tv Bloomberg Markets European Open Bloomberg March 25, 2019 2:30am-4:00am EDT
nejra: the global stock crowd gathering pace. look at the sea of red in asia. broad-based losses. the msci asia pacific dropping 2%. joining us from our bloomberg partner in mumbai is near russia. let's kick it off with you. we have talked at other times about indian markets outperforming the rest of asia. india has not been able to escape the risk off today when it comes to equities. talk to us about the bond market. >> you nailed it. good morning to you.
we have not been able to escape this. there is a bit of a pullback in equity markets. the money markets have corrected. currency and the equity markets are down about 1%. the money market is the interesting one. the fact that glow the slowing down, people anticipated the money markets to come off. that has not happened today. now. about 7.31 right the money markets have not really shown any kind of dramatic down take. economists andf global brokers saying they now expect the indian central bank not once but twice over the course of the next three meetings.
that is not having the impact on the yield. watcher, i would really believe this could come off somehow. that is not quite laid out in the session today. let's see what happens. will all be seeing what happens, niraj. losses inthe biggest the asian session today is japan. shares down 3% as inflation concerns. to beholds, it's going the worst day of the year. yield japanese 10 year fall as well. no surprise here. lowest since 2016. are they going to get to -10 basis points? australia as well trading at a record low.
that u.s. yield curve inverting set markets off. i want to take you into my terminal. interesting hedging happened around this trade. we saw opposite reactions in euro and dollar spreads. euro in the blue as german bond yields look negative. , this spread tightens. we saw a lot of hedging happening around the drop in u.s. yields. that sent this spread lower. it also further impacted those losses we saw in u.s. 10 year yields. great work. thank you so much. let's get the bloomberg first word news in hong kong. >> special counsel robert mueller found no collusion between president trump and russia during the 2016 election. the report also said there was not enough evidence to find the president obstructed justice.
that did not exonerate him either. from over.s far top democrats are demanding the release of his complete report. theresa may is clinging onto tryr as her own ministers to oust her. may is looking for one more chance to put the divorce deal to parliament, but it has already been rejected twice. the u.k. was supposed to be leaving the eu this friday. >> she really is a dead woman walking. viewas got to go and in my she should have gone weeks ago. of -- for china to open up its financial markets according to the people's bank of china governor. meanwhile, j.p. morgan is calling on china and the u.s. to
resolve their trade dispute. economy, the u.s. and china, we should be very worried. both sides recognize they need to -- daylobal news 24 hours a powered by more than 2700 journalists and analysts in more than 120 countries. bloomberg. nejra: thank you. global yields plummeted in tandem. what is that tell us about the state of the economy? some strategists say it's an ominous sign that the growth slowdown is not a fleeting event. the reality may be less dire. here to explain the forces at play is bloomberg's dani burger. tell us what you have found. german bond yields have gone negative.
that u.s. curve is inverting. priceseuro area disappoint last week. structural shifts might be just as important. there could be a less ominous reason for those prices. think of the technological advances, not to mention the amazon effect. it has made everything cheaper for consumers. we did have that rise in u.s. bonds. they once again have reliable buyers. they will really have to purchase more securities or else the balance sheet will shrink. then there is my favorite. the german buyers are pricing sensitive. there are types who pile into bonds because trends suggest momentum is to the upside. then there is your everyday portfolio construction rationale. remainset valuations elevated so investors have been buying bonds to hedge their stock holding. it is a less frightening reason for the sink and asked bond slowdown in yields.
nejra: thank you. we also asked the ceo of prudential what he makes of the global fall in yields. >> the portfolio in which your footprint is matters. i like where we are. we would like to see all markets growing and all economies stable. we don't get that option. the bulk of our business now is asia. we get good growth across multiple markets there. the tax policy, you saw heavy reinvestment back into the u.s.. see capacity being built by the amount of money that was redeployed. those are healthy trends. europe is more political than economic. the political and economic are blended. there is instability in both. we are primarily an asset manager.
currently we have no material operations in europe. manager raises a lot of funds and they tend to be risk-off positions. we tend to benefit from instability. >> are you starting to factor in a recession in the u.s.? >> no, the products we provide there are smooth. a higher tax, more volatile market tends to drive more demand for what we do. the underlying products the consumers are allowed to allocate their money across top managers and guaranteed accounts so they can do you risk the product inside the portfolio. the product inside the portfolio. we are certainly more conservative on reddit and duration in the u.s.. doesw much of a challenge a weaker rate environment and a
dovish fed, potentially a weaker dollar as well. how much challenge does that pose? >> i think it is priced in now. accounting, the actual interest rate helps you. certainly it is effectively our discount rate. rising rates are good for insurers. they start gradually rising. insurers don't do well if rates rise quickly and they don't to well if rates fall quickly. any smooth shift is manageable for a business like ours. if you are only in guaranteed it's very good. that was mike wells. william porter is still with us. we were talking about this inversion. we have a beautiful chart showing how that has been
predicted the past two recessions. before that happened we saw the 10 year bund yield go into negative territory for the first time since 2016. you are a bit more of a purist. about there concerned direction of the 10 year bund yield? involves mirrors. people should right above their mirror, the ecb is running out of funds to buy. buy.nds to they may have to buy more credit as germany retires its debts. ratio pushes up against 30%. it is absurdly technical. thispread's chart showed as well. the technical is not going to go away anytime soon.
yieldcally fired the bond -- bund yield. i don't think it knows what it's talking about. it is to distorted. nejra: there is a story on the bloomberg talking about the fact it is -- a lot of people have lost money that way. brought up the chart, i also had it up showing european swap spreads diverging. it is perceived risk increases. this clearly shows the euro 10 year stock spread increasing as the u.s. one has been falling. does this mean european credit markets right now are definitively more risky than the u.s.? william: i don't think so. it is a different technical between the two. less not amore or
phenomenon in europe. the market frankly is off-site. i am off-site on u.s. yield. a couple months ago they look to render slain mispriced. things look -- they looked horrendously mispriced. i look much more at the corporate fundamentals. a really substantial european slowdown would change that. for now, the fundamentals in corporate europe looks fine to me. let's talkejra: about a significant slowdown. we got those ugly pmi's out of germany. the last time we spoke you were quite up about the fact we have about the fact we have seen a pickup. william: i am on the back foot on that, clearly. we have downgraded our european growth forecast.
i was thinking on the way in this morning, having lived in japan and the usa, i was in japan many years ago and they are still undergoing adjustment to what we are talking about in europe. they had this competitive sector and the domestic economy was something you could talk about in polite company. it has taken many years to become more efficient, modernize work practices, et cetera. this transition we have been talking about, the european economy moving away from its excessive reliance on trade, i hope it does not take 20 years. that is the nightmare. i suspect we are going to look back on this as a pause rather than a turn. i am on the back foot. we should check back in december. nejra: is it the corporate sector telling you that as well? you were saying things are not
looking bad. william: absolutely. it is theory as well. it is overdue for correction, the excessive reliance of europe on demand. it has been seen as a sign of strength. actually, a sign of weakness. who knows what's going to happen to china over the next five years or so? if you are completely reliance on that for your economic policy, you have a problem. nejra: william porter stays with us. coming up, rio tinto is not concerned about the slowdown in china. the ceo tells bloomberg he is looking for positive views on the economy. when you are traveling to work, tune into bloomberg radio. froml be joining you there 8:00 a.m. london time. ♪
nejra: let's get the bloomberg business flash. is set to announce a $3.1 billion deal to acquire a dubai-based rival. the company wants valued at $1 billion in a 2016 funding round, making it one of the most valuable startups in the middle east. the company says it has over one million drivers and operates in more than 90 cities. youtube has reportedly canceled plans to hire -- that's a pullback from its plan for a pay service with hollywood quality shows. the decision is reportedly due to the high cost it would take to compete with entrenched players netflix and amazon. and the turkish lira is rebounding after funding more than 5% on friday after
president aragon warned -- erdogan warned speculators against the currency would be punished. the nation's banking regulator says a note by j.p. morgan that recommended selling the lira had manipulative context. that is your bloomberg business flash. nejra: xi jinping will be in paris today on the next stop of his european to her. he is expected to close new investment deals after finding a memorandum of understanding with italy last week. china's top officials have pledged to lower tariffs and speed up bond sales as they seek to manage the nation's economic slowdown. speaking to bloomberg, the chief executive of rio tinto says he is optimistic about the country's direction. are watching the situation very closely. the key one is really china.
-- we are selling iron, businessiamonds, and from china. we are pretty good on the chinese situation. is china slowing down? yes. are we concerned by the slowdown? the answer is no. >> in terms of demand from china, do you expect it to be in line with 2018? if you look in terms of copper, there are no concerns. you know what? i do not control the environment.
we are making sure our costs are controlled so we can make sure. >> is that your view the stimulus measures of china around infrastructure are going to benefit companies like yours? >> absolutely. investment in china means additional steel. additional copper. absolutely. >> in terms of the trade war, there was a sentiment we are close to a deal. now we are hearing tariffs are not going to be lifted at the end of the deal. does that raise your concerns? >> a lot of wealth has been
created globally. one of the key drivers was trade. in canada, the u.s., china -- common sense will prevail at the end. i am the optimist in the room. the sooner the better. nejra: that was the rio tinto ceo speaking to bloomberg. william porter is still with us. both of us were listening to that conversation. what caught your attention where the comments around copper. why? >> i don't pretend to be able to understand the depth of the chinese economy, so i look at the copper price as a judge. exactly for the reasons we just
heard mr. jacques saying. it is a tremendous driver. when we look at yield curves and so on, we want to look at other indicators telling a different story. he understands the chinese economy better than i do. he is not worried. nejra: when we were talking about europe, there are four legs of the euro economy. it is the overseas element that concerns you the most. china, even in a broad-based level and the u.s.-china trade tensions telling you to do? well, to reconfigure the european economy, but in terms of our strategy, it becomes a judgment call as to whether those three legs can make up for the damage.
our judgment call is it can. in our strategy, we expect performance out of consumer defense as well as anything exposed to fiscal and probably most of what is priced in negatively. in terms of what is going on in china. it is probably already priced in. the question arises, what if i'm wrong? one of the things we have talked about and taken as an article of theh is how cohesive european -- increasingly converging on the euro area. think what has happened is the eu, through brexit, has put the 2010, 2012 prices behind. very separating in the euro area. if i am wrong, we are going to go into the next downturn with a much more cohesive euro.
risk premiums therefore need to be lower as a result. nejra: what does that mean for how you would choose credit in the core? under -- if wek set at pmi's, we rank or we german manufacturing pmi versus german services pmi and it makes for a fun job because one is in freefall and one is flat. this foreign trade problem is to some degree a german problem. bad loans and so on our moral periphery problem. i used to say it's all about spain back during the crisis. can spain make it? i'm going to put that in the past tense. spain has made it. the game has changed radically without us noticing in the euro area to a point now where italy
cannot leave the euro, but can destroy. we are getting to a point where if you need to restructure any periphery country, by which i mean italy, you can do so without threat to the euro. that makes you favor the periphery, ironically. it means lower risk premiums. under all the noise about brexit, the has been a fundamental change. great insight this hour. thank you. head of european credit strategy at credit suisse securities, our guest host for the hour. breaking news just crossing the bloomberg here. the company is to spin off its inernational internet assets amsterdam. it is to retain its primary list on the johannesburg stock exchange, but it is to spin off its internationally internet assets in amsterdam. we will bring you more headlines
♪ >> european headquarters in the city of london. i'm nejra cehic. these are today's top stories. >> there was no collusion with russia. there was no obstruction. none whatsoever. total was a complete and exoneration. >> president trump claims vindication. robert mueller finds no collusion with russia during the 2016 campaign, but the political fight over the report is far from over. sinking feeling. bond yields around the world tumbled to the lowest levels in years amid concerns about slowing global growth. and using control. theresa may is set to face a plot by her own cabinet to oust
her as she tries to put her brexit deal to another vote. ♪ >> good morning, everyone. just gone 7:00 a.m. in london, an hour from the start of cash equity trading, global equities falling along with bond yields. the s&p 500 closed lower on friday and u.s. futures are on the backstop. we saw the stoxx 600 drop by more than 1% on friday and it looks like the declines could continue today for a fourth day, ftse futures off by 4/10 of a percent but it doesn't look like we will see quite the move to the downside we have seen in some of these asian equity markets, nonetheless it is a clear sign of risk off and we are seeing the safe havens. let's take a look at the bombs. the 10 year treasury yield is edging lower today, but dropped
to its lowest since january, 2018. at the moment you are seeing money moving into those futures which signals that those yields could continue moving lower. the10 year treasury yield, key thing is the inversion, for the first time since 2007. is it a reliable recession signal? the san francisco fed says it is. mohamed el-erian says be careful of reading too much into the inversion, particularly in credit markets. taking a look at the 10-year bund yields, dropping below zero for the first time since 2016. it looks perhaps like it could average ever so slightly higher , and thes session 10-year btp yield might also crack higher, judging by what the futures markets are showing. let's check in on asia, juliette saly in singapore has more. great to talk to you. we have seen some multiyear and
record lows hit in asia, and look at that read in the equity market. >> yeah, absolutely. let's dive into equities, because it has been a typical case of risk off. fallinghigh, equities along with quite a big drop in of whatodities in terms is listed in the shanghai in singapore futures. big drops in iron ore and copper. weaker by 2.4%, the nikkei had its biggest drop since christmas , weakness in australia and a lot of the eem's and lay trade india is off by over 1%. all of this can trading a drop of around 2%, the biggest one-day drop we have seen since october. let's take a look at some of the assets because you mentioned that drop in australian yields, we have seen the yield on the 10 year fall to a record low, 1.78
in terms of what you are seeing on the yield, there has been a significant move and similarly with the 10, also at a record. also watching this risk off in terms of what you are seeing in asian currencies, the korean won is the worst performing against the dollar on these global growth concerns, but have a look at the bar absolutely surging against the dollar, that is after thailand completed his first election since the military coup of 2014. >> juliette saly in singapore, thank you. let's bring you a red headline here. aipac agrees to buy them are set for his seven dollars 21 per share. it values it at about $3.4 billion. this is just coming through.
plus a final dividend of $.12 per share. bond yields around the world are tumbling to the lowest in years, highlighting concerns about slowing global growth. some investors are upping bets that the recession is coming. we asked the chair of j.p. morgan chase for his take on the status of the global economy. take a listen. >> we have had the great recession a decade ago. this system is now much stronger, especially the financial system, the banking system, and the like. the systems are much stronger and like always and economics you have cycles, but they are not between recession and boom but between different paces of economic recovery >>. plus the fed's decision to strike a more dovish tone and a hold off on rate hikes and appropriate response, given some of the challenges? year we came out of last
with the turmoil of december in the beginning of this year, there was great uncertainty that emanates from the trade talks between china and the u.s., between north korea and the u.s. , within europe, brexit, all those elements of uncertainty. we say, what's the rush? this upset is one where you can be patient. not a u-turn, but a clear trend witnessed bytion, the fact that there is an expectation indicated that 2020 will be another rate hike. thatld say this is a car is moving in a predetermined direction at a slower pace. >> there is a discussion by some
that we may be looking at a rate cut at some point -- what do you think would be the catalyst for a move like that? >> i would say i would hope it would not come because distortion has exceedingly low interest rates and it would also indicate that another distortion is still remaining, central banks remaining the only game in town. one of the processions of the financial crisis has been for the past few years, the central bank. it is important to restore arena, to the instrument also fiscal policy but even more importantly structural policy. >> that was jacob frenkel, chairman of j.p. morgan chase international, speaking to tom mackenzie. joining us from abu dhabi, simon
ballard, executive director macro strategist at first abu dhabi bank. so great to have you on the program. good day to you. let's start with what's happening in the bond markets. we have a chart showing the inversion for the first time since 2007 of the three-month tenure curve. -- mohamedcted el-erian says be careful in reading too much into this curve. today we are asking the question, will the u.s. yield curve recession signal be valid this time? will it? the problem is i don't think it should be but i think the more you look at that curve and fear what it is trying to tell you, the more you buy into the idea of a recession and consumers force the event which shouldn't have happened in the first place. don't read too much into it, i given that the fed has to
look at data dependent. i do not believe recession risk is that intense in the u.s. economy but by definition the more people subscribed, the more they will look into it. >> simon, you bring up a brilliant point about this self-fulfilling propensity that markets can have. that, what a risk of should the fed do from here to avoid this? >> well, the fed for the time being, it would almost be a when it shifted to such a dovish start -- the fed is data dependent and was being patient, the fact that it alluded to possibly normalizing by one more rate increase was corrected that stage and at any time between now and the end of the year could it be revised lower.
there's a no increase with ality this year study policy increase. for the time being the fed needs to continue to sound patient, accommodative, and data dependency is key. raise those interest rates nine times, it still needs to move, i don't believe we are looking for a rate cut between now and the end of the year because i've just dismissed the reasons why -- the risk is the underlying strength of the u.s. economy that does not support that. we need continued rhetoric and to see some form of stabilization. and of course the of the missed brexit story. >> simon, you have talked about the underlying signals in the u.s. economy not supporting the view that a recession is on the horizon, but if we look at other signals in the market, there are other parts of the market that aren't necessarily signaling
that recession is imminent. that has been pointed out by mohamed el-erian and others. what parts of the markets are you looking at that are telling you that a recession is not actually imminent as the curve might suggest? >> as you say, if you look at credit markets, at risk, the corporate credit side, it is tight, but by definition that might be the result of a flight to quality and that in itself could be a contribute in factor to the end result of recession. but for the time being, european germany,t week out of nevertheless they are still hovering but not significantly weaker. the data while weekend softer in terms of the global growth outlook is certainly not that deep into recession or suggestions of recession.
if you take them on a broad brush. >> you brought up europe, and i do want to ask you, because my guess the last hour said if you look at the 10 year bund yield, they have stopped looking at the bund yields and any kind of signal of what's happening in terms of economic fundamentals. have you started doing that, too? >> yes. there's obviously been a question mark over underlying fundamentals and their relevance for some time but with the 10 year down into negative territory now, it really is look at the inversion of the u.s. curve, look here in the middle east, there are much more relevant qualities and fundamentals to be studied rather than that negative yield, which is capital preservation in curve form. >> great to chat, stay where you
are, we will come back to you in a moment. simon ballard at first abu dhabi bank stays with us. let's stay in touch with one of our other top stories this morning, president trump is calling the mueller investigation and illegal takedown that failed after the special counsel finds no evidence of collusion with russia and the attorney general says there's is not enough evidence to charge it with obstruction of justice, yet the political fight over his findings is far from over. top democrats are amending the release of his complete report. trump faces continuing risk from other investigations with federal prosecutors in new york looking into his companies, presidential campaign, and inaugural committee. let's get the other top stories this morning as well. we are standing by with the first word news. >> thanks. may's own cabinet is reportedly pushing her attending the date she will step down. bloomberg has learned that
someone help her win support for her brexit deals. this weekend, one million protesters marched in favor of a second referendum, and the petition calling for the government to scrap article 50 past 5 million signatures. failed,overnment has absolutely failed, to deliver on the results of the 2016 referendum. reform,e no credible and when parliament fails, the only sensible thing to do is put the people back in charge. >> the turkish lira is rebounding after plunging more than 5% on friday, this after the president warned that the bank is responsible for speculating against the currency, which was punishable. the nation's banking regulator says a research note by jpmorgan, the recommended selling of lira had manipulative content. a spokeswoman for the bank declined to comment. swath of territory
once held by the islamic state in iraq and syria has been liberated according to the pentagon hours after a kurdish fighting force in syria claimed victory. it is the first time the u.s. military has proclaimed the terrorist group no longer holds the landed called it caliphate. global news, 24 hours a day on air and at @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> anabel, thank you so much. let's get a check of the bond markets. we are 15 minutes into the cash session and european bond markets. the 10 year treasury yield is steady on the 244 handle after we saw it dropped to its lowest since january, 2018. the 10 year bond yields dropping into negative territory for the first time since 2016 on friday. we are still in negative territory, but steady, not falling and he further. in other parts of europe yields are moving higher, the btp yield
is up for basis points, the 10 year spanish yields also edging higher. we are seeing some stabilization in u.s. and european bond markets, in asia yields continue to fall. aussie 10 year yield hitting a record low, japan 10 year yield, jgb falling deeper into negative territory. coming up, after securing a short extension, theresa may is on the verge of losing control of brexit. we will discuss that next. when you are traveling to work, tune in to bloomberg radio, live on your mobile device or dab digital radio. this is bloomberg. ♪
inversion in the three-month tenure curve. is that a harbinger of recession? that's the big question. the 10 year bond yields dropped on friday following ugly pmi's. it stays in negative territory today, but we are studying up in terms of the move. euro futures on the back foot. we could see a fourth day of declines for european equities, dropping more than 1% on friday. theresa may facing a potential ouster, trying to bring her meaningful vote back for a third time. will she manage it this week? the euro dropped along with a 10 year bund yield on friday, but we are steady today. let's get the bloomberg business flash. >> thanks. nasa is forming a new global internet group and listing it on the euronext amsterdam. it will consist of the company's internet investments outside of south africa.
the company is expected to be 75% owned by them with a free-floating remaining 25%. this grew from and africa focused media company to invest internet businesses around the world. and stay tuned for our interview with modesto ceo opdyke after 8:00 a.m. london time. that's your bloomberg business flash. >> anabel, thank you so much. uber may announce a $3 billion deal to buy dubai-based rival kareem as early as this week. the acquisition would come ahead of the plan ipo, which could be one of the new york stock exchange is biggest ever listings.our middle east finance reporter has the story. great to have you with us. why does uber want to spend over $3 billion on this acquisition just a few months ahead of its ipo? >> well, i think part of the strategy here is to try and stop the rivalry between uber and kareem, stop the cash burn in
the money going into trying to expand in the region. obviously uber has in the past retreated from some parts of the world, they retreated from china to do swaps to own equity and portions of different businesses, and in the middle east they seem to have taken the decision, but rather than try and swap this competition, they want to be the ride-hailing platform here, in the competition between uber and kareem has been very intense. kareem has launched some products before uber. this really enables uber to have the complete monopoly on ride-hailing in this region and also look at other areas like mass transportation, digital wallets, and solidifies that position for the ipo later this year. >> bloomberg's middle east finance reporter, matthew martin. thank you so much. theresa may is fighting for her political life as she battles a cabinet plot pushing her to resign.
the prime minister is hoping for a third chance to put her brexit deal to about this week, but she will first have to see off attempts by lawmakers to take control of the agenda. meanwhile, iain duncan smith says the leadership contrast with their the country into chaos. >> i think right now, and idea of a leadership election would create complete chaos because we are in the middle of trying to figure out over the next few weeks what we do. to suddenly change the argument is to say to the european union we have lost control completely and to make us a laughing stock around the world. ballard, executive director of macro strategies at first abu dhabi bank, is still with us. simon, you have a neutral view on sterling in a two-week timeframe. is that basically you wanting to just sit on the sidelines until you see how things play out? >> absolutely. the longer-term, my personal longer-term view, is still to
the downside. i think a hard brexit situation is far more probable than the market gives it private for -- does it credit for. mr. duncan smith suggests a change in leadership could create chaos. i suggest that the current leadership has been creating enough chaos already. as a good for the next couple weeks, the 12th of april, the 22nd of may, if she unexpectedly gets her deal, then there is still significant downside risk for both brexit and the political instability, a downside risk to cable over the medium-term. >> what's your base case for where we end up 12 months from now? who knows? it's like putting a finger in the air, isn't it? my base case -- this isn't necessarily the trading desk
view, but my base case is that the uk's walking toward hard brexit. cover the 12th of april, when the deal has not gone through, that becomes the cliff edge, and there will be no resolution or agreeing on how to get the eu. much, try toy negotiate trade deals. at that time, cable will certainly work, it will be significantly lower. 12 months, one would hope we have found stability and clarity, a recovery, economic optimism going forward. >> that is a fascinating in bold call in this short-term, in terms of us heading toward a hard brexit. that coupled with all the things we were talking about earlier in terms of the potential risk for recession shown by various bond market signals around the world,
are you in any way pricing for a meaningful and sustained rise in volatility across markets? >> i think you are going to see a sustained and meaningful rise in volatility around cable and sterling assets over the next couple weeks, but it could be fairly short-lived. it's the uncertainty for market sentiment that is always key to volatility, and i think that is one of the main albatrosses hanging around the sterling market. if we could alleviate some of that uncertainty, but in the short-term it will remain elevated. the market continues to flirt with historic lows, yes, i expect to see turbulence. the absolute risk of recession is minimal, so volatility and uncertainty will remain elevated for the for seeable future as we play through conflicting rhetoric. >> simon ballard, executive
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♪ >> good morning. we are live from our european headquarters in london. i'm anna edwards. the cash trade is less than 30 minutes away. ♪ >> slowdown signs. friday stock selloff rolls around the world after an inversion on a key part of the u.s. yield curve -- is the bond market heralding a recession? we will speak shortly with charles evans. the prime minister's cabinet stands behind theresa may amid
reports she is being pressured to step down. collusion.president trump says he is vindicated as robert mueller's report finds no evidence of collaboration with russia. >> there was no collusion with russia, there was no obstruction, none whatsoever. it was a complete and total exoneration. program, thisthe is "bloomberg markets: the european open." 29 minutes to go until the start of the session. looks like we will pick up on this negative vibe we are seeing in stocks, certainly in friday's session and then into asia overnight. this is the extent of what we are seeing. the chinese market down by a few percents, 3% on the tokyo market, a lot of selling with japan down by more than 3%.
these are some of the friday moves, you can see what's happening in the emerging america,n latin joining in with that negative fear around global growth -- what does the weaker data out of europe mean? all of that adding up to a very negative session in the u.s. that rolls into asia and we expect into europe. the biggest drop in stocks in asia is in 2019, this is very significant. let's put up the other side of the gmm, because a lot of this has already had an impact on the bond markets and we are seeing that whiplash back into stocks. it's interesting to see these moves in the new zealand yields going on, because we have seen all-time low yields in australia and new zealand joining in with the low yield party over the last 24 hours or so. we are not seeing a lot of appetite for the dollar or the
yen, scandinavia seems to be benefiting in the last 24 hours as investors look for havens amid this selling in stocks. mark cudmore is our bloomberg markets live strategist, joining us from singapore. great to have you with us. as one of your colleagues on the mliv put it, stocks are failing to keep calm and carry on. tell us, is there anything you can seal the horizon that puts a line in the sand, that stops the market from selling in the way that it is? we saw it on friday in the u.s., it is clearly caught on in the asian session, fears about global growth, the week data, the inversion of the yield curve. >> i don't think they will stop selling off in the next week or so, but i don't think they will continue that violent dissent from friday. ,s we highlighted a week ago overall the short-term dynamics are probably more pressure. we have had some terrible data recently so overall it has been a very good quarter in stocks, a stocks,e to take
a good time to clean up your books, lock in some profits. that important to remember we could still be on for a great start to the year, particularly in asia. >> because he of come so far, haven't we? it is hard to talk about 2019 without talking about the fourth quarter of last year, they seem to go hand-in-hand. let me ask you are question of the day. will the u.s. yield curve recession signal be valid this time? every time we talk about inversion of the yield curve. there are literally milliseconds before somebody points out that yield curve inversion predicts more recessions they take place. give us your thoughts. >> i don't think it will be valid this time. the one we are getting very excited about from friday has predicted four out of the last five recession.
it had one false positive in 1998. but it has had such a long lead time that it has not been very useful for markets. even if it is valid and we are getting a recession around second quarter or third quarter of 2020, that's not any reason to be risk-averse. it probably means we have 12 months, it is history. people are using the signal to sell stocks but are barking up the wrong tree. there's also the issue that might be another fake signal. this is the second largest expansion in u.s. history, because we are judging from -- it has been a very long expansion, extraordinary monetary policy and the same reason this has been a long economic cycle so far, it continues to be a long cycle, and i do not think it makes sense given that corporate
markets are trading well and overall most of the fundamentals are saying we will get subdued growth, disappointing growth, but not a recession. >> the citigroup surprise index was below zero for some 350 days, maybe we were all expecting too much. mark cudmore, our bloomberg markets live strategist. join in the debate and get involved with the question of the day. what are your thoughts on the 10 year yield curve inversion? tv is the function to use on your bloomberg. up next, we will speak with the amidgo fed's charles evans signs that the market is expecting a rate cut before the next 12 months. we will talk about what this yield curve inversion means, and the change of reaction functions, plenty of great, timely questions. that's coming up. bloomberg radio is life on your mobile t device.
worst day for equities in 2019 and we are expecting to pick up on that negativity. at the heart of all of this is what's going on in the yield curve rates in what the fed is going to do about it. a slew of weaker data is starting to get people worried about a slowdown in markets are pricing and 90% chance of a rate cut in december. let's get to one of the leading dovish voices at the fomc, the chicago fed president charles evans. he joins us with rishaad salamat in hong kong. good to see you. >> and you as well. i am joined by charles evans. we are going to put it to him whether he likes this moniker of being called one of the most dovish members of the fomc. thank you for joining us. how do you like it? >> perfectly fine. >> everybody is fixated by this inversion taking place -- tell us about your view and what it fo portends. >> long-term interest rates have
come down over a very long period of time and it is not surprising that yield curves tend to be flatter but there's more of that now and the first thing i look at is the two to 10 year -- it is really quite flat. the yield curve is something people are always looking at -- is it a recession indicator and it is always difficult to find a nice leading indicator. into aput yield curves statistical model, they were telling off a slightly higher probability of recession, but nothing really different than a in unconditional forecast. they have often misfire in terms of forecasting recessions. but it is something to pay attention to, and we are monitoring the data. the fomc just announced that we and monitor all of this,
financial conditions or something we are looking at. >> are you looking at leaving data -- you won't use the word contemporaneous. contemporaneous, is that the thinking right now? >> the yield curve? at the moment, we have seen slower data, the consumer retail quarter isfirst looking like it will be weaker, but the current expectation is that we should bounce back in the second quarter, and i'm looking for growth to be one to three quarters of 2%. that is lower than what we had last year but it is either at or which isnd, decelerating from 3.1% in one of the things that gets everyone's attention is lower than 3.1%, it is a pretty good number. >> why is it? is 1.75%,rend growth
you don't get above trend all that often especially with the mature expansion. this year we will be coming to the end of fiscal stimulus that took place after the corporate tax reform in the government spending increase, they added perhaps half a point to 2017 and 2018, it has pretty much back to the trend growth, unemployment rates are low so we should be able to continue with that. betweenhappened december and january, where we had only two people on the fomc thinking the rates were ok where they were, and now 11 think they are ok where they are? >> well, the two people in december presumably didn't want to increase the funds rate the i agreed to the
december rate increase and i think that took us to about the , that's a little on the low-end of where we think the mutual funds rate is an monetary policy by this judgment is neither adding to the expansion are holding back, it is almost a neutral level. markets were flummoxed by the commentary about the balance sheet, which has been continuing to roll off towards 3.6 trillion. we just announced the system market open account and that's we are going to end the redemptions of maturing assets in september, we will get a taper beginning in may and by september we think the balance
sheet will be about $3.6 trillion. we expect to hold the balance sheet in that range for a period of time and with the economy growing, non-reserve liabilities will increase and continue to go down but we will be running a system to support our funds rate target range and that will be an important part. >> being data dependent as you are, you are looking at the data in december and january, what would materially change it for you? >> we have more restrictive financial conditions at the end of last year and strong growth. then you get to the first part of this year and markets rebounded after we communicated more carefully that we think policy is in a good place and we can monitor and positive for a time. but the economy ended up slowing down with the first quarter and now we are trying to figure out how it plays out and financial
conditions still seem to be quite reasonable and will this be a temporary slow down or something more? i think we will finish the year -- i think that's pretty good, but i think inflation is close i am -- that's good, but worried it still takes accommodation to keep inflation at that level. i'm mark's down my path for policy rate increases so that i basically got policy on hold until fall of 2020, to see how the economy is playing out, just a little bit of additional accommodation or not to further support inflation -- why is it above 2%? i have inflation rising to 2.2% by 2021 consistent with a symmetric inflation objective and solidifying the belief that we will get inflation to target and we are going to have as much capacity to cut rates in the time we really need it but at
the moment things look good. >> ok. we looked at the statement last night and as i recall we talked , last time itnt was strong and the latest minutes it is solid -- why the change of that word? >> strong a stronger than solid, you are right. the february employment number came out at 20,000, which is low. we think it's an aberration, and if you average it in with the previous month, which was very strong, the two-month average comes to 165,000. 165,000 vermont is still a good amount. andave a short expansion expect that sustainable employment growth when you are in a mature expansion is closer to 100,000.
but the most recent number was 20 and we want to make sure the labor market continues to improve and how that will play out from here. >> if you had another repeat of february how would you look at it,? i if we got another 20,000, think we would have to think there might be more signal. we have to pay attention to labor forces, what wages are , i would say that when you see downturns, negative employment -- 20 would be a low number. is the trade were playing out in this? >> i think it adds to the uncertainty that businesses have to think about in pursuing future plans. there are a lot of businesses that are in a good position to continue their expansion and take advantage of new technologies, the disruption to adjust their plans in order to continue going forward, but as
soon as you have to also worry about the international you are a lawyer or corporation that has arranged the supply chain, and now you have to wonder if that is going to continue to be the important part, or if you have to adjust or dismantle it, that could be time-consuming. that uncertainty is something businesses have to be grappling with. >> what about china, that slow down? >> i think that is more uncertainty. with china there is reason to believe in recession -- i.e. heard the suggestion that the chinese government is looking at continuing the growth prospects, whether it is stimulus or rightsizing things they have been doing. i talked to some business people who have operations in china and they are modestly hopeful that things will smooth out.
i think the foreign growth outlook has definitely slowed compared to 2017, which was very strong and an important component in u.s. and world growth and now they have stepped uncertainty is an as to how it plays out. there's a lot of things up in uncertaintythe more is resolved so businesses can go about doing what they do best, planning for the future and adjusting to risk, that would be beneficial. >> the pmi has lately been painting a poor picture -- the global economy is not doing well. if it gets worse, america is not an island, how is it affected? and how does it affect your way of looking at monetary policy? >> as i say, the more foreign growth slows, that has negative ramifications for everybody and it would have some implications for the u.s.. i don't think it would be a
showstopper or anything like that by itself unless it was amplified by other factors. ,ut think brexit is a wildcard although it continues to be extended, i can't guess exactly how it will play out. whether it is europe relying on china and then being slower or a configuration of european countries that are a little bit weaker -- germany all briefly -- that emissions scandal there are a variety of factors in this is one we will have to monitor and be patient. >> yes or no, was the december hike a mistake? >> no. i'm very comfortable with where we are. >> charles evans, thank you so much. that is charles evans, the presidents of the fed chicago. looking at a pause, and just be patient. watch this space. >> thank you very much, rishaad
salamat speaking with charles evans, the chicago fed president, talking about returning to growth. minutes to go until the start of european equity trading. looks like it will be negative. up next, the stocks to watch, including a group of private equity firms and pensions funds that have agreed to buy a satellite company, in a deal valued at $3.4 billion. this is bloomberg. ♪
♪ >> will come back. this is "louvered markets: the european open." five minutes until the start of the cash equities trading day. quickly take us through the story. a private received equity takeover agreement for $3.4 billion, ending a long-running saga that a number of firms have been trying to take over, based not far from here. tried butanies have now it looks like the canadian pension fund has sealed the deal. >> and -- >> yes, spinning off the assets,ional internet this is south africa's largest publicly traded company, this deal to spin off that unit is
♪ >> the morning, everybody. a minute to go until the first cash equities trading day. starting off as a negative session, the euro stable against the dollar, weak data lead the euro lower in part of the story around global growth concerns seems to be what is weighing on equities and the oil price, down by .4%. this is the weight of that global growth concerns story on equities, the csi in china down a couple percentage point, 3% on the nikkei. we are seeing this questioning of where the growth story goes. not seeing money going into the dollar and the yen. is the pound fluctuating a little bit just below where
closed on friday as a result of all this talk about whether theresa may could be ousted this week, or could she stepped down. we are expecting a negative start to the european trading week. expect to see these markets down by .3%. over in the united states on friday, we saw extensive selling as a result of concerns about growth, the french and german data, the u.s. data, inverting the curve, but we are seeing that curve inversion and along with that lots of concerns about the global growth story. a week session in asia feeding through into europe and we are seeing weakness coming through. better than opening we anticipated by 1.1% at the very start of the trading day.