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tv   Bloomberg Markets European Close  Bloomberg  August 21, 2019 11:00am-12:00pm EDT

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30 minutes left in the european trading day. from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. this is the european close on "bloomberg markets." guy: european stocks in your session highs, but volume absolutely un-he met today. -- absolutely uneven today. btp's are catching a bid today. looks like president mattarella is trying to form a government rather than going back to elections. the btp market likes that. vonnie: in the u.s., the s&p 500 firmly above 2900. retailers are partially the reason for that, including lowe's. target is up the likes of 17%. the 10 year yield 1.57%. we will be speaking yields any moment with steven major of hsbc. he will talk about the twos tens spread as well.
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after inventories came in come a drawdown, we saw the advance in crude oil pare back a little bit. at $56.40. guy: bit of breaking news out of the united states. the congressional budget office reviewing the full year 2020 u.s. deficit. what they are saying is the deficit is going to top $1 trillion. that is a couple years earlier than originally anticipated, and may have an impact in terms of what happens when it comes to 2020 elections and the kind of politics we could see around that, and potentially could have an effect in terms of the president's ability may be to push through some more fiscal policy in advance of that 2020 election. vonnie? vonnie: we have are publicans complaining about the deficit for a long time, which is an
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interesting shifting strategy. this puts added pressure on the gop to start talking about this once again. guy: yeah, and everything to do with the budget, obviously, gets political pretty quickly. that will only get amped up in advance of the election. you look at the fiscal side of the equation, it is going to be part of the conversation that happens at jackson hole, where we are going to be seeing economists gathering, investors looking for signals us to where we go next with the global economy and fed policy. we are joined by steven major, hsbc head of global fixed income research. good afternoon. hello. nice to see you. does the speed of the move lately kind of concern you a little bit? steven: i was asked that
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question by a customer, and they said has a stock to you recently? -- has it shocked you recently? what has surprised people is obviously the speed come about this is the nature of duration-based rallies. all,ng happens, and then whoosh. it is not like you can all of a sudden it. the yields are sadly going to be in a range for some time, and it makes it hard work because you have to have the right position in the first place. otherwise, you are going to miss out. so now you've got all these people who have missed the duration move because they've either been short of duration or they've never believed the story, and they are scrambling to find ways to catch up, but it is too late. guy: those people will be hoping that from a technical point of
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view, the speed of the move means we get some degree of retrenchment. you don't think that is going to happen? steven: i see a narrative around fiscal policy and bonds and the like as being convenient for people trying to talk the yield up. i see talk around bond supply and deficits as being an unsatisfactory way to analyze bond markets for the past 30 years. the total debt to gdp in the u.s. is 2.4 times, so total debt public and private is 2.4 times gdp today, 240%. 10 years ago it was the same. all that's happened is the government has levered up in the household has delivered -- has delevered. it's the same today as it was 10 years ago. it's just that the makeup of it has changed. the government has the benefit of being able to borrow in temporal fashion.
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they have to worry about what future taxpayers are going to think about the debt. me as a household, i can't ramp up a big mortgage and give it to my kids. i could if i wanted to come up but it is a different kind of accounting identity that we have. vonnie: and even this latest headline saying that the deficit will top $1 trillion two years sooner than expected in 20 isn't likely to change anything. hsbc's year forecast has been between 1.5% and 2% for the last seven years. what do you see on the horizon that pushes it out of that range on one side or the other? steven: we could easily break to the bottom end of that range in the near term. what we are saying in our recent work is that the central tendency is around 2%. i'm talking here about five or six years out. imagine that the fed cuts rates aggressively down to 0%, and there's a response.
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it might come through refinancing activities for mortgages or what have you. but the fed would hope that rate cuts will work to get them back to what they would consider to be neutral in five or six years. .e estimate it at about 2% dot has it aterm 5%. of course, there's a risk that we are wrong. so what if inflation comes fed actionthe recent has been some kind of aberration? they've made a double mistake, and they have to revert to the previous path? that is possible, but it is difficult even then to see yield getting up to 3%, which is why 2.5% is probably the maximum we are going to get. it is very unlikely that if the return to its hiking path, that it would even
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go that far. the other thing is the japan effect. if the fed goes down to 0% and can't get off the floor come of the fair value for treasuries is close to zero. if you put some kind of weighting of that into your scenario analysis, it does correct the yield down. i don't think 1.5% is an unreasonable forecast. we have to get to a sort of darker place to lower the yield forecast from here. at this point, i am satisfied to wait and see. getting i remember topped and tailed in the u.s. election, so let's wait on this. vonnie: is the fed facing a conundrum, or is it obvious what they should do? is there enough data out there giving us enough information at the moment? that if you i since just look at the u.s. data, there's probably not much reason
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for the fed to have even eased, but what they've done is taken out some insurance, if you like. they've looked at the global economy, and effects of the matter are as recently as q4 2018, they had unambiguous evidence of the rest of the world slowing down. the incoming information everywhere else is that. it would have been wrong to ignore that. some of the u.s. data is a bit weaker. it is not a disaster, though. if the fed was looking at a closed economy, just looking at the u.s. on its own, the rates are probably fine where they are. but the reality is that is not the case. we seen the risk that they have to cut some more. guy: the market has between 50 and 75 basis points priced in this year. you look at the retail numbers out of the states today, they are painting a pretty solid picture. which 75%onsumer, of
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of the u.s. economy is related to, looks pretty solid. i appreciate what you said about the global economy slowing down, but isn't 75 basis points to much? steven: it might be too much, is soon, but the question where the policy rate will be in five years' time. i know you want to know about the next meeting and the one after, but the fed can only influence the overnight rate. about whatdo much that rate is in five years. they are basically a customer of that rate. guy: the fed owns the front end of the curve, the world owns the middle. steven: exactly. supposed to have been tightening, longer-term policy expectation has been falling. thatew on all of this is the fed knows they've got
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ammunition, and if you want to call it a bullet or silver bullet, fine. they know they can cut rates hard and fast. we saw in new zealand that they cut by 50 recently and have done 75. the fed only to 25. that's only get 25. the market -- the fed only did 25. the market is hedging its bets. to me, fair value is where that four-year rate is going to be. steven major is sticking around, hsbc global head of fixed-income research. vonnie: retailers and home improvement stores doing particularly well today. target is up 18% right now. this is bloomberg. ♪
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♪ vonnie: live from new york, i'm vonnie quinn. guy: from london, i'm guy johnson. this is the european close on "bloomberg markets." let's get a first word updates with courtney donohoe. courtney: denmark is saying an invitation to president trump to visit the country still stands. the prime minister says she was disappointed and surprised by the president's decision to stay away, and says she had been looking forward to the visit. he was due to arrive september 2. president trump canceled his trip after danish politicians criticized his offer to buy greenland. in venezuela, embattled president nicolas maduro says government officials have been holding secret meetings with u.s. authorities for months. -- maduroo's also says he would like to speak
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directly to president trump to resolve the conflict. china has confirmed it detained an employee of the british consulate in hong kong. he is being held under a 15 day detention process in shenzhen. beijing called it an internal matter and not a diplomatic dispute. italy, president sergio mattarella has started talks about the next government. he will have to decide whether a new ruling coalition is viable, one of two main options after the resignation of prime minister giuseppe conte. the other is to call new elections. 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. i'm courtney donohoe. this is bloomberg. vonnie: thank you. let's get a check on global market with abaco doolittle. abigail: setting up -- with abigail doolittle. abigail: setting up to be more
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of a risk on day. the s&p 500 and the nasdaq both up after yesterday's modest pullback. the german dax is higher, 1.2%. the asian session, mixed results. smaller moves there. uncertainty continues to pervade investors around trade, the economy, and the fed. we will be receiving the fomc minutes later today. the risk assets certainly confirm sector was. all 11 sectors for the s&p 500 are higher. on bottom, some of the defensive sectors such as utilities and consumer staples. investors stand away from defensive sectors even though staples is one of the top on the year. tech also higher. sectors on top. investors have found their risk appetite. that is true when we look at haven assets to confirm this sense of risk on.
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the german 10 year yield up one basis point, though still at -68. the 10 year yield also higher in the u.s., telling you investors are moving away from haven bonds to some degree on this day. gold slightly lower, and we also have the dollar beating began on the day. investors not going towards the yen. the reason i bring all of this up, if we take a look at a 15 day chart of the s&p 500, we are going to see that this month of august has been all about with saws between risk on and risk -- about whipsaws between risk on and risk off. investors not really knowing what to make of the economic backdrop. yesterday we had the drop, today we have the gain. it will be interesting to see whether the fomc minutes brings any resolution, but probably more so waiting to see what fed chair jay powell will say at jackson hole later this week. vonnie: exactly. thank you for that round up. just want to point out that police in hong kong are clashing with hundreds of protesters,
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holding a sit in at a suburban trade station. this coming -- hundreds of protesters holding a sit in at a suburban train station. the coming on a month after attack on protesters. steven major of hsbc is still with us. if you take a look at my terminal, we are down right now pretty much to 2016 lows, but before that, it had been a couple of decades before we had seen a low like that. i'm curious whether any of the trade headlines or anything coming down the pike on european carmakers, for example, will impact this and how the fed is supposed to think about all of that. steven: that's a good context. it looks a bit like where we
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were back in 2016. in some ways, it feels like 2016 as well. just confirmed that the valuations are quite similar. in 2016.e a mistake we didn't respond quickly after the changes that happened around the u.s. election, so we had to respond to that. to me, it feels probably worse because weight now actually got more reasons for it. maybe investors might be thinking the same thing. without trying to overplay this, the fear i have is that policy rates are going to fall a lot more from here then people generally think. i think negative rates can go a lot more deeply negative, and the u.s. is clearly on an easing path. so things do look different in many ways to 2016. if you want to come up with something more optimistic, you could say there's a trade deal, but is it a deal?
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is it a permanent deal? has the damage already been done? it is difficult for me to see a trade deal of any meaning actually really moving the bond market very much. i think in many ways, that horse has vaulted. vonnie: so you have to wonder, are investors reluctant to embrace that scenario you just made out? even that we just had a 50 basis point move, it was quite orderly and it looks to be over now. should it be over? should investors be buying more treasuries? steven:steven: i think there's a risk that the yields can keep coming down, and the problem that many investors have is that the median expectation is informed by these extreme scenarios. 1.5%, a number like there's probably a meaningful chance we go to 1%. there's also the possibility we go to 2% or above. that's the problem.
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1.5% is informed by the push and pull come of the various structure of global factors. our forecast is 1.5%. as i said, it is a kind of murphy's law, as the irish would say, that i'm thinking about. just when you think things are are about tohey get worse and something happens. guy: can i ask you about currency hedging? japan's pension fund really struggling to make money. a couple of reasons for that. all assets are becoming increasingly synchronized, which isn't great if you are running huge quantities of money. the other thing is with the yen doing what it is doing, they are struggling with that as well. where do you see the dollar going? if you are sitting in the united states and you look at what you can get on a hedged versus unhedged basis around the world, the numbers look radically different. we should be able to put up a chart to show this. how different does the world
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look if you're sitting in the united states, and europe, and japan in terms of the yields you are getting? btp'sed portfolio in looks very different to another hedge fund. what you are referring to is how it is possible for a dollar-based investor to buy assets abroad and sell the currency forward, and get more yield and they cannot home. for u.s. dollar-based investors, they can buy stuff in europe and hedge it back into dollars, hedged the euro cash flows, and end up with more yield. there you go. there's one for the people worried about bunds at -60 because they are not -60 when they are hedged. they yield more than treasuries. for others outside the u.s., the opposite has to be true. for a japanese or european investor, obviously the hedge can't work. it can't working -- it can't work in both directions, see the
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only way to do it is to buy unhedged, which seems to be what has been happening. they also are looking at domestics that are looking at getting overcrowded. guy: u.s. credit markets are offering a positive yield. treasury market offering a positive yield. i struggle to see why people will not continue to put dollars to work in the united states. that only exacerbates what we are talking about here. steven: your question is about currency, which i neatly avoided. you can see how everything is linked. we talked about hedge returns from a u.s. perspective, and what has to be unhedged from outside or partially hedged. if the floor for yields in japan and the euro zone keeps falling, it can only drag the u.s. yield complex down with it. as regards the currency, the
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currency is not just a function of rate differentials. that's what you would call a cyclical explanation. that's one important pillar, but there's also the more structural drivers and the more political. that's how our ethics team -- m, they have those three pillars. at the moment, everything is aligned for the dollar to go up, lasts,t's not to say it and it is not my call. everything is in line structurally towards the dollar rising. guy: we will leave it there. global head, hsbc of fixed-income research, stays with us once again. this is bloomberg. ♪
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♪ vonnie: all stocks in the dow are higher right now. we have a bounce of about 1%.
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the s&p up 8/10 of 1%. the nasdaq as well, up 1%. 15.vix all the way below guy: equity markets trading higher today. you have seen an expiry in the vix today, so be warned of that. free minutes to go until the european close. we are positive. we are having a reasonably good day, but be aware that volume is pretty un-he met today -- pretty anemic today. it definitely feels like an august day, at least from a trading point of view. the close is coming up next. this is bloomberg. ♪
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♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. guy: 30 seconds until the end of regular equity market trading in europe. a positive day. european equities are high. francis trading up.
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italy is having -- france is trading up. italy is having a solid day. we have come back a long way. the ftse 100 now trading at 72. up by 55 today. up over 1%. the cac 40, the luxury stocks helping out. the auto sector as well. the italian stockmarket up 1.7% today, having a decent day. 344 points being added. let me pour cold water on that. it is august. nobody is at their trading desks. volumes are anemic right now. just go to the stoxx 600 on your terminal. you get a chart that looks like this. it is basically showing you that we are 30% to 40% down on trading volume. that blue line is the 30 day average. well above where we are. now.is where we are
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volume is light. trying to get a signal out of the noise today. just a little bit more difficult. let's take a look at what is happening with the individual stop stories. 3.73. is up a story that rental and -- that lt and fiat chrysler are still talking. a danish company up 16.8%. luxury stocks up. u.k. up byt of the 4.8%. that is look at the european close. vonnie: we had equity market trading yesterday before the fomc minutes today and jackson hole later on this week. more tweets and trade headlines from the president. today we are seeing a nice bounce. a little bit of confidence in the consumer, confidence in
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trade. 29 point 25 on the s&p 500 target. up 20%. aflac with unusual policies in japan. it is the worst performer in the s&p 500. crude has erased most of its gain after the inventories showed twice as big of a drawdown as the market was anticipating. let's have a look at the bond universe. the 10 year yield at 1.57. bit of the safety trade as well. the dollar is higher versus the yen. 1.0 647. the euro taking a little back from the swiss franc. 10889. let's talk about -- guy: let's talk about what is happening with brexit. the pound is down but not that much.
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the british prime minister boris johnson is on his way to berlin to meet angela merkel. they will have a dinner tonight. he will then meet the french president tomorrow for lunch. the french coming out over the last hour saying a note deal brexit has now become the central scenario. the pound barely bunched on that, which may indicate we got to the point in which a note deal brexit is where the market is in terms of its valuation of sterling. let's figure out what boris johnson will achieve over the next couple of days and the what he may achieve at the g7 over the weekend. bloomberg opinion editor joining us now. the message is pretty consistent. we do not think much will change. that is what the germans are saying. the french are saying a note deal brexit is the central case scenario. is it? assume it we have to because the prime minister of
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the country has been repeating that day in and day out. he has a government that is incredibly on message and they're putting every measure in place to see that it happens. at the same time he has given the smallest of wiggle room in his letter to the european council president where he said we are happy to make a commitment to keep the irish border open. we just do not want the backstop in their. -- in there. the eu have slap that down. we will not see any glimmer of hope at the g7. where'd you get relief? either parliament manages to stop a note deal brexit or the unthinkable happens and the eu come up with something. i would say the chances of that are diminishing. vonnie: is a complete fantasy because the idea of a no deal scenario does not exist. the french have one version and the british have another. in this note deal scenario, britain still has to pay the divorce bill.
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i am sure boris johnson does not think that is included in a no deal scenario. brexit is not an end point. it is just the beginning of the next round of negotiations. that is part of the intention of johnson's letter, where he tries to redefine how britain looks at the irish backstop and says we do not consider the good friday agreement as mandating a backstop. partly that was a message to the domestic public and partly that was putting the eu on notice that when it comes time to sit down for negotiations, he will like theresa may except for the premise of some of the negotiations. guy: i hear a lot from the continent, the idea that parliament will stop it. that is what they seem to be relying on. there is a belief that boris johnson is not going to be able to deliver what he wants.
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is that informing the way they are reacting? the french are talking about a no deal brexit being the central case. official still talk about the idea that parliament will stop this. therese: it is interesting that neither side seemed to understand the other. from the u.k. you have the sense that europe will give at the last minute, they always give up a last-minute and a no deal brexit will be so harmful to europe. from the european side you have the sense that surely parliament can do something. these are clever people who know the rules and it is quite possible that each side overestimates the flexibility that the other has. there is a chance parliament could force boris johnson to ask for an extension. it is not a straightforward option and the more you look closely at it, the harder it is to see how that is going to happen. atnie: sterling trading 1.2141 versus the u.s. dollar.
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thanks to bloomberg opinion editor therese rafael. guy: how much does the bank of england cast in a no deal brexit? the french think it is a central case scenario. >> the gilt market looks to the noise. that is why it is 5%. sovereignty has over its currency, it can issue freely. it is not constrained like the euro zone countries. the shock absorber is sterling. it is interesting, your point that sterling did not move. maybe it is a wednesday in august or maybe there is something in it. sterling, over my lifetime has regularly taken these 20, 25% hits and then stabilized. that we arel be getting there. does anybody seriously think
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there is not a high chance of a hard brexit? that is what everybody has been talking about. obviously it is a scenario that has been incorporated into valuations. gilts, don't worry about it. gilts look through and the bank of england will ease an economic shock, any kind of scenario that results in a downturn. guy: not quite so explicit on that. in germany, the 30 year auction went out the door with not a lot of cover, went out the door at 11 basis points. the german 30 year trading 14 or 15 basis points negative. what did you learn today? steven: it was auctioned at a negative yield. that means the coupon was zero and the price was above par. it will be redeemed at par in 30 years time. , also year is at -60 urso with a zero coupon.
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these yields can go lower. if the actual policy rate goes down and the expectation of the policy rate in five years is still below zero, then the euro falls. people say who is buying this paper? the question is who has not got enough of it. there is a massive structural short. there are those with obligations , promises made to the future that are shorter fixed income. the idea there is a demand /supply imbalance because of what the ecb is doing is not right. that does not explain the valuation. the valuation is aligned with where policy rate expectations are in five years time. vonnie: the fact that there was maybe disappointing results for the german government -- does that mean they miscalculated the amount they put out there or are they missed tackling something else?
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are corporates- the beneficiaries of this low yield environment? steven: on today's result, i do not see how it can be disappointing if you can issue zero for 30 years. in the fullness of time we will see whether that is the lowest level of yield. i doubt it. i imagine it weeks to come the yields will probe lower levels. it is difficult to issue on a wednesday before a bank holiday in august, when not everybody is there. it is difficult to issue when yields are so low. it cannot be a failure if you can issue above par and mature above par. it seems to be good business. vonnie: is germany any closer to being less of a safe haven than it has always been? it does seem like there a lot of hints to that effect. steven: if you look the political evolution, obviously the main players are changing in
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germany and the big eu institutions. the ecb, european commission, things are changing their. the cause for fiscal using missed the point that there is a debt break at the country does not want to do it. the other thing is any kind of fiscal using would have to be huge and productive if it will have any impact on yields. the threat germany comes in the next few years, with the new leadership in the ecb and the new chief economist who might be looking at things like safe bonds or common issuance. this is a story from the past, it is not news. that might challenge the benchmark status that allows germany to have the lowest yields in the euro zone. maybe we will have a convergence on something around swap yields as being fair value. that is a multiyear scenario. carry on this conversation for long time.
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thank you for spending time with us. steven major, hsbc head of global fixed income research. a very light volume session. that is where we have closed out. nothing doing during the auction process. those are your closing numbers. if you want to carry on the market coverage if you are at work getting in the car and you want to drive home and listen to more of the market action, jonathan ferro is in new york, i will be joining him in london for the cable show at the top of the hour. dab digital radio and around the world on all of your bloomberg devices. this is bloomberg. ♪
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vonnie: live from new york, i am vonnie quinn. guy: and from london, i'm guy johnson. this is european close on
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bloomberg markets. mike pompeo says iran is creating terror and unrest in the middle east, making those comments in the un's piece -- in a you and speech. eightcirilli spoke to special representative for a run -- spoke to a special representative for iran. towhat is it important understand is the iranian military uses these space launches to accelerate the development of an intercontinental ballistic missile capability. it is important -- this is something the u.n. security council has condemned in the past. prior to the iran nuclear deal it was prohibited by the u.n. security council. as part of the iran nuclear deal it was water down. we are doing everything we can to expose the motives behind the space launch test. we will keep at it. kevin: you mentioned the united nations. yesterday mike pompeo delivering a message to the u.n. security
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council cautioning against ending an arms embargo. that is set to expire in october, 2020. what will happen if that does not happen? brian: this would be in a norma's mistake. it is amazing to believe in 2015 when the iran deal was being negotiated they concluded it made sense to allow the yuan arms embargo on the world's leading sponsor of terrorism to expire in five years. that is what will happen next year. the u.n. arms embargo is scheduled to expire under the iran nuclear deal in october of next year. there is a travel ban in place -- and 22 others under a u.n. travel ban. in the state department we put on a countdown clock to start demonstrating how the iran nuclear deal will start expiring . yesterday secretary pompeo
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called on the u.n. security council to extend the u.n. arms embargo and the travel ban on iran. look ahead to something like the g7, what are you expecting to hear from u.s. allies on the issue of iran? we have talked about this before. there appears to be some divide and disagreement about how u.s. allies in -- and the united states should handle tehran. brian: there's not any disagreement in terms of the end state. there is not any country in the world other than iran that thinks it should have a nuclear weapon. when i talk with my european counterparts and other members of the g7, we share the same threat assessment. is islamic republic of iran the principal driver of instability in today's middle east, with the regional grandson -- regional aggression, missile
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proliferation, detention of u.s. citizens and other citizens. we will continue to make the case that it is important to put pressure on iran to deny it the revenue it needs to fund its violent foreign policy, but also to pressure them to come back to the negotiating table so we can replace the existing iran nuclear deal with something much better. cirillibloombergs kevin with u.s. special representative to iran brian hauck. time for our latest stock of the hour. shares of target hit a record after the retailer pulls strong earnings and a gain of more than 3%. we are joined by abigail doolittle. abigial: they have that all target feeling back. the stop popping higher. comps up 3.4%. traffic higher. the ceos turnaround continuing to help. two factors. they have brought all of these private label brands into the target stores that you can only
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get across different sectors including kids, food, apparel, furniture, they have also redesigned the store. consumers liking that. their delivery strategy is working to bring down margins but also drive more traffic to the store. the turnaround is showing up in the numbers in a big way. guy: the smaller format seems to be really working. what about trade? is that having an impact? abigial: the second half of the year should be ok. the tariffs expected in december 1, the 10% tariffs against chinese goods, consumer goods could weigh on the store and hit them hard. most retailers, but target even more so. they could have strategies, one is start outsourcing for india and cambodia. they may have to selectively pass him along. another headwind could be the potential of recession, even if it does not come for 18 months.
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they have weathered those well in the past, maybe not as well as walmart, but they have pricing to build up customer loyalty should that situation happen. target has that old feeling, delivering on all cylinders. vonnie: not a bad day's work. abigail doolittle, thank you for our stock of the hour. showthe david rubenstein airs tonight on bloomberg television at 9:00 in new york. tonight's episode features noted value investor john rogers, chairman, so -- co-ceo of aerial investments. take a listen to this sample. >> what is the best single deal you can talk about? >> one of the best companies we ever bought was royal caribbean. we bought it when people thought people would never cruise again. that stock has gone up close to 15 times. we still think it is an extraordinary bargain.
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are some off ours the media stocks that are really cheap. we are optimistic that madison square garden network will do well when the next -- when the knicks come back and start to championships again. it will be great for new york city and the stocks. guy: if you want to catch the few -- the full interview with john rogers on the david rubenstein show tonight you can do that in new york, 9:00 p.m. and thursday evening at 7:00 local time in the u.k. and hong kong. vonnie: coming up, our global battle of the charts. he do not want to miss it. this is -- you do not want to miss it. this is bloomberg. ♪
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guy: time for our global battle of the charts. you can find these on your bloomberg. gtv is where you will find all of the fantastic charts we use on bloomberg television.
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let's kick things off with eric balchunas. eric: i want to show you the most interesting chart in etf land. it is the core emerging markets etf, which advisors love because it is very low cost and it was a hit. has done nothing but taking flows for seven years. look at recently. the first ever outflow equals $2 billion. em.le are souring on we have seen em flows for a while. when you see retail oriented products like this, you can tell that em is starting to break the back of the spirit of retail investors. that is a worrisome sign. whether theder strong dollar has something to do with that. nice chart. you.e, over to vonnie: that is a lesson. my chart is just an illustration.
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an easy one. day andt a volatile that is what will be talking about through the rest of the week. we remind ourselves of the picture of major bond complexes. the german sovereign tenure, -- 10 year, japan is the blue line, both below the zero line. u.k. government bonds are in purple and u.s. are in yellow. the u.s. still has a ways to go to meet the likes of japan and the u.k., but definitely on the way. we will see what happens next. real money is being forced into corporate because of the yields that are low in going lower. 50% of real money is in u.s. ig. it was 40% last time. you can see that chart on the bloomberg at gtv . guy: shows you why the dollar will have a tough time going down and why we will close
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higher. the yield you are getting in the states is fascinating. we did here earlier on talking about the hedge basis. you can get a better yield in germany if you are dollar investor. i have to hand it to eric today. the fact that the em story has broken the u.s. retail investor is something worth paying attention to. it has been a tough time. we had a strong chart -- a strong start. charts.t 1:00q coming up today at -- at 1:00 new york in new york and 6:00 in london. balance of power is coming up next with david westin. this is bloomberg. ♪
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david: from bloomberg world headquarters in new york, i'm
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david westin. welcome to "balance of power," where the world of politics meets the world of business. on the brief today, kevin cirilli in washington on president trump's call for advice for jay powell. president trump's talk about tax cuts, and then from london emma johnson's pry mr. difficult dinner date with angela merkel. i referred -- on prime minister johnson's difficult dinner date with angela merkel. the president likened jay powell to a bad golfer who cannot fight. kevin: cannot make it up. the president continuing his attacks against fed chair jay powell, arguing he would like to see rate cuts sliced lower and he would like to see them do something to compete with china. the president, according to treasury department officials, argued that president xi jinping

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