 minutes into the trading day. your top headlines dr. bloomberg, good vibes. investors flocked to risk assets on a double dose of good news. a china-u.s. traders had a tentative deal in washington to avert another shutdown. recession fears. kyle bass joins the chorus of voices warning of a downturn in the u.s. >> i think economic activity will begin to wane in the back half of 2019 and by the middle of 2020, we are most likely to be in a recession. as 4.5lus, as much
percent following, investors are not impressed by sales growth in china. is gucci still cool? welcome to "bloomberg markets: the european open." i'm matt miller in berlin alongside anna edwards at bloomberg's european headquarters in london. anna: still cool? not a subject i am qualified to comment on. we will leave that to the analysts and share price response. 30 minutes in, this is what we see across equity markets. broad-based, the rally carried the german market getting the best gains. michelin up over 9%. this is listing some other suppliers for the auto sector. higher by 4%, 5%. they seem to be suggesting as the ceo of mr. feeling -- michelin departs, he seems to suggest there is more to michelin than selling tires. there is much more out there.
that is the story behind the numbers this morning. on the downside, let's see what is moving because the luxury goods company is failing to impress on its china narrative, down 3.4%. the activist investor also, down 2.8%. how much of that is idiosyncratic of an activist investor thwarting breakup and the management and confusion and chaos? how much is it about a german industrial sector failing -- struggling? seeing what we are across the markets. ig group down 5.4% perhaps on the back of the trading platform and profit warning there. let's get a first word news update from hong kong. annabelle: congressional negotiators have reached a tentative deal to avoid a government shutdown. the agreement is said to give the government -- president less
than month -- money than he demanded, $1.4 billion. he saw as much as $1.5 billion. trump said the shutdown was important to highlight the issue of the border. >> if we did not do the shutdown, we would not have been able to show this country, these politicians, the world what the hell is happening with the border. that was a very important thing. [applause] u.k. lawmakers have criticized philip hammond in a report on bottom budget. u.k. chancellor think a divorce dividend" fora " the economy but it was said the damages should be described in those terms. crashing out without a deal would be "disastrous." >> a no deal brexit would be like an atomic bomb for everybody. or the eu itself, it is something everyone dreads and
nobody wants to go there. annabelle: global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in .ore than 120 countries this is bloomberg. annabelle jewelers in hong kong, thank you for that. president trump sounded an optimistic tone on trade during a rally in texas. he saw a piece with annabelle. he told supporters he was going to make "great deals on trade." some of our guests warned the president's wins could -- whims could undermine rhetoric. >> the carrot is an eventually rollback of tariffs later. this steak is tariffs will be increased further if china doesn't stick to the deal. have purchase agreements, which are important byu.s.-china trade march 1, but to get to the structural aspects of market
impediments, it might take longer. >> for the market to stabilize and for us to make progress, the deal has to be big enough. that means compromise on both sides. >> the market has an 85% probability a trade deal gets done. depending upon how the wind is blowing that day and how president trump feels, that might be properly priced. matt: the trade war has weighed heavily upon valuations in emerging markets, what are the fundamentals being ignored? salman ahmed, chief investment strategist at lombard odier investment managers is still with us. what do you think about the trade issue? has it taken our eye off the ball as investors? salman: i think on trade war, the timing of the deal is as important as the deal itself. there is athink
narrative that there is some whimsy about president trump, but 2020 is an election whenand the trade war win it comes, it will be a big part of the narrative next year when the u.s. presidential election comes through. in that sense, i think i expect there is a high chance that this deadline is extended and probably the probability of a deal getting through is in the deeper end of 2019 rather than now. the market has latched onto the fact that a potential deal can come through, but the deeper structural issues are not going anywhere anytime soon. anna: let me ask our mliv question of the day. it is interesting in the context of where china can withstand in terms of the pressure created by the trade war? seriousl china default global risk appetite? miners and aaa.
are you concerned about the level of defaults coming through in china? lots of people were grateful to china for, in general, taking on so much debt and investing so much, but now we are seeing it come back to hurt perhaps global markets. salman: one point to remember is -- is higherion than abilities. as far as the issues in the leverage that was done, it was domestically. foreign investors cannot force a balance of payment crisis in china because we don't have access to do that. there is a defiled -- default cycle that is healthy and state driven. some sectors will be chosen to be defaulted and cleaned up and it will happen over a period of time. anna: so these things that happen in china stay in china. it doesn't become systemic for the rest of the world? salman: i think the bond market
in china has just started opening up. there will be a flow of 5.5 billion regularly, but before are holdingvestors 5 -- foreign investors are holding 5% of chinese debt. we are holding 5% of that debt. the comparisons are usually with the 97 countries, but chinese heavily leveraged to mystically. -- domestically. matt: we talk about a lack of firepower in europe and some are the lack, kyle bass, of firepower at the fed in the u.s.. when do you think about the pboc and the communist party in china? supportingntent on the stock market and supporting economic growth. they have to obviously to keep people employed and off the streets. can they do that? salman: right now, when i look
at the stimulus in the supply plan right now, it is different than the one after 2008. and again in 2015, 2016. fiscal, more liquidity injection in their, more state intervention than just market-based. the focus is more on consumption this time around rather than investment and that should play out differently and more slowly than the market has been used to. anna: thank you very much. great to speak with you. salman ahmed, chief investment strategist at lombard odier investment managers. , the stock movers this morning including ig group. the plus 500 rival is suffering on news that firms will be hit by new european rules. this is bloomberg. ♪
anna: welcome back. this is "bloomberg markets: the european open." 42 minutes into the trading day, gains across european equity markets, up .6 on the stoxx 600. trade has caught the market's imagination and news around diverting a shutdown in the united states. let's get our top stock stories with annmarie hordern. at the onesooking
that are lower today. ig group, more than 5% down. read across from plus 500, issuing a profit warning for 2019. trading companies lower off that news. nkrupp to the downside nearly 10%. they saw profit plunge in the last three months to december based on damages from tariffs in the u.s. and rising costs in china. tui travel down nearly 5% this morning as they saw seasonal loss double and a lot of this has to do with the fact we had a hotter summer in the u.k. and the scandinavian markets. that kept more people at home and brexit weighing on profit, saying that kept more travelers at home due to a weaker pound. anna: a few movers to the downside. in keeping with that theme, let's have a look at what has
been the latest talk on the recession in the united states. hedge fund manager kyle bass has warned a u.s. recession is on the horizon. the haven capital founder sees a dip by the middle of next year as fiscal stimulus wanes. he spoke about fed policy and his global outlook. and: if you look at asia the subcomponents of chinese industrial production, the four of five of them are in negative territory. italy entered recession a week and a half ago. germany's internal numbers look like it will be in recession in the next three to six months, and the u.s. has this positive stimulus coming from the tax 50 --hat we believe had a $250 billion impact last year. next year, a will only be $150 billion. you have to look at the delta. the delta is 150 from last year to this and from this year to
next, -250. innomic activity will wane the back half of 2019 and by the middle of 2020, we are most likely in a recession. given the conflict between the democrats and republicans in is thes, my guess democrats aren't going to let trump stimulate going into an election year. they are saying behind the scenes he has taken the economy hostage and they will let him shoot it. the u.s. to be in a mild recession by the middle of 2020. >> but powell and the fed had a message, you said he failed the emerging markets when they continue to hike. what sort of path are they on now and what score would you give him thus far? listen, we had the worst december in stock market history. the market dropped at 1.16% in a month. the month they took lehman
brothers down, when all the u.s. insolvent, we were worried about aig, we lost more than 10% that month. we were down 16% in september -- december. the reason i am giving the central bank an "f", look at what is happening in southeast asia, from europe from the economic perspective. the u.s. with our full stimulus, it is wearing off. the last three recessions in the u.s. we have had, we cut rates 500 basis points. now we can only cut them to 25 or 250. a week or two ago, san francisco put out a white paper about the benefits of negative interest rate. i hope that is not where we are going, but we can only cut rates about 250 basis points. the point of normalization should have happened long ago, not now. they were really late in the cycle in raising rates and now they are stuck. so when we get even into a small
recession, i don't think we have the arrows in the quiver. let's hope that we learn something from japan and europe about negative interest rates. they destroy the banking sectors and they have not helped their economy whatsoever. i don't think that is the place we should go, but i guess what i am telling you is sometime in 2020, interest rates will be a lot lower than today in the u.s. it comes to u.s. stocks, is it more likely we --l get a raise visiting revisiting of the december highs or lows first? -- theook, there will be markets will rejoice to the extent we get to quote a win on the trade deal. a will be short-lived. my guess is by the end of this year, u.s. market will be lower than it is today. matt: that was kyle bass, founder at hayman capital management. we also have paul krugman on yesterday and he expects a mild
recession soon and says the fed doesn't have the firepower to fight it when or if it happens. let's take a look at the stock of the hour. shall we take a look at the stock of the hour? have we decided on whether it is -- ok, good she sales fail to impress. gucci sales fail to impress. we saw the stock fall earlier in the session so it is recovering to some extent. the gucci growth, china, not enough to spur investors to buy the shares and as a result, some red boxes on your graphic dashboard. this is a function you can use together a wealth of information on any stock. we've got it up for the french luxury goods maker here, off 2.4%.
see a valuation there, key metrics as well as what analysts think of the stock. joining us to talk more about it is bloomberg's european consumer news came later eric pfanner -- leader eric pfanner. performanceing's compared to the rest of the luxury goods industry because the market is not impressed today? eric: it is another strong period for kering and gucci, but they set expectations so high. they had so many quarters of runaway growth, especially led by china, gucci, that even strong double-digit growth wasn't enough to impress the market after lvmh last week did especially well and surprised people. good she has had a bit of a run so maybe there was room for it to get soft. anna: how well they are they doing in china at the moment? shows the chinese are not
done with luxury goods. eric: they are still up 20% year on year. it is really strong, just not as strong as it has been. what has changed a little is the dynamic of who is buying and how. there seems to be less of the tourist buying that was going on as the chinese authorities are trying to bring more of the spending on shore, onto the moon laned -- mainland and boost the domestic economy that way. that seems to be working. they are still fighting, maybe a slightly different mix of purchases. matt: so why are the shares falling today? run, they've had a good and people were looking for something really special. they've gotten used to gucci basically beating expectations quite pronounced fashion quarter after quarter, year after year for two or three years. this time around, that didn't quite happen perhaps and people are looking to the future and saying, how long can the gucci run go on?
does this company need to diversify a little more and put its growth on another pillar, as well? anna: thanks for bringing us the update. interesting to treat -- see it trade down on that update. down 2.4% this hour. bloomberg terminal users can interact with the chart on bloomberg tv. you can find more by using the g tv function on your bloomberg. next, battle of the charts. this is bloomberg. ♪
matt: welcome back to "bloomberg markets: the european open." 54 minutes into the trading day, we are looking at green arrows across europe right now. not as strong on the ftse, but still a .4 5 -- up .5% in the u.k. time for the battle of the charts. annmarie hordern will go head-to-head with dani burger. why don't you kick things off, amory? -- annmarie. >> i am looking at cocoa bonds today because today is a critical day where santander has had to exercise its call options. investors are waiting on whether they will make their decision. it isa test case because the first one where they are unsure of whether or not they will make this call since these coco bonds have been around,
these risky bonds. watch today.coco dani: she's got the risky bonds, i've got the safe bonds. record inflow into long-duration bond bets, which is crazy because all of the start of this year, we had this massive risk on rally. even so, this is an etf tracking long-duration bonds. market cap, reaching a record. nearly $11 billion since the start of the year, 2.3 billion in investor inflows have come on into this fund. we are looking at this market being pulled two ways. stop saying everything looks great, bond markers saying investors are preparing for doomsday. matt: i love that chart. i am going to say for me, you are the winner. bonds are fascinating, convertible bonds interesting, but the etf -- em story is
really one that a lot of people will be talking about today. making a decision, taking bets, and hopefully making money. anna: i hate to disappoint you, but i will go with annmarie. i know you don't like when we disagree because we have a draw, which is not in the printed or other publicly available rules of battle of the charts. i should point out, there are no rules for battle of the charts. we make them up as we go on. i like annmarie's chart because of the way many people trade these. they are priced to be called at the first opportunity which is why this hasn't brought significance, but i like dani's chart. european equity markets fly higher. seems to be optimism around the trade story. we know the trade representative like kaiser has landed in china. he landed in his hotel. in of optimism to push markets higher this morning. matt: absolutely.
this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. francine: meeting soon, the
white house says trump will get together with xi jinping two in the trade war. global stocks rise. capitol hill reaches a tentative deal on border security that would keep the government open. forecast in its first earning since these scandal. we are live. if you're watching from asia, looking to bloomberg surveillance. these are your markets.