tv Bloomberg Markets European Close Bloomberg February 13, 2019 11:00am-12:00pm EST
european trading day. i am guy johnson. vonnie: i am vonnie quinn. this is the european close. guy: this is what we find ourselves with in europe, the stoxx 600. 1%. spain.al tension in the budget did not pass and we will has -- we will see the government have an early election. we are also seeing other performers coming through from russia. this appears to be on a morgan stanley note, voicing concern of the market being complacent on the sanctions. , you can out of asia see the new zealand dollar gaining significantly. the central reserve bank first back the dates of the next hike.
-- pushed back the dates of the next height. it is a little dovish but not maximally dovish and the currency went up. vonnie: in the u.s., the s&p 500 is up half a percent. most of the major movers include hilton hotels. dish network is down more than 7%. activision blizzard is paring its gains. they will cut 8% of their workforce as they restructure and they are trying to figure out how to combat these battle royale games from other game makers. let's move on and talk about the question of the day, which asks in a straightforward first, -- which cracks the s&p 500 or the treasury
yield, which is around 2.8% at the moment? we have cpi data earlier on out of the united states. john stopford joins us now on set. what do you make of the risk rally does far and where would you put your chips in terms of the gains? john: that is a combination of things. the fed and other central banks have stepped away from a hawkish stance, so that is a relief. a lot of it i think was people got very short and to the end of last year and squeezed higher on a reduction in bad news. we are cautious about chasing the market at these levels. we are getting closer to the november levels you talked about. the data remains pretty awful. the market is anticipating an inflection in the data, an improvement in the data, and it
would be nice to see that before getting carried away. guy: earnings are going down. earnings estimates are going down quite rapidly. someone who was on earlier on has talked about how the session is already here. the earnings story is not backing up this move. what cracks? john: i think the market is beginning to think that this is 2015 and 2017 again, rather than going off a cliff into a global recession. if that is right and we see data recovery in the second half of the year, you can justify the levels we are seeing in equities, particularly against a more benign monetary policy background. the monetary policy background is only benign week is the data has been so weak and the markets have been so weak. we think the market is tactical
as it rallies up towards the highs and possibly goes further. you want to be reducing, and if it corrects the fed to some extent, and other central banks have created a put, so you can be more comfortable buying into weakness as long as the market does not tip how stram, a german lighting company is in talks with being capital and carlyle group. all stremme which is based in germany, stock price a little depressed over the last few months.
they are in talks with bain capital and carlyle group. we will continue to follow that. carlisle concerning -- considering the purchase of 100% of the shares. these trade talks with china, how much are you anticipating some kind of a resolution to this before the first of march? john: i think we are pretty skeptical about a resolution. clearly, both trump and xi appear to want to do some sort of deal. the question is, how cosmetic is that? we would have additional terror increases get postponed -- tariff increases get postponed, the talks continue, and maybe tariffs are permanently postponed or cut back to where they were. the biggest issues on intellectual property and china's place in the world versus the u.s. will remain unresolved. this is a skirmish and the war will take decades. vonnie: what does it mean for assets and in particular
emerging-market assets in the near term? john: at the margin, it is positive. markets have rallied back quite a lot since last year more important for most emerging markets is the outlook for growth in the u.s. and china in particular, and also the policy backdrop. if we are in a benign world where growth is not too fast or slow, and policy can remain looser for longer cargoes nine entire for emerging markets. outside of china, emerging markets click to be doing well. it looks pretty benign but it can change quite quickly. guy: can i talk to you about em? a chart shows em flowing into etf, andd-biggest etm,
in the last couple of months a spike in terms of money flow. ?ave they gone too far would you be lightening up on some of those or in their does is there still further to run? -- is there still further to run? john: there is a window of opportunity for high-yield and more cyclical markets that have been held back maybe by tighter fed policy and growth concerns over recent years. within equities, with think there is potential upside in em. scarynd markets, those and potentially some interesting currency flows within ems well. had the movers gone a reasonable way and do not want to get carried away. guy: where is the dollar going? john: short-term, it is
interesting that it is managing to rally. that is a conundrum to us. we are not entirely sure those conditions are sustainable. clearly, the fed have pushed rate expectations down. growth in the u.s., the data looks better than the rest of the world, so it is hard to see the dollar coming off significantly. it is probably more likely to go up a bit then down a lot. vonnie: john stopford stays with us. we have more to talk about. let's check in on the bloomberg first word news. , robert: in beijing lighthizer and steve mnuchin continued the latest round of trade talks. a sticking point has been the u.s. complaint that china steals
or pressures american companies to hand over their technology. roger stone once roger -- robert mueller to prove his office did not violate a court order. he asked a judge to make that order, claiming a cnn reporter sent him a copy of the draft indictment for it was publicly released. cnn was president when the fbi raided his house and arrested him. joachimcan crime lord el chapo guzman is facing life in prison. two high-security prisons in mexico before his capture and will likely be sent to a super max prison in florence, colorado, a facility no one has ever escaped from. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney donohoe. this is bloomberg.
vonnie: let's get a quick check of the market. we are seeing a bit of a bounce, not as big as yesterday by any stretch. the dow up 7/10 of 1%. the s&p 500 is up half a percent and the nasdaq is up one third of 1%. anderms of movers, pfizer fiscal systems are down. everything else is higher. the dow is being led by goldman sachs, visa and american express also performing well today. ♪
markets. abigail: we have stocks higher on the day, the s&p up about a half a percent following strength in europe. 1% andxx 600 up 7/10 of the shanghai composite up 1.8%, up for its fifth day in a row, the longest winning streak since february 2018. a small decline for the emerging markets index. , it will in the armor be interesting to see if the rally continues. as for europe, these rising stocks may suggest that europe could cool off. we are looking at the economic surprise index in positive territory. in blue, the european version of that at one point last year climbing positive and now negative with data coming in negative.
the german dax is below the 200 day moving average and that may mean the stocks movement could cool off. what is not cooling off, a 13 day chart of the dollar index -- excuse me, the bloomberg dollar index, down just two days. otherwise, up 1.2%, a tremendous streak. the fact that the fed is on pod's, more dovish -- on pause, more dovish, other banks may follow suit and that may make the u.s. dollar more attractive, or perhaps just a haven. guy: i am confounded with one has been going on with the dollar this year. john stopford still with us on set. the data continues to be incredibly poor coming out of europe. industrial production falling off a cliff. europe is a high beaten trade on
china. or problematic will this be will we see a bounce back midyear as the chinese credit kicks in? john: will we see significant easing in china leading to an acceleration? chinaew is the easing in is still somewhat targeted rather than wholesale, and the level of stimulus is positive but not dramatic. we are not necessarily looking for a sharp bounce in chinese growth, but more of a stabilization and perhaps some improvement. the delta for europe, that may help. the serial nature of disappointing data out of europe continues, and it is hard to be bullish. guy: it almost feels recessionary and some of the major economies are in recession. how do valuations look? is europe a value trap? are there opportunities?
how much money do you want to put into europe? john: we typically look at stocks on a stock by stock basis rather than from the top down. clearly, where you are matters and where you earn your revenue matters. we are not massively bullish on european equities, but you can find interesting and attractively valued stocks which are globally competitive and can do relatively well. the momentum trade unfortunately still remains to be long the u.s. and maybe some other markets around the edges. europe, it is hard to get too bullish yet with earnings revisions in the data going the way they are. vonnie: you say there are value pockets. can you give an idea of where you might be tempted to buy? john: we are tending to focus on
particular companies that pay sustainable dividends. that is really what we are into. defensive become more over the last three to six months. in this rally, defensive stocks are doing well and maybe that is to do with this easing back of rate expectations globally. you see a collapse in bond yields and pricing of things like the fed rate. sense andncome makes a world where there is not a lot of growth, and if you can find attractive yielding stocks where the cash flows underpinning that yields are good and reasonably that is a so on, reasonable place to look for opportunities with an equity. vonnie: any thoughts on this announcement that -- is looking to get sold to carlisle and bain
capital? could this be a sign that maybe deep valuations and private equity will take advantage? john: valuations generally come off x u.s. over a reasonable time. that creates value opportunities for people looking. i think there was a spinoff obviously and it perhaps offers value to the inquiries. inevitably, people will be looking around, are there deals to be done? definitely. guy: just a final question. when you look at yen, where are you looking? we talked about china and venezuela, clearly different markets. i incurious to your thinking of
whether geographically you are tousing -- i am curious you're thinking of whether geographically you are focusing on one area to put assets to work. within the em story, are people rotating back into china? i wonder geographically if there is a differentiation. john: if we are talking about value traps, china has been a value trapped in equities for a long time. guy: is it still? john: it is beginning to look more constructive and is relatively cheap.
and beginning to trade somewhat better. i think if some people are looking for stories where the bad news is well discounted, china is one of those, and from a stock picker's point of view, it is a big market. there are potentially some good companies to buy. guy: we talk about em as if it is one big bucket. nice to see you, john stopford joining us from investec. we have just been talking about this, we will dig into the details of this potential deal -- those talks have been confirmed by bloomberg. we will talk more details in just a moment.
this is a stock that has been over the last year absolutely battered. this company looks incredibly cheap. that is one of the driving forces. they are always looking for strategic -- that are undervalued. osram faced some headwinds in china and they are dependent on the automotive sector so if we can take them private, they can continue their transformation away from the public markets. was siemensm originally. does that mean private equity is looking at competitors like philips lighting? >> it is evidence they are looking at industrial assets they consider undervalued. we have seen some private attempts in germany in the past.
they have been difficult to put have- to pull off but they been able to realistic and return some value to shareholders in themselves. guy: premiums are always relative. what kind of premium could we look for? aaron: that is the billion dollar question because we are talking about a $3.9 billion company. shareholders will push for a hefty premium, but shares are down quite significantly. in any situation, you will see a back-and-forth tree management and it will come down to whether they can close the valuation gap and go away being happy. vonnie: why would carlisle and bain go in on this? have they done that a lot? aaron: we have seen a lot of deals where private equity firms have teamed up. it brings different expertise and helps in terms of financing.
it helps when you are going to do this kind of a sizable deal, because in europe we do not see very many take privates. you can share the financial burden and bring in the expertise. guy: he talked about the auto sector in china and europe. .t is absolutely baffled how much is this a macro play to the fact that that story will bounce back and will go through some transformation? aaron: they believe if we buy when we are facing headwinds, we can take some time, cut some costs, and focus on automotive, semiconductors, tech related. i ensure they see some way to push forward and benefit down the line. guy: thank you. vonnie. markets,hecking u.s. paring some gains, the dow up
for tenths of 1%. the s&p 500 is up one third of 1%, plenty of positive earnings. the nasdaq is up about one quarter of 1%. the dollar index is stronger 3/10 of 1%, mostly thanks to the euro which is at 1.1286. crude oil is trading at 58 when 15 a barrel. -- 58.15 a barrel. guy: the free -- three main markets are higher, the london market performing higher. the best-performing sector, resources. this is bloomberg. ♪
the german and french markets rising a little bit today. germany outperforming and the best day in terms of the sechrist -- the sector story. the 7191, the dax continues to climb away for the 11,000 mark. madrid market finishing flat. withical instability feature on the iberian peninsula once again. a will get more details in moment. but stuck about the individual stocks we are watching in europe. we have seen some reasonably decent sized moves. disappointing numbers coming out of the banking sector once again today. stumped on the back of that. also ram, it's stock up by 14.4%. that confirmation with the private equity -- but as we just it itfrom our reporter, has been turbulent. a very solid session as well,
the company certainly feels like it has lamented right now and the market is giving it that momentum as well. 6% of the upside. are we seeing this all confirmed by volume? the volume story looking reasonably ok. it looks ok as we come into the close. for the average volume day, i would say the volume thus far this year have not looks particularly exciting to climb the wall of worry around these markets. that is a look at the european close. --nie: in the u.s. come in the u.s., comparing some gains, so another day of gains this week but not by as much. some of those stories are worth looking at. the top performer of hilton worldwide. the dollar index is stronger by a quarter of percent. the euro giving back a quarter of the gains. the 10-year yield is still in that range. crude oil futures are gaining after inventories.
a double whammy, the market was looking for about half of the builds that we actually got. japan isee, obviously up 1.3% on a stronger yen. the euro being weak or a stronger dollar index. weaker and a stronger dollar index. >> let's talk about spain. it could be heading for an early election. the budget did not go through today which is somewhat of an issue. parliament rejecting of 2019 budget of prime minister sanchez. abandoning the minority government. that is due to the ongoing trial which started yesterday of the independence bid. with control of less than a quarter of mp's, convention
dictates, they now call a general election. sanchez will decide on friday whether or not you'll make the decision. let's go to maria to get some details on all of this. does he have any choice but to call a general election? no surprises here, the budget did not go through and this is a very weak government with a very unusual correlation and he was a very weak prime minister from all sides. technically, he does not have to end he can stay in government until 2020 and just roll over the budget, the political convention will tell you who really has to -- she really has to end perhaps it is not make any deference to, so might as well just go to it. he is leading in the polls, however, we look at a country where politics have become where heed probably will not get a majority and this looks overall very
shady whether you get an election or not. what would change about the situation presumably he would still need separatists to have some majority? maria: exactly. you can see this issue has not really gone away. this is all about the catalan independence crisis. trial for a democratically elected politician who may end up in jail. it continues to shape the entire's political sphere in spain. a polls, he would not win majority and what have to turn to catalan regional lawmakers and the way you go back to square one for opposition, however, they do say they could get a center-right majority which is perhaps why the market did not move too much. they may like a more conservative government. guy:
being generated for business. i am serious how the business story is going to react all of this. there has been a significant increase the minimum wage at the end of the year and we have seen the property story changing quite a lot. how much volatility could this cause to the economy. -- economy? maria: right. if you look at spain from ia macro perspective, it continues to grow very strongly and happens in many ways and shows that it solves from political story which is been shaken since 2015. there have been a lot of exports and that also resulted in the crisis. there are internationals that do not make money just from spain. are not really based in spain, they just need to have a solid half quarter and that is at. for the lead and storyial bank, this is a that has a government that is
able to complete a four-year term. it looks shaky. guy: maria, thank you. vonnie: let's get to washington dc tosident trump buying a pass avoid another government shutdown. he could attempt to have other funds for his wall. we are joined now by kevin cirilli. the consensus seems to be that he will get some funding and he will the claire a national emergency. what is the word industry in washington? kevin: to be completely frank here according to sources that i spoke with, this has been their plan all along. it comes at a time in which conservatives in the conservative movement's are critical of this president for not agreeing to a deal with lawmakers or break during a -- woulding a deal that
advance more allocation funds for a wall along the border. it only funds about $1.5 billion or so to enhance the border security in addition to another billion plus dollars for humanitarian aid as well as others. the president seemingly reluctant to get on board but he tweeted out quote, "i was just presented the concepts and parameters of the border deal by hard-working senator shelby. looking at all aspects knowing that this will be augmented and getting almost $23 billion for border security regardless of wall money, it is being built as we speak." i want to focus in on a particular aspect where the president to eat it that he will be looking at other sources of revenue. he could do that in a number of for and that is one different budget allocation tricks or other pots of money's revenue sources including the army corps of engineers. would be topect declare a national emergency,
the latter of which makes republicans on capitol hill very reluctant to get on board with that simply because it would enhance the issue and pull more political -- for more political gasoline on a contentious issue and could end up in the courts. wall?evin, what is a kevin: what is a wall? guy: i got curious, the language around what is a wall has changed. kevin: we have heard this change over the last couple of weeks. slats, aen awol, steel smart wall, different thrown types and techniques -- and that has made some republicans in the base of the party a bit more that said, ituse has been according to sources i speak with, oh way to garner more centered democrat
support. of washingtonside and you are in the business community or overseas and trying to price what exactly this means, it looks like there'll not be another government shutdown should the president ultimately sign this. couldrse, anything happen, but they have to sign and keep the government open ahead of the deadline on friday. the otherppens, then market moving storyline that we are following is the u.s.-china trade talks and secretary mnuchin heading over there with bob lighthizer. vonnie: sarah sanders is saying that tomorrow votto would be of -- that mar-a-lago would be a great place for meeting. is that the latest of what is going to happen? kevin: yeah. to what is interesting is the timeline surrounding when president xi and president trump would decide to meet together.
whether or not it will, head of that march 1 deadline, and a lot is riding on the next 48 hours in terms of that march 1 deadline with the president has said that he will increase tariffs on $257 billion of chinese imported goods. billion of chinese imported goods. makers have been urging republicans to pressure the white house to not ultimately decide to do that. vonnie: kevin cirilli, and bloomberg's chief washington correspondent, our thanks. first word news, here is courtney donohoe. u.s. intel -- a former u.s. intelligence member has been cited. back in 2013, she allegedly helped iran target her former fellow agents.
award has been issued for her arrest. the u.s. canwith only hurt the islamic republic, those comments come just ahead of american led summit on the middle eastern war. the meetings begin today and are expected to largely focus on iran. the comments adding that any negotiations with the u.s. would be quote, "unforgivable mistake." theresa may today deflected questions about the brexit's plan, but did not deny that comments from oliver robins. global news, 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney donohoe. this is bloomberg. guy: thank you. let's take a look at where europe has finally closed out. i had to be honest, barely
budging during the auction process. ftse hashere the finished up. day as well, but not much action during the auction process for the ftse 100. if you are leaving the trading desk in getting in the car, you can tune into the digital radio and carry on the conversation. takingro and i will be over the top of the hour on bloomberg radio. you can find out all of your bloomberg devices. kevin: -- this is bloomberg. ♪
their potential merger. >> our opponents are wrong. they claim that the merger will lead to higher prices. in fact, the opposite is true. consumers will win with lower prices and better services. how? will drop sharply and our network capacity will expand tremendously. vonnie: we are joined now with our reporter from bloomberg intelligence. it matter what he says to these committees, will the decision be made on any of the testimony anyway? matthew: that is pretty unlikely. this is mostly about political theater tied to the deal. the democrats now control the house and many of them have concerns about allowing a deal like this to move ahead. but ultimately, the decision-makers here are not the legislators on capitol hill, they are the department of justice's antitrust review and the federal communications commission.
both of those regulators adhere to precedents based legal tests. this is going to be driven more by their analysis of the evidence under those tests than by the politics that we are going to see play out today. jon was talking about the fact that this transaction is through massively different other manager. -- mergers. is that really the case? matthew: that is his burden to make that case because he is a difficult case to make. you have it on already very concentrated market with four providers in it. we would go to three. what he has to do and they have done a fairly good job of doing is saying that the telecommunications world is different and the future of telecommunications is five -- 5g and that requires heavy investment in two things -- infrastructure and spectrum.
themselves, sprint and t-mobile cannot get there and cannot compete with the at&t's , but together, they can be supercharged and be a serious competitor to provide this service. that is what he is really driving out when he says this one is different. because our industry is different and we need this in order to allow the opposition to continue. vonnie: why did he have to pledge not to use huawei gear? thatew: that i also think goes to the politics on capitol tol today where he is likely face difficult questions related to that issue. see the issuey being front and center before the sec and the department of justice. but at help them answer some questions today from lawmakers who might be concerned about china possible role in these telik medication networks going forward. guy: if i was going to merger
up, what i let the deal go through or not to go through? this is an our view, very, very close call. you should be very careful not matter how you are thinking about this deal. the level of concentration that is involved sets up all sorts of red flags for the regulators. the best way around those red flags in the best way to overcome those hurdles is an unprecedented argument about that only byorks allowing these two companies to come together can we really compete with the at&ts and verizons. it is a very close call and has a chance. i'd like its chances better before the fcc with its three republicans making the decisions there. the department of justice which adheres to a strict antitrust legal test and have to consider its precedent going for it, that
is a much tougher call. hard to say either way. matthewour thanks to with bloomberg intelligence. congresslso hear the committee in full by using your bloomberg terminal, live go. guy: tilton is the best performer and s&p 500 today. is the bestlton performer in the s&p 500 today. kailey leinz is here with more details. dubbed jeffrey analysts this a very healthy fourth quarter. higher. at 112 really strong dollars and that showed an acceleration that they are gaining market share. a large part of what drove that was internationally, currency playing a big role here. the cheaper currencies abroad
allowed putting more money in consumers pockets. so you did see strong growth this quarter, whether previous view was between 2% and 4%. you are seeing investors in the street really shrugged that off. that same jefferies analyst that i mentioned earlier said that this is a re-setting up expectations of an achievable bar for the company going forward and kind of the risk of the stock and i should point out that yes the midpoint of a cia 2% is pretty much in line with what we saw this year and still higher than years past. not too terrible a picture. vonnie: what is contributing to hilton lowering its of you? on the call today, they said it has to do with macro factors. one of those is china and the slowing of the economy over there and analysts asked a lot
of questions about china on the call and they said that it did see slowing in leisure travel but that has not slowed development yet. they are not seeing too much of a ripple effect in the pipeline and they are positive on china going forward. so not too big of a headwind going there either. guy: kailey leinz bringing us as a stock of the hour. a global battle of the chart, that is next. this is bloomberg. ♪
♪ guy: time now for the global battle of the charts. of course you can find all of these charts and all the other ones we put up on bloomberg tv by running gtv . kicking things off today, eric balchunas of bloomberg intelligence. corporations spend their money has been a very hot topic right now and even a political topic at this point. we decided to look at whether buybacks, which is one way that
corporations spend their money, is doing better than whether they put their money back into the company in terms of capital expenditures. you would think that buybacks are doing better, but that is not true. here we have three indexes. the white line is the nasdaq cap ex index. these are companies doing the most innovation, and the two below are the buyback indices with the s&p and the nasdaq. it goes against the grain of the capex is doing better. and what is interesting from the etf point of view, there is no etf, yet there is three buyback etf's.- buyback an unusual hole in the etf market and also a little surprising when we ran the numbers. guy: next chart, eric. vonnie quinn. vonnie: my chart is china-based.
showing the spread between the bonds in china's at the widest in seven-year. it isnow, you can see about two at six basis points. once private investors to invest in these companies that moreaybe just a little risky than government-sponsored companies and government bonds. but investors are quite happy to take the return and invest where they know that china is not going to let an industry fail. you can see that chart on the bloomberg at gtv . sucker for aays a china char and it has to be said that i am going to give it to eric today. the chart that vonnie was talking about about the over indebtedness of companies and that indebtedness has not led
them to putting money to work and productivity, i.e. they are not investing in businesses and doing exactly what air was talking about and using buybacks, which is a very inefficient form of capital beating short-term returns but not so good for the long-term story. eric is the winner today. that iswatch etf iq, coming up with eric balchunas allen bloomberg at 1:00 p.m. in new york, 6:00 p.m. in london, 2:00 a.m. in hong kong. justmarkets right now are about wrapping things up for us. from bonnie and myself, have a great afternoon. coming up next we have "balance of power." ♪
power." today, given server really from the white house and the president inching toward a budget deal. from london, theresa may is no longer secret exit plan. nextussels, on what comes for the spanish government. let's go to kevin at the white house. the president using us -- teasing us. kevin: it looks like he does not like it and it is not going as far as he likes but ultimately he will end up signing this budget agreement. that could change between now and friday when lawmakers have that deadline in order to pass some type of budget agreement that will keep the government funded to over another government shutdown. the president also now taking the most aggressive steps yet to signal even if he does get on billion thate $1.5 is included in the bipartisan budget agreement to build a portion of the