tv Bloomberg Markets Americas Bloomberg August 7, 2017 10:00am-11:00am EDT
♪ vonnie: here are the top stories we are covering around the world. another day, another record open for the u.s. stocks. but is the quiet about to get shattered? we will check the outlook with our chief meteorologist -- chief strategist. and the latest of that meeting getting underway. will they cut production levels? and in politics, an exquisite interview with the finance minister in france. he says things are changing in france and the nation will prevail over frankfurt when it comes to bank business post exit. -- brexit. we are about 30 minutes into the trading day in the united states and a julie hyman is here.
it should be the beginning of a quiet month. julie: so far today at least as the major averages are up, but no big gains. the dow has been fluctuating between gains and losses. it looks like it could be the 10th straight day it is up. and another record, we will see if the s&p 500 manage to catch up this week. we have seen the growing divergence as the dow has been the outperform or. to dig -- outperform her. to dig a little more into that, we are looking at the past 10 sessions and the gains it has seen. some of them have been hefty. it looks like it is still the longest winning streak going back to february, the 10 session winning streak we are watching for the dow. i am getting individual movers. there we see much more movement and the increasing lack of correlation among the stocks, as we see big earnings movers. tyson foods trading higher after they raised their profits and a
sales forecast. margins, in better part because herds are larger, cost going down. and horizon pharmaceuticals also forecasting full-year scales above estimates. those at pmo pointing to their primary care business, although it is getting more into orphan drugs as well. one of them is a treatment for gout. company'st 11% of the sales. berkshire hathaway out after the close on friday, the company's insurance businesses holding it back, leading to a slide in operating profits in a third straight period. and energy, quick check of oil as we get started with the opec meeting. libya resuming production. we have crude oil down by 6/10 of a percent.
a little bit of a leg up in the past few minutes. mark: oil stocks are up. we have three to three groups rising. three up to rising for the first week. basic resources are up. we are tracking the metals. and the world's biggest provider of services, medical care. and $2 billion to boost the offering of home dialysis devices in the u.s.. fresenius will pay $30 a share for the massachusetts-based company, 30% more than the closing price on august 4. it will be finalized in may. and plunging as much as 30% from the all-time high. baxter updating their plan for their home dialysis product. the stock is down percent today. -- 12% today. and we have data out of the u.k., consumers cutting back on
spending for a third month in july. putting them in their worst slump in four years, dealing another blow to the economy at the start of the quarter. in year on year drop spending, clothing, household goods, sports among the worst hit according to the data from ihs market. there is a squeeze on pockets as inflation outpaces wage growth and there's concern about shoppers and the broader outlook for the comfort -- for the economy. the report coming days after the boe downgraded the academic -- economic outlook. and the uncertainty of brexit is weighing on businesses. and the u.k., eurozone, economic surprise index. in the eurozone, coming down from highs. anything above zero showing that the data is beating the forecasts. -38 in the u.k. shows that
story. and i am really quickly looking at the euro running 9% against the pound since touching the low in april earlier, a few months ago. and an extension of a trend that would push it to parity against the pound at the end of december, but bloomberg's fx rate forecast model shows the euro region -- reaching parity against sterling by the end of the year, roughly at 5%. if the trend increases on this trajectory, it will happen by december. vonnie: that is a key question in our next guest will give us his take on this. corporate results largely dominating the headlines and we have key data points from the world's biggest economies driving market sentiments. the job reports giving us clues on the labor economy and today in europe germany kicking off a week of industrial data.
earlier, robert zoellick gave this assessment of the global economy. robert: the overall economic conditions are one where people are feeling better and the broad-based nature of the world economy gives people comfort. geopolitical issues like north korea and how the u.s. conducts itself, those are risks. vonnie: joining us to navigate the week ahead is peter to keeney, at counter fitzgerald. a lot of good data out there from the corporations, even from forecasters. what about this market? it has become a little boring. calm. is it a buyers market? peter: both sides of the argument can be made come a win volatility is low, it can stay low. other times it shows complacency. we like to take the totality of the circumstances and look not just at the calm as a measure of
complacency, but look at the overall picture. what we are seeing that makes us a little bit nervous is sector dispersion picking up quite a bit, we see weakness in retail, energy, because of oil prices, but also in mining. and small caps for example, we have seen to some extent, underperform. we think valuations are rich in the s&p and a small caps and the argument has been it is ok because earnings have been strong, but the fact of the matter is, earnings for the past six or seven quarters in our view have not been the driver. it really has been global monetary policy away from the fed. the fed passing the baton over to the boj and ecb in particular. vonnie: you were specifically asked this question earlier, what happens when central bank policy, when it becomes asynchronous or becomes diverging?
peter: we look at the last time the ecb shrank its balance sheet. it was in 2013. at the same time, the fed decided it was the right thing to do to grow the balance sheet bite $1 trillion. there was a policy offset. now it appears if the ecb shrinks it's a balance sheet, in fact, it would be normalizing, the fed would be normalizing, and then we would have the boj which is going up strength, -- upstream, in isolation. mark: talk to me about europe. this is a great shot that shows the global stocks, but we can put it in the context of europe, you can see the white line is the dax. they have diverged because of auto stocks for germany, industrials, because of the strong euro. have they lost their luster, dax underperforming europe, but europe is underperforming the u.s. which has hit records on a
daily basis. what is going on? what is the mentality toward the european stock market? peter: there has been a shift. the european trade was clearly the most popular at the beginning of the year and market participants were bullish on europe versus the u.s., specifically on the valuation basis. pmi's had turned it nicely, the concern about balance sheets were in the rearview mere, so investors were comfortable with investing in europe. now we could have mario draghi coming out in jackson hole on the 25th of august saying, we will taper. that is not the base case, but a risk. valuations coming up a little bit, we have had pickups in the automakers, and in the german numbers this morning we saw that the second derivative seems to be changing and things seem to be slowing down a little bit. tapirs and theb
u.s. continues to gradually raise rates, and yields creep higher in g7 countries, what is the knock over for emerging markets? will they reject trade of the decade -- could we see in impact on emerging markets similar to the taper tantrum? vonnie: it is an important question. the emerging markets are more and more an important part in the driving part of global growth, so we have not had a real increase in rates yet. i think the research shows empirically that when you get developed market rates rising, it is clear from the data and analysis that the emerging markets suffer from capital outflows. the reason why this has not happened yet, because the developed markets have not risen for various reasons.
in fact my that is one of the reasons why mario draghi's speech or his comments are going to be so important. it will be interesting to see whether or not, especially on the long end of the german curve, we see action in the 10 year and particularly the bond. vonnie: that is a point that you make with the euro getting stronger, you say play at their currency. peter: it is interesting, currency etf's are not particularly viable way to play in the currency. most institutional investors will use the markets directly. what is interesting about the liquid.re is and it is sort of an easy way for people to play the dxy cross, so that is one of the few times we will suggest a strategy on a currency etf. we like the dollar long in the
dxy, providing a convenient way to play a stronger dollar we think for a rally in the dxy. vonnie: are you hedging or you looking for a stronger dollar? peter: it is difficult to call the bottom when you are catching a falling knife, but the differential expanded to about two and a half standard deviations versus the two-year rate differential. it had been dislocated already, so why now? a combination of factors. very oversold, large short position by speculators, incredibly bearish sentiment, it is a crowded trade, that is the short dollar. so combined with data from europe, we like the long dollar for a trade to 95. vonnie: ok. we will check in with you very soon. let's check in with emma, she
has the first word news. emma: north korea ruling out talks on nuclear weapons programs and to say the u.s. will pay dearly for their crimes, the response of the regime after the united nations security council imposed further sections. they're not -- their biggest ally china back on sanctions. may'se u.k., theresa office dismissing a rapport the country will pay to leave the eu. a government official calls a figure speculation, meanwhile brexit supporters pushing back against the idea of paying index it feet. and democratic senator elizabeth warren is blocking the -- to run the antitrust division. that is according to people familiar with the matter. elizabeth warren has described the nomination will put the interest of corporations ahead of the american people. he is a former lobbyist. and president trump has accused
mexico of stealing u.s. jobs, now trying to get mexico workers a pay raise. when talks get underway next week, u.s. negotiations will push a better way to conditions for mexican employees, making mexico a more expensive place for companies to do business and encourage companies this day put rather than going south of the border. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. vonnie: and thank you. coming up, the weak start for oil with crude hovering around $49. futures are next. this is bloomberg.
from london, i'm mark barton. vonnie: this is bloomberg markets. crudeor futures in focus, dropping today with prices hovering around $49 a barrel as opec and other large producers are meeting to discuss why; behind in reducing production -- discuss why some are falling behind in reducing production. bob, this meeting does not appear to be having much of an impact on a barrel of crude yet, why is that? bob: i think opec has lost credibility in the fall of the percentage of compliance, which was mostly saudi arabia, into the low 70's they have lost credibility in the last couple months. if they can get their heads together at this meeting, they can get the move they have been looking for for six months, given the context of the crude
oil situation and the price action we have seen. they can get something done if they make the right announcements. vonnie: where do anticipate the price would go to? jpmorgan out with $42 a barrel for next year. us gettingeasily see above $52. when you look at the bigger picture, you pull out the weekly chart and the high we had on thursday or wednesday of 51.43 is a lower high. if we continue down, take a 20,000 foot view, it looks like a slow down trend. it needs to break up, price needs to break out for the longs we have, get some satisfaction and pile it into those. are troubling, it is a contextual piece of data and andave had 2 up, one down,
that will not maintain given the production we have in u.s. barrels in 350,000 the legacy production from july to august. you have to have the rate counts going in the right direction, given the legacy production drop off, in order for prices to continue lower it is not happening in the short term. vonnie: we have to leave it there. that was futures in focus. mark: time for the bloomberg business flash, a look at some of the biggest business stories in the news right now. i'll obama -- alibaba and marriott joining up, the companies setting up a joint venture to host marriott on alibaba's travel site. 6000 hotels including the sheraton and ritz-carlton chains. and tyson foods jump in the most in 18 months. the largest meat producer in the u.s. raising sales and profit forecast. the pork business benefiting
this is bloomberg. i'm mark punter -- mark barton in london. vonnie: today, sprint beating estimates with a promise of $3.4 billion, good news for softbank's chairman who is on the hunt for more deals in investments. mulling various options, including a merger with competing carrier t-mobile. cory johnson joins us in new york to explore all of his options, maybe not all of them. cory: that would be impossible, he has shown us a capacity for a lot of changes in business, although he claims to have a 300 year plan for the company. this is really interesting, the notion, this tireless interest in the us thousand of this interest to look at t-mobile. vonnie: the charter has gone away for the moment, but they have not gone away for good. which would be better for son a deal comes to sprint,
with comcast or t-mobile, another carrier? cory: you can see in the immediate term, t-mobile is obvious. they are looking at the point five g spectrum, they are both fighting with the giants. under the trump administration, they think they can get approval they could not get under obama come as a look at the market share of the major phone companies. you see the chart it shows you that verizon and at&t have a well over half the market out there. and for anybody else to compete, son does not want to be third or fourth, so the growth of t-mobile is getting closer to that and he wants to be number one. whether it is good for consumers to have three major carriers in the country, it is not his concern or interest, he does not do it for the benefit of u.s. consumers, he wants to be number one in mobile in the u.s. they have interesting financial issues that are propelling this
forward. a lot of debt coming due soon for sprint. they need to restructure that. they need to look at what they have not used. t-mobile has a lot of spectrum they want to use and 5g can be a game changer for the companies out there. vonnie: they think it could get done, but we are not there yet. what a get done? -- would it get done? cory: it is true that the type of people that donald trump has supported, whether it is people in congress, or in the regulatory regime, but the notion that really big companies does not hurt consumers is a core conservative value. the notion that coveted and lowers prices and cup edition from smaller companies, a lot of companies is not one that seems concern some at all. they are giving away a limited data. plus in frontot a
of the customers, rather they minus? cory: the biggest driver is t-mobile. he has pushed out all kinds of deals, 50% off for seniors, pushing the way that nobody else is. coming up with unlimited data plans, giving people the ability to switch phones in the middle the contract, the kind of things the big carriers were forced to do in a has forced everybody else to follow. sprint has been a follower and t-mobile has been gobbling of the market share. vonnie: cory johnson of bloomberg tv and radio. coming up, oil below $49 a barrel as producers gather for a two-day meeting. we will hear from one strategist. this is bloomberg. ♪
we are checking in on the first word news. emma chandra has more. emma: two u.s. envoys expected to visit kuwait as part of the push to diffuse the gulf crisis. the envoys will also visit the other four countries in the allies before going to qatar. qatar on have isolated extremism. and maduro claiming victory after what he claims is a terrorist attack on a military base. they have detained seven of the attackers. the attackers confessed they were working with the opposition the back by foreign governments. prosecutors demanded a 12 year prison sentence for the air to the samsung fortune. he is accused of bribing a presidential confidence. lee has been in detention since february. the scandal led to the ousting of the president. and the new chief of staff in america trying to put the end --
to an end to the chaos in the white house. kelly has warned against leaks, and he also tells staffers to put the country first, the president second, and of their own needs last. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. vonnie: thank you. crude trading lower today, still above $49 a barrel, this as opec and other large producers are meeting to discuss why some are falling behind in the pledges to cut output. at odds are the production estimates, however some nations are set to argue that independent sources are overestimating their production, helping us sort it out is barclays head of energy commodities research. michael, welcome. we are hearing compliance is
that 86% now with the opec production cut, does that sound right? michael: we estimate it lower for those of 11 countries part of the opec and not part of the deal, 11 countries. part of the lower estimate comes from the fact that iraq is basically overproducing. they are claiming that their compliance level needs to be linked to the change in their export volumes. they are essentially saying, since domestic demand has increased, exports are lower, but the market is lower and it excludes them, or basically means they are compliant. in original agreement back november 2015 is an agreement of reducing production, not exports. vonnie: what needs to come out of this particular meeting. if there is an announcement saying that countries of pledged to be better, to comply more closely to the production cuts and not just export cuts, will
that work, will it help the market? michael: i think it what opec has been successful at doing is basically precluded shorts from entering into the market. there are shorts, but this has are shorts from entering the market and they have been able to talk about various points over the last 6-8 months since the agreement was concluded. the question is, from here can they continue to say or give the markets the reassurance that the overall market is balancing. i think from here, we must look at overall supply and demand for the balance of the year, and it is definitely going to be the case we will be in a deficit for the balance of the year compared to the first half of the year where basically opec overproduced, leading into the first quarter, leading to a high amount of exports and continued builds in inventory all the way
through the first quarter of the year. so from here, we're looking at a time where we should see more active draws in inventory, and it should lead to the prices moving higher, more in line with what they attend - -intend to achieve. it is a lot to ask. mark: what will that mean for the next move after this extension of the supply cuts, when it comes to an end, will it extends again or go deeper? what should it do at the start of the year? michael: many are looking for an exit strategy from opec and the non-opec group, the problem is they have not formulated one. i should argue we should not expect one to be formulated because there are other wildcards, we do not know how shale will act on different price levels, we do not know what libya and algeria will be producing, if there will be a reaction from iran on sanctions,
and we do not have a sense on ezuela will be wil producing lower. it is no surprise to us that they do not have an exit strategy because of these. mark: talk about prices, we have been stuck in a $10 range. interestingly, you said the fact of supported prices in july will not last and you expect a downward correction, why is that? michael: the first reason is market sentiment has turned positive because of a couple of different fundamental reasons over the course of the summer. some of those drivers in market sentiment is likely to turn the opposite direction as we enter into the season for a demand. what has happened over the course of the summer is demand has a surprised to the upside in many places, but as you recall last year in august we had a lot
of concerns about the state of gasoline inventories. we have gone through the peak of the summer and gasoline inventories remained high, and as a result we saw a sharp correction last august. we are saying given where the positioning is right now and how we are moving into the shoulder season again, there is a reason for prices to move down again, before they go higher toward the end of the year. vonnie: we are seeing this in so many ways. i want to point to opec on the bloomberg where you can see everything from what the countries are producing to what they should be producing. i want to ask you more about demand, because we see the forecast for demand growth, china surprised to the upside in the second quarter, said the 1.8 million barrels a day opec is taken off the table is going to be met with, you know, increased demand.
next year, jpmorgan is suggesting the prices will go down to $42, which seems odd if there is less oil and more demand. what is your take? setael: next year, we have it to be around the $52 range, but we do expect the prices the -50 in the first half because demand is likely to go to lower. yearthe first courhalf of this it has surprised to the upside, but at the same time it is a surprise to the downside a 900,000 barrels a day of demand growth in the first quarter. if you look generally, there are many sensitivities in the market, the sensitivity shale producers have, and these prices do get up into the mid-$50 range by the end of the year on the success of opec strategy. then we are likely to see a
reversion by demand in next year. one of the other things that analysts are pointing to is all things are not well in china. partycourse, we have this congress happening in the fall. it is possible that we could see higher demand growth, higher economic growth, but then we moved to a lower level in 2018. that as a result will lead to a souring in sentiment, and in the oil demand picture from one of the primary uses of oil. vonnie: so many variables. michael:, thank you -- cohen, thank you. mark: the south african rand spiking ahead of the no-confidence vote. we will get details from johannesburg. vonnie: and in stocks, one analyst says the mover of the hour needs time to " break and house."ten the
♪ live from london, i'm mark barton. vonnie: i'm vonnie quinn. this is "bloomberg markets." brighthouse has completed a spin off from metlife, and shares are not getting a welcome housewarming. julie hyman explains. a little back on, what exactly is brighthouse? julie: it is a seller of annuities. and the market cap about seven and a half billion dollars, $7.5 billion, and they have $20 billion in assets, the
investment portfolio is nearly $80 billion. it is a sizable chunk. the new ceo of the company says in a recent interview, he is focused on the safety of the portfolio, other annuity providers talk about the types of these portfolios and he has really talked about keeping it stable. john rosenthal, a longtime money manager from metlife, will be running the portfolio. and metlife is still 20% involved. that is the profile of the newly separated company. mark: why is it doing so poorly? julie: a couple of reasons why from analysts. we have most of them talking about how there is perhaps not that strong of a demand for the annuities market right now, one analyst saying the spinoff is not happening at the greatest time, when annuities are facing
minimal demand and there is regulatory change. wells fargo says there is upside if the markets and interest rights rise simultaneously. many analysts say over the longer term that brighthouse could do better. as of now, there are six holes and one cell -- sell, that coming from citigroup. they are also talking about the return on equity's target, which they haven't 9%. if you look at other annuity providers and insurance companies, it will put it toward where it is estimated for return on equity, on the lower end and they are talking about difficulty in achieving 9%. the bloomberg spinoff index year to date is up 19%, sharp contract -- contrast. top ones include paypal and yum china. vonnie: i love it. an index of spinouts.
and julie, thank you. mark: time for the bloomberg business flash, a look at some of the biggest business stories right now. resume in preliminary talks with sprint and t-mobile. sprint is facing increasing competition in the u.s. wireless market and of the company's biggest shareholder is softbank and that she the executive is pursuing all options. and netflix has agreed to acquire the publisher of comic books such as "kingsmen." they will be bringing critically acclaimed character franchises to film and a series. terms were not disclosed. mark miller developed comic this, "the avengers," and is netflix's first acquisition. falling to 1.1%,
goingunlikely it is to be a turning point for germany. bloomberge latest business flash. vonnie: we go to a developing story in south africa, the rand extending gains, stronger by 13 -- by 1.2% versus the u.s. dollar after it was announced the parliament will be voting by secret ballot tomorrow on a motion of no-confidence in the president, jacob zuma. inare joined by our reported johannesburg. -- reporter in johannesburg. how likely is the vote to succeed? >> what we know is the opposition parties have to vote for the motion to remove jacob zuma, as well as at least the lawmakers from the anc caucus to vote with the motion. it is a huge psychological blow
by the national assembly will be voting in secret. it is also a victory for the opposition party that has been complaining for it to be done in secret. whether or not today will be jacob zuma's last is up in the air. mark: what will happen tomorrow then? >> what we do know is the margin of -- the vote will kick off in the afternoon. we have protesters marching on parliament ahead of the vote. it will include a group that will support jacob zuma to the end. it will be a long night as we see whether the lawmakers will oust the president, or whether he will survive the bid to have him ousted and unseeated. vonnie: what does it mean for the markets? we are looking at the rand strengthen on the idea that there will be a no-confidence
vote. is that on the idea that jacob zuma could be gone? >> i think it also shows the democracy being vibrant, to know that political parties can vie in parliament and a certain rulings by the constitutional court, such as the speaker shows thathe matter, the market contrast. and we will be watching the developments today and tomorrow closely. there will be a ratings update on friday. vonnie: in johannesburg, thank you. mark: still ahead, part of eric's was of interview with brunello mere, why he says paris will prevail over frankfurt in the fight for post-brexit business. this is bloomberg.
york, i'm vonnie quinn. mark: i am mark barton. this is bloomberg markets. france toss climb in improve under the presidency of macron, however he raised eyebrows of the revitalization of a shipyard earlier this month. we spoke with the french economy and finance minister bruno le maire in an interview, starting with whether the shipyard was an exception. bruno: it is an exception, because there is a link between the shipyards and defense interests. and how we look at the decisions taken by the united states for instance, they are doing exactly the same when defense interests are at stake. are your defense interests at stake, i think this is normal and everybody could understand
that we defend our economic and a strategy interests. >> how can you reassure foreign this ass who say strategic interest? bruno: take a look at our latest decisions with macron. we have decided to reduce taxes, this is good news for foreign investors. we have decided to simplify the labor markets. and we have taken deep decisions to simplify the labor market. these are very good decisions for foreign investors. so just have a look at our decisions and i think that all the decisions we have taken with president macron are a clear signal sent to foreign investors, you are welcome in france. >> in the battle pro specs it -- post brexit, no major
international banks have chosen paris to relocate staff. why do you think paris is already losing the race to frankfurt? bruno: we will win the race, we will win the race of attractiveness because we are making the right decisions. arosek the questions that during the last month is, will they stand firm? we will stand firm. we will take the difficult decisions. we will lower the french taxes. we will make our country more attractive. we will take the structural reforms and the decisions that are needed. for instance, we will simplify the labor market. banks,hink that many many investors should be aware
that france is changing. and that it is not something fake. this is something true. things are changing deeply in france. and that is why we will win the battle of attractiveness. mark: that was the french finance minister. will bring caroline connan in from paris. he wants the target the likes of google who do not pay taxes in france, how will he achieve that? >> the french prime minister -- is well aware that taxes are too high and this is why some internet giants are looking at legal ways to pay their taxes elsewhere. for example, we learned airbnb only paid 90,000 euros of taxes in france last year. so bruno le maire wants to show the way toward tax normalization
across the eurozone and he says france will lower home taxes to 25%, and he wants to team up with germany to do the same and he hopes to achieve a level playing field if germany and france can agree on a common tax rate by next year. vonnie: apart from the common tax rate he is hoping to hash out with germany, how else does he plan to, you know, reinvigorate the eu harmony? project was atu the heart of the debate in the presidential campaign in france and the rise of populism across europe and president macron has always wanted a federal way of running things across the eu and eurozone. to bets the eurozone --
implemented by the eurozone, something the german chancellor had been reluctant to do in the past. but she says she is now open to the idea. now bruno le maire said that under certain conditions, that germany will look to achieve with france, he said these conditions would it not include the ecb. he said the germans will not use the head of the european central bank, which is thought to be replaced in 2019, as the bargaining chip toward more eu integration. he also wants new proposals by december by the next eu summit in december. mark: thank you for joining us. we will hear more from bruno le taxe, this time a corporate reports. the european close is next. we are following stocks.
35 minutes until the end of the session. gains in london, declined elsewhere in europe in the equity markets. take a look at the currency board. itsy, the euro continuing ascent? it is. it is up by a fit of a percent. and lower against the dollar, holding above 130.27. consumersa showing cutting back on spending for a third month in july. and the bond board, as we approach the european close, yields declining in l ondon, spain and italy. this is bloomberg. ♪
-- i'm vonnie quinn. this is "bloomberg markets." ♪ o's aggressive canes could put it in parity with the dollar by the end of the year. france's image. bruno lemaire speaks to bloomberg says his nation is determined to come out on top. >> we will win the race because we are taking the right decisions and we are standing firm. mark: is the bond