tv Bloomberg Markets European Open Bloomberg March 4, 2019 2:30am-4:00am EST
anna: welcome to "bloomberg markets the european open." i'm anna edwards alongside matt miller. matt: markets say there is still room to run. optimism for u.s.-china trade deal drives asian stocks higher. u.s. and european futures point against. the cash trade kicks off in 30 minutes time. anna: reconciliation in sight. the u.s. is said to be in the
final stages of a trade deal with china. an agreement could see most or all duties lifted. the shanghai composite cracks 3000. the chinese index closing at an eight month high. how much higher could equities rise on a trade truce? donald trump renews his attacks on fed chair jay powell. exclusiveom our interview with the standard lights aberdeen boss. >> we have to ask ourselves why he is commenting on the dollar. he clearly wants it weaker. are 30 minutes away from the start of trading. let's take a look at what is going on in terms of treasuries. this will give you a clue as to whether or not we are looking at a risk on market today. you can see that on thursday we were down 2.66%. now we are up to 2.76%.
investors are willing to let go of the perceived safety of u.s. government debt and wade into equities. take a look at futures. we have positive trade across european equity indexes. futures i should say. we are looking at gains of a 0.4% on dax futures right now. ftse futures are up about 0.4% as well. a little bit less than that. what do you see on the gmm? we see appetite for stocks, not so much for fixed income. that seems to be the risk-on nature. we see appetite for equities in hong kong and china. .ll this talk about trade what can we expect from the
growth story out of china in the year ahead? that is going to be a big theme of this week. the chinese currency continuing the gains we have seen. it is a very strong performer since the start of this year. you can see the pound is also in the gmm because of the gains it is making the european research group setting out its demands as it sees them in terms of the irish backstop. the list of things we want to hear from geoffrey cox. let's look at the other side. estimate for sovereign bonds. in terms of the commodity market story, oil prices consolidating above $56 a barrel on wti. cuts policy and u.s. production. matt? are: u.s. and china reportedly close to a trade deal that could lift most or all u.s. tariffs on chinese goods. bloomberg understands this would be the case if beijing follows
through on pledges on intellectual property rights and buying more american products. china is reportedly offering lower tariffs on u.s. foreign --ds -- farm goods in cars. and cars. what do we know about how close we are to an actual deal? the fact we are talking about all these different trends and we are getting more and more sources telling us there are multiple fronts, it is a signal to the markets we are getting close. sources have told us we are closer to a deal. it depends, the sticking point to that is, how will beijing comply? what will be the schedule of lifting tariffs? will it be gradual to make sure beijing does comply? thent to point out, we have national people's congress spokesperson this morning come out and talk about new foreign
investment. the reason i bring it up is because intellectual property has been a sticking point. what he said is that is going to be folded into that new law. the npc will be voting march 15. you take that as another sign of progress we might be getting closer to a deal. that is what we heard from chinese officials. tomorrow is a big day at the mpc. we are going to get the growth estimates, aren't we? >> absolutely. that's going to be the number we are all going to obsess over. we will be benchmarking activity against that target out of beijing. bloomberg economics things that's going to be between 6% and 6.5% growth 2019. it doesn't make a lot of sense, but just to put that into context, the target from the last two years was, quote
unquote, around 6.5%. and in and around where the target was, it is almost an acknowledgment they are prepared for slower growth. we are also looking at the budget deficit target and as a function of how they plan to achieve that growth target. the mliv question of the day is basically whether or not global stocks can rally on a trade deal. what about chinese stocks? we have come so far so fast in chinese markets. runhere any room left to when we actually get a trade deal? >> that is a very good point. adam was talking about 3000.
back, june 16, it actually gapped down that day. the headline was donald trump was drafting tariff rules or the list of products subject to tariffs. it is fitting we are back above that level now that we are talking about tariffs being removed. we are also getting markets toecting more policy support be more tangible, more detailed these next few days. we were speaking with morgan stanley, the chief economist, basically saying when you look at how they frame monetary policy, watch for that. morgan stanley, they think, they will remove the word deleveraging from the way they .rame policy from here markets are expecting it not just to be sentiment driven, but an improvement in fundamentals. anna: thank you very much. reporter's markets
david ingles. let's get a bloomberg first word news update. huawei's ceo is suing canada, claiming her constitutional rights were breached. china has accused canada of abetting the political persecution of huawei. she was arrested after a request from the u.s.. u.s. and south korea have agreed to end their biggest joint military drills in a bid to reduce tensions with north korea after president trump and kim jong-un failed to reach a deal. south korea's defense ministry says the move was made to pursue permanent peace. bill gross has defined his investing career by beating benchmarks, but he says the era of outperformance is over. yields are lower and the spreads between treasuries and
maturities are razor thin. gross says central banks have changed the game. >> i think there are things to look at that still exist in the .arkets the probabilities of generating historical output the same way are much less than they were. spacex has taken a leap forward with the successful docking of its capital at the international space station -- it's capsule at the international space station. boeingve spacex and contracts worth more than $6 billion to fly cruise to the space station -- crews to the space station. 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. this is bloomberg. matt: thanks very much.
up, trump flexes his muscles in front of a home audience and blames jay powell for hick ups the u.s. economy. more from his to our speech at the cpac conference next. bloomberg radio is live on your mobile device or on dab digital in the london area. go ahead and tune in to markus karlsson. this is bloomberg. ♪
anna: welcome back to the european open. 17 minutes to go until the start of the trading day in europe. the asian session marked by triumph over vertigo. there becrossover will into europe? futures suggesting we will be modestly higher. matt: let's give you what you should be watching this week. a little agenda this morning. tuesday, china's annual national people's congress opens in beijing. we just heard about that. the nation's economic growth target will be announced. the ecb rate decision thursday. i will be there. the economic forecast could be revised lower and officials may
discuss long-term loans. friday we have the granddaddy of all economic statistics. jobs day in the u.s.. hiring may have moderated in february. estimates say payrolls may have increased by 185,000. not bad for an economy this late in the cycle. anna: talking about the drivers of the u.s. economy, president trump has repeated his view the dollar is too strong. he also hits out at federal reserve jay powell as someone who, quote, likes raising rates. speaking at the cpac conference, the president says the u.s. economy is doing well despite the actions of its central bank. here are highlights from his two hours speech. we have a gentleman who likes a very strong dollar, but i want a dollar that's going to be great for our country, not a dollar that is so strong it is prohibitive for us to be dealing
with other nations and taking their business. has an incredible economic future if they make a deal. but they don't have any economic future if they have no -- if they have nuclear weapons. the relationship seems to be very strong. that is important, especially when we are dealing with this kind of a situation. collusion with russia. the collusion delusion. we are going to go into his finances. these people are sick. get into that now with mark cudmore, our bloomberg mliv strategist. we are going to get peak trump when he is talking to cpac. he does bring up jay powell. he does bring up the dollar again. what do you expect markets to make of this?
markets's comments on have a diminishing marginal impact. when he talked about the dollar a year ago it had a big impact. several references to rates and the dollar. they have started to impact, but this time, there is nothing at all. openloomberg index did higher, but you expect that scenario given trade optimism, given the risk on mood. i think markets will go on ignoring trump on the dollar and the fed unless he really escalates. anna: good morning to you. risk on in the markets in the asian session overnight because of these headlines around what can be done on trade. let me ask you about how much there is into the european session. a lot of people are quick to point out there is not a direct link between how high the shanghai composite rallies and
how much we get in europe. >> i think there are a couple different things. we need to note europe is the growth laggard globally. it has been held back by the fact some of the data globally has been slowing down. in europe it has been negative. the cyclical -- industries are struggling. europe will not see this bullish narrative continue from the asian session. another thing that is important is the price action in asia was quite bearish. given the exceptional returns we have seen in china, we could see a pullback. cell on the trade news. the story around china is exceptionally bullish. the trade war fed hiking and china deleveraging, those
dynamics have shifted back into signs of a trade deal, signs of the fed pausing on rates, and china is adding massive stimulus to the economy. some very constructive, very bullish medium-term on china and on global equities. short-term, the price action was negative. that is a worry going into the rest of today. matt: first off, i have got to show you this chart. i could have used it for battle of the charts. on the possibility of chinese stock overheating. this shows chinese stocks, technical stuff going on, but i wanted to ask the question of the day, which is about global stocks. you are asking people of global stocks can rally on this trade deal. you mentioned it could be sell the news kind of effect here as
we get to the end of this long saga. what are you hearing back from respondents to the mliv question of the day? collects as you might have guessed, it is an issue which evokes very emotional answers. people are very much in tune, very firm overall. some people are focused on the slowdown on the economic side and think this is a dead cat bounce and duke should be selling all equities you can. i am in the camp that there is an economic slowdown happening, we have known for some time. global growth is roughly average. it is marginally below, but also, we are getting very supportive policies. from the fed, who have stopped taking rates. china adding major stimulus to their economy. we have supportive central banks who have still got liquidity
coming into the system. we have earnings that have plateaued at a strong level. prices are massively discounted from last year. yes, global equities could rise easily 90% this year to make a new record high. short-term we the might get a sell the fact when the trade deal is signed. anna: remember, if you want to get involved in the question of asking, reache out to us in the markets life team. use ib+tv on your bloomberg. let's get a bloomberg business flash. >> elon musk says tesla will unveil its model y in less than two weeks. the new model will have normal doors. the model y will cost 10% more than the model three.
to emergee starting for bp's portfolio of u.s. shale assets. till corp. energy and enduring resources have expressed interest. these could be worth $2 billion. paring itsng -- business following last year. matt: thanks very much for that. minutes away now from the start of trading across the continent and in the u.k.. we will look at your stocks to watch at the open, including supermarket top year -- operator after reports amazon is planning more grocery store competition across the united states. this is bloomberg. ♪
anna: this is "bloomberg markets: european open." six minutes to the start of trading day. sam unsted from our equities team is covering trade related talks. annmarie hordern is focusing on management news. first, what's the story with ahold? open moresaid it will retail locations in the united states.
has always reacted pretty badly to any change from amazon in the u.s. retail market. this might happen again today. amazon's mostly planning stores on the west coast. ahold has mostly operations on the east coast for now. matt: thanks very much for that. sam, let's get to trade talks. what are we expecting? >> we are expecting broad-based gains. anything sensitive to the trade story. keeps, autos, i would also a lookout for semiconductors. anna: we will watch those. what's the news from u.k.? >> a management shakeup. ted baker's ceo has resigned.
♪ ? good morning. a minute to go until the start of the cash equity trading day. let's have a look at how the markets look set to open. the ecb looms large on the agenda for thursday, oil prices firmer. china, as wellf as the asian session broadly, have been strength coming through the equity markets overnight, all talk about how quickly we could get a deal done on trade and some of the conditions that could go along with that. the pound is firmer against the next week we get a
vote on that, and this is the we are of the future, expecting to add a little bit to the european equity market at the start of today's trading day. the story in asia, we will see how much is translated, optimism around trade once again. how much can we factory to the european equity market? how much do we take at face value? whether do we question we have sold the china-u.s. trade battle to open up between the united states and europe? for the moment, ftse 100 opening up, the pound is on the move, that can have an outside impact on equity markets in the u.k. up and theis strength of the pound is mimicking the games we saw this morning. we will wait for these markets
to open up. haven't had a great deal in terms of corporate reporting, interesting bp story around asset sales. sectors look to be on the move to the upside. energy, material, telecom, utilities, all moving to the upside, very much focused on health care. a large swath of red around health care and industrials looking negative, but health care is certainly part of the story. it suggests we are jumping onto a risk on defensive strategy. >> let's take a look at the individual movers. first of all the breast to the upside is pretty breathtaking, 528 stocks rising and 60 down. in terms of the individual roofers the daily mail is the biggest gainer on news that it is going to spin off the euronext stake to shareholders.
let's take a look in terms of the index and the who's moving the market the most. nestle is boosting the stoxx 600 the most, roche leading up the charge. taking a look at the losers, novartis taking the most points away from the stoxx 600, and that you have british american and linda on the downside, in terms of the biggest point, nor day a is the downgrade,her on the this is the see -- grocer down on concerns about competition from amazon in the u.s. >> interesting that the daily mail is one of the biggest -- one of the headlines across the
bloomberg, we will keep an eye on that in return to the individual movers. european markets opening higher. the u.s. and china are close to a trade teal that could lift most tariffs. bloomberg's understand this could happen if beijing follows through on intellectual property rights. china is also reportedly offering lower tariffs on u.s. foreign goods and cars. let's get up-to-date with the latest news flow. david igo's joins us from beijing. give us the latest. what do we know about the potential for a deal soon on trade? >> right. they mention some of the conditions that need to be in place and a lot of those things are coming together. a good example would be the tariffs on u.s. agricultural they will be able to limit it more. weeks, china few
might be looking to up the goods. the other sticking point is intellectual property, which falls more under the structural reforms, and this morning we did get some progress on that mediae we did have this briefing and the spokesperson talked about this new foreign invest within which they will be folding in strength and in a lot of ways you take that comment and it does show you that there might be some progress made, highlighting and emphasizing the that those two sides are moving closer to a deal, which is why markets shot of substantially ahead of the official growth target tuesday.
>> thank you. david inglis there, wrapping up in story as it stands now terms of u.s.-china trade talks. joining us to discuss further is randall crosser. welcome to the program, thanks for joining us. let me ask you how optimistic you can be that a trade deal with the u.s. in china, if it is completed, as far as we know, how good that would be for global growth? would it to be a boost? would it give us back to a stronger level? >> it's a positive but i don't think it will save the global economy. the trade dispute has many aspects to it, one of which is about soybeans and tariffs, but i think that's the smallest case
in the bigger picture because it's really about intellectual property and enforcement mechanisms, a broader change in the chinese system of law and those will be much more difficult to have and they will be continuing concerns around enforcement, even with respect to soybeans. >> good morning. that is why we could see different estimates on the timescale around trade. some people are suggesting cool heads will prevail and others are saying this will go on for years -- it depends on how broadly you define this trade tension. >> exactly right. there's a lot of pressure that the president feels and the chinese feel to get some form of a deal -- the easy thing is to buy more soybeans and reduce tariffs on autos, that kind of thing. and you can count the number of soybeans -- in terms of technology transfer and enforcement, that is a much
vaguer saying, something that is much more difficult to enforce. >> what is your assessment of how much these trade tensions are weighing on the growth story? the have seen estimates come down, but it is still relatively strong even if we progress through the cycle. >> exactly. the numbers sound big and scary, but as long as the tariffs don't go up dramatically, the impact is relatively modest. there is a lot of uncertainty, and that may have impact on growth, because people aren't investing. but the effect has been very small. randy, of the effect, renegotiating all these packs, from nafta to china to europe trade agreements? what is the effect on global growth as it is willing? >> on the margin, it is all helpful, but i don't think this is the key thing driving global growth. there has been a downtick in
investment, a downtick in consumption outside of the u.s.. 2017 was the year of synchronized growth. 2018 was the year where the world slow down with the exception of the u.s. but the u.s. isn't likely to grow as fast stop >> stay with us. up next, the stocks on the move, including the daily mail, announcing the spinoff of the euromoney stake. quite a complex story. what does this do to the business in the holdings of the chairman? we will talk more about that shortly. this is bloomberg. ♪
♪ welcome back to the european open. 11 minutes into the trading session, looking at green arrows across the board in europe and in the u k on optimism for a u.s.-china trade deal. president donald trump has renewed his attacks on fed chair jay powell. the president told the conservative political action conference that america's economic strength comes despite the fed's rate hike and preferences for a strong dollar. >> we have a gentleman that
likes raising interest rates at the fed. we have a gentleman that loves quantitative tightening in the fed. gentleman that likes a very strong dollar the fed. i want a strong dollar, but i want a dollar that is going to be great for our country, not a dollar that is so strong that it is prohibitive ross to be dealing with other nations and taking their business. >> that was trump speaking over the weekend. the former fed governor is still with us on set. listening to that excessive use of the word gentleman, a very loaded use of the word -- how do these kind of attacks from a president go down within the fed? you know the inner workings. how much does it complicate the job when you see a president to make these very overt comments about fed policy? >> it certainly complicates the
communications, but i don't think it changes the fundamental last december the fed raise rates, the president on the day of the meeting was tweeting that this was a mistake, the fed clearly showed it would do what it thought was best, but it does really complicate the communication because the fed has to do what it thinks it is right but also not do the bidding of a politician. sometimes what it wants to do is what political actors want to do. you don't want the perception that they are all doing that because that will lead to a loss of credibility and confidence in the fed. >> what you think about raising rates just for the sake of building up your store of dry powder? we haven't really seen inflation, no one expects it in the u.s. or globally, and yet the fed has managed to raise rates. nine or 10 times since the end
of 2015. fortunately because in case of a downturn we don't have much to cut. >> the fed gets criticized on both sides -- if there's no inflation, why are they raising rates? and they have had this crazy low interest rate policy and they have to get out as quickly as possible. they tried to balance those two and they gradually raise rates in the inflation rate has been .bout 1.5% to 2% it has been the head of the inflation curve and that is why we see such flat yield curves because the expectations are quite low that the fed will go behind. typically central banks and the fed waited until inflation got above 2% and then resume rates up to break inflation expectations/ now they are doing it in advance. these economies grew slowly while the rest of the world was willing so i think it is hard to
be too critical so far. >> when using the dollar -- we heard president trump talking about it and i have a chart that identifies the number of episodes in the past year where president trump has talked about the dollar strength. it hasn't necessarily brought the dollar down. it hasn't necessarily wait on the currency stop would you expect these kinds of comments? think jay powell has a particular view of where the dollar should be. he thinks the market should be determining the dollar and understands the implications of interest rate policy relative to ecb or bank of england policy and that has an impact on the dollar. he doesn't have a particular view of where it should be in there are a lot of factors of the u.s. that have an impact on the dollar. that is when regardless of what one says, it is hard to drive the value. >> one guest earlier said the dollar is too strong, it is
overvalued. do you share that view? >> it is hard to know exactly when a currency is overvalued or undervalued if it is largely market determined. if there is intervention by a country like china or others, then you can make that statement. it's really just relative to expectations about what the ecb will do, the bank of japan, the bank of england. >> a lot of critics have been saying for years that the dollar will eventually lose strength as a world reserve currency but it doesn't seem to have happened yet. isabelle mas horizon? >> i don't see that on the horizon. it's a relative market and it will be the dollar relative to something else and you have to choose some currency to hold your assets in. the euro was a challenge for a while but obvious leave the challenges within the eurozone and questions about the euro --
that's not a challenge. the ribbon may could rise up, in theen the opacity institutions in china, that will not be a challenge. eventually there may be something but in the near to medium term i can't see anything challenging the dollar. >> thank you very much. users with us. let's get our individual stock movers. annmarie hordern has a few to watch. >> let's start with "the daily mail," up 4.5%. they say they will be distributing to shareholders with a special dividend before thebreak -- this means chairman will have a lot more control over the company. we are seeing pressure from they have more than half of their revenue coming from the united states. and then ted baker to the
downside more than are percent, the ceo is resigning effective immediately over an investigation of his conduct. he founded the company in 1980. >> all right. every, thanks very much. some of your stocks to watch. up next, brexit or the trade war, which is the bigger risk in the year ahead? we will hear more from our exclusive interview with martin gilbert. this is bloomberg. ♪
♪ welcome back to the european open. 20 minutes into the trading day. european equity markets heading higher this morning, lifted by talk of a trade deal -- how imminently can we get that? that lifted equity markets in the asian section. the aberdeen co-ceo retains that equities are this year's best investment, saying the u.s. is a particular bright spot. he spoke exclusively to bloomberg about president trump's complaints about a strong dollar. ourselves whyask is commenting on the dollar. he clearly wants it weaker to boost exports and continue growth. i think the u.s. is doing fine. growth is good, and i always say in fund management you ignore
the u.s. at your peril. it continues to do -- the stocks that do continue to do well. >> you said last year equity is the best investment for 2019. we have seen such a healthy correction. do you still stand by that call? >> i think so. we will hopefully go back to what i would call normalized markets now that quantitative easing is officially almost finished and i think that rings back stock pickers. a business like ours, which is bottom-up stockpicking more tending toward value rather than growth and quality, had a tough time in the last few years until the last quarter of last year. the markets are a hope turning back toward active rather than a more passive style. >> will that continue when we start to see the fact that the u.s.-china trade relationship is thawing, getting closer to some
sort of agreement? >> i think hopefully we will get some sort of agreement. i think trump would like to reach an agreement, and we can now take the hawks and the more hawkish members of his own are attending more toward being anti-china that he probably is. >> is that still the greatest risk, or is the fact that we are now -- is brexit a greater risk? >> i think america and china is a much bigger risk than brexit. riskt is a more localized i think of the u.k., clearly, and probably a bigger risk for ireland than anyone else because comes inply chain through the u.k. and you see predictions that there is a hard brexit and ireland could see a significant slump.
but it is a risk and it's a risk for europe as well. >> that was the standard life aberdeen co-ceo, speaking exclusively to juliette saly. is still withe us. i'm sure you would agree that u.s. chinese trade relations are a bigger risk for the global economy, but how much of a risk is brexit for europe, as martin gilbert was saying? >> well it depends on what happens but i think reasonable heads will prevail to make sure that at the end of the month we don't see all trade stopping. there will be ways of doing stopgaps -- that won't be forever but for some period of time but i don't think there will be some sort of crash. >> do you see a big opportunity in a u.k.-u.s. trade deal, much
talked about, given your knowledge of the two economies? are there wins available? >> there are some wins available but i wouldn't put all the eggs in that basket -- that is one piece of the puzzle but it's not things -- trade deals were to fall off, there's a standard of the wto has so it's not like tariffs go from zero to 100. they just fall to the standard, which is not particularly high. >> when you look at the brexit,ity of a smooth could that be at risk for the eu as well? could other countries see that in decide to follow's? even if't imagine that this goes smoothly that other countries will want to go through this tumult. there's no particular incentive for europe to make it tough --
all these other people want to break away given all the tumult, the lesson is that this is a really difficult thing, even if in practice it will not be a problem. >> you characterize the dilemma faced by the ecb, weakening the economy? >> they are in a pickle. i am looking at the picture here in the u k and they are in a very tough situation -- they are clearly slowing quite rapidly, purchasing additional assets, interest rates are really negative into could be hard to push them further. unlike the u.s., where we have raised rates and reduced the size the balance sheets, they don't have as much ammunition available to respond to this slowdown. >> i've always thought it was interesting -- they call it the gherkin in german, it means pickle, and i guess brits use the same terminology. former federal
anna: -- matt: was get your top headlines. reconciliation inside. the u.s. is said to be in the final stages of the trade deal with china. most orment could see all duties on chinese tariffs lifted. stocks start the week on a tear. the chinese index closing at an eight-month high. european equities rise for the third session in a row. and talking down the dollar, trump or news his attacks on the fed chair jay powell. will hear more in our interview with mark gilbert. we have to ask ourselves why
he is commenting on the dollar. he wants it weaker. matt: welcome to bloomberg markets, this is the european open. i'm matt miller in berlin, alongside anna edwards in london. anna: let's have a look. half an hour into the trading day, where we are. 476 stocks on the stoxx 600 heading higher. propelled by optimism on what can be done on the trade story between the u.s. and china. the publishing business is on the upside. the story is sitting out that stake in euromoney and it has been well received by investors. bank is set to drop out of the stoxx 600 shortly, but up by 4.7%. an interesting story. in the banking business is expected to support the company.
interesting stories developing on the downside, although the broad move is to the upside. down thisanies are morning. the numbers looks to be in line, but they are planning to slow growth in 2019. goes down. presented to the growth business in the united states by amazon. that is the top story. we also saw another company moving down, the french retailer business is lower. let's get a bloomberg first word update. via: the ceo arrested in canada claims are constitutional rights were breached. china has accused canada of abetting the political. -- persecution of huawei. president trump has repeated his
views of the dollar is too strong. he also hit out that jay powell is someone who likes to raise rates. the president said the u.s. economy is doing well despite the actions of the central bank. a strong trump: i want dollar, but i want a dollar that is great for our country, not a dollar that is so strong it is prohibited for us to be dealing with -- it is prohibitive for us to be dealing with other nations. olivia: juan guaido says he will return to caracas. the opposition leader secretly left the country in february to oversee aid presented by international allies. it is the latest move to end the role of negra's maduro. -- of nicolas maduro. withnt leap forward taken the successful docking of their first astronaut ready capsule at the international space station. the only passenger was a life-size dummy headed with sensor devices. in 2014, nasa gave spacex and
boeing a contract worth more than $6 billion. day on air, 24 is a and tictoc on twitter, powered by more than 2700 journalists 120analysts more than countries. matt: thank you very much for that. war may be nearing a resolution as we have been talking about. bloomberg learned a deal is in its final stages. they could let its most or all of their tariffs on chinese goods. until that deal is signed, the biggest question for investors remains, how do you trade the trade war? >> how do you trade trade war? increasing tensions could ripple along supply chains, prompting -- tw forces in the worldo. they say the trade war is already weighing down cyclical and value stocks, especially miners.like autos and
commodity currencies are under pressure, too. the aussie sank on reports that china is banning australian gold. the aussie is particularly vulnerable, considering it is also sensitive to china data in overall levels of risk appetite. likelyanother says it is a deal will be rich, and emerging-market asian stocks could rally over 10%. with all this uncertainty, where will you put your money? that was a closer look at how investors are positioning themselves for a trade war. could investors be sleepwalking into another financial crisis? our reporter says it lies in loan obligations. although it is seen as a safer
alternative, that assumption is dangerously wrong. the credit quality of a leverage loans, which underlines the cielo's, is typically not investment grade. the loans increasingly have minimum investor protection. guest.ith us is our path --ook back on the has financial crisis and castor mina head to look at create another one, the piece we quoted looks at the risk around clo's. are we right to look at credit markets? we never know exactly where it is going to come from. if we knew, we could take steps in advance. looking wherever there is leverage, if something goes wrong, that tends to have consequences for a lot of other markets. that is a natural place to look. but there are few political concerns by can come in.
we talked about china today. there are issues in europe. italy is one of the weak links in europe. if there are challenges in emerging market countries or questions about italy, the italian banking system still has not been fully cleaned up. there is a lot of risk exposure that is there. that could mean weakness for europe. at the time of the financial crisis, it was not the o's that caused everything. u.s. banks were loaning to much money to people who could not afford to repay it unless the underlying assets continue to rise at an unreasonable pace. do you see anything like that when you look around the world? are there any financial crises at our doorstep right now? fortunately for most countries, the banking system is better capitalized. it helps you to withstand some shocks. it is a major downturn in
particular markets that you will never have enough capital to fully withstand that shock. one of the areas getting a lot of attention are the property markets in china, because there has been a lot of leverage china has done since the financial crisis to try to make sure its economy does not slow down too much. they are trying to deleverage now. we will see if they continue to talk about it. they have been trying to pull the air out of the balloon without it going out to quickly. that is a key question going forward with the people's congress, will they be able to do that? olivia: anna: we will learn more about the target growth rate they have in mind and how much leverage they will allow. how about in the united states? is therefed on pause, overheating in the u.s. economy? randall: the fed is on positive until they see strong evidence of inflation. we continue to have robust job growth, as we saw with the recent numbers.
without a lot of inflation pressure, which is starting to go up a little more rapidly. the key will be whether productivity growth goes up, because if it does, then you could have wages go up without overall inflation pressure. anna: that sounds like you believe the next move will be a hike. randall: i think the fundamentals of the u.s. are still strong. the labor market still seems to be strong. maybe things will taper off as the year goes on. we will not be as strong as last year, but we will still be relatively strong. matt: i remember when ben bernanke went on 60 minutes and a short the world that the fed could easily stop inflation whenever it wanted to. as soon as it showed up. it has not really showed up since then. left it be ok if the fed rates on positive until we get a sustained inflation above 2%? randall: that is exactly the
the fed tables these days, whether they should have a difference in monetary policy strategy rather than have a 2% inflation target and try to stay close to that. since we have been undershooting that for so long, should bailout the inflation rate to be above 2% for a while afterwards to make up for that? that is the big question. would that allow inflation expectations to start to become unanchored and moved up? i think there is a chance for that. right now, people are expecting low inflation, despite the strength of the labor market in the u.s. anna: the need for symmetry or not in the u.s. monetary policy. thank you very much for joining us. randall kroszner from the university of chicago. up next, we will bring you the stocks on the move this morning, including a company planning for slower growth in 2019.
board as the risk on mood rolls around from asia and is set to head over to the usa. speaking of, bill gross has defined his career by feeding the benchmark. he says the era of outperformance is largely over. our reporter just prior to his retirement about the problems with index funds. funds, rms of the index it is a phony one. the real debate, the entire market is an index. even if you are actively managed, there will always be one side with four times the fees. i -- thehe arguement argument is -- >> a specious one? >> yes. if you are negative on index funds and etf's, we want to
continue to 150 basis points. volvo had it right. john bogle? and his emphasis on index, which is the nemesis of low fees. trading as well, but really low fees because he always felt htthe investor was giving up 1.5% a year. it was easy when markets and bond markets were returning 12%, 14% a year. markets are only returning to percent or 3%, in some cases negative, you cannot do that. i am all for it. can have anou
actively managed etf. there was bond. fine. the fees that are the problem. gross,hat was bill retired portfolio manager speaking to bloomberg on the occasion of his retirement. let's get our individual stock movers. annmarie hordern has been for us. annmarie: let's start with gainer peruvians up. the paris-based perfume company says they are raising, with some gains. but to the downside more than 7% this morning. meetsgh their revenue estimates, they have good earnings, they say they will see slower growth. medical to the downside.
the stock is down after this medicareat the u.s. and medicaid services might be looking toward a payment system that would favor home dialysis over clinic treatment. fresenius operates clinic treatment dialysis. any change would hurt them and their profits. --t: amory, thank you annmarie, thank you. let's take a closer look at the deal striving markets in europe. joining us is ruth david. i will kick it off with the daily mail, finally spending off its take on euro money to investors. what prompted the move, and how have investors responded? ruth: one of the things we have seen with a bunch of companies is when they do these kinds of spinoffs where they are giving value to investors, the response has been pretty positive and the stock is up today.
they are talking about special dividend that must be used because media companies, as they are well aware, have had to deal with challenging conditions. the stock value has fallen. they have done this before. they had the mistake in euro money earlier, undertaking a risk. the analysts are taking it pretty positively, which is the response you have seen to a lot of these spinoffs across europe, increasingly considering it these days. anna: on some news we talked about a lot at the end of last week, we have the geneva motor show coming up. its intentions towards jl are. brexit is one of the factors, but what is driving their decision to reevaluate? ith: for years, they bought more than a decade ago.
it contributed to its profits, whereas in the last year, we have seen it struggle. there have been problems with brexit, problems in china. there has been a huge slowdown along with the european carmakers. motors is looking at the story. from as far as we can tell, they do not want to get rid of it. that is something they would hate to do. but would they be willing to bring in a backer? would they be willing to bring in a sovereign wealth fund or a strategic investor who would give them a capitalist infusion? our understanding is that might be the case, because they are at the stage where they need money. jlr is really struggling. it is the performance of the parent company, and they feel they need to do something. matt: they have done an amazing job with a lot of those brands. it would be a shame to see them get out of it, considering how
well the jaguar design has progressed forward, and range rover as well. let's get back to something interesting for bankers. metro bank is blaming brexit for its sales. will investors back its latest fundraising attempts? ruth: that is the $350 million question. it is interesting because we have been talking about this happening for a while, but i think everybody was estimating it would be around $200 million selling. they said they want to raise around $350 million. they did this the same day they said they have been misclassified materials, which means they do not have enough capital. they are trying to talk to investors and have wealthy backers. some have come out and said they will back metro, but we do not know if this will get done. gett does, what prices stacks, because investors have
seen their holdings tank in the last year. gains thishere were morning, but it is set to drop out of the stoxx 600 on the current reshuffle. ruth david joining us with the latest m&a news. if you are a terminal subscriber, check out the latest m&a news and the stats, the size of the market. ma . don't forget that terminal users can interact with the charts we use during bloomberg tv programming using gtd . next up, the battle of the charts. this is bloomberg. ♪
matt: welcome back to the european open. equity markets up 0.4% on the stoxx 600. time for battle of the charts. matt is going up against annmarie hordern. annmarie: i am looking at domestic revenge. cash running back engine the u.k. mid-caps. the reason i love this chart is look how dramatic it is. these are the biggest etf's, and they had record inflows, a monthly record inflow, and it comes as risk of a no brexit deal begins diminishing. you see how investors feel about where the situation is going. the fact that you are seeing so much money back in to these
mid-caps. anna: matt, let's get to you. matt: i am looking at cars, because i am going to geneva tonight for the auto show and bringing you a bunch of interviews there. -- one of the people i will interview is the ceo of a member of our team noticed if you normalize the luxury carmakers since aston martin's ipo, you have tesla in white, porsche preferred sales in blue, you see that aston martin has done the worst of all 60%hem, dropping more than -- more than 40% since the ipo. losing almost half of its value. the interesting thing is if you look at the analyst estimates, they expect aston martin to climb by the most -- it has the most potential upside, 45%, compared to the second biggest potential upside projection for
porsche, 29%. aston martin could do well, if you listen to the analysts, but a lot of them are saying that sticking to the 2019 target is a pretty bold move. anna: i am going to go with annmarie on this. she seems to be ahead of the times. and we lovely chart, will no doubt talk more about the car industry. you are going to the motor show and we will talk about that to the rest of the week. excellent chart and it will get a lot of airtime. i will stick with an race chart. we have watched -- with anne-marie's chart. it seems people are increasingly taking no deal off the table, but it is a little premature. thank you very much. matt, we see european equity markets bouncing strongly this morning on trade. matt: we do, and we saw that overnight in asia. we expect that to show through
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francine:francine: rally on stocks surge as the u.s. and china are set for a trade deal. for a dealost hopes growth as tories outlined their conditions for supporting prime minister may, sterling rises, inviting the fed. president once again takes aim at jay powell. president trump: i want a strong dollar. i want a dollar that will be strong for our country, not a dollar that is so strong it is prohibitive for us to be dealing with other nations and taking their business. ♪ francine: welcome