tv Bloomberg Markets European Open Bloomberg August 7, 2019 2:30am-4:00am EDT
anna: welcome to "bloomberg markets: european open." we are live from the european headquarters. alongside mattds miller in frankfurt. matt: the markets they go for gold. a growing haven demand. european equity futures are pointing higher. cas trade is less than -- cash trade is less than 30 minutes away. anna: no need for dry powder.
with abal easing trend surprise half percentage point. james bullard says the u.s. central bank cannot react on a day-to-day basis. failing to stem the flow, net outflows at aberdeen were greater than analysts estimated in the first half. we will speak with the ceo shortly. the german lender says it's profit target for the year is looking significantly more ambitious. matt: commerzbank has brought me here. i will talk to the finance chief in a little bit, and i will ask if calling your target ambitious is the new profit warning. that seems to be a trend for german company. they say their targets are ambitious. they make it clear they have been hard-hit by the sales
forecast and then they bring them down. it is a difficult environment for banks, and i will ask what the hardest part is. i am sure local rates are not helping, and what their plan is to get out of it. time cutting costs. we will ask for clarity on that from stephen englels. we could see equity indexes rise again today at the open. we have index futures up here. asia.a mixed session from dax futures up i 0.4%. ftse futures up 0.2%. we will have a look at the mining space in a moment. this is from the asian session overnight, pretty mixed. recovering from the excitement from the earlier part of the
week with the movement in the chinese currency. is this like 2015? we will talk about that more. the lower interest rate story globally, it is not just the fed, new zealand assets have a big role to play in what happened overnight. up by 1.9% in session. as a result of the stimulus the central bank, also with the aussie dollar. incomeother side, mixed in new zealand as well. that if the basis point cut from new zealand. seenindian assets, we have a cut from the indian central bank. 35 basis points. we talked about the underperformance in london,
maybe this will have something to do with it. iron ore prices down another 7%. gold on a tear. debra: china's currency is at the front of a trade war. they set the rate stronger. we have reached that psychological level. beijing will keep the exchange rate steady. one of the most dovish at the federal reserve is not dovish enough. james bullard is forecasting one more rate cut this year. -- was at was amid midcycle adjustment. the brexit impact between westminster and brussels continues. both are blaming the other for the diplomatic breakdown. the eu is not engaging in talks for a new agreement.
the prime minister will not sign a brexit deal that includes a irish backstop. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. much.thank you very aberdeen has failed to stem outflows, 16 billion pounds in the first six months of the year, more than billionage 13.4 pounds. joining us now is norman keith skeoch, ceo / executive director, standard life aberdeen . can you tell us why we saw bigger outflows? is tough outdustry there, and there is a lot of change and inclined demands. flows are hard to come by.
what can we do to change it? that is in hand. one thing we have announced is a in ourcant improvement investment performance, something we have been working at for some time. over 65% of our funds are at a benchmark, that really important three-year period, and we have seen a strong pickup in performance in the first six months of this year, which i think will have an impact. the net flows,ut the outflows in the first half of the year were substantially below the second half of last year. anna: that pickup in performance, what is that down to? keith: it is down to three things. first, we put in place 18 months ago some things we call
performance enhancement plans. it is technical about idea generation and the way we run our investment process. we put improved leadership in place. the teams came together, and we are beginning to see the product of those. you need to accept in this business that the market has come our way, and that has benefited performance. but from what i have seen in the volatility in the first six months of the year, we continued to progress through that. performance is in good shape. anna: you said the asset environment remains tough. what is at the forefront of your mind when you say that? it is the changing nature of client demands, and in a world which is volatile, returns are compressed, actually clients
are looking for a combination of performance and innovation that budget.u meet that risk that is one of the reasons i talk about a transformation. what you need to do is be prepped for the future, and make sure you are launching stuff that will be well held and the like by clients. just a lot of change around. is this transformation going to include market gilbert stepping down from the role of vice-chairman? keith: if we had something to say, we would have said it. like to break news here. wordsu tell us in your how has he been to build up the
business as standard life aberdeen? keith: martin has been very important to building the business at aberdeen, and get throughelp us the merger. we said it would take three years to complete that strategic transformation, and at the moment we are two thirds of the way through. today's results are showing that we continue to make good progress. anna: you talk about the pickup in performance. i want to ask about the role of scale in fighting the headwinds in the industry. you put together the businesses in recent years. do you think scale is a good way to fight the move from active passive funds? keith: i think scale is very important, but i would distinguish the subtle distinction between scale and the bulk.
this is not about having huge assets under management, it is about having the scale to make sure that you have the ability to reinvest in technology and people, to actually take advantage of transforming your business so you can beat those client demands. the scale and transformation is what it is all about, and we are two thirds of the way through. we continue to make good progress because we are deploying quite a lot of our transformation in investing in the business. finger onhave your the pulse of markets. we started to see a lot going on from the trade war to the pivot of central banks around the world. we saw deeper cuts than expected in new zealand, but that may
become a more common story. economic indicators are pointing down. german production, the worst we have seen since the financial crisis. are we at a precipice here? keith: not yet. you have a huge amount of noise, and we have to remember we are from 2018.ck i think what is going on is a reminder that growth is slow. we have not achieved escape velocity. as growth slows and there is noise and worries about brexit and trade wars, what we are getting is a monetary response. inflation is low. quantitative tightening is in never never land. i would imagine the easing of monetary policy will act as a support to economic growth, and
if economic growth remains intact, and most importantly corporate cash flow yields remained positive, that lower level of interest rates will improve the valuation markets. for sure at some point in the next couple years as markets recover from these levels, there will be an issue. at the moment, having started in a positive position and cut back a june, i think if there was serious downdraft from here, we would be all right by it. what kind of effect is it having on your business? forh: we have been planning some form of brexit for some time. business we opened a in dublin.
we have real substance in our management company in luxembourg. we are well prepped. at the moment we are talking to suppliers about their preparedness for a no deal brexit. we are thinking about the impact of that on portfolio risk. it is getting an awful lot of attention. we are as prepared as we can be. it has never been done before. brexit bringseal a bunch of risk. there is an issue about supply chains and away way connections get broken in the u.k. there is the uncertainty about investment which will slow economic activity in the u.k. then there is the sheer
political uncertainty of what happens next. sign that yous a .et more volatility in markets as an active manager, one of the things we look to do is take advantage of that volatility. anna: keith skeoch, ceo / executive director, standard life aberdeen. up next, the yuan weakens is the new zealand cuts by more than expected, and indian bond yields rise as a result of the r.b.i. move also cutting interest rates. this is bloomberg. ♪
basis points. in new zealand the kiwi has tanked after announcing a larger than expected rate cut. good to have you with us. what is the message? this was bigger than expected from the central bank. the message from both of the that movedks, two and they moved big. new zealand and india. the message is central banks are willing to go big. the meeting we had this afternoon, they are expected to hold rates, but sources say the o of a flock -- the odds of a cut, and in the
philippines they are expected to cut rates. it is a global trend. we have to talk about the federal reserve, we had james bullard saying there is no to pile on rate cuts. the markets do not seem to be buying that. are expecting 100 basis points over the next year on top of what we got in july. central banks are willing to go big. matt: did india not cut enough? yields are rising. new zealand makes sense where bond yields are coming down 14 basis points. >> i have not had a chance to look at that. perhaps your previous guest was
perhaps your previous guest was right when he said one thing that rate cuts can do is spur growth. it is not always a given that a rate cut has to bring yields down, you would think that is the logical conclusion but it does not always have to happen. one possibility may be people think the rate cut will be successful in helping growth. anna: what about treasury yields? 1.5%.re falling seems like the next logical step. yields have been falling dramatically. there have been a couple signals from the bond market that suggests the rally can keep going. the term premium has been --ling and as it record low and is at a record low.
the risk aversion index is ,piking, raising tremendously showing the risk aversion. we know that from the volatility we have seen from the chinese currency, and the volatility in stocks. this flight to safety has a lot further to run. 1.5% is a good target for the 10 year yield now. us,: thank you for joining west goodman, bloomberg strategist. we are minutes away from the open of cash trading across the continent. we will look at your stocks to watch at the open, including unicredit, it is cutting its revenue target as it struggles to spur growth like many other banks. this is bloomberg. ♪
anna: welcome back to "bloomberg markets: european open." six minutes into the start of equity trading in europe. dani burger is here. annmarie.t with what is the story with the glencore trading business? stocks are anywhere from 2.5% to 5% this morning. it is a tough 2019 for the minor. slumping commodity prices, copper, coal, zinc is taking a bite out of them.
glencore does not have any of that. anna: the unicredit story, cutting revenue target to spur growth. second-quarter revenues declined 5%, and they missed on expectations in terms of the prophet number, and trimmed therefore your sales outlook by two basis points. reported a decline around 4%. anna: the headline story. upgrading their 2019 outlook by 5 million pounds -- euros, higher than what they had previously. they are expecting volatile trading and down calls, unclear
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anna: a minute to go until the start of cash equity trading. the session in asia a little lackluster. a little karma, perhaps. the volatility and excitement over the chinese currency. futures looking a little sluggish. chinese currency still very much in focus. we continue to watch this. one investor calling this the most important number in global markets right now, and will remain so depending on how we far we get from 7. watching the retreat a little bit. the new zealand dollar, important to note the extent of the global easing we are seeing
from central banks. the new zealand central bank cutting by 50 basis points. the indian central bank cutting by 35 basis points. an unusual number for them to pick. the message is that there is easing happening right now. futures were suggesting that we would get a bit of a bounce at the start of the trading day. we kept an eye on iron o pricesre -- ore prices and that could hold the london markets back. on the other hand, the pound is a little bit weaker and that could push the ftse 100 up a little bit. we have seen a little bit of movement into haven assets overnight. gold price is surging. that could help mining stocks. the japanese yen moving to the upside. in terms of the european equity session getting underway and opening pretty firmly in the green, the spanish ibex up. 0.3%.tocks up by
that is the picture of european equity markets. let's dive into some of the sector detail and look at what is going on. things look to be generally more green than red and that is reflective of the move to the upside we are seeing. health care seems to be an underperformer, which is a risk on signal. i do see red on the materials side. that could be of interest giving the iron ore price. interesting to look at individual movers. let's dive in. we've got to the upside. looking for some of the companies that have reported this morning. i don't see a great number of them. to the upside, 455 stocks on the stoxx 600. there is an upside bias on the market right now. ams a little higher. it is a mixed bag. some of the corporate several reported to the downside.
in -- down byng 4.7%. glencore down as well. down by 4%. standard life aberdeen down by 3.8%. unicredit down by 2.3%. we do see the mining sector is one of the sectors waiting on things. if we look at things from a sector perspective, three sectors in negative territory. by far the biggest is basic resources. for that reason, the ftse 100 treads water. whereas the other european equity markets move higher. ? matt ? -- matt -- matt? matt: u.s. futures dropped as investors remain cautious in the face of trade tensions. joining us now is the head of fundamental strategy at ubs. let me first ask you, with regard to the escalating trade
tensions, there is no end in sight -- it does not appear there will be an easy fix to the broken relationship between the u.s. and china -- are we at an inflection point for markets right now? >> you say that and that is absolutely fair and true and that obviously creates a number of ripple effects for markets. at the same time, we are at this point where it is not cost-less for other side to just go all in and start pushing ahead with the conflict. you have seen signs of definite escalation. equally, the chinese policy action with the currency has shown that these paths are not exponential. in this kind of a set up, you need to be very aware that you don't chase risk down. you find ways of trading this tactically. come of theto that most clear implication from all
of this is that to caution -- cushion for all the risks, you need lower yields. anna: let's talk about the thai central bank. i mention this because we are all about the central bank cutting story today. the bank of thailand has cut its key rate to 1.5%, the most in the survey of economists. this was a surprise. we were not expecting to see a cut from thailand. while that might not be a headline story on its own, we have seen the indian central bank cutting, the new zealand central bank cutting by much more than expected. what does this leave you thinking when it comes to the global easing that we are seeing at the moment? this is a trend that is gaining momentum. themos: when it comes to smaller economies, they need to consider a lot more what is going on with respect to the benchmark country's. when it comes to the big economies, they have been
setting the tone. shift fromen a huge the fed's stance from this time last year. you have also seen the ecb -- and i think the smaller central banks are basically taking advantage of the opportunity and easing even further to cushion their risk. it is a rational reaction. the main question for the trend, which you rightly point out, is how the fed but takes it from here in terms of the easing. how far, how fast, and so on, and so forth. a the fed disappoints, then lot of the central banks may find themselves at a place where their currencies weakening a little bit too much for their own liking. in contrast, these guys are going to be able to ease without too much currency damage. yesterday, there was writing about james bullard,
and markets have gone gaga when james bullard starts sounding hawkish -- we did hear a typical dove say that the fed has already adjusted for trade uncertainty, that the fed cannot react to day-to-day negotiations. he does not see a recession on the horizon. we are not in a situation like 2007-2008. is the fed not going to deliver what the market expects? themos: i think that is the hardest question of all. i think that what you have here is a fed that has actually, with the benefit of hindsight, may have adopted to hawkish of its own last year. now they are on a path to sorting that out and fixing it. i think the market would have , dovishd a more speedy kind of tone to the fed. the fed so far has not fully delivered the kind of dovishness the market would have expected,
but the market knows quite well that the data is very likely to be slowing down in the next year because obviously the fiscal package is falling off from the numbers. you have trade uncertainty. monetary and fiscal policy are no longer as supportive as they were during the recovery. the only tool that is there to alleviate those pressures is the fed policy rate. and the main question for markets is how? but how the fed manages that path. anna: let me ask you where that leaves the interplay between the fed and trade tensions. obviously, the fed has to keep up with the latest developments in trade tensions and other tensions between the u.s. and china. they have tightened financial conditions. i have a chart of those financial conditions. it shows how that is been happening because of the trade
tensions. everything we have seen because of the yuan this week. does this latest round of tighter financial conditions maybe suggest that the fed needs to get back to easing? themos: absolutely. in fact, what you are saying is that this tightening of financial conditions says the fed should have already done that. that is the main outtake from this. the fed is in a very difficult spot. a spot which they may have contributed to it. at the same time, their model, some of their most simple models of trade, do not show huge damage from trade to the economy. i don't know what to make of that. at the same time, the impact the trade tensions has on confidence, supply chains, financial conditions is much more intuitive rather than quantitative. and it requires a level of counterbalancing from the monetary authorities. aat counterbalancing needs
level of proactive approach from the fed. anna: because we are talking about percentage tariffs, but we are also talking about more than percentages and tariffs. thank you very much. themos stays with us on the program. up next, the stocks on the move, including glencore. profits tumbled as cobalt profits collapsed. moving lower on the corporate results today. this is bloomberg. ♪
welcome back to "bloomberg markets: european open." we are just about 12 minutes into the trading day. a little bit of a mixed picture. points, org down 2.5 0.03% right now. otherwise, continental indexes are gaining across europe. let's get to our stock stories with annmarie hordern. annmarie: thanks, matt. i want to start with what is kicking off the stoxx 600. up more than 3%. they agreed to sell their stake in a german chemical parts operator. more than 4.5% this morning. they beat their warning that
lower interest rates are having an impact on margins. they are very vulnerable to the lower for longer interest rates. if you look at the three banks that reported this morning, all three are lower. glencore to the downside. down at nearly 4% this morning. really taking a hit on lower commodity prices. cobalt, copper, zinc. these are all things that the miner has in its portfolio. its rivals were able to boost their profits based on the iron ore rally. glencore has none of that. anna: thanks very much. today, we talked about a few central-bank surprises. india made an in conventional move -- unconventional move slashing its rate by 35 points. the reserve bank governor cut rates to a record low of 1% at the bank a busy london hinted there may be more easing to come. >> when you are looking at
europe, sweden, japan, all with negative interest rates, and with us at 1%, and many other economies below 1%, it is easily within the realms of possibility that we might have to use negative interest rates. us onthemos is still with set in london. we talked a little bit about the central banks. a question of the day we are asking is about whether central banks have run out of ammunition. orr talked about the various tools they might use. where will they turn if you do think that they are running out of ammunition? themos: i would say they are running out of conventional ammunition. not everywhere, because the fed well has a long way to go if were to come to a stage where they needed to support the economy. the fed matters a lot more for the global economy than the new
zealand central-bank. the main question is not about ammunition itself, but the point of discomfort at which they are willing to use a lot less traditional monetary tools. look at the ecb. they have been able to discuss the deployment of qe again. that discussion only has eased financial conditions tremendously. the main question is are the comfortable enough to do it and to do it in a way and in a scale that really eases financial conditions further? the main question is the level of comfort that central banks have to go deeper into more unconventional tools. anna: matt? matt: do you think they can offset the damage done by these trade wars? we have already started to see -- or we had already started to see economic data cresting the hill, so to speak, and worsening
even before this latest escalation. if you look at any kind of quantification of the impact of trade wars, the largest chunk comes from intangible factors, like confidence, or supply-chain disruptions, etc. can central banks deliver a level of easing that from the market perspective outweighs the damage on confidence as being done by trade conflicts? i think the answer is that they can. the main question is whether they are able to are not from a political perspective or any other standpoint. the main problem for central banks is not just the trade war. it is also that they experienced a decade where trend growth has and we are able
to conceptualize where we are coming off a stimulus package of strength growth. at the same time, inflation has been very difficult to move higher. is main question for them does it make sense for them to keep doing what they are doing and i don't have a choice. anna: in the meantime, we are waiting for the central bank policies to unfold or take effect perhaps. we see volatility. this is about fx markets and the level of implied volatility. and thethe blue dots red dots. there had of the average red dots.
this is for the currency markets. one thing you are saying for sure is that volatility is on the rise. the summer tends to be quite liquid for markets. , i would say that the sustained higher volatility is whether we get a sharp de-risking that makes the dollar a lot stronger, brings the dollar-yen a lot lower. if you don't, you have another -- a number of instances of currencies that have seen sharp moves. if the data is flat, if central banks are supportive, if trade tensions take a pause, you might see those entry-level's attract inflows. equally, when you look at things like the euro-dollar, in one of the biggest points of pressure,
it has remained in the ranges, which is quite astonishing, right? if you don't have some kind of escalation over the next couple of weeks with dollar china moves come left and right, it is very hard to think that you're going to move into an environment of structurally higher volatility. themos, you are going to stick with us. our guest cohost for the hour. up next, going for the gold. the precious metal tops $1500 a troy ounce for the first time since 2013 is demand for traditional havens builds. we will talk about what got investors running scared and how long it could go on. this is bloomberg. ♪ erg. ♪
welcome back to "bloomberg markets" -- this is the "european open." we are almost 25 minutes into the european trading day. gold futures have risen big-time. above $1500 eight troy ounce for the first time in six years. the precious metal is nearing bull market territory. this year's gains have reached 17%. joining us now is the head of european metals coverage. themos is still with us.
a does look like this took little while to ramp up. we now see it full steam ahead. what are the forecasts you are hearing? >> it seems like it has been a really bullish market for gold. the flight to safety and all the recession concerns and the trade war have put a rocket ship under the gold market. so, i think you are seeing a lot of people get in and prices just keep climbing higher. anna: themos, let me ask you your views on gold. we have the opportunity of holding gold as the fed cuts interest rates. that seems to be the textbook reason for why the rates are on the rise. is it sustainable? themos: i think you hit the nail on the head. one of the main factors driving gold is the real interest rates in the u.s. on a steady decline. the main way of answering this is taking a look at the long-term expectations of interest rates from the fed on the markets.
you look at five years forward for instance, it still starts 1.78,ing like 1.77, something like that. can that drop in a negative scenario? or as the fed basically cuts a couple of times, do people assess that maybe the lower interest rate stays here for longer? i don't think it is a very difficult assumption to think that if we look at rates from that perspective, there is more downside yield then upside risk. ,f you transpose that into gold then you get a sense that gold benefits from this environment. lynn, what does the supply side look like? how is it ramping up with supplies at this level? lynn: the interesting thing about gold is you never really pay much attention to the supply side. gold is always very much a financial market and it is the safety and for haven demand that has always,, first and foremost, been the case for gold markets.
anna: you have also been covering the glencore story for us. pressures on the shares today, down by some 3% in the morning session. the lower copper guidance seems to be something that citigroup is siding. what is the story? lynn: it has really been an interesting one. they said they were going to shut their big cobalt mine in congo. profits were down a ton in the first half. they have been hit by lower commodity prices across the board and you see them now trying to take action to put a floor under the cobalt market. matt: themos, let me quickly ask you about bitcoin. a lot of people have been talking about these two, i suppose, commodities, you could say, in the same sentence lately. is there ever a chance that the digital currency knocks the precious metal off its podium? themos: no. [laughter] they are think that
very different. we have written a very big and thoreau report on this. h report on this. there are a lot of endemic risks to bitcoin to keep it from becoming a fiat currency, let alone a substitute for gold. what i would say is that concept of blockchain payments and technology is definitely going to propagate, whether that is bitcoin or competing technologies. i think it is definitely an open question on the asset, rather than the principal. anna: writing about bitcoin and gold and the way they move together, it does not seem random, but a thick report you have written on it, so a thesis for another time. thank you both very much. themos stays with us for another conversation. let's look at european equity
matt: 30 minutes into the trading day, let's get your top headlines. surprises abound, three central banks cut rates, adding pace to the global easing trend. but will they have enough ammo to combat a future shock? standard life aberdeen slumps as investors pull money. it is atells bloomberg harsh environment for asset managers. >> it is tough out there and there is a lot of change. flows are definitely hard to come by. matt: caution at commerzbank.
the german lender drops after saying profit targets look quote significantly more ambitious after the first half. i will be speaking to the cfo later on today. good morning, welcome to "bloomberg markets." i am matt miller here in frankfurt alongside anna edwards in london. anna: 30 minutes into the trading day, let's look at how things are shaping up. higher, so that is the buys to the upside in the breadth to the upside. a biotech business is up 8%. the numbers seem a better than anticipated. , we have gotat chemicals and banking stocks, a range of assets. let's move it to the downside. this is where we have seen a number of corporate supporting
results. , concern about the interest rate environment. standard life aberdeen, we spoke to the chief, down by 4%. times are tough, it seems. , achieving targets is more difficult, as you mentioned. down 3%. glencore weaker by 2.7% on their numbers. same story over at legal and general. let's get a first word news update. china's currency policy is staying at the forefront of the trade war. the pboc set the daily reference rate marginally stronger than seven a dollar. beijing has vowed to keep the exchange rate steady. the kiwi dollar is plunging
after the reserve bank cut its benchmark rate. most economists had forecast a 25 basis point reduction. the bank says that, without stimulus, it is difficult to revive inflation. north korea has funneled billions of dollars to its nuclear problem, according to a united nations report, which claims they have amassed billions by stealing. the regime of -- regime has 30 overseas agents handling the transactions. has its fourth reduction of this year to support the slowing economy. the rate is now the lowest since 2010. india has been the most aggressive asian nation and cutting rates this year. disney has opened the most highly anticipated themepark in companies history -- in company history and attendance fell about missing on the top and bottom lines.
disney has also been hit i spending on its new streaming service and a costly flop of phoenix."ie "dark the chairman of masayoshi son is hoping to prevent softbank into a technology investment firm. global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. met -- matt? matt: thanks so much. standard life aberdeen has failed to stem its outflows. clients pulled almost 60 billion pounds in the first six months, more than forecast by analysts. we spoke to the ceo earlier today. >> the industry is tough out there.
there is a lot of change and a lot of change in client demand. flows are definitely hard to come by. what can we do to change it? that is already in hand. one of the things we have announced is a significant improvement in our investment performance. over 65% of our funds are now ahead of benchmark of that really important three-year period. we have seen a strong pickup in performance, which i think will start to have an impact. that theoint out outflows in the first half of the year were substantially below what we experienced last year. anna: that pickup in performance, what is that down to? >> it is really down to three things, i think. placeof all, we put in
things we call performance enhancement plans. a whole bunch of technical stuff about idea generation and the way we run our investment process. we put improved leadership in place as the two teams came together. i think you are beginning to see the product of those two things. the other thing you need to accept is the market has come our way and has benefited performance. but from what i have seen in volatility, we continue to progress through that. i think performance is in a good shape. anna: you say the asset management environment remains tough. what is at the forefront of your mind when you say that? you talk about the yield environment, the active passive debate, what makes it so tough? >> it is the changing nature of client demands.
in a world which is a volatile and growth has slowed, clients are looking for a combination of performance and innovation that helps you meet the risk budget. one reason-- that is i talk about a transformation. what you need to do is to be prepped for the future and make sure you are launching stuff that will be well-held and liked by clients. just a lot of change. anna: that was the standard aberdeen ceo speaking to matt and i. fundamental strategy at ubs still with us. keepf the other things talked about was demand for equity remains low. where do you see the equity story heading? as we look at trade wars escalating, do you think that is fully reflected in equity
markets? >> two things. the first is a short-term thing. in the short-term, you have a very negative environment from all of the shocks, but you have a huge offset, central-bank easing. right, andgets it that is a big if, any kind of will offer opportunities for stock pickers to get back in the game, and vice versa. if the fed does not get it right, financial conditions will force their hand. the other thing is that if you assume we are in an environment of low growth is not a recession , this is not an environment where you sell stocks. it is an environment where they become hugely bifurcated. they are being negatively impacted by the longer yields
and there are stocks that offer a steady dividend with a level of growth that is predictable where's the decline in the discount factor just makes them priceless, basically. you see those gaps opening up further and further and it gives room to flock around specific sectors. themos, i am going to talk to the cfo of commerzbank later. not only his bank, but all the banks across europe have had a tough time lately. they are not making money or are shrinking down. can we continue to get growth in equity markets, for example, or growth in the underlying economy if banks are not doing well? themos: going back to the previous discussion, the decline in yields has been pure and negative for banks, particularly are basicallythey
being squeezed into providing less profitable financing. if you look at the overall lending conditions for europe, they have not been that bad. yearse the fact that, for , lower rates have challenged banks, the volume of credit has not collapsed or anything. that is something the ecb look set. -- looks at. profitability is something they also look at. these issues are coming from specific locations. once again, the main question environment is this one that fosters growth? basically, they can still provide credit to the economy. the trick comes in a recession with low rates, a difficult set up for any part of the economy. is because you cannot
stimulated any further? themos: you end up in corner solutions. you run out of wiggle room in a number of places. where you invest money, how you choose are assets, what is the risk in a loan that does not pay you much because of low rates? can i push the envelope through conventional tools, or do i need to buy assets i am not ready to buy? all of these are issues that come up in a recession. , headthank you very much of fundamental strategy at ubs. themos will continue his conversation on bloomberg radio at 9 a.m. u.k. time, 10:00 a.m. if you are in frankfurt. coming up, brent in a bear market. oil extends losses as trade fears escalate. we discussed the outlook next. this is bloomberg. ♪
into a bear market amid concerns the trade work will continue to sap demand. joining us is our energy editor. what is it that has driven brent down? anything to do with supply and demand, or is it simply president trump and president xi? helen: as you mentioned, it is the u.s.-china trade spent. -- spat. what happened this week which counted for the fall in the global benchmark was the markets. this was because of escalating tensions. is there ishearing a possibility china may slap tariffs on u.s. crude imports. china is one of the most commodity -- important commodity importers. anything china does will have an
immediate impact. it will have an immediate impact on prices, and that is what happened this week. anna: that is why we end up in bear market territory. that is the demand story. what do things look like from a supply demand downs perspective? -- balance perspective? helen: the market is still oversupplied. the group of the largest oil producers in the world, in june, extended their pact to continue cuts the amount of oil they produce and send the market. the international energy agency released a report saying that what opec has been trying to do for the last couple of years they are still struggling to do. they say that opec's best chance of making it happen is this quarter, when oil demand for the
year is expected to peak. whether they can make that happen or not, we don't know. matt: how are these sanctions on iran affecting opec's outlook? month, according to a bloomberg survey and chip tracking information that we have, opec's output fell by 130,000 barrels today. that is quite significant. output fell to the lowest since the mid-1980's. what is happening is u.s. sanctions on iran are attempting to squeeze its exports. obviously, that is reducing supply to the market. but what we are not seeing is immediate impact in prices. that is because of the bearish factors we have in terms of the trade war, the drag on equities.
what is happening with oil is an equity story, it is not about supply or demand. anna: thank you for joining the dots for us. up next, we will bring you some other stocks on the move, including commerzbank. the lenders says it is becoming increasingly difficult to hit profit targets. matt is over in frankfurt to speak to commerzbank. we bring you that story next. this is bloomberg. ♪
anna: welcome back to "bloomberg markets." 8:51 in london. european equity markets on the rise this morning, even the ftse 100 joining. the dax up over 1%. central bank rate cuts are one of the dominant trends of the morning. let's get to some individual stock movers. annmarie hordern has your movers. annmarie: on top of this -- the stoxx 600 is this firm. what they reported losses, it was more narrow than what was expected. commerzbank to the downside, down more than 3%. fourth straight quarter of
falling revenue, now they are talking about half the targets being at risk. matt will be interviewing the cfo. unicredit, another bank to the downside, down more than 2%. they missed of the lowest estimates for results and are facing a slowdown in lending, fees trading him and cut revenue targets -- trading, and cut revenue targets. looking at adm, these are the three biggest lenders. abm, these are the three weakest lenders. matt: now, we go to our finance editor in rome. what else didn't investors like in these numbers? noticedf the things we
is that the loan-loss provisions came in worse than expected. that is worrying because on the thengs and the ceo -- end ceo has done well, so there's concern they are not having the results they wanted. the topline is really at risk in banks across the board. this environment and low rates is going to keep pressure on that. it becomes more dependent on these measures to save money and to be more efficient. the interest rate story also hurting other banks. amro also falling today, that seems to be a concern. >> yes, exactly. initially, they look very positive. they actually had an increase in interest income, bucking the
trend, but they worry that will put pressure on margins. they were not very specific, but efficiency measures, that could be a different cost savings maneuvers. this seems to be the problem with both of them. there are a lot of ways to reduce spending, but where is the top line going to come in with so much pressure on regular banking revenue? much,thank you so bloomberg's finance editor in rome. i want to tell you that muddy waters is reporting a short position in burford capital, a litigation financer. it helps companies fund legal battles, a key holding of neil woodford. he is the under-fire fund manager. in aput out a notice
decline in the share price. the cash position and liquidity access was strong, they believed share movement was, with regards to the rumor of a short attack, now we know where that position was coming from. 20%ord capital gained earlier on in the trading day, now it's down to pretty much unchanged. tot, you are in frankfurt see commerzbank. matt: i am here to talk to the cfo stephen engles. the bank has said the full-year profit targets are ambitious. this has become code in german , therate speak for, well fact they may lower them soon. saweast that is what we last year and from other german companies, saying the targets are ambitious.
sort of the precursor to a profit warning. what they need to do to hit those targets and to strengthen the bank further. and what we're -- what we were talking about with themos, economic growth in germany is difficult because the government is not willing to boost spending on things this country needs, like infrastructure, which is not helpful for a bank like commerzbank. anna: right to months of the fiscal side of things will be part of the conversation -- right, the fiscal side of things will be part of the conversation. let's map out some of the policy moves. new zealand shocking with a 50 basis point cut, india cutting by 35. thailand cutting-ists -- cutting it's interest rates.
francine: global easing, new zealand and india rocked the market. , butuan weakens again officials are telling companies the currency will not continue to fall. and profits at risk. commerzbank says it will be difficult to hit targets as trade tensions hit home. ♪ welcome to "bloomberg surveillance." these are your markets. we are seeing quite a lot of movement, all to do with trade. since we had those tensions wrap up, we