tv Bloomberg Markets European Close Bloomberg May 7, 2019 11:00am-12:00pm EDT
european trading day. the europeanis close on "bloomberg markets: european close," i'm vonnie quinn. looklondon doesn't disproportionately down. it.ks taking european commission earlier on downgrading forecasts around europe but particularly in germany. trade, certainly a story. i was told earlier this week, the market would breathe a sigh of relief. yen is the bid. european stocks, we are watching the news on brexit. there is a critical meeting starting around now between the labour party and the conservative party on whether or
not we can get a deal to take that u.k. out of the eu. bonds aseing a bid on equities, selloff, there is a safe haven bid being attached. vonnie: major selloff once again. trade tensions on radar. chinese delegates are still coming later this week, thursday, friday. thes&p 500 has gone through 2900 mark, a key psychological mark. we are well below that. forr selloff -- mylan, example. it did not give much to go on. it is doing the 10 month review and not updating with any satisfaction. best performer, american international group in the s&p 500, other companies reporting
low away quarterly earnings. lyft is doinghat in terms of revenue and guidance. we are watching for direction on the ridesharing market. terms, the 2-10 spread -- we didn't have much of a change overnight. some comments from richard homeda, he really hammered the point that the fed is lasered on the 2% target but he could not say how we would get there. guy: that does seem a problem now. trade is part of that focus as well. the trade narrative driving markets today. --sion between u.s.-china president trump threatening to
raise tariffs on friday. we asked richard clarida what kind of an impact trade tension is having on the u.s. economy. he spoke to mike mckee. >> so far, trade measures in place had a modest effect on the economy last year and we are hopeful there is an agreement. that is obviously up to the president and negotiations ongoing. if that is not the outcome, we will take that into account in future policy. does that mean a difficult deal? sarah joins us. that wectation was, were going to get a deal. the market is trading lower today. give us a sense of where you
think the story goes next. will we see the tariffs imposed on friday and what type of impact will that have or do we get a last-minute respite? sarah: the major thing that has changed is the mood music. with trump threatening, china telling us they would retaliate one minute after they go into effect -- really, it seems tensions have escalated again when there have been a lull for the past few months. what we know now is talks will continue as planned, as they had set for a couple weeks, and really the u.s. have already targeted friday to announce a deal. that is what we will be looking at. will they come to an agreement? will china come with an offer, they peace offering to allow the
u.s. to accept a deal and avoid the tariffs? vonnie: we know there are several factions within the u.s. camp, more hawkish and less hawkish. what can the chinese give the u.s. while satisfying every person in the chinese administration? sarah: the main sticking point has been china agreed to changes in laws to address u.s. concerns over forced technology transfers. over the weekend, there were backtracking. the u.s. wants to see firm commitments from china, in order to say it got a strong deal. china will come back with language about its own domestic laws, showing it is serious about these changes to appease the trump administration. there is speculation. is this just showmanship by
trump? there are people in the business community that are hoping they can convince trump to not raise tariffs on friday. guy: we were hearing from richard clarida about the impact on u.s. economy, describing it as limited. fail, if we don't get a deal on friday, if tariffs go in place, how much does that raise the risk the fed will be forced to cut? watched by the imf, the fed, as one of the outlooks. markets will react right away. businesses, uncertainty for them is a killer for business. they are not planning ahead, adding the jobs they would have had or expanding as they would have because there is uncertainty about the environment.
that will weigh on the forecast for u.s. economic growth. that will give the fed more to consider when they start thinking about the next meeting. what does the u.s. think it can get out of china at this point? onah: there is probably hope either side they can get a deal. that is what we can see clearly from china still agreed to come even though they said before they would not negotiate under duress by the trump administration. the top negotiator is still coming this week. underlying some threats, we have to believe there is still some goodwill. it may not be on friday, as the trump administration had hoped. the talks have not broken down. there is still a chance of a deal. vonnie: thanks.
courtney: mitch mcconnell has declared case closed. he argued today it is time to move on from robert mueller's investigation. house democrats are demanding the full unredacted report and they want robert mueller to testify. in the u.k., theresa may's government and the opposition labour party are set for talks today. they are hoping to reach a compromise. if they cannot, that raises the chance of another referendum or an emergency general election. theresa may's government has hinted it may accept a temporary customs union with the eu. in turkey, elections board has turned over a rare defeat for president erdogan. it has ordered a rerun in the mayoral election for istanbul. there were widespread irregularities in the boat which party. by the major
the decision could hurt the economy. in myanmar, reporters were free from prison after being imprisoned for 500 days for reporting on atrocities to muslims. the government freed them as part of a mass pardon. 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. on courtney donohoe, this is bloomberg. vonnie: let's get a check on the cello. nasdaq, worst performer of the major indices. health care and computer indexes are down. s&p 500, the worst performers include mylan, down 14.5%. pioneer and natural resources down, dragging the index lower. this is bloomberg. ♪
guy: from london, i'm guy johnson. vonnie: i'm vonnie quinn. let's get a check. selloff today. here is abigail. tuesday risk off tone after yesterday's pullback, trade tensions weighing on stocks in the mood. pace for a second down day. days sincerst five the beginning of march. bearish. in europe, the dax is down. emerging markets down.
nowhere to escape. the dow is interesting. similar to the s&p 500 chart. it may be a tell. overall, a range over the last year between the bulls and bears. this is the 50 day moving average in blue. the dow is back in range. the s&p 500 is above. the dow is below the 60 day moving average for the first time this year since going above it. there is near-term bearish pressure. this could be a tell on what is ahead for the s&p 500 which is still above that range and the 50 day moving average. specialized indices, small caps selling off, chips selling off, as well as biotech. this is broad-based. it extends to big tech. investors are selling off names
that put up strong earnings reports. it speaks to the degree of fear. apple,ft, amazon, facebook, all lower. brent crude, european crude, crude down 1.6%, speaking to the degree of the risk asset selloff, across various asset classes, commodities, risk assets. a broad pullback today for risk assets around the world. guy: thank you. escalating trade tensions and a possible no deal brexit to blame for the latest cuts from the european commission. eu has slashed the projection for germany, down significantly. the deutsche bank international economist joins us from frankfurt. good afternoon. do the german numbers broadly fit with your modeling now? >> they are spot on.
we basically cut our forecast for germany after he learned fourth was flat. the .5%, butwith we have to see growth has surprised positive side q1 but showrd-looking indicators there is a seasonal effect and underlying demand is weak. looks like stagnation. guy: when do numbers bounce back? >> we are waiting for china. the expectation is china is going to turn around modestly and given the strong link between the chinese and the german economy, should then help the german numbers. so far, to be frank, we saw pickup in the surprisingly
strong q1 gdp number and sentiment in china but it has not been reflected in export expectations so far. the baseline assumption, and the market's, is that the turnaround might materialize around the middle of the year. study: part of the ec's says brexit may affect europe but only minorly, whereas other developments across the 27 could affect them more. what is the greatest risk in europe now? >> of course, brexit is one, also, we have an escalation of the china-u.s. trade conflict that will also leave a mark in the german and european numbers. overall, it is a high level of geopolitical uncertainty. in europenal demand
and germany, on a capital good supplier, we see this uncertainty is now impacting domestic demand in germany. if you look at domestic oh core capital goods, they have been week recently. -- weak recently. vonnie: how much worse does it get? >> that is hard to say. i am happy we cut the forecast a few months ago. at that time, until the end of the last year, everyone, at the beginning of the year, there was the flu, then strikes in the middle sector, low water levels on the river, everyone had an explanation, and then there was a hope the economy would pick up from now on and it has not. if you look at forward-looking indicators, pmi's, there is
currently no indication the economy, especially the manufacturing side, will pick up anytime soon. middle of the year, for the time being, it is more a hope than anything, which is supported by hard evidence. guy: the transition from angela merkel to aka is more difficult than anticipated. we have a paralysis within german government. is there any chance we get a fiscal push to help out the situation? the german economy could certainly take it right now. >> i expected this question. from angelaon merkel to akk is not the key element. the key is the coalition. they have, one of the key elements is to maintain.
if you look behind the propaganda, there is already a substantial fiscal loosening. socialecause of all the giveaways, the grand coalition has agreed on. i don't see anything going beyond that, on the contrary, all the signals we heard from spd and the minister's he wants to do everything he can to maintain the black zero. we have the council estimating new tax revenues for this year, next year. if anything, if the numbers are weaker, then we might see compensation by the government to make sure the deficit doesn't increase. seeonly chance i honestly for cyclical fiscal policy is if and sothe labor market,
far it is still going strong. guy: everything still procyclical. maybe that is not what germany and europe needs right now. thank you. i will come up with some more cunning questions for the next time we talk. vonnie: markets now. all lower. the best performers, mcdonald's, and it is still down. boeing, microsoft, apple, goldman sachs all down 2%. 500 down 1.5%. 1.7%. down another leg, this is bloomberg. ♪
current and former employees tell bloomberg that brand building has become more important than serving shoppers. apple expanded opening 500 stores. what one company is dealing with, google conference underway, already. what have we heard so far and what do we expect? >> we are early. we're just getting started. this is google's biggest conference of the year, a big time for developers around the world who developer android and the other ecosystems to get together and hear from the company. the sessions are about asking specific questions about new updates. google has new empire software that touches lots of things. people are learning about,
setting the agenda for what we will see over the coming year. privacy and security will be a big part of that. guy: let's talk key areas. we are seeing the company try to speed up the renewal cycle on android. are we still going to get news on games? walk us through the key announcements. >> games, not sure. we had a big announcement a couple months ago. upgrade cycle is a key question. that is something we will be asking questions about. google has trouble convincing carriers and device manufacturers to upgrade the phones that run android with the latest version so people that use those funds can stay safe and have the most optimal software, unlike apple which can just push upgrades directly to the phone.
update toecting some the software to make that easier. it sounds technical. it will have a big impact on googles user base. vonnie: typically, no matter what we hear today, the street is likely to look at it differently. >> absolutely. the other thing i will be asking about is, how the pixel 3 has been doing. we are not sure. it looks like the phone was not quite as successful as google hoped it would be. you saw that coming in on earnings they reported recently. we will see if there are updates on that. vonnie: thank you for that. u.s. markets. apple selling off as is google and all the stocks in the dow jones, lower. s&p 500, down 1.6%.
mylan, the worst performer. pharmaceutical companies down 6% as well. s&p 500 down. a pickup in the vix. it is still below. this is bloomberg. ♪ guy: let's take a quick look at where europe is. down, down, down. london was closed yesterday. similar fashion to europe. banks taking it on the chin. oil stocks under pressure. this is bloomberg. ♪
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pounded. this afternoon volume is reasonably strong. this is a convincing moved to the downside. we are seeing trade being one of the key factors here. the selloff is commensurate with what we are seeing in the united states in terms of sectors being hit. the banks are under pressure. the ftse was closed yesterday. down 1.75% today. those are similar numbers posted around the rest of europe. the other markets are down. the dax down, the cac 40 down 1.7%. china still. lvmh is trading down. oil stocks under pressure as well. from a sector point of view, let's go to the grr on the bloomberg. wrecking this down from the stoxx 600. sectors in positive territory.
iliad is helping the telecom sector. elsewhere it is a sea of red. let's say you were the real losses are being crystallized. banks under pressure, hsbc, stocks like that under pressure. oil and gas trading lower. chemicals under pressure. london's bank, the miners are trading softer as well. auto parts under pressure. insurance, technology, big sectors that are important to watch carefully. very much trading lower. let's take a look at some of the single stocks. it is not all bad news. giant,the french telco up. sends and receives the mobile signals. that business has been sold off. iliad trading up. bmw down 3%, coming out and
basically saying the numbers are top but we still expect a bounce back in the second half. the market is less and less convinced about that second half bounce back. that is why the stock is trading lower. end, we have for our eight trading up -- we have trading up onrari good numbers. bmw, not so much. a selloff are seeing in the u.s. as well in terms of equities. the dow jones down 1.4%. the s&p 500 down 1.3%. fluctuation but what is really interesting is the s&p did reach the 2900 mark. it looks to be staying comfortably at that level. we will see if it ends the day below 2900, which would be
psychologically important. the vix is still below 20. volatility muted. treasuries and the crude patch. treasuries and the crude patch. brent crude down 1.5% and several other commodities down as well on the back of these trade tariffs coming down the pike. exchange,f foreign china is trading at -- you mentioned both of the european movers. the brexit story is back. we're watching it carefully trying to figure out which direction the talks will -- the talks between the government and the labour party will take. the timing is unclear. if the talks go well, maybe we will get a deal for the u.k. to leave within the next few weeks. if they don't, the chances for a general election or second
referendum rise. today is being perceived as a big crunch day. let's find out what we are expecting. bloombergs emaar ross thomas joins us now. going into these talks, what is it? ,> towards the end of last week the message both parties came out with was we have both been punished at the polls and we have to deliver brexit. , -- ands an ultimatum optimism about an effort to make a deal. whether that optimism has been sustained is not clear. what happens next? if we do not get a deal, basically the government will have to put the parliament alternative brexit scenarios and seek they can find some type of consensus in parliament. parliament has done this before and failed.
one of the things to watch will be the how the government structures these boats to make sure they forced a majority and not let parliament say no to everything. vonnie: the foreign secretary says the customs union might be the thing that breaks the deadlock, but he is hinting at a temporary customs union. is that even possible? ita: it is possible because is already in the brexit deal that parliament rejected, and a chunk of the tory party rejected. there is a slight sense they are reinventing stuff that has long been rejected. may -- theheresa checkers deal. a way of pleasing all sides and that was rejected by the eu. with this idea of a temporary customs union, that is what the backstop says. -- the backstop is. there is certainly a recycling of ideas.
the election result last week for labor was very bad and it is not clear how they will bear in the european elections. the real-time pressure is on the tory side. labor does not have a big incentive to agree to something unless they are going to get everything they have been asking for. one of the things they've been asking for is a complementary referendum. perhaps there is room for compromise with a customs union, the other alternative is the second referendum, which is a trickier point. guy: increasingly, labor mps seem to be insisting on that. they dodge the story a little bit, but the momentum seems to suggest labor mps becoming more and more excited by that issue. emma: we talk a lot about how the conservative party is split up, but the labour party is also split. jeremy corbyn is probably less keen on a second referendum than
other leading figures in his party. that is going to be one of the sticking points. guy: we'll leave it there. great stuff. emma ross thomas joining us for the latest on the brexit story. watch this space this afternoon. vonnie: a south african company is reporting its 2017 earnings after a rocky time. 17 months. here with the latest is bloomberg janice q joining us from johannesburg. looking you tell us after seven months? janice: do not hold on to your seats. we've been waiting for these earnings to drop all day and it is now almost 6:00 in south africa and we just had a statement from the company saying they will release them later today or tonight. the 27 keen earnings are important for a -- the 2017 earnings are important for a few reasons.
we were expecting these early december of 2017 when at the last minutes the auditors refused to sign off on the accounts. public theto the crisis the company was having. following that, the company appointed pwc to conduct an investigation that took another 15 months and came out in march. , the auditors needed to go through that does see what changes needed to be made. the pwc report did find that a small group of former executors, with the help of others outside the companies, has structured fictitious transactions to inflate asset values. we hope there will be details in these earnings that give a little bit more light into exactly where the problems are.
guy: later tonight we will get these numbers. in terms of where this leaves the company, is this a going concern? what does it look like in terms of a business that the radically still trades? certainly -- the stocks are trading, but they have several units that have stores that open every day. customers buy goods. in that sense it is a going concern. they have been in talks with creditors who have rolled over as a result of the talks. it is a going concern. lookingit indications at the next asset value today it is a going concern and other senses. and thegoing concern
two things people might be looking out for, especially those trying to make claims against the company, they will try to get a sense of what size the pie is that they could potentially go after and then looking forward, we are expecting the fiscal auditor 2018 results next month. the creditors will be looking at that to see what profit labels there are and what income is to see what they will do in terms of extending dates. vonnie: we will be waiting for those results. our thanks to janice kew in johannesburg. let's turn to first word news. courtney: china is sending its top trade negotiator to the u.s. this week for talks about the tariff war. there was concern the vice from your would cancel his trip alling president trump's decision to boost duties on
chinese projects. administration officials say the chinese want to reopen areas that have already been negotiated. iran may respond to tightening u.s. sanctions by backing away from parts of the 2015 nuclear deal and that creates tensions after the u.s. to employ an aircraft carrier to the persian gulf. one iranian official said iran does not plan to follow the agreement, but iran is set to make some reductions to its commitment. 99% ofkan officials say the suspects in the easter sunday attacks on churches and hotels have been arrested and their explosive materials seized. president tells the associated press that sri lanka is now safer tourists. more than 250 people were killed in the bombing. the islamic state has claimed responsibility. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am courtney donohoe. this is bloomberg.
let's talk about breaking news over the last couple of minutes. let's take you to italy. 17% stakesell a in a bank. stake. 17% in terms of anticipating this there have been various stories floating around that unicredit is looking at a possible exit from this institution and offloading the stake. this is italy's biggest bank. effectively preparing for the full independence of this group. it has been anticipated. we are now getting confirmation of a deal taking place. this is how europe ended the day. we did think there would be more positive reaction to news.
that has turned out not to be the case. the trade narrative does seem to be quite negative. european stocks have sold off. the banks at the forefront but also some of the oil stocks under pressure as well. a little bit of a respite towards the close and into the option. nevertheless, the ftse, the dax, and the cac 40 all finishing down around 1.5%. we will continue the coverage later, at the top of the our jonathan ferro and i will take you to the cable our on dab digital radio and all of your bloomberg devices. we will talk about the german data and what is happening with the fed and the trade narrative as well. this is bloomberg. ♪
guy: from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. this is "the european close" on bloomberg markets. goldman sachs financial leverage conference is underway. ed hammond is there. ed: thank you. -- i'mined by christina joined by the cohead. it is great to be here. have hadke we could more fun having this conversation in december. let's talk about the now. the fed warning there is new risk in the credit market. a lot of the high risk borrowers seem to be taking on new leveraged loans. is that something we should be concerned about? christine: thank you for being here. this is our fourth annual leveraged finance conference for
the firm. to be uptty excited 13% in terms of attendance. there's a lot of talk about your question. one of the panels i was just on -- our manager from pimco raise this point. borrowing is up, that is the most secure part of the capital structure. you think about credit risks. security is where you want to look. things that has driven this has been the lack of regulation or the winding down of regulation. is that something that is causing more risk into the market and more unchecked risk? >> it is a fair point. the market has evolved. on the one hand, leverage has crept up over the last 10 years. on the one hand, leverage has and covenant light has become market standard so there are less covenants.
on the other hand, the equity check is still robust. bigger portion of the capital structure than it used to be. coverage ratios far more robust. the leverage guidelines had the effect of pushing some of the most levered deal, called the top quintile of levered deals, out of the regulated banking into direct lenders. the direct lending community, which was a small part of the market five years ago, now 20% of the market. ed: if we are seeing this robust direct lending market, and it is also becoming more diverse, it is not just one kind of alternative credit. are they set up to deal with any kind of downturn or any squeeze in the credit market? i worry the liquidity is not there. christina: they have long-term
capital. they do take on very large positions so be interesting to see from a liquidity perspective theyere is a downturn, if have the stomach to hold their positions, and if they bought into the less liquid names. a number of the account as it so it is repeatedly, something to keep an eye on. ed: one of the biggest leverage requirements has been 3g. we have seen a philosophical and implosion of their model. what does something like that me more generally for leverage requirements when they're looking to do m&a? christina: capital has been available in the cost of capital has been low. corporate clients function as a bit of a hybrid. they maximize their cost of capital with the most cheap forms of capital. it pushes leverage high. i do not think it effects the
leverage financed part of the market because they tend to play more in the higher bb, but doing very large transactions, with to keep an eye on all sections of the market. ed: the large transactions are coming from where? where is it likely to continue to come from? vivek: it is a fair point. year to date we have not seen as many bigger deals announced, and the bigger deals were announced in the third and fourth quarter of last year. we are not seeing a lot of activity yet on the big deals. part of that is as you start the interview in december, we a slowdown, and when we had a slowdown like that the market dialogue slows down. we are seeing a return to the smaller deals. billion dollar and smaller deals are more active. one to $5 billion deals, a bunch of activity on the bigger deals. that is taking longer to come
back. a private equity raise last year with significant. a lot of drive power sitting in those coffers. they are very much poised to start looking at larger transactions. we have not seen that yet but we have an anticipation we will see more of that. this concern the market, perhaps justified you have a lot of bbb credits. some large. if we do go into a of contraction and you see some of those slick and a high-yield, is the market there? christina: if that happened to occur in december, that would have a pretty profound impact. if it happens every time, i do not think we are concerned. vivek: i agree with that. you would need two things to happen. that plus some other event that would cause the market -- the sum of the things would be an
guy: breaking news. let's start off on the siemens. it is going to be carving out its gas and power unit. what we are looking at is a significant change in the structure of the company. this is something ge is going to be paying attention to. they will carve out the gas and power unit and then transfer the stake they have in the wind turbine business into that. also saying aside from that it is looking to trade
more than 10,000 jobs and is targeting an industrial court targeted margin. related to this, we then have news on vestas. it is changing its ceo. henrik andersen will succeed as ceo. vonnie: it is time for our stock of the hour. chevron under pressure today. we are in a down market but there is more to this. kailey: chevron has lost out on anadarko, at least for the time being as anadarko has declared occidental's bid superior to chevron. the question is how much to chevron want this? chevron does have a lot of cash on hand. split as to whether chevron will come back. some say the only daughter $70 a share as their stock is worth so much more than anadarko, some see them walking away from the
deal and then walking away with the breakup fee. vonnie: the clock is ticking. only three days left? kailey: exactly. vonnie: coming up, "balance of power" with david westin. senate majority whip john clued will discuss whether senators are frustrated with the pace of china trade talks. that is coming up. in the meantime the selloff continues. the s&p has broken through the 2900 and is sitting at 2885. several sectors are lower and all the stocks in the dow jones are lower, down 1.5%. the nasdaq down 1.8%. this is bloomberg. ♪
where the world of politics meets the world of business. on the brief today, from brussels, germany weighing on european growth. --m washington, u.s. tried u.s. china trade relations, and from johannesburg, south african elections. tell us what happened today -- how big of a surprise was it germany came in with .5% growth? in general the commission downgraded slightly the forecast for the eurozone and a lot more for germany. surprise, as there is a slump we happen the eurozone economy, but because in recent days we have had positive q1 data there was expectation it would be better this time. date for its assumptions for the forecast was at the end of april. there is a potential upside risk to the numbers we saw today. germany was the