tv Bloomberg Markets European Open Bloomberg March 28, 2017 2:30am-4:01am EDT
elsea ballerini following the show on xfinity x1. the acm awards. live on sunday, april 2nd 8/7 central on cbs. ♪ guy: good morning. you are watching "bloomberg markets: european open care coverage i'm guy johnson in london. matt marling is -- matt miller is in berlin carry the south african president planning to fire the finance minister. we will speak to the head of goldman sachs south africa. call returns. u.s. stocks rebound late in the section.
-- session. breathing room for credit suisse. the lender ceo says he is looking at other ways to raise capital. him. going to hear from we are less than half an hour away from the start of cash trading here in europe. it will be an interesting session as equity markets turned around yesterday in the u.s. after a couple days malaise due to the health care failure. asian markets overnight turned around and european futures gaining. green.the ftse futures up 4/10 of a percent. take a look at the bund trade. littleelds trading a higher. investors getting out of the safety of german bonds. right now yielding 0.9%. guy: let's talk about the gmm. majors comes to fx, the
-- we will see what happens in europe. a couple things to say. the south african rand move down by 2%. have relating -- rerating coming up in april. big holders of south african debt. a bit of a lead in what happened in london this morning. back ands are bouncing that could feed into what we are seeing in the london market. we talk about the mining stocks in more detail in a few minutes. but first, here is juliette saly with your first word news. juliette: south africa's rand has slumped this morning. the drop came after the president was said to have sold -- told senior leaders that he plans the finance minister from
his post. that was according to three people who were at the meeting. a spokesman for anc said the people were misinformed. in australia, the worst outflow in six years has smashed. halted coalie has operations and forced thousands to evacuate or seek shelter. wind gusts have been measured at up to 260 kilometers per hour. it is expected to be the most powerful system to hit the country since 2011. u.s. president donald trump will sign an executive order later that begins unraveling rules and directives to combat climate change. move will undo policies deny -- designed by barack obama to keep the carbon cutting his promise -- administration promised. although trump fell short of leaving the climate accord. hasit secretary david davis
said britain will pay nothing less than money you officials have floated needs to be paid. the comment came days after jean-claude juncker's says the you cable be expected to pay 50 billion pounds. bill is set to be a source of disagreement after brexit is triggered tomorrow. --ttish first manner minister nicolas is expected back in for her plan to pursue a second independence referendum. she is seeking permission to discuss the legal means to hold a vote by spring 2019. lawmakers will vote around 5:00 p.m. u.k. time a day before the u.k. triggers withdraw from the european union. global news 24 hours a day, powered by more than 2600 journalists and analysts in more .han 120 countries this is bloomberg. thank you.
credit suisse ceo says the bank has made enough progress in its restructuring plans and can consider alternative capital raising options. he spoke at the credit suisse investment conference. >> in a funny way, it is a positive thing that these things are taking place. when we started in october 2015, we said we would need 11 billion in capital. we have made a lot of progress since then. grow profitably, strengthen capital, and -- if you look at progress we have made in 12 assets,20 billion in [indiscernible] we're hitting our targets.
-- legacy, [indiscernible] [indiscernible] it has been a the 12 months and a lot of progress. it was a capital backstop, and we were clear about that in february, which has really helped us, restructuring barriers and now we have been progress as we consider other options and that is all that is all the data i can give you today. are not talking to banks, we're just considering options. a lot of reports in the media, we have been clear in february that it was an option. .ooperation was continuing to theet's cross now conference in hong kong. what else did he tell you is to
mark that since the you get about how use going to tap that extra capital? >> the since we got from him is that there is no rush. he said he has got a bit of time when it comes to brexit and coming up with that strategy, but also they also have some breathing room to way those before, the base case scenario was that partial listing of his's swiss banking unit. now he says the progress they have made in this turnaround program that has allowed them one option of which is selling stopped. -- stock. analysts have said it may be the the stockn, given has rallied since july. he wouldn't elaborate on details as to what these options are.
we do know that they have not talked to any investment banks when it comes to capital raise, and preparations for a swiss listing, the partial ipo of the banking unit, which has been a crown jewel are still underway. if you read between the lines, you can tell there is still a little bit of breathing room there. guy: talk to me about job cuts. yvonne: he said we're not done yet, but when it comes to the worst, it is pretty much close to over. the, he was saying that was toughest year from them. they had to cut 2000 jobs last year. 2017, a are in for possibly 1000 cuts. the asian equities cuts -- side in the region has been hard hit. he said we could see jobs lost
in the second quarter in asia. 2018, he said could be less than that thousand. when it comes to job cuts, we could be seeing some and in sight. much.hank you very yvonne joining us from the credits -- credit suisse investment conference in hong kong. next we talk about iron strength. the price and iron or has rebounded after an 11 week low. an analysis of the outlook for commodities. this will feed us into a conversation about south africa. political infighting in south africa. sending the rand tumbling as the president is set to fire his finance minister. we assess the situation on the ground. that is coming applied later on in the program. the open, cap 20 minutes away. this is bloomberg. ♪
♪ welcome that to the european market open. 18 minutes to go until the start of cash trade and we are looking at futures that are pointing up after a turnaround in equities worldwide yesterday, starting in the u.s.. let's get the business flash with juliette saly in hong kong. juliette: ericsson provisions the third million in quarter.
the company said the announcement was triggered by recent negative developments related to certain large customer projects. move highlights the challenges that ceo faces as he tries to stabilize the network maker. strategic opportunities for its media business. the long goodbye is finally over. or that two years after he was ousted from pimco, the from he cofounded and turned into a $2 trillion asset manager, the company will pay him $81 million an degree to dedicate a new founders room in its headquarters in honor of gross and others who launched the firm in 1971. is bracing foric losses as a slump in the pound urges british voters to leave the eu. the airline ceo said it is getting out management and taking other steps to boost margins.
the company is unlikely to be able to offset higher dollar cost in fuel and aircraft. that is your bloomberg business flash. guy? guy: thank you much. finding a little short-term support. this is beginning to edge off. pricesp-off in commodity came after the decision to cancel the vote on president trump's health care bill. the policy failure -- sentiments around the reflation trade. cudmore.s now, mark we are going to talk about south africa in this conversation as well. but let me turn to you first of all, pulling together for me because i am trying to understand iron or and what is happening with the health-care bill. this is a noisy market right now. are a lot ofere
factors moving. we have demand-side measures, people talking about trump's ability -- the reflation ability to enact trillion dollar infrastructure. we have jitters around chinese growth, concerns about the chinese property market. at the same time, we have seasonal effects weighing on the number. iron or is a very seasonal commodity for you get stronger performance in the first quarter of the year and that tends to give back some of those gains as we progress into the year. at the same time, you've got a number of supply-side issues. weighing into the market, whether that is growth in iron or chinese domestic producers or brazilians, or in the copper markets -- for instance, resolution or potential and to the strikes we are seeing. you have a number of these factors. supply, demand and currency effects as well. huge number of burials -- variables playing through these commodity markets.
that is leading to volatility in the minors. guy: mark, that is an awful lot of factors for the market to think about. as you try to look at what is going on here and understand what is going on here, is it possible to get any kind of directional view, and is that directional view based on anything that you can really take to the bank? mark: i think it has been difficult in commodities. iron or confused a lot of analysts on the way up. popyone predicted it to out, and if it kept going farther and farther. and the collapse happened quicker than expected. there are a lot of factors, whether china, slow dynamic growth, trump's failure to get the health care bill through, and the seasonality factor. certainly metals are looking quite heavy at the moment. weeks, commodities are looking quite heavy. oil is trading poorly.
sentiment ongative the commodities side and that is a bad sign for growth. overall we remain structurally bullish and the world economy is ok, but this is a worrying sentiment right now that you can't fight. you: paul, i want to ask why the iron or minors -- minors in general have problems keeping costs down, expenses down. why aren't they watching those lines closely enough? paul: i think if you look at the minors over the last few years, they have done a good job in stripping out a number of lines in the cost of production. if you look at the cost for iron close to 50 month -- $50 per ton. now it is $20 per ton. and you have exchange rate and oil affects, but one shouldn't underestimate how much hard work
some of these mining companies have done it looking to address that cost base. clearly that is something they look at all the time. one of the few factors that can actually control in the face of the volatility we see in the commodity priceline. look, they have done a pretty good job over the last few years. the new ceo, what do you think? paul: it is going to be interesting to see what he does. he did a good job in persuading the market. yearsnt a number of trying to move away from his predecessor, he essentially wants to be the biggest in every commodity producer irrespective of the value. we have done a good job in underlining the need for rational behavior, constrained supply-side growth in line with demand. guy: what is he need to do?
paul: he needs to do little other than repeat what his predecessor has been doing the last few years. a steady hand and nothing new. he had a simple strategy, which was to continue to pay down debt and grow the iron or expansions and in line with market demand. to the extent they continue to do that, you have an interesting story. it is if they do anything radical that people get jittery again, i think. matt: mark, i want to ask you why -- first off, why do you think zuma called gordhan back from a one-way -- one week long roadshow? mark: originally, i thought he would be doing a cabinet reshuffle. i didn't think he would be removing him, he knew the market reaction would be negative. headlines this
morning implying zuma has told the communist party leaders he does plan to remove gordhan and that would be negative for south africa. a lot of bonds are owned by foreigners, it is bad if they get downgraded. was one of the best-performing currencies in the world, that shows you the run it has been on. if the story was positive, zuma has killed that. matt: paul, what you think about the rand? now i can only get 13 for a dollar. shouldn't them -- a move like this week in the rand? paul: we have to see with the full impact of this will be on the rand. from the perspective of the mining companies based out there, the we crammed actually helps. actually helps. if you look at the pgm, the rent basket price attracts a weaker
rand helps on the cost front. from that respect, the quite like it. the greater perception of -- political risk in south africa is an mining district and that at the other way and can impact ,ompanies like anglo american some of the companies with the heaviest south african exposure. guy: if we get a downgrade of south africa, does that change the in the stability of some of these companies? paul: i think it depends on how the exchange rate moves relative -- what the further news is around cabinet positions in south africa -- >> if gordhan goes, it doesn't help. i am more hands-off with anglo if gordhan goes? to be. think it has
it speaks to a lack of stability in south africa. that said, there is always a lot of news around -- the election cycle with the anc, always a lot of hot air flowing around that. but moves like this are pretty significant events. matt: mark, are there a lot of moves left in these assets? is there a long way for the rant to weaken considering the strength you have seen over the last 13 months? mark: i have to say i do think there is. particularly if gordhan is removed. there is definitely a lot of more price action to come in the rand. you will see volatility in the rand and other assets in south africa. removed, you not have raised the risk premium around south african assets and that she changed some of the pricing. that would be choppy and not one way. we need to watch what happens with gordhan and if he is removed, definitely.
mark: how would the south african central bank react? you have seen the story in the market as picking that up, but now it is beginning to reverse that trade. if you are the central bank and trying to manage this story, you thea sharp spike, maybe central bank doesn't like? mark: a good question because they are meeting this thursday. one thing i don't expect is to change rates. one of the dynamics of the currency was that core inflation has dropped so rapidly. most recent print was at 5.2%, but it seemed inflation was under control. there is a worried about the currency may be they might air on being two dovish this thursday. that has narrowed the window. they are not going to sound too dovish and have been reminded that the currency risk -- a climbs the stairs and falls down the escalator.
paul, i am thinking about my commodities book and figure out how i traded. the futures are very important for me, but also stock -- looking around the world at the moment and seeing all the noise and the commodities. where is my best bang for my buck? paul: i preferred to be focused on the base metals and commodity -- than the commodities. i think they tend to show better valuations. commodities that i think are trading towards the bottom end of the range rather than the top and. it is situation where we are worried about some of that pressure coming off, there is less room to fall there and that is more a defensive play, particularly given the situation that you can start looking at it as a much this -- less risky way than we were 12 to 18 months ago. matt: paul, thanks a lot.
great to get your take on this. thank markt to cudmore from an life and show you on my screen, which i look at every morning and so do many market participants -- i always click on this chevron and pull out a cheat sheet for market action. if you hit the side of the ml can get a quick recap that is useful. we are minutes from the open and i want to get to your stocks to watch. check out shares in ericsson this morning and check out .hares at tesco as well first off, ericsson seems up to $1.7 billion in costs as a revamp begins. ericsson putting out some numbers that may move the market or move its shares in the market this morning. guy, you are watching tesco? plenty of stocks to watch,
♪ guy: one minute to the cash open. let's talk about the futures. the fair value cap collations point to a positive rebound following yesterday's selloff. that is what we were dealing with and the u.s. markets stabilized up into the close. as result, that is what we are pricing this morning. looks like a positive start, up by one third and half of 1%. in terms of the market open. maybe the dax firmer, matt. matt: i am looking at eurozone stocks. if you look at in close to the , you can see investors europeanoney into
stocks right now. the most since they have the week after brexit. this is especially important to look at the day before. theresa may sends out the letter to trigger article 50 , so investors look like they are getting ready and positioned by putting money into this euro area etf. the most money since the week of brexit. guy: as we can see, the market is opening. surge.we get a positive we are waiting for them london market to give us the numbers. at the moment, we are looking at a picture where we are trying to see the auction and the markets position off the back of that. .0 seconds into trading now i slightly worry about that number on the bottom of the screen. it looks like denmark its are coming up -- markets are coming up a little bit. let's get details with manus cranny. manus: just closing down his iv.
-- you don't know -- you don't want to know what is in the ib chat. there is always a little risk, what could be the reward? shanghai composite down for tenths of 1%. is arestion in china they getting more stability? that is one of the moves this morning. just under 24 hours away from article 50 being triggered and the start of brexit. how confident are we? brexit and how blissful are we? it is based on inflation, employment growth and uncertainty. on the 23rd, the 24th of june last year, we job -- dropped below zero. we peaked in the fourth quarter
but we are drifting, not as blissful as we were. are we getting to a more uncertain period despite the numbers we have had? matt was pointing at the etf flow and the money coming into european equity markets. conversation with blackrock this morning. strangers orof optimists, events on the way you want to look at foreign direct investment. this function on your bloomberg shows the net inward investment in the united kingdom for 2014-2015. u.s. flowing in perhaps the most -- you are seeing a sense of where the money comes from. gilts shade lower. we have dropped a bit in equities -- equities rallied. we're not having great success with the overall openness of
holocene on who is in my messagebox. guy: i'm sure your messages are full of clean and lovely messages. let's show you what is going on. the gainers are on the left-hand side of my screen. it is a mixture dominated by the minors this morning. stoxx 600.s on the it is the miners that are bouncing back. seen selloff in the mining stocks, we seeing that turning around. let's show you what is happening with the losers. on the downside, money rotating out of safeties. p.a.t. being sold this morning, jfk off, dan geo is off. thoseis rotating out of
staples. rotating back into some of the banks, high peter traits and into the mining stocks. that is the rotation we're seeing as the markets stabilize after yesterday's selloff. absolutely fascinating how we watch the developments go from friday to monday into today. the selloff of riskier assets after trump's defeat these after the dollar selloff subsided. doubts remain about implementation of the remainder of trump's agenda and how that could affect u.s. interest rates. chicago fed president spoke with bloomberg and gave his take on the rate path. >> to the extent that i gain more confidence in the forecast i have, that would be a good indicator i could perhaps support three. two might be the right number if there is more uncertainty, if
there are any modest concerns over whether we are going to get there. if we get continued strong growth and inflation underlying inflation, really picks up, we could get four this year. matt: with us now is charlie morris. charlie, what do you think about the comments from athens and the fact that the fed continues to look more dovish than the market was set up for before the last rate hike? charles: i can't disagree with that. we are looking at two hikes and it could go lower. at the u.s. two years yields and inflation expectations, they are cooling in the last few weeks. that explains a lot of what is happening in bond markets and the stock rockets. guy: opportunity or threat? charles: opportunity. without knowing why. the trump trade is higher inflation. that is trying to get the
economy to full capacity and that kind of thing. guy: already a full capacity? charlie: unemployment terms, depending on how you measure it. we could grow faster than we do. the trade rate could be higher in other parts of the world. right now there are things going pretty well. guy: what an european stocks right now? charlie: that is a direct question. the answer would be the dollar. allocation is more driven by currency than the stock market. the dollar is punchy at this point. europe is on the cyclical low in terms of relative performance, currency adjusted and is a buyer. i am an optimist for europe and britain. matt: and for banks? do you think the path of rate increases, the slow and steady path is a good one for bank stocks? charlie: i was bullish a year ago and it played out pretty well but in the last few weeks, that has reversed.
bond yields are coming back down. unless rates rise faster, bank trade will struggle from here. in europe, there is more to go for. the recovery is stronger than there is in the u.s. on the basis of how these banks have already moved. matt: if you take some of the profits from your bank that a year ago, where you reinvest them? charlie: right now defensive and growth is the best area to be. the problem with growth is the prices aren't attractive and that is also the case with defensive. but that is with the market offers right now. or is little you can point to and say is dirt cheap. one of the problems today is south africa, the firing of the foreign minister and the rand has sold off. ok, so there is something happen in south africa. where there is value there is problems and that is an ongoing
thing we keep seeing. guy: if you think the dollar is punchy and moves lower from here , the e.m. play is the most obvious place to be? charlie: yes. matt's point, south africa is one question, money has been pouring into locally nominated bonds. when clients come to you and want to play begin play space, how do i do that? charlie: the numbers thing is important. there is a difference between oil markets and nonoil markets. brazil and russia have been phenomenal this past year, but in my opinion, the oil price is going to struggle to perform from here. the normal markets -- nonoil markets could do well and that takes you to places like turkey and south africa, choose a different risk. a different assessment. these markets are volatile and they are also not massively deep capital markets.
when you talk about emerging markets like this, their market -- one decent u.s. stock is the same as an emerging country in some cases. guy: how much cash would you have on the sidelines right now? charlie: about 20% in short dated bonds. that is tactical because opportunity by duration and politically for the past eight months, i sat out of the way and kept my bond portfolio very defensive. that is waiting to go into non-bonds when it it -- makes sense. matt: charlie, thanks very much. you are going to stay with us. head of multi-asset. great to get his take this morning as we see equity markets turn around and big moves in commodities as well. we are going to get charlie's take. one day before the u.k. is said 50,revor -- trigger article
scottish plans for a second independence referendum and later, we continued this breaking -- developing story on south africa as president jacob zuma is about to fire his finance minister. he just talked about it with charlie and continue with the head of goldman sachs south africa come alive from johannes berg. ♪
well-connected european open. let's check on markets right now and for that we go to american jh -- nejra cehic. nejra: looking in your mid-cap movers starting with the swiss company that operates airport duty-free shops and is moving on reports that china's h and a group is looking to buy stake. almost a fourth of a percent. the most since november of last year. we seeing booker group also moving. two of tesco's largest shareholders are urging investors to join them in opposing tesco's bid for brooker, -- booker, which is a whole food grocery. tesco should focus on the turnaround and we are seeing booker drop the most since the end of january, down by as much as 2.7%. is called lower than it
is moving at the moment. but i only about 9/10 of a percent. it seems to be moving on terms of its rights issue. it plans to raise 512 million pounds. the issue price is 70 5/10 per share. it is also viewed for 2017 remain on changed. -- unchanged. guy: let's talk about what is happening in scotland. nicola sturgeon is expected to win backing for her plan for a second referendum. she is seeking permission to hold a vote by the spring of 2019. scottish lawmakers will vote at around 5:00 p.m. u.k. time. that vote has been delayed following the attack in london. sturgeon met with theresa may yesterday, speaking before their meeting, theresa may made her case for keeping united kingdom united. >> when this great union of nations sets its mind on
something and works together with determination, we are an unstoppable force. guy: meanwhile, cap out plans to invest 5 million pounds in u.k. over the next three to five years, taking its commitment to about 40 billion. the company's finance minister talked to nejra cehic. u.k. has a most very important market for us. we are to have more than 55 billion steadily funds in investment in the u.k.. we're putting an additional 5 billion pounds for the next three to five years. these investments will be through proper investment authority and its subsidiaries. our main focus is going to be technologies, and also some real estate sectors.
are making this announcement in the same week at the u.k. is going to trigger article 50. to start the brexit process. is there any scenario, any kind of deal that britain might make the eu and if there isn't a deal before the two years that is up, that would make the u.k. less appealing to you? >> the way we look at our investment is on commercial basis. when you look at the last 10 or 12 years, we were happily investing in u.k. and europe during the financial crisis. most of our investments are very long-term investments, so we are not looking at a short-term upside or downside. so that is what we would like to carry on in our investments. paul: there have -- nejra: reports that you have been discussing a bilateral trade guild to be activated when the u.k. leaves the eu. is this in the works and are you
working on it to be ready as soon as the u.k. -- gcce work among the community. fda, fromg is on the our side, we will have the discussion with the gcc. guy: let's find out about charlie morris. charlie, exhibit a. traits are -- traits are aggressively short of the pound. charlie: to buy the pound is the right trade. not to be short pound, because these guys on your side. as soon as they start covering, you make money very quickly. the downside potential of the pound is small because the price. 125 fair value ppp on many measures. the outlook is going to be better than you expect, even if it is worth, that trade is going
to make money. longer pound is going to make a lot of money. matt: what about the medium to longer term? from european space -- perspective, it doesn't the u.k. gets a lot of access to this important market for the growth of u.k. industry? charlie: of course, but what everyone is going to in the end vote with their head. i am very bullish on the outcome because i think europe is a wonderful place and britain is an important country within europe and i think that 27 countries aren't going to do something crazy. it is going to be difficult for them to agree on a really bad outcome. that is why i think some sort of consensus will come through in the end. also longer-term, i don't really think a small country like britain does have a problem. i look at new zealand, which has a smaller population and it is
probably one of the countries in the world that has the most value of any other. great things can be done within small countries and that doesn't fear me at all. guy: what about the gilt market? s trading at 1.17. inflation is going slightly higher at the moment. you have a very negative yield effectively on the gilt market. does that make it expensive? you avoid or are you happy to going? charlie: the gilt market is massively over priced. sterling a moment ago, you look at the spread between the u.s. treasuries and gilts. there is a very strong correlation. basically, the market is telling you they are bearish about the outlook for the u.k. and bullish for the u.s.. you can go back 40 years and never see a spread this wide. our countries are more similar than the markets currently have priced in and that will come
through. gilt yields to selloff and if anything, u.s. treasuries to come. the difference between the two will narrow. matt: i am just looking for some index in u.k. companies that have been punished. if you see companies that are being punished -- >> there isn't one, matt. at the am just looking ftse 350 and it is up up and away. charlie: in pounds. i beg your pardon. what was the question? guy: matt, you ask the question. matt: i am just wondering, do you look at companies that have been unfairly punished? charlie: absolutely, a good example, easyjet. a company you don't if you loved europe because it did secure up from britain. the shares are down quite
significantly. compared to ryanair which has a headquarters within the eu going forward. it is also a more efficient airline. on 13 timeses trade forward earnings, yet the margins behind the scenes are different in the two cases. it is a classic positive brexit trade. headlines -- i just don't believe it. on a rational continent, that wouldn't happen. theer way, if it did, machine is pretty unstable in the longer term. cannot connect to the issue of how you denominate, because you are a foreign investor -- there are very few sheep -- cheap acids in the world right now and you don't see big moves in a developed market like to move in sterling very awesome -- often.
for external investors -- the ftse year to date, 2.26 in pounds, up 9.1 in euros. difference is significant. assets. acids cheap -- cheap? i don't think there is any difference between domestic and international, it is either cheaper it is not. , theolted down price property you can't take away or some grandmaster not allowed to leave the country. the currency really matters for something like that. the other side of it is the yield. you could say the house in london, the yield would argue it is not cheap, but to a foreigner it is cheaper. to convert these diverging arguments. putting stock market
constant -- compare it and it gives you a strong indication. the europe stock market has been underperforming for 10 years. that must mean considerable value. i think this market has opportunity and is attractive. i think the same for europe as well. u.k. a little more so. guy: charlie will stick around, let's get a bloomberg business flash. erickson will book extra expenses as much as $1.7 billion in the first quarter as the business stutters. the earnings will be cut by about $1 million because of recent developments related to large test him or projects. erickson will also look higher restructuring and write down some assets. goodbyess come up along is almost over. more than two years after he was ousted from pimco, the firm he cofounded and built into a $2 trillion asset management.
he settled bitter legal dispute. the company will agree to dedicate a new founders room at his headquarters in honor of those who launched the firm in 1971. spurgeon atlantic is bracing for a loss this year as a slump in andpound ways on bookings rivals ramp up u.s. capacity. the airline's ceo says it is thinning out management and taking other steps did we margins. the company is unlikely to offset the impact of higher dollar cost of fuel and aircraft. increased competition. that is your bloomberg business flash. matt: thanks, juliet. credit suisse ceo told bloomberg the bank is considering alternative capital raising options after making massive progress on restructuring. he still wouldn't be drawn in on the details. has been a busy 12 months
with a lot of progress. the ipo was a capital backstop and we were clear on that in february, which has helped us. restructuring barriers. now we have made so much progress we can consider other options matt:. still with us is charlie morris. charlie, you made a successful best on the banks -- that on the banks a year ago. what you think about banks now as some of them come to market with their hat in hand? optimisticwant to be but the cases and test strong as a year ago. the prices are much higher. also the shape that the juncker -- the yield curve has changed. short-term debt -- yield starting to fall. probably not the case on this site yet, but they -- we haven't had the beginning of the trump trade on the side of the atlantic if you like to call it
that. i think the trade is starting to wane. i tracked the bank trade all over the world and is not as strong as it was. guy: if europe is going to outperform, you want to going to the banks? they are high be drawn european recovery story? charlie: that certainly was the case. banks aren't always high teachers. -- i beaters. guy: where are they going? charlie: i agree banks would be part of that but southern stocks to a higher extent. southern european stocks. guy: thank you very much for coming to cs. next the rand, up is expected to fire his finance minister. we will speak to the head of goldman sachs south african
♪ the rand plunges at south african president zuma is said to be planning to fire finance minister gordhan. we will speak with the head of goldman sachs investment bank for south america -- africa. u.s. stocks rebound late in the session. was the recent selloff just a health care hiccup? and breathing room for credit suisse. in an interview exclusively, the lender ceo tells bloomberg he is looking other ways to raise capital than listing parts of his swiss bank unit. with her from him. welcome to bloomberg markets, the european open. i am matt miller in berlin
alongside matt -- guy johnson. 30 minutes into the session on cash. howard things shaping up here in europe. not undoing the losses we have seen completely, but outperformance in the dax we were expecting. --don lagging, but miners trading up two tenths of 1%. let's talk about the real market action. we have been seeing some in the rand. that is a today chart. -- two day chart. the last 20 four hours have had interesting action. said to telld was senior members that he plans to remove the finance minister from that post according to three people at the meeting yesterday. this comes after he ordered gordhan to cancel meetings and return home.
that was the first move. after he had begun the weeklong roadshow. the managing director and head of the investment banking division for sub-saharan in africa at goldman sachs. walk me through what your reaction to this news is. is it a surprise or not? there have been significant stressors building up to what will likely be a political showdown between anti-zuma and pro zuma forces around the position of certain cabinet .inisters, including gordhan there is an elevated risk this with the decapitated's, but no confirmation of that. --this in south africa is, calling for calm heads and the leadership to exercise restraint before catalyzing anything that
would put south africa's economy and people at risk. guy: can i drawn direct line between jacob zuma firing gordhan and a rate downgrade? fiscal and economic and monetary signals in the last few months have been extremely positive. the institutional stability has been something the rating agencies have put a lot of score on to the extent that institutional stability is upset, one can expect the rating agencies to go negative and give the negative outlook. hiring of a highly competent and well-respected finance minister may put our ratings in question. there is a direct correlation. that, asset prices will be under pressure as you have seen in the last 24 hours. against the backdrop of asset prices having done well in the
past year and general economic growth coming back. it would be a pity if the president was to undertake a change and catalyze this confrontation in a manner that would upset the stability. how much weakness -- we are looking at a chart right now that south african rand hits a -- it is a three-month chart, if you drag it to a 12 month chart, last year i can get 17 rand for one u.s. dollar, after this move i can get 13. do you see a lot more weakness ahead for the rand if gordhan is fired? that the recent trading prior to these events was pointed towards a strengthening rand. 16 .80 12going from months ago, down to where it is now prior to this event, 12.30 -- iack to 13 as it came
came on the interview. that level is downside risk. if there is a view in the rockets that there is a shop that will upset the equilibrium in south africa and with it, the growth prospects. the downside risk asset prices, but the bank stocks, the rand and various other asset prices, as witnessed in the tsonga in 2015, from which we learned quite substantially how the market would react. hopefully it doesn't come to that. hopefully the political leadership is able to keep cool heads and not bring about these changes. south africa is in a recovery mode in terms of economic and asset prices at this moment. guy: why now? do have any insight on the trigger on this?
should they have explained to the president you are going to get a violent reaction in response to this? why does he keep wanting to get rid of gordhan? why does he feel that is something he needs to be talking about again? colin: effectively, i think conflicta politic -- in the politics of modernization in south africa and president shown aectively has more traditional bent in terms of the way he wants to govern, and the anticorruption drive of minister gordhan and other of his cabinet colleagues that have been in confrontation with him, has put that confrontation very much in the headlights. i think this is a buildup of a
power struggle that may or may not be resolved, but this is a political contestation for the ruling party. much is at stake for south africa in the next 10 years. i believe much rides on that, and we may certainly seen a very strong battle emerge in the days ahead and in the months ahead leading to december. let's take it back to the markets, hazmat was saying this is one of the biggest moves we have seen in the rand in recent months. why do you think the foreign exchange market mispriced the risk? why didn't putting a political risk into the system? interview, in this this has been an ongoing bubbling battle, how did the market mispriced this as much as it did?
sure to decent of mispricing, i think it is a case of judgment from market players as to what would emerge over time, but the fact is emerging markets have a -- commodity prices have stabilized. the current account deficit has moved from 4% to 1.7%. inflation has come down. africantals in south have been quite positive over the last few months and i think the markets have been reading that. and clearly, the slower rate of interest rate increases in the than might have been anticipated leaves emerging markets to be stronger. i think the political risk factor obviously is something markets struggle to understand. if it comes to pass that the minister is fired, i do believe political risk will become highly elevated. it will be difficult to put the genie back in the bottle in south africa -- and south africa will suffer for it.
but obviously, this has been a point of speculation in the markets and an open discussion for some months. whether president zuma will move against finance minister gordhan or not. are you not optimistic that maybe a weakening rand could help exports, especially when it is difficult for minors to keep costs under? we would like to see foreign direct investment in the economy carried with these kinds of questions about the macro thatre, it is unlikely foreign direct investments will flood in until those issues are clarified or resolved. there may be some temporary effects in terms of exports. the value of mining exports in particular, which is significant in south africa.
but overall, it is damaging to the economy. business is calling for a straight and cruel hit. we would like to see this finance minister and his colleagues stay in place. i think we need stability at this point rather than crystallizing changes which are going to cause significant direction -- disruption and put our business rating at risk. matt: who could be a replacement if gordhan is gone? colin: that is entirely in the hands of the president -- speculation that the former head that isy come in. purely speculation. i have no information on who in the president's mind he would like to see in that position. guy: final question, the fa rb, the south african reserve bank has a decision to make on interest rates.
you can see the events story on my bloomberg. if we get a lot of noise this week, does that change the thinking of the reserve bank? in terms of the direction of interest rates? colin: it elevates the risk factors for the reserve bank. i would have thought that absent , there was a positive development around inflation that would have fed a more but with this they will be extremely cautious and exercise a prudent few. they have been a good job on the monetary policy. goldman sachs itself has forecast a drop in interest 2017 andthe course of the rent at around 12.70. but those are the fundamentals not on the questions of these kind of events that can disrupt markets. colin, we thank you for
your time. it is always great to get you on. head of director and the banking division for some zahara in south africa at goldman sachs. matt: if you are a bloomberg customer, you can watch this show using tv on your terminal as well as the video streaming. you can also follow the charts and functions we use and message us directly using the ib function which will you see highlighted. you can submit questions. you can be part of the conversation, it is a great way to keep up with markets events. coming up, presidential pick -- pitches. next.l go live to paris this is bloomberg. ♪
♪ this is the open. 45 minutes into the cash session. nejra: this is one of the biggest movers in terms of how much it shifted the index. also one of the biggest gainers in percentage. since 2011.st this after first half trading profits rose 25%. the company also sees the group making further progress in the second half.
wolseley provides heating and plumbing surprised -- supplies, has a big presence in the u k and u.s.. the other changes including group name to ferguson plc. this is the best performer on the stoxx 600 in percentage terms. 4.8%. the most since may 2016. since augustst 2016. this is a portuguese utility that has been raised to buy and we have heard it is offering to buy the 22% stake it doesn't already own in its renewable energy unit. on the downside, looking at ericsson. it is going to book as much as 15 billion swedish krone in extra costs. recent negative developments for some of those expensive. -- expenses. this is the ceo is cutting costs and narrowing focus while
contending with contract losses in italy and russia and four straight quarters of revenue declines. we are seeing the stock dropped in the most since november 2016. thanks for that. let's get the bloomberg first word news with juliette saly. the ceo of credit suisse has said the bank has made "massive progress" in its restructuring efforts. speaking exclusively to bloomberg, they now have enough breathing room to consider alternative capital raising options beyond a long-standing plan lift part of its swiss banking unit. progress the ipo was a capital backstop and we were clear about that in february, which has helped us go from a restructuring period and we have made so much progress we can consider other options. donalde: u.s. president
will sign an executive order later that begins unraveling rules and directives to combat climate change. the move will undo policies designed by barack obama the carbon cutting promises his administration made alongside nearly 200 other countries. although trump's measures stop short of a decision to formally withdraw from the landmark paris climate mission accord. to the u.k., brexit secretary david davis said britain will pay nothing like the sums of money eu officials have flooded as needing to be paid when the country leaves the flock. the comment came days after jean-claude juncker said the u.k. will be expected to pay around 50 billion pounds. the bill is set to be an early source of disagreement soon after brexit is pictured tomorrow -- triggered tomorrow. global news 24 hours a day, powered by more than 2600 journalists and analysts in more .han 120 countries this is bloomberg. matt? matt: thanks very much.
let's turn to france where there are less than four weeks to go before the first round of presidential voting begins. the country's biggest business lobby has invited the three candidates debate their programs to executives and entrepreneurs. we're joined from paris. what are the concerns of french executives and how are the top three candidates expected to respond to those? >> the first of the three top ron, just walked in a few minutes ago. he'll be the first to speak in front of this panel. hour toe will have one explore their economic programs. for many executives, even though some of the economic proposals diverge, their biggest concern is the protectionist program of marine le pen. if you look at macron and
fillon, they both want to cut the tax to the european average of 25%. the difference between the two is macron wants to keep it while wants to endfillon it. mary the coach -- marine le pen wants to tax workers. the biggest concerns from executives here is the protectionist policy -- the fact she wants to install a border controls, add taxes for imported goods and leave the euro and the european union. they don't endorse a specific candidate, but clearly their favorite programs are the ones of macron and fillon. guy: they are the favorites. let's talk about the less penrite, and the pen -- le
victory. you have to make some contingency plans as a boss. are you hearing about those contingency plans? >> this is the french paradox. denymost executives do not the marine le pen risk. --t of them say of the pen le pen victory has never been so close. a majority say they don't have a contingency plan prepared in case of her putting in place her plans to leave the euro. in fact, marine le pen knows that a lot of the french people, 72% of the french population, actually do not want to leave the european union and the bureau. this is why she has tried to soften her tone over the weekend, saying leaving the euro step, butbe the first
the final step because she wants to wait for the results of the german elections in september. guy: thank you very much, indeed. , weou can see, the event are getting some live shots. an get those on live on your bloomberg. a quick look at the equity performers this morning. yesterday a big theme to the downside. we are bouncing back a little from that. london retaking 73, but only up 2/10 of 1%. the good news, it is brightening up. this is bloomberg. ♪
♪ things are brightening up. this is bloomberg. london still a little fog, but things are getting little sunny. an upside move when it comes to equities. the dollar beginning to regain footing. a health care pickup beginning to fade. one hiccup in the markets relates to what is happening with the rand. the second leg lower for the rand or higher for the dollar. the two factors hear quite clearly. that is the story, that gordhan was being recalled. this the story that he is going to be fired. let them take of you on this and we will see what happens next. it has been a good trade.
you have been buying the rand a lot lately. matt: it is very interesting in market participants probably think he has been called back to south africa to participate in a trial, and maybe not be fired. some people are set up for that, others are not. it will be interesting to see the rand move if he does get fired. it has been at 17 for the dollar at a year ago. it is now at 13 to the dollar. it could get weaker if it goes back to levels we saw at the beginning of last year. we just heard from the head of investment banking in sub sahara for goldman sachs. there may be room for the rand to weaken if gordhan is on the way out. go takes you to the portal page of the central bank. a decision is due thursday. how will it decide given the
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