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tv   Bloomberg Markets European Close  Bloomberg  November 8, 2019 11:00am-12:00pm EST

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is looking for? greece and italy are hit hard again today. is this a rational repricing or something more? live from london, i'm guy johnson, with vonnie quinn in new york. we are counting you down to the european close here on "bloomberg markets." ♪ vonnie: we have the s&p 500 grinding backup towards flat. we are off our highs for the week, but there are a few hours to go in the friday session, so we will see what emanates from the market section. 10 year yield back down to 1.90%, reversing some of the selling during the week. a couple of these stocks on the move today include disney, as you might expect after earnings yesterday, up 3.7%. investors waiting for the
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rollout of disney+ next week as well. gap is down 7.5% after the announcement that the ceo will step down. change of any business might take longer. guy: here in europe, bit like the united states, moving lower on this trump headlines, and then bounced back up again. we are still negative on the day. the euro down as well. the dollar has been catching a bid today. what has been interesting is the bigger reaction in the bond market. earlier today, italy was down for five basis points. -- down by one basis point sorry, up by one basis point. we have probably seen a bigger reaction in bond markets then in equity markets, which is interesting. it's been a big week. there's been a big selloff this week for btp's. they are up by 21, 22 basis points this week. let's talk about these markets,
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try to figure out where we are as we wrap things up. erik nielsen, unicredit group chief economist, joins us out of berlin. how critical is it to the markets, to this trade deal, that we see a rollback of tariffs? it is important. it is obviously the thing that everybody in the market talks about. personally, i'm a little bit tired of this tweet policy we have with donald trump. the key story for me is that equities have become expensive, and somewhat seems to hinge on that one little issue, whether we get a deal or not at this stage. this is the fundamental direction of trade between america and china, not a positive one. am very reluctant to think that trump is about to reverse his position fundamentally. guy: so you don't think there's going to be de-escalation here? erik: no, i think there's always a possibility during the next
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year as we come towards the u.s. election, but at the same time, i am more in the other camp, thing that the u.s. economy slows, which is our forecast during 2020, and trump is going to pump up this xena phobic xenophc again -- this obic rhetoric again. stocks have come up and down a little today and yesterday, but fundamentally we are at very rich levels indeed. vonnie: characterize the bond market move this week, both in europe and the united states. were they related? erik: yeah, i think it is. it is always difficult to sit back and then be clever after what's -- clever afterwards and say this is what happened, but it has been a risk on story because of trump and the trade story. we had the selloff in the bond markets.
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i think that is sort of a specific story. then you have the specific italy and greece story on the european spreads, which are probably more national issues, particularly for italy. vonnie: the move to 1.95%, will we see it again soon? is it a reflation trade? erik: no, i'm not so sure, but there is -- if you take the greece story, it traded inside italy, which is phenomenal to think about, but it is a very liquid market. italy probably got hurt on the issues between the two coalition partners. growth dataeak also. growth data also. i think it is more of a specific story on this issue. guy: what has surprised me, and they hear what you're saying about italy and greece, is that the market has been reasonably therly, both in terms of
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going market and the credit market. do you see any signs that that could break up a little bit? that we could see more idiosyncratic risk rather than this mass move of yields generally higher, both in btp's,ies, bunds, wherever you look? erik: i think that is exactly the right way of thinking about it. for me, the equity market has become a bit rich now. there's a lot of risk on, and i am not an easy buyer of the trump story of a trade truce that lasts very long. i think we are heading into an area where people see this quite rich pricing of the equity market and other markets, and geopoliticalhe mess coming on again as the economy slows down. there is anario, as lot of liquidity out there,
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people start to look at the credit risk you see around, so i think that will be the theme the next couple of weeks, more than the general theme that we started off with. guy: so would you be a seller, if you were a holder of equities, would you be a seller of a trade deal? do you think the next phase is going to be so difficult that, once we get through this one with the richer equity valuations, that the market is likely to roll over? erik: exactly. i've been a little been impressed at how far we went on the equity side, so i'm a bit long on this. but for some time, and certainly now, if i were an asset i locator, iasset would sell equities and strength. if you have another rally, i would start to exit and look for safer assets. but the problem is it is so difficult to find anything that is halfway interesting.
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things like italy may come back and play again. it looks like they are getting a bit of political peace out of rome again. it is one of the places to get a little bit of yield. it is not easy to be an asset .allocator vonnie: it's clear when china put out the statement that the u.s. agreed to roll back, forgoing any kind of joint statement, you know donald trump doesn't like to be seen like looking like he is backing down. obviously peter navarro or somebody got that through to him, and he said this morning, no we haven't, and they are going to come here to sign a deal. this is going to carry on for a while. is there a deadline for phase one to get signed? if it is, it will likely get signed, right? erik: it might be. i think you framed it very well. the terrible problem for businesses and for investors is apparente is no
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strategy of all this. it is all done in the oval office of the white house. peter navarro may say what he want to say, but it is a well-known fact from anybody when they come to washington that everybody immediately says trade policy is one person, and one person only will decide this, and that is trump. it seems he wake up one morning, may be needs a tv appearance or something that looks good for him, and then suddenly there comes something again. my impression on the other side, and china is frustrated with this uncoordinated approach to this relationship, but they have their plans. they are also too proud, and they are also looking to win the media story of this, although they have a better handle of the media story then the u.s. president, obviously. vonnie: erik, into next week
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and beyond, i'm curious as to how much you're seeing the trade story impact the hard data. it hasn't been impacted in other data. even content is sort of holding in. erik: it's a good point. to be honest, i'm a bit confused about this also. we know the manufacturing sector is not doing well. there's no real signs of spillover into services or to the household. that is the good news. the labor market is holding up ok, even though there are clear signs in the u.s. and europe that they are beginning. we are coming off the cycle. that is the important part. ,hen we get this data last week many thought that gdb hires were higher than -- many saw that gdp
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numbers were higher than anyone expected in europe and the u.s. it is a very confusing picture. it's not inconceivable that all of this data are not heading downward. but they actually will get a second life. it is not inconceivable. i don't think it is the most lightly scenario, but it is not a scenario where you should speak with too great conviction of where you go from here. but i think the odds are for a slowdown. guy: stick around. economist, chief looks like it is party time in berlin this friday night, just on the other of brandenburg gate. erik: it is good to be here. vonnie: not just any friday night, either. the big ceremony tomorrow to commemorate the berlin wall falling, of course, will be something to see.
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let's check global markets now. here's kailey leinz. kailey: we are looking at a mixed and very bouncy session. stocks are well off the lows they first hit when president trump said he is not fully on board with the tariff rollback. investors try and weigh what every contradictory headline means. the dow is down by zero point 2%, the nasdaq higher by 0.2%. we are a little lower in europe, with the stoxx 600 down by about 0.4%. i want to check on the bond market because the selling pressure has been put on pause, at least for now. when we took a look at the week we've had, it really has been aggressive selling in the bond market, with the 10 year yield resin 20 basis points in the past five days. that is the biggest move upward in yields since back in july. i want to hop into the terminal at gtv take a look at what the market is telling us on what they expect the fed to do. for january 2021, how much lower
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the traders think the fed rate will be at the end of 2020. right now they are only pricing and a cut of about 20 basis points, the right now at even a full 25 basis point cut. we are really rolling back those easing expectations. finally, a few movers on the day. the energy sector is the biggest laggard on the day, in part because of oil lower by about 1.4% on wti. take a look at the biggest movers in that sector, exxonmobil and marathon down the better part of 3%, and valero and conocophillips down by about 1.5%. vonnie: thank you for that. remember the function gtv on the bloomberg allows you to browse all of the charts featured on bloomberg tv. analysiswith key and savior have her it's for future reference -- and save your favorites for future reference. 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 check in on the bloomberg first word news. here's courtney donohoe. courtney: there may be a pitch in negotiations for an interim trade deal between the u.s. and china. donald trump says the u.s. hasn't agreed to a rollback on tariffs with china. in fact, he said he hadn't agreed to anything. president trump won't impose tariffs on european cars next week as threatened, according to european commission president jump on juncker. -- president jean-claude juncker. eu has threatened to impose its own tariffs on american goods if president trump carries out his threat. house impeachment investigators subpoenaed acting white house chief of staff mick mulvaney for a closed-door deposition today,
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but to no one surprise, mulvaney didn't show up. democrats will release more transcripts from previous depositions today. next week, the inquiry moved to public hearings. in alabama, jeff sessions will run for the seat that he gave up to become trump's first attorney general. he says he remains a strong trump supporter despite "our ups and downs." after months of insults from the president having to do with his recusal from the investigation into russian interference. 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. still with us from berlin is erik nielsen, unicredit group chief economist. i want to play a soundbite from rough out bostick of the atlanta fed -- from raphael bostic of the atlanta fed. he talked about the amount of room that the federal reserve
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has. i worry about the amount of space we have. ,hen you think historically leading to a recession, we don't have that much space. so i want to make sure that when we do deploy our tools, they are deployed to maximo effect -- to maximum effect in a way that leaves us with policy room going forward. vonnie: when you consider that yesterday, the bond market reversed practically half of the last rate cut anyway and one day, he makes a good point, doesn't he? erik: yeah. i'm a bit confused about the fed, to be honest. on the one hand, they deserve a lot of credit for having moved incredibly fast or early in this potential slow down, thereby helping cushion, not prevent, the u.s. slowdown. but there dots are still sitting
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way above the forwards, and the methods of holding back as an economist, you would say that doesn't make any sense because if you are holding back firepower just to have it, you are actually increasing the probability that you need it. so they confuse me a bit. we at unicredit, we are in the camp oozing the fed is going to cut a lot more than what they say now -- in the camp at who thinks he fed is going to cut a lot more than what they say now. for those of us who think the u.s. will hit recession or near recession sometime late next year or 2021, or there about, because rate source are -- because rates are so low, it is not a cliff edge event that takes you down into recession. it is more the boiling frog
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story of slowly, labor markets hit you, and therefore you are having a slow move down. our guess is that the fed will probably end up cutting another three or four times for a total of 100 basis points or something before you trough out, but it is going to be gradual as you slowly get convinced the u.s. economy is actually slowing. so our base case scenario is that several cuts, but gradually and slowly. guy: the market is definitely not priced for that. just looking at pricing now, we've got 21 basis points of cuts priced in by the end of 2020. how out is that? that is where market pricing is right now. erik: i'd take the other side of that coin. that's how money is made. i'm very happy to take the other side of that story. on our probability models, these are models that all economists on typical labor market
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data, but not the yield curve story. on the macro story, a normal probability would tell you that there's about a 50-50 chance of a recession in the u.s. in third or fourth quarter of next year. it goes up dramatically after that. then you look at the curves, which are flirting which in -- flirting with inversion. it is the largest expansion in modern history. your thinking about the fiscal expansion the power to head the u.s. economy. you hopefully don't think of that is something that would never have to be paid back. there are no free lots in life. you start to say, is this economy not going to slow? yes, the fed is doing a good job, but if the central bank new how to prevent a recession, we would never have recessions, so of course it's not going to be enough. it will cushion it. i'm not going to make a call
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whether they bottom at zero or 0.5%. very happy to take the other side of that bet. guy: just market pricing versus where you are. on the ground in berlin, how did christine lagarde's calls for more fiscal policy go down? erik: almost not reported, really. first of all, in berlin, we are all very excited about tomorrow's 30th anniversary of the fall of the wall. more importantly, there is at the top political level really very little appreciation for this call. i have great doubt that christine lagarde can change the opinion. that said, if you take a rather mainstream stand today, we have a big picture of a road with potholes that says, "your purse is full in the country is going
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bankrupt." point being, fiscal is very strong, and it is not being on the country that is falling apart. the thought is that there is a movement in the population. why are we running this fiscal surplus when schools are not being invested in properly, when the roads are not where they should be, and when the public sector in germany is so far behind the other western european partners? so i think it is moving, but it is a long way before you get the top political level to appreciate it. i think it will be well into next year, but too late first -- too late for fiscal stemless to work. vonnie: it already looks like she is not going to let up. she talked about germany and 12 countries in total that have fiscal room for fiscal stimulus. we have more time with you. we are going to talk a little
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bit about what you just mentioned, the fall of the berlin wall, and a few moments. erik nielsen, unicredit group chief economist, stay there in our berlin studio. this is bloomberg. ♪
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♪ guy: from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. this is the rpm close on "bloomberg markets -- the european close on "bloomberg markets." offlix, hbo, and a coalition other titans will make a crackdown on password sharing. they are considering a number of measures, among them, texting users a code that they would have to enter to continue watching. investors still think that saudi crown prince mohammed bin salman on has too
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high a valuation for saudi aramco. money managers like alliancebernstein think it is still too rich. they say lowering the evaluation will be a sign of strength on aramco's part. that is the latest bloomberg business flash. guy: european markets getting ready to close shortly. ftse 100 the underperformers today. the oil stocks have been dragging it down. on the week, though, it is up by 0.8%. it is a clipped by the dax, up over 2%, as is the cac. continental markets had a very good week relative to pretty much everything else. this is bloomberg. ♪
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guy: 30 seconds to go. europe about to close. wrapping up a week that has been positive but not today. the ftse is down. it is the trait you would expect
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to be coming off today after a big risk off week. it is the mining stocks, it is the oil stocks dragging the ftse lower. the dax is down .5%. the cac 40 down .2%. we will come back to that in a moment. let's talk about what has been the sector story and get an idea of how we worked our way through the session. today, classic risk off. we are back in two the utilities. we are back in to health care, we are back into the telecom sector. these are the sectors that have been beaten up. markets may be thinking we have gone too far. we did not go down much of the president's comments related to trade. the rotation is not what we have seen this week. the rest of the week, the story has been positive with these stocks. food and beverage down 1.5%. i would've thought that would be moving in a different direction.
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retail, banks, resources, travel and leisure. food and beverage down 1.5%. let's take a look at stocks to give you an idea of what is happening with individual names. two french banks out with numbers today. 7.8%. the commissar worth focusing on. both french banks out with numbers not doing well. ridgemont -- rich down i want to focus on, 5.71%. this is a luxury end of the market. today, because of what is happening in hong kong numbers did not look that great. richemont trading down. well ands trading drag to the sector up with it. -- stop finishing vonnie: we have a few more hours in the friday session in the u.s..
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we get approached 3100 on the s&p 500. we will see if we can get back there. we are down to 3082. the dow down more than that. a few more negative earning stories today having an impact as well as the president rolling back some of the positivity surrounding trade. the 10 year yield is 1.90. that is a bit of a reversal from the big moves yesterday and crude is down $.50 to $56.66. let's have a look at earnings reports in the s&p 500. regeneron pharmaceuticals is an earnings story -- is not an earnings story, is a chagrined story. one of the competitors had a trial fail for a drug that it is also trying to make a version of and that is helping regeneron pharmaceuticals. as for xerox, the story was hp was in talks to acquire xerox a couple of months ago according to cnbc reporting. xerox would not allow hp more time to do due diligence and
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then made a bid for hp. hp says it is not in any rush to respond to the xerox offer. disney is an earnings see story as is monster beverage. they both impressed analysts. movers to the downside. gap on word the ceo is leaving. courtock is down in news is down 4%. years sinceng 30 the fall of the berlin wall, a pivotal moment, and the political changes that followed marking a watershed moment in the history of europe. how has germany and the world fared since and what is the outlook for germany's biggest economy? bloombergs matt miller took a look back at the nation's journey since 1989. matt: 30 years ago the berlin wall comes down. germany unified for the first time since world war ii. thecost of integrating
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former soviet satellite state does not come chief -- does not come cheap. growth takes off and germany becomes the dominant economy in europe, and in some sectors the world. volkswagen, bmw, basf the view at the heart of the machine. the euro is born with the european central bank headquartered in frankfurt. berlin loses its beloved deutschmark, but germany becomes the chief beneficiary of the common currency. as economic might go grows, problem is emerging. the european debt crisis, and increasingly hostile russia, the immigration crisis, brexit, and the u.s. china trade war sapping germany's export dominance. collapses, export slide, and germany teeters on the edge of its first recession in more than six years. with angela merkel in the twilight of her power, germany struggling to restore its
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preeminence. pressure builds on the government to spend its way out of the economic malaise. openif the fiscal tabs are , will be enough to pry the engine of europe. guy: matt miller in berlin. 30 years. you can draw a direct line between what has happened with the coming down of the berlin wall and the arrival of the euro. two huge benefits for germany. erik nielsen, unicredit chief economist still with us. germans not accept the fact that they have been the biggest beneficiary of the single currency? it started with them. it was a quid pro quo for the french to allow the reunification of the germany, but germany has been the biggest beneficiary. now when germany is so against what is happening in the ecb and many members of -- many german members of the ecb have left, why would the germans accept this? question and i
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am not sure i can answer it in a satisfactory way. -- ite right that germany it is notight to say the biggest beneficiary but it is one of the biggest beneficiary. i believe the euro is not a zero-sum game, it is one where everyone benefits. it is also important to remember that monetary policy and exchange-rate policies are important for growth, but they are not as important as structural reform and prudent fiscal policy and both expansionary and contractor he ways. this is important. there is one thing that has been overlooked with the euro. germany has been a major beneficiary of the euro, but it is also germany being the only country who gave up power when the euro came in. in any reasonable counterfactual
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, if you think through what europe was before the euro and would've been otherwise, it would have been a story of the buddhist bank setting monetary policy in germany with a clear view to what the fed does, and everybody else, with partly the exception of france, but certainly all of the smaller countries setting policy according to what the german bank does. does. we sought this past week with thomas jordan, the president of the swiss national bank, saying we are waiting for the ecb. there is not such a thing as independent monetary policy for a small country in an open world of pre-capital movement and trade. it was the bank that gave up more power than any of the other ones. guy: has reunification been a success? tax only justion came off. you look at the rise of the aec in eastern europe and you wonder
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how successful this move has been. erik: without a doubt it has been a massive success. you cannot possibly travel through the former east germany and not conclude that life is one heck of a lot better than it was under communism. there is zero way of arguing any other way. it does not mean every single person has one. it means distribution of benefits has not always been fair the way it should have been. a lot of people have left east germany and moved to the west. you've seen moves to britain and other places to look for opportunities. those left behind's are those were less mobile. one of the things that have not been missing is a big move of businesses in the former east germany. there are a lot of issues to be tackled. ifb and therise of
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far right political parties that is particularly dominant in east germany has something to do with this, but it probably has more to do with identity policy -- identity politics. ,ou see it in hungary, poland countries where the population was incredibly homogeneous in the world has changed, and part of this part of europe are struggling, to put it politely. vonnie: will germany take the lead in the banking union eventually, if we wait long enough? we already saw a tiny sliver of a change of mind on the part of all actuals, saying maybe there -- of olaf scholz, saying there is a door to deposit insurance. erik: i think that is right. the finance minister olaf scholz -- the finance papers gave the
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details, i think you have to conclude this is a positive step. he has removed the red line on the common insurance deposit insurance. the vision of common insurance is not my first bet, but you cannot expect to get everything on the first day. he has moved. theynot agree with what say in the paper on risk assignment to sovereign debt. europe ultimately needs its one just likek security, the united states and dollars. you do not have to have a functioning currency like the euro without having a risk-free -- so-called risk-free. they have to get their head around. i am not in agreement with those were quick to shoot him down for those things you disagree with. the fact is the finance minister has taken a quite sizable risk in domestic politics by putting this out and it is a step in the
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right direction. guy: i will quote from -- vonnie: i will quote from that financial times article you quote. a lot of scholz said -- would be undermined -- is this germany responding to brexit or an opportunity that would be crazy to pass over? erik: that is probably part of it. often see these type of events. i cannot judge whether the finance minister believes that was the trigger to do this. many prominentw and influential germany economist who have agreed with this for a long time, that for the banking union to work, for the eurozone to work you need a proper banking union and capital markets union. from a political point of view, i can see that brexit is a convenient hook to hang your hat trump's anti-trade
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policies, if you will, also gave a push to the european side. sometimes things happen outside of you come and for the general public and political side it is convenient. the economics are clear. rik, thank you for joining us today and giving us anytime. that is erik nielsen, unicredit chief economist in berlin on the people of the 30th anniversary of the fall of the berlin wall. guy: enjoy the weekend. let's check her european stocks have settled friday night. we are through the auction process. a little bit of a dip in the london market. we did see the downdraft coming earlier with the trump comments on trade. we recovered from those but the london market is still suffering as uncertainty on trade, the mining stocks and oil stocks under little pressure. the dax has had a week which has been pretty strong. a little bit of underperformance from the dax and the cac 40, both down, but the cac 40 only
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down just. you can tune into "the cable show" at the top of the hour if you're on your way home and what more market analysis. we are on dab digital radio and the london area and around the world on all of your bloomberg devices. this is bloomberg. ♪
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guy: tibor bloomberg first word news. here is courtney donohoe. courtney: president trump is set to rewrite rules on vaping. the president wants to set the rules for using -- for the minimum age of using vapes to 21 and older. president trump is betting the economy outweighs tension when it comes to african-american.
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the president announcing the formation of a group to recruit black voters. the trump campaign is done similar things for hispanics. both efforts will rely heavily on the decline unemployment among minorities. mike pompeo warns that nato risks becoming irrelevant. that adds fuel to criticism of the transatlantic alliance. loseo says nato would significance if it's 29 members do not contribute enough. he was in berlin to mark the 30th anniversary of the fall of the berlin wall. 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. guy? guy: thanks very much indeed. alaska $64 billion sovereign wealth fund is increasingly looking toward alternative to makeup gains offset by the decline in oil prices. the fund cio recently sat down with bloomberg kenneth palmer to explain exactly how he is allocating to those alternatives. oni think it will depend
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where we are at different points. right now, i feel like we are looking at more defensive investments. veryer, we still have active biotech direct investing efforts that is not defensive, but it is an area where we have built expertise and delivered strong returns for us. i think the team will continue looking at biotech situations and then an area that there is not a lot to do today, we are nurturing our relationships and that is an area where as the cycle turns, we will get fund exposure and get investing as well. >> are you expecting the cycle to turn? are you preparing for a potential recession? >> i am on the margin. we are trying to be defensive and holding more cash than historically. we are overweight fixed income,
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we are overweight hedge funds. i am not calling for the cycle to turn but there is certainly a lot of red flags. we want to be ready. at some point the cycle will turn. i do not think we will be in a bull market in perpetuity. we want to be ready for that eventuality. >> you mentioned concerns with private equity, even though you are looking to build out that exposure. what are your concerns for right now and why do you think those will not be an issue over the next three or four years? down, valuation is the biggest concern. you look at the multiples on leveraged buyout and they now exceed where they were in 2007. the leverage level as measured by debt to ebitda are higher as well. that is in a world where the shiller pe multiple and the public market has never been this high except 1929 in 2000.
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me is totant thing for make sure we have those less market exposed investments in terms of fixed income, hedge funds, and cash. i think in private equity, an advantage is a wide dispersion of performance returns and we have been fortunate to be in the top quartile in our performance. in a down market, i think we can outperform to an extent we cannot in public equities. i think there are some deals getting done in late stage venture and in maker cap buyouts that people will regret later. we are more involved in smaller market buyouts on the margin then some of our peers. i think valuations are lower there. the sponsors have more control over the companies. marcus frampton, the cio
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of the alaska permanent fund speaking with bloomberg. time for our stock of the hour. it is gap, the worst performer in the s&p, down 8% after our -- after the ceo is out. kailey: if you ask the street, they say the ouster may be long overdue given how badly the company has performed, both as a company ended terms of the stock price. it has lost 60% of its value under its tenure. the timing comes as a prize given it is right before the crucial holiday season, very important to retailers, and ahead of the spinoff of old navy. he was seen as the one spearheading the effort. new management might take a different attitude toward that. that a bit of a downside surprise. at the same time they announced tech is gone, the company also released third quarter preliminary results. their guidance by
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seeing if you get margin and said comp sales will be down again by 4%. gap,ess across old navy, and banana republic. the question going forward becomes is a new leader going to be able to meaningfully change that story? vonnie: it is not as if retail is in the best state, anyway. kailey leinz with our stock of the hour. thank you. guy: coming up, it is our global battle the charts. it will be a good one. it is friday. this is bloomberg. ♪
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vonnie: time for our global battle of the charts. you can see the charts on the bloomberg by running gtv . kicking things off this friday is jessica summers. jessica: i want to show you strength we are seeing in the oil market. one section of the oil market is showing strength, that is wti's prong spread. we can see it split into backwardation this week, a significant move.
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that is primarily because of the keystone pipeline. backwardation is a market structure where we see near-term prices more expensive than later native barrels and it shows a tighter supply market. this happened just recently after a leak. we seen oil supplies not be able to slow down, so that key oklahoma area where we have the biggest storage hub. supply to gulfss coast refiners, means the spreads may strengthen further depending on the length of the outage. you can find my chart of the bloomberg at gtv . vonnie: wonderful stuff, thank you. guy, what you have for us? guy: let's talk traded figure out what the relationship is between stocks that have exposure and do not have exposure to china. what we have here is a ratio of china exposure versus the msci world index.
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basically, if china stops are outperforming, we are going up as we have been during november. interesting to see we also did a similar thing last november. what i am showing you is the fact that the market is getting very excited about the prospect of tariff relief. now, what did the president say earlier on? "i have not agreed to this yet." are we getting over our skis? a lot of people will be asking themselves this as they go to the weekend. the beginning of the week, we started talking about this idea that this trade deal, this phase one trade deal not only include date agricultural purchases and other things on the it would actually de-escalate the situation by rolling up some of the tariffs. the chinese augmented that, then we got word from the white house that would maybe happen. we were all waiting for the president. finally on friday morning, we got the word. the president is not convinced yet. is the rally we are seeing in november in china related stops may be going too far?
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the market do not go down much. that was interesting. the market still believes the trade deal can be done and we may see relief coming through. that was the signal we got today. you can find this chart on your bloomberg. vonnie: great stuff, guy. i will award today's first place to jessica summers. jessica: thank you. vonnie: well done, both of you. great stuff. power"up on "balance of the sun microsystems chair will it has housing about -- been trade around the flat point. that continues around the s&p, unchanged. the dow down .2%. this is bloomberg. ♪
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david: from bloomberg world headquarters in new york to our tv and radio audiences worldwide, i am david westin. welcome to "balance of power,"
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where the world of politics meets the world of business. on the brief today, erik wasson in washington on the whistleblowers letter to president trump and a second conversation with president zelinski of ukraine. welcome. let's start with what the president told us about today. the second conversation happened first, back in april. erik: that's right. there was an initial conversation between president zelinski after he was elected and president trump. trump is saying he would be willing to release that. we do not know if he is clear that with zelensky. linsky was surprised when the initial transcript came out. it caused him diplomatic problems with the eu. -- pardonalso saying me -- he is against the idea of having a public hearing. this is in contradiction to the gop

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