Skip to main content

tv   Bloomberg Daybreak Europe  Bloomberg  November 2, 2016 2:00am-3:31am EDT

2:00 am
nerveswith selection spook -- u.s. election markets spook markets. will the fed hold fire? no move is expected today but how strong will it be? brushing off brexit. a new survey shows 70% of u.k. bankers think london will remain europe's preeminent banking center. ♪ >> welcome. that's annads
2:01 am
edwards -- i'm anna edwards. withf, let's start volatility which seems to be back in the market in the last 24 hours. certainly making itself known. the euro, the dollar and the mexican pso. eso. this is anmuch as awakening from the complacency, as you take a look at the index from bank of america, it measures price swings based on future options, you are looking at a return to levels we saw in mid-october. yes, an awakening but on a longer-term timeline, really back to levels we saw a month ago. anxietyection risk, high across the risk radar today. manus: it is very reminiscent in terms of the risk as we ran back
2:02 am
up to brexit. asia stocks dropped. the philippines market is near its peak of july. volatility of the nikkei is up. it is a personification of risk. it dying at 3/10 of 1%. that abc poll putting the difference between donald trump and clinton at barely 1%. the market correctly signals 80% percent of the time. what happens to the incumbent when the market moves lower -- it is exit. it could be rough for hillary. tenths -- we for are up on the dollar. we were lower on the peso. the magic numbers -- 46, 45. 46, clinton. -- 45, clinton.
2:03 am
46, trump. gold at the highest level in a month. gold coin sales in the united states mint surged for the third straight month, the longest run since 2010. tin hats on, risk at the ready. let's first word news with angie lau. angie: thank you. has namedan president a new prime minister and finance chief as he tries to restore confidence but prosecutors want to erupt her at the center of the allegations. she nominated yoon as prime minister, an advisor to the former president. financial services commission g-yong becomes finance minister. most u.k. bankers believe london will remain europe's preeminent financial center after brexit according to a survey.
2:04 am
it says about 72% agree it will retain its role as the main hub of finance in the european union. said brexit would have a negative impact on the u.k. financial market, with 82% saying the eu would also be hurt. thursday, --r super tuesday, -- super itrsday, a report suggests has remained unchanged with carney. according to the national institute of social research, inflation will have 3% by the second quarter of next year. the u.k. growth driver will shift from consumers to trade. it will be at a quarter of a percent when carney leaves the doe in june 2019. the missing malaysian airlines flight news -- the plane may have plummeted at 25,000 feet
2:05 am
per minute in its final moments. that was the final analysis of the debris recovered. the aircraft was not configured to land when it hit the water. someone may have been attempting to drive the aircraft beyond the current search area in the southern indian ocean. $233 millionled from the return bond total. has been billion fund one of the industry's fastest growers. a year ago it reached the $50 billion milestone in record time. bond mutual funds outperformed its peers. 90% over the last three years. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries.
2:06 am
you can find more stories on the bloomberg. yousef: let's check in on the markets in asia. shery ahn is standing by. shery: a sea of red across markets in asia. the regional benchmark at the lowest level in more than one month. in the region, political turmoil in south korea. 1.4% -- it was already one of the worst performing engagements in the world this past month. it is losing ground again as the president replaced her prime minister and finance minister. the shanghai composite down 4/10 of 1% while the shanghai index is losing 1.4%. the volatility gauge on the hang seng. we are seeing mainline investors dumping hong kong shares. million in net $192
2:07 am
the first two days of this week. stocksseeing those shares going into the negative. again, on this wednesday. we are seeing new zealand losing more than 1%. we had a very strong jobs report out of the country this morning showing that their jobless rate fell to the lowest since 2008 which cuts speculation that they will seek further rate cuts. the nikkei down 1.8%. we are seeing very strong yen as we see them flock toward safe havens. the yen surging for the second consecutive session. this after it fell last month on speculation that the fed rate hikes would come gradually. now strengthening for tenths of 1% and trading at 103.86. before i go, take a look at the korean yuan because it is the biggest loser among emerging
2:08 am
market currencies. %.akening, down 1/10 of 1 anna: thank you very much. 378 economies have released a letter showing wide electing donald trump would be a mistake. it says the billionaire has misled the electorate and promotes magical thinking and conspiracy theories over sobering assessments of economic policy options. trump's economic advisor said the letter was an embarrassment to the corporate wing of the economist profession. he said the plan would boost growth. hillary clinton added her voice to the criticism of trump's financial integrity. donald trump is the poster boy for everything that is wrong with our economy. i think we deserve a president who stands up for you, not somebody who stiffs you, cheats
2:09 am
you and walks away with money. anna: polls are continuing to narrow. an abc/washington post puts donald trump up 46% to 45% within the margin of error. the u.s. dollar, mexican peso and the brazilian currency all fell. joining us now with analysis in the studio is the chief economist at g-plus economics. as somebody who knows a lot about economics, mark donald trump's economic track record. >> it is clear from the polls that the markets will have to prepare for blacks one election here -- black swan election here. the reality is one is how the news affecting the polls and the movement of the polls has become news. the second is the fundamental
2:10 am
dynamic between the candidates in terms of public expectation. it is clear that even two years ago during the referendum, the political map looked like the kind of environment where low probability of high-impact events were rare. today it is clear, especially in the outcome of brexit, risk is here to stay. i think the markets need to prepare for the two scenarios. one that hillary clinton may actually lose and second, even if she were to win, the fringe voters would be a dominant feature in the u.s. which will out politicize the globalization. manus: preparation is everything. greg story. that's great story -- great story. the risk and reward analysis under trump 10% on the downside.
2:11 am
under hillary, 3% kicker on the upside. now,arket, you are saying we should begin to prepare from a wrist point of view for trump? lena: i think this is the kind of environment where it is impossible to predict the results as it was with brexit, but you have to prepare. enough toly not easy predict the outcome of the election that could be driven by the politics of division rather than the politics of conviction. if that is the scenario we are looking at, then it really comes down which is the part of the electorate that can mobilize enough to vote. yousef: you are saying either scenario is possible. we take a look at the volatility index and that applies to all asset classes. how do i get on top of this? lena: this is exactly it. you have to prepare and i love
2:12 am
the volatility chart. it is a cross-section of volatility. one asset class that is the fact wet is have seen dramatic change in financial conditions. we have seen the strengthening dollar in the past month. yousef: it is awoken from his lumbar. le-- from a slumber. lena: exactly. there is the risk of a surprise election result. the uncertainty surrounding the u.s. policy outcome. or role the u.s. has played global trade will change whoever wins this election. anna: i have a chart here. volatility expectations. we made the point at the start of the show about the peso, the currency weand the
2:13 am
see on the rise. volatility has been so low that on a long-term chart, it does not look like too much of an outlier. this is bank of america, merrill lynch and others -- jpmorgan. various measures of volatility, just showing how low it was before this week. lena: it creates the risk of what they call -- it means it is immeasurable. it is a short-term market collapse. so, given that the markets are not convinced for either scenario at the moment, it suggests a clinton victory is no longer a hike conviction call. whatever the outcome of this election, we will see a rise in volatility from liquidity conditions. that means investors have to move towards different strategies. manus: lena, stay with us.
2:14 am
here are some of the top highlights for you. we willthan one hour, get a snapshot of the post-brexit u.k. property market. nationwide house prices. it is over to the german unemployment. and then we have the eurozone manufacturing pmi. at 6 p.m. this evening, it is the all-important fed policy decision. yousef? yousef: still to come, on fed watch. every meeting is live but are some more live than other? there is an election in a few days. we discussed the details. the deputy leader of chancellor merkel's parliamentarian bloc says the u.k. pledge to listen shows the government's fear of brexit consequent is. more of this ahead and germany has its own political landscape
2:15 am
in 2017 with it being a year for elections. we hear from the nations green party. stay tuned. this is bloomberg. ♪
2:16 am
2:17 am
2:18 am
anna: welcome back. it is 2:18 p.m. in hong kong. hang seng down by 1.4%. the upcomingd elections in the united states a feature of trading over the last 24 hours. the fifth of bloomberg business flash with shery ahn. shery: valiant pharmaceuticals has confirmed it is talking about its intentional drug business. it comes after it was discussing the field to a japan pharmaceutical company. according to the wall street journal, the business could go for as much as $10 billion. tesla says it's controversial
2:19 am
solar city acquisition will pay off in a few years. dd more than half $1 billion to its balance sheet by 2020. elon musk is solar city chairman and largest financier. he says the merger will give customers a single destination. called for more independent directors if the merger is approved. young china holdings rose 5% in its new york trading debut yesterday. nhe company which owns kfc i china was spun off from yum1 brands -- yum! brands. they were changing taste and had more local competition. the chief executive officer spoke to bloomberg. >> we have an incredible -- we are supportive of it transformation strategy that i am putting in place. it is nice to have the support
2:20 am
and endorsement of the board as you go through such a large change in the organization. shery: that is your bloomberg business flash. manus: thank you. the federal reserve in light of its november policy decision -- the markets do not see it moving until december at the very earliest. the fed chair janet yellen has been battling a high level of content and the area. a strong picture with the hawkish comments. yellen will not be giving a press conference, arguing that this meeting is not as live as others. us in the studio in london. lena, we will get to the shape of what happened to the bond market next, but i was looking at the level of dissent. but it isly prophetic the most dissent since greenspan and bernanke.
2:21 am
talk me through the complexion of the fed 2017. a more aggressive, hawkish fed? lena: i think what is clear is the fed has mastered the art of tightening. presided over a remarkable year for growth in employment which is clearly running and little on the hot side in the words of janet yellen and airing down on the unemployment rate. aat has led the fed to have strategic lever with respect on focusing with economic conditions and having a strong handle on financial conditions. the message between data dependency or an economy that diminish butit wants to have strong conditions. the fed has done a good job given the dissent.
2:22 am
yousef: i'm looking at the implied probability function and we are at 17.1% for november. jpmorgan described today's meeting as a bit of a kabuki dance in terms of fostering. anna: i need a dictionary for that one. the chart shows the increase. i think it is clear the market is very sensitive to the fed's differential message because what is important here is the fed has focused on the strength of the economy, but also having a clear distinction between the cyclical strength of growth and the level of sacrifice. the full employment but also making sure inversion is on the way up. but, at the same time, the fed has been very cautious not to tighten financial conditions to avoid a tempered tantrums.
2:23 am
anna: what link the you see between treasury yields and who wins the election and working out where yields go when they set policy? i ask this because i saw in your notes that there could be a deeper yield curve. there is analysis that suggests that yields -- this is the 10 year -- it will climb whatever clinton has a lead. whatever assumption you make about how fiscally grandiose, you can come to either conclusion. lena: in the short-term, it is driven by a mix of pre-election drivers and long-term strategic's and the mental drivers. with respect to the short-term drivers, they tend to rise on a clinton lead in the polls which suggests the underlying environment for longer qe
2:24 am
that's all yields grind down to record lows earlier this year which has come to an end. the u.s. economy is holding up much better than the fed in spite of the u.s. energy sector that has been bearing down on gdp figures early in the year. is testament to the fact that even though we may see slowdown in labor conditions, it will not result in any widening. underwriting that of the oil prices which is supporting inflation expectations. has inflation expectations taken hold? i'm looking at the yield curve. this is the u.s. yield curve. let's take politics aside. let's see that we have a bit of continuity. what happens next? are you worried about inflation expectations? we are still far away from the magical 2% level around the
2:25 am
world, aren't we? lena: i think there is clearly ongoing slack with the economy which means there is residuals with inflation. risk premiums are still out there. yuan, thes of the underbid commodity prices globally -- it is still a global shortfall of demand, particularly in the commodity heavy emerging market sectors. is ameans, yes, inflation theme but will we have seen in the past quarter or so is that inflation has been underpriced and the fact u.s. inflation is clearly higher than widely perceived. a call of making the argument that the height in december or signaling a height december would
2:26 am
be a mistake. share some of that anxiety. lena: i don't. the fed has mastered the art of tightening. the one thing the fed has control over is interest rates in the u.s. the fed has been keen to be behind the inflation curve and therefore a cyclical leap to real interest rates. what is extraordinary the interest rates have fallen since the fed height rate in december -- hike rate in december of 2015. the u.s. real yield curve is actually flatter. we have seen in the last month, there has been more normalization. you look at the u.s. real rates compared to the strength of the economy, the remarkable thing is the last time interest rates were this low -- manus: as always, time has run against us. hold those thoughts.
2:27 am
we will talk more later. lena will stay with us. day after shell developed -- delivered the benefits of compacts. they are hoping to reproduce the names. this is bloomberg. ♪
2:28 am
2:29 am
2:30 am
anna: welcome back. this is "bloomberg daybreak europe." the dollar against the yen, with some appetite in the asian session for safe haven place. the japanese yen, gold, the swiss franc -- all of those getting a boost from the latest election jitters. it made itself known in markers the last 24 hours. a host of companies reporting this morning. let's start with the german airline. they say they are operating in a difficult market environment. they are lowering capital expenditures in 2018 and 2019 by about 300 million euros per
2:31 am
year. they increased fourth-quarter capacity by about 8%. they previously planned for capacity to increase by just under 10%. creeping down in their traffic expansion plan for the fourth quarter, cutting by one percentage point. aircraft.very of they are also reacting to price pressures. nine months have nudged it down. this is a company that now, a little less funny for hours, was heralding success in its long halls, having revamped the routes. facing competition, of course. and through some joint ventures with asian carriers -- that has been one of the themes. on it today. ryanair is holding a press conference. they do not currently operate from frankfurt.
2:32 am
is ryanair planning on taking the battle of the skies right to the door of this particular airline? we will keep an eye on that story as it develops through the day. manus has got breaking news on the oil sector. manus: yesterday it was shell and dp. -- m.v.p.. now, you have other earnings. below theon, slightly estimate of $251 million. here is the big headline for --don petroleum -- fof lu for lundin petroleum. have more than doubled 2015. they're upping guidance in terms of production. missed everembers so slightly, in terms of revenue. the market had penciled in 320. i can tell you, in terms of
2:33 am
projects coming online, they started a project expected to almost double their average foyers through this year. it dropped holding in the norwegian field. it really is about the guidance, up 75,000. the ceo says the balance sheet can sustain $40 oil. we are going to have that conversation and about 30 minutes time. we will be speaking with the lundin petroleum ceo in his first interview of the day. living with $40 oil, up in your guidance? a bit of the majors yesterday. anna: a new edition of "daybreak" is available on your bloomberg and your mobile. let's look at some other top stories making this edition. the cover story in today's fed decision, which is overshadowed by election jitters. that is reflected in the futures market. a 60% chance of a rate hike
2:34 am
this month, but that jumps to 68% for the december meeting. everything that develops out of the fed over the next 24 hours. manus: the next story is about the u.s. elections. less than a week to go. it is about anxiety hitting the markets. the s&p tumbled to its lowest level since july. this is the abc news washington fall. donaldumbers showing trump beating hillary clinton with 46% to 45%. there is a lovely story on the bloomberg about what to watch on the s&p 500. my birthday, august 8 -- i know sinceth remember that -- then, the market has died to nearly 4%. and that is inauspicious for the incumbent party in the white house. , i'm starting to worry about manus. he has given us months to
2:35 am
remember, and we have not. i apologize. manus: i just like my birthday. i just like my birthday. use of: who does not? manus: what is the problem with that? i like my birthday. yusuf: we hear from alibaba and facebook. revenue growth is expected to remain solid, according to j.p. morgan. facebook is expected to see sales increase about 50% for a fourth straight quarter. manus? manus: time for risk radar and i believe out everything to do with historical data. polls, 46-45,to the abc polls -- it has rocked the asian market. asian stocks dropping the most in seven weeks. the market has correctly signaled the outcome in the election.
2:36 am
86% of the time since 1928. day six of a drug. money going into gold. gold coils -- old coin sales from the u.s. month, the longest run since 2010. take cover. bit of protection. 1292. up peso dying, the dollar 0.5%. anna: the use of the word "angst" has increased in bloomberg copy. it is making me nervous. will london remain europe's preeminent financial center after the e.u. exit? this is a survey by the consulting firm. about 72% agree the city will retain its role as the block's main finance hub, but nearly four in five say brexit will have a negative impact. meanwhile, another report suggests mark carney will
2:37 am
leave u.k. interest rates unchanged throughout his remaining time at the bank of england. according to the national institute of economic and social research, inflation will hit 3% by the second quarter of next year, but rates will still be at 0.25% when carney leaves his job in june of 2019. a is still with us in the studio. what you make of the latest line surrounding the boe and the uncertainty that brexit is feeding into them? lena: i think the bank of england is facing a difficult environment. news, but weing still have to see the economic evidence of any meaningful change in the economy. when you look at the growth figures, since the pmi surveys consumer behavior, they belonged to the euro before brexit.
2:38 am
the strong performers in the run-up to the referendum in june were accompanied by rising structural fragility in the economic growth phase. record lows, u.k. household savings, and a wider current account deficit. the latest questions about the sustainability of u.k. growth in the aftermath of brexit, particularly given comments on sensitive sectors such as consumer spending and foreign capital inflows and the current account deficit. anna: we will see how consumer-sensitive sectors hold up. we get numbers from house builders and retailers today. strong.e been fairly we will see if that holds as we see in action expectations changing. i have this chart on the bloomberg. wearable bank of england rates go under carney? it shows they have not moved that far under carney. the yellow section is a forecast of market expectations.
2:39 am
not long ago, we were expecting mark carney and co. were going of thisup by the end year. that does not seem to be the case now. expectations have changed. no changes expected in this week's meeting. one to be ahe next hike? lena: i think it will be quite some time before we see a rate hike in the u.k., and that will have a fundamental impact on the health of the balance sheets of u.k. banks, despite the fact that mark carney says -- anna: there are limits to the extent which they can look through higher inflation. lena: that is right. there are two elements. one is, i think the anchoring and has been right, when you have a sensitive economy which is relying on the housing market , which is reliant on strong financial systems -- all of these are fundamentally -- 80% of the economy is sensitive. that means the economy is sensitive tushar or sustained changes in financial conditions. i will consider a 50 basis point
2:40 am
or a tradet yields weighted devaluation of the pound a very sharp change in u.k. financial conditions. the bank of england is right to anticipate a knock on effect. the rising u.k. inflation premium, the potential for lasting damage to the u.k. public finances in terms of stronger borrowing agers, higher borrowing needs ahead -- all of that really limits the ability for the bank of england to do much to affect financial conditions. gilts,if we look at the they have sold off along with all of the other bond markets, but the bank of england is one of the few central banks still doing quantitative easing. -- is the to selloff gilts selloff overdone relative to peers in developed markets? lena: as ever, you are asking the great question. i think at this point valuations
2:41 am
factor, given that we have not seen a massive exodus in u.k. .inancial assets and the outcome of the negotiations has yet to become clear. but let's not forget the u.k. economy has been markedly resilient, and it is probably several quarters before we start to see a knock on impact in terms of the longer trade and investment implications that reduce access to the u.k.'s largest trade partner market could have on long-term growth potential. for now, however, i think the rising u.k. gilt has been well correlated with the knock on impact from global growth, normalization in global inflation expectations, and the fact we have seen the end of qe. the bank of japan, the bad, even the ecb moving away from the kind of environment that has, in turn, alone markets to shift away from financial sectors to
2:42 am
fiscal policy. all of that is contributing to a steeper yield curve, especially with the bank of england peaking. bloomberg has an exclusive interview with the former u.k. chancellor of the exchequer, alistair darling, today at 10:30 a.m. london time. we had toward november 27 and the autumn statement. bank of england meeting this week. than a years less until germany's next federal election, and the issue of the migration of turkey is likely to remain high on the agenda. in an interview with bloomberg, the coleader of the green party says turkey is a long way from joining the e.u. >> it is not realistic to expect turkey to join the europeans. i do not expect that turkey is moving toward europe. turkey is moving far away from europe. we are discussing the death
2:43 am
penalty, cracking down on newspapers. opposition politicians -- just elected mayors, they lose their jobs because thereupon it does not like them. this is not democracy. the: let's talk about eurozone, about europe, and about that economy. population growth one way to drive growth. headlineing at the from our colleagues at bloomberg intelligence that says the euro area economy is showing growth, but not fast enough for the ecb. it is just sluggish at the moment, isn't it? lena: absolutely, and the price of persistent undershooting of the inflation target in the eurozone, the fact that headline inflation is barely in positive economic, is rising inequality, persistent youth unemployment premium in the south -- that has a knock on political cohesion of the union. its ability to move toward stronger capital markets union.
2:44 am
and ultimately the future of the euro era. i think in the aftermath of brexit, we have to bear in mind 'sat even if the government central policy direction of the euro is toward a stronger union, french protest votes are increasingly affecting this direction and are ultimately driving the forces of division over the forces of unification. what happens next? so much weight of expectation on the ecb for christmas. do you think the t gets adjusted? we have had a huge sweep of more bonds than the ecb can get their hands on, with this shift in the yields around the world. that is good, isn't it? i think the fact that the inflation mandate of the ecb is beyond the power of the central bank lending at this point -- it is down to political cohesion and the ability of governments to drive through growth,
2:45 am
supporting structural reform, rather than down to the ecb to pump more liquidity into the markets. continue withwill a credibility challenge. that means it will not be able to step back from quantitative easing or record low interest rates for a long time. constraints to the quantitative easing package suggest that at most it will have to migrate into less liquid credit markets, sustained asset purchases. that de facto means some form of tapering, even if that is not the message the ecb wants to send in 2017. manus: thank you very much, lena. coming up, do not look now. i will not sing the song. some opec members boost the output levels. our crude prices going nowhere
2:46 am
but south? we have that conversation. and brexit. investment demand in london property has been pressured since the e.u. referendum. is it good news for persimmons? and what is the focus outside the capital? hillarythe midwest -- as an extra stop, michigan style , as the election campaign gets tighter. ♪
2:47 am
2:48 am
2:49 am
yousef: i live shot of new york, the big apple. u.s. futures currently called lower. point 2%.0 down zero 2:49 in the morning over there. let's get the bloomberg business flash with shery ahn. shery: valeant pharmaceuticals is in talks to sell its
2:50 am
gastrointestinal drugs business. reports the company was discussing the unit sale to a japanese pharmaceutical company. shares fell sharply on that initial news. according to the wall street journal, the business could go for as much as $10 billion. tesla says its controversial solar city acquisition will pay off in a few years. it expects the deal to add more than half $1 billion to its balance sheet by 2020. ceo elon musk is also solar city chairman and financer. he says the merger will give customers a single destination for a solar roof and home battery. investigators have called for more independent directors if the merger is approved. young china holdings rose on its new york trading debut. the company, which owns the kfc and pizza hut brands in china, was spun off from yum brands following a tumultuous stretch for asian operations.
2:51 am
after losing market share, it is -- with changing tastes and local habitation, the director spoke to bloomberg. >> they have been incredibly supportive of the separation, and the transformation strategy we are putting in place. it is nice to have the support and endorsement of the board as you go through such a large change in the organization. shery: that is your bloomberg business flash. yousef? yousef: oil is extending losses from the lowest close in more than a month after weekly industry data showed u.s. crude stockpiles expended. but the gluts should be set to ease. the eia says u.s. production will fall by thousands of barrels this year. that is the first drop since 2008, according to data compiled by bloomberg. still with us is the chief economist at tsipras economics. and joining us live on set is peter fitzgerald, global head of multi-assets at aviva investors.
2:52 am
the latest oil numbers. what do you make of the current supply and demand balance? how does that vote for oil prices? peter: first of all, i think it is impossible to predict oil prices. i do not think the producers can produce oil prices. i do not think the buyers can predict oil prices. i think even the very, very large countries like saudi arabia cannot accurately predict oil prices. is,question one must ask and i compensated for taking risks, from an investment perspective, in terms of investing in oil companies? our view is, given the changes they have made to their, given their ability to withstand volatility in oil prices -- we think there are attractive options in those businesses, particularly when you look at the dividend yields you can get paid why your sitting there and waiting. anna: you look at those you want to play with and those you do not, it is all about the dividend for you? peter: the sustainability of the
2:53 am
dividend, and potential growth. it changes what business has done to their balance sheet's to withstand global prices. we have seen shall smash estimates. statoil came in with weaker earnings than expected. --re is the optimistic optimism coming from? it is not from oil prices. peter: you have to look at how much pessimism is built into the market. you need to be less pessimistic than others to make money in certain investors. when you look broadly across the oil majors, what you want to avoid is some of the idiosyncratic risk in terms of individual companies. our view is to take a broad basket of these businesses rather than that on one or two of them. anna: manus, come in here. your thoughts? i saw the bank of japan talking about a higher oil price and goldman sachs talking about $40 on the barrel. how important is that as a major
2:54 am
swing producer? opec hase reality is, on numerous occasions in the past tried to bring back almost a cartel approach to oil in terms of controlling supply, and it is virtually impossible to get all members to agree and to control that. again, we go back to the fight desk. oil is trading in the mid 40's. navy it could fall by 10 or $15. maybe it could increase by 10 or $15. is in thate it range, you can get paid by going to businesses that make money from this investment. lena, what is your expectation around the oil price? as peter was saying, there is a range to play with, i guess. lena: as a macro economist, my specialty is financial economics. my team is connecting the dots.
2:55 am
central toare quite our understanding of the cyclical structure of the global economy. in demand terms, oil revenue is going to be high. , thec, depressed inflation limits of monetary policy. on the supply side, energy markets have been emblematic of hasoverinvestment that happened through commodity sectors, especially in emerging markets, over the past decade. i think in the short-term this has been more of a supply rather than a demand story. the global economy is fairly strong. i think probably at this point oil prices are not really reflecting the strength of the economy. yousef: i would like to pin it to her numbers. on the cpm function on the bloomberg, we are looking at $55 median estimate. the you fall into that? a pressen it comes to protections, i am a macro economist. if we fall into that, i will be
2:56 am
optimistic for the future for the general cpi inflation. anna: peter, if i look at the oil majors and i'm thinking as a u.k. investor, maybe they form a special function, because you are talking about a lot of earnings coming from overseas, something of a shield from the weakness in the pound. peter: i think in general there are a lot of u.k. investors who have an illusion of wealth today because they are looking at their investments in a devalued currency. you can make that argument for some of the oil majors. if you are constrained to investing in u.k. stocks, these are an interesting way to cushion yourself from some of the weakness in sterling. but i think you need to look at the performance of businesses ine bp, shell, total, eni common currency terms rather than local currency terms. anna: peter stays with us. lena komoleva, thank you.
2:57 am
3:56 here in london. power u.k. homebuilders holding up? we break earnings from persimmon and speak with the ceo. ♪
2:58 am
2:59 am
3:00 am
yousef: political jitters. ook. elections nerves spp market. investors seek haven. will the fed will fire with polling day less than one week away? gnome with expected today. how strong will be december signals the? -- signals be? thinkhan 70% of bankers london will remain the preeminent center.
3:01 am
welcome to "bloomberg markets: bloombergpen -- daybreak. reporting earnings third-quarter sales coming at $9.18 billion, a for on the sales estimate 9.1 4 billion -- $9.14 billion. for 2.1 $1e was billion. the company is keeping its fiscal your group outlook. the third-quarter net coming at $429 million. $501estimate was for million. and-to-date, gains of 12.8% before the announcement as well, 16 out of 29 alice tracking the
3:02 am
-- analysts checking the stock. they try to focus more on its core business. anna? anna: breaking news from you can incorporate, yousef. let us talk about what is happening at a uk retailer. -1.75% to positive. they are narrowing that range. they are taking a bit off the top, so a little bit more confidence about knowing where the future takes us at least. are fullures price. directory is flat, so no growth at all. third-quarter net total sales down by 3.5%.
3:03 am
in terms of the forecast going in terms of the numbers, full priced sales under the next brand. the forecast amongst 19 analysts was for a decline of 2%. compare those numbers. third-quarter net brand sales -- down.rand sales that number is weaker than had been expected. this is a business with a very strong track record. profitilson has widened margins for seven consecutive years. he prides himself on the heat has managed to not read his prices in away some others have had to. we'll keep looking out for comments they have about brexit, inflation, and how that is hitting the consumer. that is move on. numbers coming through. this is another business run by someone in favor of a brexit. the first quarter sales up by
3:04 am
2.5% and total sales up by 2.2%. their sales growth has slowed. very interesting when you consider that we see a lot of resilience from the uk consumer. interesting to see the details of their. this restaurant and pub operator, what it is about their business that means they are experiencing this slowing in sales growth in recent weeks. getting numbers from the housing sector as well. uk's largest homebuilder by market value, the latest lines coming through. persimmon private sales raised ahead ofust 23, 90% last year. the eu referendum was encouraging. the firm says it expects operating margin to improve in the second half and the eu referendum uncertainty which really has dominated the uncertainty around the stock.
3:05 am
seven out of 18 analysts who aack this company have a buy rating ahead of the company. year-to-date, still down. we will be joined by the jeff fairburn. let us check in on the futures market. currently, we are called lowered across the board for fewer stocks, down 0.5%. inlly tracking sentiment some of the losses we are seeing. anna: let us bring up the risk radar and talk about the anxiety we are seeing around the u.s. election and how that has been a feature of the asian trading day. ,anus: the word angst anxiousness, and the abc poll is what is driving skittishness in asian markets. seven week low for the msci. volatility in the nikkei, up 7%.
3:06 am
volatility in european stocks is up some 41% in the past seven days. s&p futures down 0.2%. that poll is putting pressure. s&p,s of a drop on the making it the first to fall below 2100 since july 7. peso, dollar mexico, that momentum driving higher. this is just off a three-week low on the peso. that survey from abc news washington post was conducted october 27 to the 30th. one difference between the two. no was the gold. -- go with the goal. pointsare buying gold for the third straight month. the longest run of buying since 2010. there is your risk radar. it is risk off, decidedly. london petroleum reported third-quarter earnings in line
3:07 am
with the estimate. let us go straight with the first interview of the day with the london petroleum ceo, s exandra chneiter. well done. when can the market expected dividend? please give us some guidance. guest: good morning. very pleased, as you said, on the results. that is on the back of good performance from our existing fields primarily have agreed. we have seen quarter after quarter, guidance. very pleased with that. it is not if but when, but of course, we would like to see a certain stable market going forward and announcing any dividend payment sustainable.
3:08 am
absolutely appreciate that. do you think investors hope that stability comes? that they can expect a dividend in 2017? alex: i am a going to be as precise on dates. in the long-term, we are going to see a recovery of the oil price and that will have an impact. it is not just a market stability, we have a major project which will come mainstream at the end of 2019 and that would provide for the -- provide further increase. at that time, despite the market, we will be obviously in an even stronger position. manus: alexander, one of the themes that have come through in the oil reporting season is taking costs out of the business. it you are getting more efficient. in of cost is dropping. efficient.ressively
3:09 am
how much more are you going to take out of the business -- how capex are you going to take out of the business? alex: it will put pressure on the providers. it is a good example. one of the largest projects in the world today, we have seen already cost down by 20%. we see further pressure on the cost. say, it is a perfect storm. we are building this enormous project in the best possible time where costs are under pressure and definitely, the main focus for a company, and we have seen it. operating costs are at a record low. we announce the breaking cost for the third quarter of just above seven dollars per barrel, so very pleased with that performance. manus: i see here. you say the balance sheet can
3:10 am
sustain $40 per oil. we are waiting for opec to agree on the non-opec, to get together and agree. how optimistic are you? it's choice me that there may be assets on the block that you are interested in. if you can't survive on $40, a lot cannot. alex: first of all, very pleased with that position. the fact that we can sustain oil prices down to $40 for the long-term and continue investments is a good position to be in. it is a privileged position to be in. , ifor the opec and non-opec think we could see for the volatility in the coming months, so i think, the pictures in the medium long-term will not change. the oil industry is not investing in the offshore industry, so eventually, once we have gone through this instability, we could see oil price recovering and of course, this brings opportunity. manus: if opec do indeed, where
3:11 am
do you think, with an intelligent head on and a practical head on, where cannot get a longer-term price of oil? $50 to $55? $55 to $60? alex: we have seen this on the back of improving the supply demand equation. we have seen the oil price going up to $50 and the market gets more stable, we'll see oil price recovering to $55 to $60 and in a differentm, it is story. it you will see a different impact due to the last of the investment in the oil industry. investmentlack of could squeeze the market higher. let us touch on acquisitions. marus oiland that could be -- would you be interested in exports?
3:12 am
where is your top list? is it the marist assets? alex: i think what we see today is there is a lot of opportunity is and of course, we are looking into it. mind you, we bought 15% of , which was an excellent deal and we will continue to look at opportunities very much focusing theirway and, you know, strategy is one, but there is another company in the market, so that is something we are going to be very particular looking at. manus: alexander, thank you so much for joining us on daybreak today. eiter.der anna: when we come back, we will be talking about the home built in the u k. how are you can home builders u.k. home? --
3:13 am
builders holding up? this is bloomberg. ♪
3:14 am
3:15 am
3:16 am
anna: welcome back to bloomberg daybreak europe. peter, we have had a host of earnings out this morning. really interesting lines coming through from the u.k. corporate. talking about third quarter showing a continuation of the strong summer sales picture. strength in the u.k. consumer has surprised some post the brexit vote. what does that do to your investment strategy? the market post-brexit is very early days at this particular stage, and it is very uncertain in terms of what the
3:17 am
outlook is going to look like, but what we would observe from the performance of u.k. stocks, his first of all, people are again valuing their investment in sterling instead of some hard currency these days, and particularly, the ftse 100 come over half of their earnings and the dividends are coming from foreign sources. if one wants to get a better picture what is happening in the u.k. economy, you should look at youftse 250, which gives smaller businesses, those more exposed to the u.k. markets. as a portfolio manager, we are short that particular area of the market's. anna: you are sure the 250? peter: the mid-caps within it a domestic portfolio. , they arends will early starting. yousef: there are a lot of politics and focus. let us get back to the united states, which has been one of
3:18 am
the key topics in this show. how are you trading that outcome and volatility and what is your view when you compare the two candidates? peter: we try not to trade our portfolios to read what we look for is how we can build a robust portfolio over a two-year to three-year timeframe and even if we get some things wrong, we do not want to destroy performance and value for our clients, so we are not an investment asset. positions around specific events. what we like to highlight to people is there is a presidential election every four where, whileis is this particular event has attracted more attention than others, if you actually look at the performance of the stock markets around other presidential elections, going back to when obama was elected, if my memory serves correctly, the market fell about 6% on that particular day. all the clock forward three years later, and we start to say, well, what were we worried about? manus: what were we worried
3:19 am
about, peter? banks worried about their net income. .sbc is up 40% barclays had a nice, lovely, third quarter seven numbers. lenders have risen twice as fast as the broader market. does that continue when you see that kind of data from the bank industry, cannot momentum that momentuman continue? in thewe have to make it context of where we are coming from. it is relatively cheap. the fact that you get some sort of mean reversion and rally in the context of an environment where yields globally are rising, that is actually quite a supportive environment for banks. i do not think you can look at it solely in the context of brexit or the uncertainty around the u.k. markets. anna: you have to take the broader picture.
3:20 am
tell me what you were saying about the risks around the small caps. you think anything that is exposed to the u.k. consumer, the period we are in now is a honey me them -- honeymoon period? it has not yet come home to roost? peter: the reality is, you see increase int an inflation. what that will do is start to squeeze real incomes and put pressure on consumer spending. but the bigger picture is actually you what happens with corporate investments and what are the larger corporate going to do, and given the uncertainty around the future trading arrangements the u.k.'s going to have not just with europe but global partners, i think it is very difficult to it envisioned an environment where you're going to have a significant corporate spending and investment in the u.k. until some of that uncertainty is
3:21 am
removed, and the belief that that uncertainty will only last a couple of years, i think, is very naive. if you look at how long it has taken canada to negotiate a trade agreement with the e.u., that was about seven years. this is a country with considerable experience of trade negotiations. the last time the u.k. negotiations trade agreement was 1972. yousef: i am looking at some of the latest research notes from the consulting firms and bankers believe that london is going to remain the predominant center across the board. is that something you agree with? it is like asking an anchor whether the tv will be around. peter: it is obviously a biased sample survey. the idea that london is not something that brexit would remove entirely, but i do think it will increase the cost of doing business and increase the complexity of doing business and there may be certain parts of that business i have been
3:22 am
elsewhere. i do not think you can say with certainty today that london will continue its dominant role. i think there is simply too much uncertainty. cover of ouront daybreak today has an escalator and 0% on. i suppose my question to you is the fed tonight, the terminal rate, i read a lovely article which said this is between now and the terminal rate. it is not very far, is it? it is much more significant than ever under greenspan. where is your terminal rate for the fed? are you all in for a hike? would eight trump victory dissuade the fed from moving? -- a trump victory dissuade the fed from moving? peter: what would dissuade them from doing so would be significant market volatility prior to that particular point, so if you were to see a trump
3:23 am
actory and work to see significant fall in the equity markets or significant this option in the income markets, then i think the fed would use their card of uncertainty as that of using the global words that say we have uncertainty domestically and probably hold off on raising rates. volatility, it think it is normal to expect the fed to raise rates in september. what is priced in for next year -- for december. what is priced in for next year? inflation in the u.s. is actually picking up. if you look at 10 year break evens, they have been rallying since summer. if you look at some of the cost pressures coming through, things like health care, our view is that you could actually very quickly have reached that 2%
3:24 am
target of u.s. inflation, and then the context of having 0.5% of interest rate becomes very interesting. anna: we had a conversation in about inflation yesterday with david bloom who is talking about the rising futures and tenure break evens and suggested that is just that the margin and inflation is not actually here to stay and we are still in a deflationary world and the fed has had to back away from more hawkish stances at the beginning of each year quite recently and everybody is turning japanese and we have to get used to that, that we will not get much more inflation in the u.s.. peter: we take a few that reflation will triumph over deflation in a number of economies, and i think what you have to then ask yourself is even if you are worried about deflation, is the current price of inflation correct? is au are wrong, what potential upside and downside around that scenario. our view is you are seeing a
3:25 am
pickup in u.s. inflation in a number of core areas, and that is not just health care costs. you are seeing wage costs start to pick up as well in the u.s., stabilization of the oil prices. our view is very much to the contrary of that. yousef: when we look at the extradition for the rate hike in december, the bar has gone quite low, hasn't it? what did it would have to come out to get the fed the push this back further? there is precedent for that. peter: i would say it would require a substantial fall in the s&p 500, for example, post some surprise in the election. anna: so, the election could cuffer things? peter: it depends on what the markets do, post the election. i do not think it will be the outcome the election that determines what the fed does. the fed watches market.
3:26 am
anna: thank you, peter fitzgerald. please does say we are joined by the ceo of persimmon. jeff fairburn joins us on the phone from birmingham. you have said that you have seen a continuation in the third quarter strong summer sales. give us more flavor around how strong your business is at the moment then. good levels seeing of interest across the board, really, on the sides. , up 19%.vation rate that is compared to the same point last year. it has been strong right through earlier on this year, so very encouraging. we were marketme and it is very good online demand. looking at the comments
3:27 am
i cannot with your earnings, you are talking about the du referendum, uncertainty may continue for some time, but at the same time, you are upbeat about how trading has evolved. talk us through what the impact has been on your sales from the ongoing brexit uncertainty. jeff: there was a short period of uncertainty around the vote, but actually, confidence returned quickly. improve against the comparables from last year which was also a good selling time for us, so at the moment, it is very affordable to buy new homes in the u k, particularly for first-time buyers. that is a shared equity products. first-time buyers are finding that they can buy property for less cost per month that it would cost them to actually rent, so it is a good time for people to get on to the housing ladder, and the industry has
3:28 am
been working hard to respond to that demand since 20 13, where we saw volumes increasing. since then, persimmon has increased its volume of homes produced in the market by 60%, which demonstrates how hard the industry is working towards supply and demand we are seeing. anna: if we look ahead to 23rd of november, jeff, what are you expecting or what would you like to see from the chancellor in terms of any support to your industry? it sounds as if you do not need any. i do not anticipate that at this stage. as you say, at the moment, sales of new homes are good and strong , strong on mind demand -- online demand. it would be more relationship the process, planning system to measure it is more streamlined, to help the process actually sus, because consen
3:29 am
of volume the industry is producing are off the same yearss of outlets we had ago. the industry needs to be operating off more sites to give us a better chance to actually build more houses in the places people want to buy. yousef: are you planning to change operations in the wake of the brexit wrote and what are you doing about investment in hiring as a result of it? jeff: we are certainly a little more cautious and we were before. if you look at the investment we have made in land this year, we are about on a sort of as incement route, where a prior years, we have been adding to our land bank. at the moment, we have been a bit more cautious until we understand exactly what any effect could be. the market is good now, but it is really dependent on confidence.
3:30 am
we need to see what happens during the course of next year, andink for the jobs market, judge the business on that basis. at the present time, we are happy to invest. we replaced the landrieu lies during the course of the year and see a good opportunity. we are optimistic, but we are a little more cautious. much jeff, thank you very for giving us your times morning. jeff fairburn, ceo of persimmon, joining us to talk about the post-brexit votes housing market in the u k. that will do it for "bloomberg daybreak: europe." "bloomberg markets: european open" is up next. ♪


info Stream Only

Uploaded by TV Archive on