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tv   Bloomberg Markets European Close  Bloomberg  March 28, 2017 11:00am-12:01pm EDT

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hyman. this is the european close on "bloomberg markets." ♪ we're going to take you from new york to london in the next hour. plus, we are covering stories in hong kong, new orleans, and detroit. here other top stories we are following on the bloomberg and around the world. just hours to go until the u.k. traders article 50, formerly starting its divorce process from the european union. the pound is bouncing around. the ftse also trying to eat out again -- eek out a gain. julie: in the u.s., we will hear from ford executive joe hi nrichs. oil is trying to rebound today, but the continuing rise of shale
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producers may blunt opec cuts. ofwill speak with tim dove pioneer natural resources. at theaking a look equity movers. stocks are rising today. stocks and bonds and sovereignties, the markets have come down from yesterday's post -- health care even where we saw in move away from risk and into defensive assets. this is a great chart showing the inverse relationship between the sterling and the ftse 100 index. the pound has become a bit of a wait on the ftse index. it's 1.6 gain against the dollar is undercutting interest in the ftse which is packed with those multinational companies whose earnings accrue when the
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sterling strengthens. stanley recommends selectively buying domestic stocks and buying price year foreign exports -- price year foreign exports. foreign exports. the dollar is the white line, in the ftse is the blue line. what a chart that is. that is a chart we will continue to focus on. we are tracking shares which are seeing it largest inflow since exit last week. -- since brexit talks last week. steady, stocks held while stocks in britain and the u.s. slump. this is all in anticipation of
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article 50. the best times could be over for europe's corporate bond market. management,et investors rendering for a downturn -- readying for a down term at the ecb starts cooling its stimulus measures. corporateexpects zero bonds to post total returns of -1.2%. investors feel a credit selloff in ecb bond buying maybe the first step towards ending more than two years of market support. julie, how is it looking there? julie: we are not seeing a big change in u.s. stocks. it is continuing the nine reaction to the failure of the health care bill to get anything on friday. the implications of what that could mean for tax reforms. at the moment, investors do not
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seem too concerned about it. financials are coming back, and they are leading the gain along with materials and energy. we have some more defensive groups like real estate, telecoms, and utilities. mark: julie, thank you very much. let's get to brexit. seeking ansaid to be early pledge from the u.k. to pay its eu bill which is estimated between -- estimated to be at $65 million a price. a price they say britain is not paying. joining us now is bloomberg brexit editor simon kennedy. is this the first major flashpoint between the u.k. and eu after the triggering tomorrow? simon: this is about the financial commitments that the u.k. has made in the past. they are not sure of the sums or if they are obliged to pay that. we are starting to see the laying of the red lines.
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eventually, what will happen is that there will be a deal regarding money from the u.k. in terms of some sort of transition assistance for a new trade deal from the eu. mark: let's talk about article 50 itself. what is the tone of the letter that theresa may writes to the eu? what is the tone of the response? be thethat will interesting thing this week is how consolatory they are to both sides. obviously, there has been a lot of heat from both sides that we have seen over the past nine months. now, you're getting the setting of an engagement, if you like, tomorrow. theresa may talking about a new partnership with europe, casting things in a positive light. she could reach out to europeans tomorrow and acknowledge their financial issues, and are have to suggest a framework. on the flipside, the europeans -- the key there will be how much they are willing to put under the umbrella of article 50. the brits would like to discuss
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everything, trade, and the divorce at the same time. the europeans so far have resisted that. they have just wanted the divorce deal. mark: is this a big enough deal for the civil service? hire: some they need to talent. they say the civil service is at its lowest in the number of staff since the 1940's. a beastly, that is a product of fiscal austerity in the past few years, but now they also have brexit on top of them now. the state we are in is, as people like to say, a fragile one. the european commission has 27 governments to turn to and has a history of negotiating trade deals. when we will see tomorrow article 50 is finally triggered. julie? julie: let's turn back to the auto industry. ford announcing today the
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creation of some plants in michigan. we are joined now by ford's president in america. >> we are joined now by joe h inrichs. good to have you with us. the president was tweeting out about your announcement before you had a chance to make it. how many net new jobs will the be? -- therere 130 jobs are 130 new jobs and hundred new jobs at the michigan assembly we move production elsewhere. there also jobs tied into the data center which we have not yet disclosed. 130 incremental to the romeo plant, and there are thousands of jobs being protected as well. >> are these men the going to be for suvs and midsize pickups? at the same time, you are producing compact cars in mexico. is there some losing of jobs?
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is there a net that needs to be done? >> no, in fact the u.s. jobs will be growing in the totality of everything we are doing. we have ordered the building of a plan to build an autonomous vehicle. the michigan plant will get all 6300 jobs. romeo will grow. existingl grow in the mexican plant to grow the capacity we have there. >> understand this was part of talks in 2015. why is it today you make the announcement? >> today, because the michigan economic development corporation is having their meeting with a talk about investment magnitudes. they actually approved it while i have been sitting here. we wanted to wrap it all together and make sure we explain it to people, because the michigan economic development corporation has been a great partner in us. they provided some tax abatement when we make these sizable
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investments. >> would you be making this suvsion -- again, it is and midsize pickups which are not terribly fuel-efficient. would you make this decision if the president had not indicated they are going to be reviewing those fuel efficiency standards? >> yes, we went. we made his commitment back in 2015 in our contract negotiations. a look at this as a portfolio approach. if you look at the money we have announced we are investing in michigan even just in the past three months alone, yes, there is the midsize truck coming in 2020, but there is also a 300 mile range autonomous vehicle as part of that investment. so, you can see the portfolio approach we are taking and have been approaching for a number of years. >> so, it was not so much a review of the standards. did they play any role at all in this decision? >> truly, we are in favor of the
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progrowth initiatives that the administrative has going. we think they could be important to the economy, and it could mean a strong auto economy in the u.s. growing. however, these can take many years to play out. all we are encouraged by these initiatives, we also have to keep in mind that we were planning for the commissions regulations -- emission regulations as they have currently been played out. newsully, it will be good for the auto industry, right now we are planning on the current assumptions we have. >> we know that mark fields has been to the white house to meet with president trump more than once. bill ford, your chairman, is said to be close with the president. two extant did you courtney with the white house in announcing this -- to what extent did you coordinate with the white house in announcing this decision? >> we had reached out to them earlier today to let them know we were making this announcement.
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we had not reached out to them prior to that. the investment we announced in january in flat rock. mark fields is part of the manufacturing counsel and helps provided the president with advice on what to do with the economy, and we are proud to be a part of that. we continue to be engaged in the dialogue going forward, because we are a big american factory-based company. we a big exporters. we want to be part of the solution and conversation. >> imagine this is part of a process. you mentioned the autonomous vehicle in addition to jobs. what else is coming up in the pipeline? >> there will be more to come. we are a big business. he will have to stay tuned, and make sure that we keep your interest in -- interest. we have some incremental suvs coming up. there will be some more news to come on that from. of course, we will continue to invest in the united states.
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over 80% of our sales have been here in the united states. we are proud of that. >> is it fair to assume there will be further announcements coming out with more jobs in the united states? >> i think as you have seen over the past several years, our commitment to the u.s. has in there and will continue to be there. 20,000 new jobs in the past five years here in the u.s. you can expect us to continue to invest and grow here as long as the economy continues to provide that opportunity. >> they do so much, joe. hinrichs president of ford america. julie: i just wanted to point out a couple of sharp market moves. the first of to do with oil prices. both brands and the beauty i.e. east is spiking. tie east is spiking good we want to look into why --
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is spiking. we want to look into why this is happening. we are also looking into shares of a drugmaker company. their shares have halted following some news. it looks like we are set to get some news on a drug, a proposed drug from the prescription drug user. tomorrow is the date when we could get some kind of news on eight german titus drug -- dermatitis drug. stay with us. this is bloomberg. ♪
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♪ julie: live from bloomberg world
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headquarters in new york, i am julie hyman. i am markin london, barton. global equities, investors turning their attention to new elements of president trump's economic agenda including tax reform. joining us now is andrew milligan global strategist at standard life investments. you say that the health care debate in the u.s. makes simple tax reform more likely? >> the logic is as follows, if the republican party cannot agree on health care reform which was a central plank, then but haste comes next, to be something that everyone can agree on. so, a border adjustment tax? not so sure about that. tax cuts for corporations. i think those will be important for the market.
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that could be some interesting applications not just for the u.s. dollar but also for companies investing in america. so, simple plans i think is what the market will be looking for. mark: and that provides a flaw? >> i think the global economy is actually doing quite nicely. we could see profits grow to 5% to 10% this year. there are a range of factors. tax cuts of some sort in america. they have been encouraging the fed to keep tightening, to make sure that everything is on course. also all the political issues in the world or other issues. twosay oil does crackdown 40 because of oversupply. not tend to like that sort of story, so you can see the downside risk should -- risk.
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i had considered that it was going to get stuck at $50 or $60 with opec acting as a ceiling. last week or so, the has become a bit more questionable. i think if we saw a noticeable step down in the oil price, then questions have to be asked about a whole host of oil related questions. mark: there were questions about president trump's progrowth economic policies in the wake of the health care failure. to those questions continue to be asked sporadically until we get more detail? asked,do continue to be but we have to consider that the u.s. economy is going rather nicely in risk -- in respect to what is happening. ofre have been talks of atution of that -- so-called gridlock, and the markets do not seem to mind
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that. you are more concerned about china and italy rather than france argue -- aren't you? >> china is rather stable this year, but next to the have to decide to make some big decisions. this year, though, there is stability. i think far too many people are worrying about the french election. complacency. >> do any of us really believe the opinion polls? the most important election has to be in italy. italy is not performing well as an economy. the election which currently looks like it will be later this year is something to watch. mark: the fact that the republicans have a domination in the house and senate, does that say that even with the powers under your control it is still hard? marine le pen gets
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in, that she still have the mechanism behind her? >> if i can get a little push of local horizons publication, we talked about the institutional framework and each country. that includes the powers of the u.s. president. wins,f the marine le pen she needs the majority in the parliament to push things through. that is difficult for her, of course. back in america, far too many people have associated america with trump, the president, the man. but of course, it is a very public it set up in american politics. we are beginning to realize how fractured the republican party is. the trump supporters, the far conservatives, it is not a very cohesive party.
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it is not just on health care reform, but on other isss as well. the question is how can they come together an also do with the democratic party which is again not a uniformed -- unified group. i think maybe people perhaps expected to much in the first 100 days of mr. trump. i think once we get into the first 300 days, and we have a better idea of the battles. mark: you use game theory to explore the various permutations. what is the end result of all this? theoryou know with game or any analysis, are you can do is be better informed. in the short-term, it will be interesting to see what sort of letter theresa may puts together with a formal notification. is it going to be non-detailed? is it going to be aggressive, soft? is it going to be giving quite sound hints about what we want to see in the second half of the negotiation or not?
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mark: you are feeling good though about the market's reaction? p at the coming back to for-profit rather than p for politics. just remember that the corporate earnings cycle is seeing an upturn. the question is could get better? yes, if there is tax changes come through and some of these political issues disappear. there is aely, if big trade war between u.s. and china, we nobody profitability would go. profits are on an upward trend currently good what to keep them going, expand, boosted -- boost it? abigail: mark: andrew-- mark: andrew, so good to have you with us. thank you. julie? julie: there is report from
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reuters that has been a suspension of loading of crude oil in libya at a particular terminal. that appears to behind this spike we are now seeing in crude prices. we will continue to stay on it and talk about it much more in the next already minutes. this is bloomberg. ♪
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♪ julie: live from bloomberg world headquarters in new york, i am julie hyman. mark: and i am mark barton. the european close is just minutes away. time for a look at your bloomberg business flash. amazon has agreed to buy middle .astern e-commerce company the terms of the deal were not disclosed. earlier this year, amazon walked away from talks. biggesty, when a device -- chief executive thomas spoke
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with bloomberg. >> for us, the u.k. and london is becoming an issue of property rights which we would like to maintain and grow. as the markets remain open, and the cost of business does not increase as a result of brexit. mark: there is a concern that brexit will lead to higher taxes for their u.k. have -- hub. latest bloomberg business flash. this hour, let's take a look at where you -- where european equities are faring. we are just at the end of the tuesday session. stocks are rising for the second day in seven. this is bloomberg. ♪
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♪ >> from london and new york this is the european stocks finishing up the day in your pain trading.
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let's take you through the market. the best-performing industry groups extending the european benchmark higher for the second day in seven. as 15 billionh kroner in the new quarter. resizes theecutive wireless network maker. he takes over in january, cutting costs. negotiating contract losses in russia and italy. he is exploring options for the media business. he is removing a layer from top management, reducing 10 geographical areas down to five. a couple of days for the south african rand. the president told senior
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leaders of the south african communist party he plans to fire his finance minister according to three people. the rand plunging yesterday after the president told the finance minister to return home. it has slumped 4.2% in the last couple of days. the biggest decline since december, which shows you the perils of investing in emerging markets. thentil friday the rand was best-performing currency against the dollar, rising 10.5%. almost half of those gains have been erased in the past two days. the bloomberg brexit barometer ahead of the big triggering of article 50 tomorrow is powered by bloomberg intelligence. it includes measures for employment growth and uncertainty. they are composed of sub indices. the higher above zero the index
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is the better rings are. the further below, the warsaw britain's -- worse off britains are. in july we were as high as 56 before the brexit referendum. it will be interesting to see if this goes up after the triggering of article 50. >> will you remain blissful? let's check out cross assets in the united states. we are seeing a lift as oil prices climb. the dollar index rebounding slightly after a slump yesterday. 10-year unchanged. 70. futures up abigail, what is up? guyabigail: this is the big sto.
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the best day since march 15. let's break this down. analystg intelligence on oil and oil companies, he said overall this reflects increasing omentum around the idea that opec could extend the cuts to the second half. that is not a sure thing. that is giving the lift to oil. this spike may have to do with a national oil company in libya confirming that a pipeline has been shut down temporarily. that is according to sources. we have a lot of strength for oil. we will get to that in one moment. let's take a look at oil relative to the spread of crude oil to brent. brent for european crude rises higher on those potential opec cut extensions, it is
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rising higher. wti in the u.s. lower. it is hitting a low last seen in 2016. as for what could be had for wti , we take a look at another chart. it is using a great new indicator, the chameleon indicator that blends lots of technical indicators. green is bullish, red is bearish. it is below its 200 day moving average, and it is in the red, showing we could see weakness ahead. we will keep an eye on oil itself. julie: thank you for that comprehensive look at oil prices. let's stick with energy. the outlook for u.s. show producers, let's head back to new orleans where we find alix steel. she is at the energy conference. alix. alix: thank you. you see those lower deputy i
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prices over time -- wti prices over time. pioneer natural resources is the replay when it comes to the prolific basin in the u.s. greg to talk to you. >> thank you. alix: let's talk about the executive order we will hear from president trump today. what regulation do you need to see rolled back? >> our role as a leader is important. we take our future responsibility seriously. we look to see a rollback of rules and a chance to give more thought to those with the idea of creating a sustainable model going forward as far as emission controls and so on. that can solve environmental issues but does not do it in a matter that is as onerous or administratively cumbersome. alix: at the heart of this is waste management. you use a lot of water when you are tracking.
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that is where regulation has come down. it has been blamed for earthquakes in oklahoma. >> if you look at the midland basin area we operate in, it has not proved to be a big issue due to the tech not ask -- tectonics in the area. it is going to be incumbent on the industry going forward to clean up that water and reuse it. own, you can do it on your but you don't need regulation. >> precisely. alix: are you more free with your budget when you hear there will be a rollback of regulation? >> our model provides an engine for oil and gas drilling. run on aing to continuous rpm. the fact is we are going to continue with the 18 rigs where running. alix: are you a victim of your
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own success? you want up getting the industry being able to be more free and add more risk and oil production and lower prices. >> what affects prices? more regulation and more activity. this is only going to be a benefit from the standpoint of reducing administrative burdens. alix: does it hurt you in the long run? costs costs, breakeven are exceptionally low. costs,llars reduction you add interests, we are below $20 of their. we can get return on current wells. that is what we plan to do. we have always been a heavy hedger. we are about 85% hedged on oil and gas.
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we're not being impatient right now. the markets provide a situation where the curve is flat. that does not provide a lot of opportunity in the long term. we will see some opportunities in 2017 to do 2018 hedging. we will say. alix: opec cuts, use a awesome, i'm going to hedge. >> we want to be heavily hedged because it is the one thing in our model we cannot control. we're really looking at margins. we can at least protect the revenue line. alix: you say you will be cash flow positive by 2018. what are you going to do with that money? >> we will be free cash flow in 2018. we get into pre-cash flow generation mode. weekend hold that cash because that is coming in at a time when
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we can use prices -- use it when prices are below $55. i think you hold it in the good times and use it in the downtimes. alix: no dividends or buybacks? >> we will look at those. it gives us an opportunity to look at shareholder friendly activities. the board will consider those. alix: there are hundreds of companies in the permian, how many are there in the next five years? >> we had a big landgrab. one of the results as it is nearing completion is at the companies now have to eat what they killed. they have to develop these fields. it does not take many people to do deals. it takes a lot of people with boots on the ground to execute oil and gas operations. there has to be some consolidation of the smaller players.
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it is clear the majors are coming in with reasonable size investments. i think the answer is we will have a smaller number. the question is whether that happens in a low price environment or until prices improve. alix: $50,000 an acre in the permian. how much more efficiency can you get? >> if you look at it, we will be making 50% returns this year based on the metrics we used. up to 100% on certain wells. we are making excellent returns. we are in the middle of the midland basis, the deepest highest pressure area, highest productivity wells. alix: what is your rates of return at 40? >> that might be like 35% to 40%. your best wells are going to be better. alix: the you have a chief
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technology officer? >> yes. alix: what does that tell you about the industry? big oil is a technology industry. shale is in production industry. >> we are already putting the company in a position where it is process pointed. technology is going to be a significant benefit to us in terms of improving productivity. you will, in the terms of artificial intelligence projects, machine learning, neural network learning. we're tackling every project with the new technology. changing.dustry is it is going to be a high-tech industry. i let my employees in the summer where shorts and flip-flops. it is all done when you do that. alix: thank you. that is tim dove, president and ceo of pioneer natural resources.
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that is going to be a fascinating five years or 10 years in the industry. julie: thank you so much. let's check in with bloomberg first word news. invest $1.2rd will billion in three factories in michigan. the automaker will spend the bulk of the money on a support factory.urban we spoke with their president joe henry. >> u.s. jobs will be growing as part of this announcement. in january we announced 700 mental new jobs to build economist new vehicles and a better suv. allmichigan plans will keep 600-3000 jobs. capacity weize that are to have. in asia a japanese
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court has overturned a ruling that barred the operation of two nuclear reactors. the reactors were idle for safety checks after the fukushima nuclear accident. they see nuclear energy as crucial for long-term energy security. supporting the call for a second referendum on independence, the scottish first minister nicola sturgeon wants permission to seek illegal means to hold the vote in 2019. she said she is frustrated with the british decision to leave the european union. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am courtney donohoe. mark: thank you. is positionedceo his bank ahead of brexit negotiations.
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we will hear from him next. this is bloomberg. ♪
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♪ julie: from new york, i am julie hyman. mark: i am mark barton. this is the european close on "bloomberg markets." julie: progress credit suisse has made has given the company enough breathing room to consider alternative capital requirements. that is according to their ceo tidjane thiam. he sat down in hong kong with us. we started by asking about what the brexit trigger means for the financial industry. >> it is a very large issue. we have time to think about it.
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release, our presence in london is quite large. we are engaged in significant restructuring. we also have quite a few centers in europe. we are investing in a new center in dublin. we also have a firm in luxembourg. howave options depending on brexit plays out. banks have seen the other -- they have started contingency plans. they are moving jobs to other european cities. when you think credit suisse well? peoplear ago we had 9200 in london. we have taken it down to about 6000. we have done a massive restructuring in 2016. we seek to get below 5000.
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we are affected by brexit. >> is there something else you are looking for in terms of clarity? do you want to see how negotiations are unfolding? negotiations see how they will play out. be.ill continue to as a bank we have been in operation since 1848. we have operated through many political regimes. we will continue to do so. >> let's talk about your business in asia. you had to revise your 16 earnings to the downside. -- your 2016 earnings to the downside. >> initially our global target for asia, as we run the business wealthve what you call
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activity. [indiscernible] we move those three together. it is up 65% year on year. we separate the market activities in a global market division. we have learned that the global volatility of the environment -- [indiscernible] >> you have/a few other targets -- have slashed a few other targets. do you think asia is key to your strategy? >> it is key to how we view the
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world economy. we always take a balanced approach between developed markets and developing markets. [indiscernible] is your view different now than it was? >> i think our view is always changing. in terms of the medium-term view, it has not changed. capturingll developing markets. suisse ceois credit tidjane thiam in hong kong. coming up, oil. this is bloomberg. ♪
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♪ madness,honor of march we are back for another sudden-death round of the term in a champions. julie: battling it out today is abigail doolittle and david gura. we will see. abigail, we will start with you. abigail: this is a great chart. realchart is the inflation. 500 from the&p 2009 lows for the all-time highs we have seen recently. that is up well more than 200%. how long can this last? in orange we have the bloomberg commodity index. in the last 20 years, these two silos have traded in tandem together. when they diverge, they come back together. more recently, the commodity index has been taking it on the
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chin as stocks go higher. at some point we will likely see a convergence. will this be bearish? how bearish for the s&p 500 and stocks? jaws: the famous closing as they were. we will see if they end up closing in this case. will we see stocks catch up with the commodities? mark: i love those convergence, divergence chart. will it be commodities, or stocks? let's bring in david gura. david: i feel embarrassed like the basketball player forgot his shoes. this was supposed to illustrate the histogram in place. it has not. i cannot get it to work. it was the biggest being below
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15. -- the vix being below 15. obviously it does not. i would reload it if i could. >> sneak back and do it again. david: like superman. julie: we have seen a subdued vix of late. that is so exciting. david: it is like a tv timeout. the vix has been below 15. we were preparing ourselves for more volatility. triggered,xit being article 50. i apologize to the viewers, my fans who have watched. mark: i think the fact that david's team is in the real semi finals, i'm going to have to go for abigail. julie: i think i'm going to have to go to abigail too. now that it has come up, i think
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that is an interesting chart. i like jaws as well. mark: thank you. take a look at where european equities finished the day. we are up for the second day. that is on the back of abigail's chart. have a quick peek at the currency board as well. sterling against the dollar today up. euro up against the pound. euro down against the dollar. let's finish with the bond market. bonds down in spain, italy, and germany. this is bloomberg. ♪
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>> i julie hyman in for vonnie quinn. welcome to "bloomberg markets." ♪
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julie: from bloomberg world headquarters in new york, we will take you from washington to london and hong kong. there are the top stories that they are following. in markets, u.s. stocks are near session highs. the banks leading the gains. the dow is snapping an eight day losing streak. crude is rebounding and commodities. washington shifting to taxes after a week of health care drama. we will talk about which stocks to watch. backingny news, $.10 is tesla. shareholder,p five a vote of confidence in elon his vision to bring the model 32 market. abigail doolittle brings us the latest. abigail:


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