tv Bloomberg Markets European Close Bloomberg August 7, 2017 11:00am-12:00pm EDT
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. market gettingnd
it wrong when it comes to inflation? let's have a look at what is happening to european equities 30 minutes away. it is mixed today, some up, some down. -- bondorex front, commodities and cbs is your final three columns. factoring -- manufacturing and construction causing a temporary blip. this chart very clearly shows, industrial.s gdp is strong orders pointing to a pickup in manufacturing.
it is unlikely a turning point for the german economy. business confidence is at a high. lagging domestically behind france, spain, and italy for the first time in 12 years. -- i thought we would track the cac 40 against the stoxx 600. the blue line is the cac, the white is the stoxx. here is where we knew the results of the first round of the presidential election. that was the high of the cac 40 this year. macron emerged the winner. that was the highest back then since 2008. the european benchmark is up by 7%.
the stoxx 600 is up by 5.6%. just as gold was gaining -- ratingthe payroll on the parade. hedge funds cutting their bearish position. gold posting its first weekly drop following that u.s. jobs report on friday. u.s. interest rates, the fcc gold short positions is the bottom line. what is a looking like there? julie: we have the dow trading lower. it has been bouncing before gains and losses. the s&p is verily -- barely higher. part of a reason we are seeing a gain in the nasdaq is the
strength in chipmakers today. ofhave seen a lot correlation between chipmakers and bitcoin this year. their products are helping bitcoin mining. they have been building on those gains since early trading. we are watching potential deals in a different industry. we are watching collins and united industries after it was reported that there are looking at avionics business which would create an arrow space giant. we have rockwell collins shares at a record as you tx falls -- utx falls by about 2%. libya has brought some
production back online. they took a leg upward at 10. now they are taking a leg downward. it is possibly affected by opec saying they have reached their record high for the year. that could put more pressure on oil. it is now well below that $50 per barrel threshold. vonnie: here is jessica summers. north korea is ruling out talks on its weapons program and says the u.s. will pay dearly for its crimes. that was the response from kim jong-un's regime. in the u, theresa may's office is dismissing a report that the
country will pay $47 billion to leave the eu. a government figure called it speculation. they are pushing back against paying any exit fee at all. the trump administration is pushing for more coal mines. 643federal government owns million acres of land, mostly in the west. elizabeth warren is blocking president trump's pick to run the justice department. del rahim is a former lobbyist for anthem. global news 24 hours a day, powered by 2700 journalists and
analysts in more than 27 countries. this is bloomberg. european equities and markets slipping after german production unexpectedly dropped in june. the euro remains resilient. joining us for his take on the markets, steven isaacs. committee chairman, the euro and it's ascent, where does it end the? guest: the problem you see from is theman data today euro itself. st builds on two things, one wa monetization of a low interest rate, and the second was a weaker currency. . you have lost one of those. in the second half, think we will see it to salary quickly.
during that time, the fed is raising rates. now it has been quite stable, partiuclarly the short end. i would call it time. mark: does that stop the ecb in its tracks? or do they plow on with normalizing monetary policy? guest: there are two issues for all central bankers. one is normalization. if we were at different levels, there would be more flexibility. effect would be to normalize back to zero. the second is what i would call legacy. the fed, we are in the home straight for janet yellen. of what kindndful
of legacy do you want to leave? by letting monetary policy run at hot levels for too long, and longer-term perspective, inflation really picked up? do you want that to be your legacy? there is only one way to go, higher. the long end is more difficult. it is subject to all sorts of different forces, supply, d emand, so one, so forth. on the short end we will see effect. vonnie: what gives you that certainty? inflation expectations for thenesses are down here in
united states, and generally, inflation expectations are lower. breakevens might be on the rise but they are below 2%. guest: i think the fed is worried about asset prices. lowestelds are at the they have ever been. the stock market is at an all-time high, everywhere. i think that the fed is worried assetasset rices. -- prices. it is a delicate situation, but if you include the legacy issue, ep reality that has to ttak place, i think that does move the fed by september. vonnie: in the various corners of the world -- we have a chart
year,1811, and last basically everywhere the 10 year failed -- fell. where does the 10 year go in the u.s.? guest: the market, if you take out illustrious names, the market is convinced that the fed and extra central banks will carry on with rose-tinted spectacles. positioning is very aggressive. if you look at speculative longs in the treasury market, they are at 10-year highs. you look at this deep confidence. then, inflation doesn't exist. it is not certain that will change in a hurry. if we are right and asset prices decelerate, the yield
curve will flatten. i tend to agree with blackrock that inflation protection is cheap. they were not necessarily calling the bond market, but they were saying that because the market is so certain, that inflationary expectations are almost irrelevant, you can buy that protection cheaply. mark: and has been a bad bet three of the last four years, but when trump won, we were not talking about his policies. you said, who will be the next fed chairman? here we are many months on and gary cohn is at the top of the leaderboard. what does a fed led by gary cohn mean? guest: i think trump is circling the wagons. he had a bruising the first six months and he will be looking for loyal people that he can do
business with. that is why i think kerry will get the job. what's -- gary will get that job. what sort of fed will it be? seeink you can just aggressive behavior in both your actions. when you look at other goldman alumni who have occupied similar seats around the world, you will see a more interventionist outlook. at this moment in time, when i am calling for higher rates, that might mean higher rates than you expect, though he is not known to the a hawk. he has not written loads of papers. when you have people elevated to that level, you can read to their papers. you can read what greenspan wrote about japanese deflation. mark: which makes many believe he will not fit into the
culture. guest: that will be a challenge for him. we don't have that reservoir of information, but you have got t he knowledge that he was a successful operator. i think he will bring those skills and that dynamic outlook. mark: stephen was right with brexit, right with trump, wrong iwth fr -- wrong with france. that is his latest call. let's get more thoughts on brexit next. germany's taxk on today. this is bloomberg.
vonnie: i am vonnie quinn. mark: i am mark martin -- mark barton. the bloomberg brexit barometer is slipping. u.k. consumers cutting back on spending for the third july. pay $47 is prepared to billion to leave the eu. steven isaacs -- we woke up to this big story that the u.k. has decided it will pay 40 billion to move along the talks but it seems that that is not the case. talksstuck in brexit purgatory. guest: i like this story. this is a push back -- everyone was on holiday.
they want to find some sort of compromise. finding is that you cannot get it through parliament. parliament is suffering. we have been down the path because the supreme court has said this cannot be done by executive privilege. i include the house of lords. the government is a huge problem here. it may not be able to get any deal through parliament. cabinetes seem that the is converging rather than diverging over the village. a transitional deal. would you concur? it seems to be an acceptance that there has to be one. weather isn't agreement -- where there is not agreement is the length. guest: i'm not sure i entirely agree. the one person who will decide brexit is jeremy corbyn.
he has the power, he has the momentum. if he came out and said, we should join the ea --mark: he already said we will not join the customs union. he thought the election on that. guest: precisely. what does jeremy corbyn really think about brexit? if he looks at the first years at the old they were party, they were all anti-eu. if you want to bring real socialism to this country, you cannot do that inside the eu. instinctsat his perhaps speak volumes. his instincts are to let they sure take its course, stand back, let the tories rip themselves apart and let the
clock tick. happen, know what will but i think that the most plausible view is that jeremy corbyn, partly for ideological reasons, 2022, the next election, labor picks up -- labour picks up the pieces, conservatives said they will negotiate a fantastic deal which they will not be able to do. it will be up to jeremy corbyn to stand back and let the hard brexit happen. vonnie: give us some investment ideas. guest: that is more interesting. i think you should buy dollars. the dollar selloff has gone too far. hikenk the fed is going to rates a couple of times this
year. you're getting paid to own dollars because the interest differential is still there. interesting fact. markets,bout the nasdaq is losing momentum here. technically it is very overbought. who is one of the largest owners of the nasdaq? the swiss national bank. recycling the dollars it has been forced to buy when defending the swiss franc from depreciation. owns $83 billion worth of nasdaq security. weeks, the swiss franc has weakened to a two year
low. and maybe they will find themselves owning the baby when the bath water has gone out. it is an interesting dynamic on my call to say watch out on the nasdaq. vonnie: are you convinced enough to short some members of the nasdaq? a tough thing that many members have lost out on, shorting, trying to pick iss and reduce allocations one thing but trying to short securities is another. i would not short. that is too dangerous. vulnerable to read raising 250-times earnings? cap?e $5 billion market
netflix is climbing on the superhero band wagon. -- themic book was artist who has published such stories as "king'sman" and "old man logan." the terms of the deal were not disclosed. sprint is facing increasing competition in the u.s. wireless market. this is your latest bloomberg business flash. we are if we are minutes away the close is next. this is bloomberg. ♪
are high. construction and insurance, the only industry groups that gained today. all the others declining after the first weekly gain in three. lots of good charts to show you. leveraged bets. a strategy favored by hedge fun ds. wages on the aussie dollar, the canadian dollar, the new zealand dollar. combining to a come -- climbing to a combined -- position. even on the bloomberg commodity index, the white line is down almost 5%. that extreme positioning may help explain why we saw the aussie, the loonie, and the kiwi actually fall. that is interesting. investors yanking out $650
million from j.p. morgan chase's e.m. debt last month. after an 18-month rally, it could wreak havoc across emerging markets, similar to the tantrum in 2013 when developing nation currencies depreciated by 14%. local bonds lost an average of 7.3%. fairly stable political backdrop support developing nation bondds even after an increase in u.s. and european rates. the debate over e.m. will continue. m&a monday resenting us with .his about $2 billion in cash, $2 billion to boost its offering of
home dialysis devices. they will pay $30 per share for the massachusetts-based company. it will be financed with cash and debt. in may, it plunges to as much as 31%. down 12% this year. vonnie, how is it looking? vonnie: at the end of last month, we were talking about how the vix might spike in august. heard our guest early talking about how maybe we are putting in a bottom, but he is the chair. -- but he is not sure. see, crude oil is
48.68 as opecat and non-opec countries continue. we are seeing some buying in sovereign bonds in south africa. this as we look to the no-confidence vote. there are some other interesting trends there. we should talk about china as well. that is all that we have time for at the moment. the bond markets are clinging to the idea that inflation will make a comeback. blackrock says it is only a matter of months before inflation is back at 2%. liz, they are clinging to this idea. what is behind this thinking? a lot of -- guest: bond market veterans believe we will see unemployment near record lows, that we will
gradually see an increase in inflation. none of them say it will scream highers. they say if you look at the tips 1.8% for the about next years. this in the market is too pessimistic. we will get inflation. we have had four bad months, they are all out -- well aware of that. we had good payrolls data friday, saw some decent wage earnings, they feel like we are getting on the road. goldman sachs has done some analysis like the fed is holding somebody bonds. some of this normalization will help breakeven rates move higher. vonnie: we showed the breakeven chart in shanghai.
question, issk the the market going to lead the fed, or the fed lead the market? guest: they look at the market expectations. they have survey-based measures. they need to see the hard figures. we have cpi on friday which is forecast to be higher. that could get them the data that they need. no one seems to think they will do rate hiking in september. it will be a focus on the balance sheet. though someember, of the bond market analysts say the fed might not hike until next year. if the fed holds off and does not hike in december, that is that for sure. the fed always say that they are data dependent. they may wait.
that could give room to percolate. vonnie: we are not exactly sing the whites of the eyes in inflation. guest: no, and the fed has been very clear, there watching. they said that they believe in the phillips curve, that lower unemployment will lead to inflation. it has lag a couple of months -- lagged behind a couple of months. they duty to see the actual numbers. 1.8% is not the market screaming and taking off. maybe they are a little too pessimistic, like martin at blackrock mentioned, if you look at the difference tween cpi -- it has the and cpe, market at 1.4% for the next 10 years, which he says is too pessimistic. that is what we are trying to flag.
these investors say, maybe breakevens should be closer to 2.25%. maybe they will be inching that way. mark: on the history of tips, it has not been -- history has not been too kind for tibps bulls. are they still following ahead in tips investing? guest: vanguard always looks at both sides of the trade. jemma from vanguard says they will the looking in the months ahead if inflation starts to move, they may buy some tips. blackrock has said they like the value trade. they have said the market is too optimistic on -- and pessimistic on you take inflation outlook in europe. they think that breakevens will move higher. vonnie: what about looking at other markets? the cbs markets, we are at
practically all-time lows. guest: it is a global market and all bleeds together, but we are seeing some growth improvement in europe, and inflations continue to be higher, the economy could pick up, that will leave to global growth for everyone. 70'sne is screaming 19 inflation here, but maybe the pendulum has swung too for the other way. vonnie: thank you to liz mccormick. let's take you to first word news. reporter: another blow to the u.k.'s economy. british consumers cut back on spending for the third month in a row. 0.1% from a year
ago. inflation has been running faster than wage growth. -- this korea billionaire is accused of bribing a presidential confidant. he was drawn into the scandal that led to the ouster of president auction hey -- hei. there will be secret balance and the no-confidence vote of jacob zuma. he faces mounting opposition from his own ruling party. 'only a handful of members say they will defy their leadership and vote for his ouster. president trump has accused mexico of stealing u.s. jobs, now he is trying to get mexican workers a pay rise. underway, little push for better wages and conditions for mexican employee is.
-- employees. news, 24 hours a day, powered by more than 2400 journalists and analysts in more than 120 countries. i am jessica summers. mark: coming up, more from our exclusive interview with the french finance minister, bruno le maire. why he is promising a big change in the tax system across the eu. this is bloomberg. ♪
sees revenue for next year levels from apeak couple years ago. joining us now is taylor riggs. reporter: per all the reasons you mentioned, past guidance and forward guidance on revenue. there are a few company thations from the c.o. went higher. if you come to my terminal, you will see the two shaded out bars. these are the analyst estimates from bloomberg. set of $37.2- and -- we'ren revenue looking at $41 billion. that would bring it back near the peak. >> it seems like barbecues and hot dogs being everywhere across the united states, does that
help their bottom line or is it a drop in the ocean? reporter: i was wondering. we are all grilling outside in the summer. how much does a seasonal affect translate into the top and bottom line of the company? we have charted out some pork prices on a one-year basis. you can see it is a little seasonal. ityou go back three years, is the highest it has been in three years. the seasonality does not do much concerning it really is higher on this three-year basis. there is a company called hedgers edge that puts up the beefns -- puts out margins. it makes up a lot bigger percentage of the company by revenue. vonnie: i think what you are saying is, we can have that extra hot dog and extra hamburger. mark: let's turn to the tax
system in europe. mairee maire -- bruno le spoke with bloomberg. he says the tax code will eventually be harmonized across europe. >> it is always a strategy based on level playing fields. the same rules for everybody. when you are doing business in france and europe, you have to pay taxes. you cannot take the benefit of doing the business in france or in europe. you cannot pay the same taxes that other countries are paying in europe or in france. the same falls to all companies and all states. reporter: does that mean you want to lower the company text search way 5% everywhere in the eurozone? guest: we will over it from 30% to 25% until 20222.
this is the second step. we want to have the tax harmonization among the members of the eurozone. you have 19 members of the eurozone. one currency and 19 levels of taxes and 19 different economic policies. we cannot go this way anymore. that is why we are advocating for tax harmonization. the first step of the tax harmonization at the open level will be tax harmonization between france and germany. i am quite convinced that no later than 2018, we should be able, with germany, to have a common corporate tax. it should be the basis for harmonization of all corporate taxes, at the level of the 19 member states of the eurozone. reporter: what concessions do you expect from the germans to
further this european integration? accept age, would you german as the head of the ecb? guest: the little bit patient. we are in 2017, the decision will be made in 2019. we still have some time before deciding who will be the next chair of the ecb. we should not wait before making decisions but as far as the integration of the euro is concerned. able towe should be make a first step toward more integration within the eurozone. mark: bruno le maire in an exclusive interview with caroline kona. vonnie: from politics in europe to politics in the u.s. congress may be in recess but
washington continues to be in the news with cooperation between china and the united states. joining us is our chief washington correspondent, kevin cirilli. washington might be largely left behind for the next four weeks, but there is a lot happening in the president is at pains to let everyone know he is working and he will be back to take meetings. >> a working book -- working vacation, so to speak. lawmakers will head to the reagan presidential library to honor the 1986 tax reform effort. behind the scenes, i spoke with a source over the weekend who are what extenders could likely get done as well as a tax cut, but the idea that there will be comprehensive tax reform, that is ambitious. sources at the treasury
department are very optimistic, led by steven mnuchin, that they will be able to get that done. but putting domestic politics aside for a second on the geopolitical front with north korea. mark: it seems as if the relationship with china -- which was questionable a week ago might be improving. >> great point. over the weekend, the united states ambassador to the united nations, vicki hit -- nikki haley, announcing a vote -- crippling economic sanctions to the dictator in north korea. and really has been this brazen, nuclear ambitions. 80% of the more than exports and imports come from china. china to be involved in these sanctions they are sending a signal that this will not stand in the geopolitical global
front. i would point out that china has tremendous he decreased the amount of goods that they have accepted from north korea since president trump was elected. vonnie: rex tillerson is saying that the u.s. will have an answer for russia by september 1. what does that mean? >> he set a deadline. a republican-controlled congress issuing a sanctions bill to the president's desk which he signed last week. in terms of where this is going, in terms of additional sanctions, we will have to wait and see. it is no question that investors have already began to greet the russian market with skepticism. we have nothing much market reaction to the russia investigation.
but we have noticed a broader trend of investors looking at the russian financial institutions, particularly those who do business with putin, as risky. mark: time to look at some of the biggest business stories in the news. iran signing the country's biggest car deal ever. 778deal is valued at million dollars. it follows the lifting of sanctions over the nuclear program. they support spending on the model three electric car. itssale will bolster balance sheet. the latest bloomberg business flash. it is the euro versus emerging-market spreads.
vonnie: it is time for our global battle of the charts where we take a look at the most telling charts of the day and what they mean by investors. -- can always act should access these charts by running the function at the bottom of your screen. julie: i am looking at things beyond the united states. i'm looking at emerging-market debt as well as the high-yield debt. on both ofng spreads those flatten out here. aere flattening out over couple of different things, one of them is optimism on emerging markets. we are seeing the average yield on debt ready to blow. there is to supply in the junk bond market. july has the newest issuance since february of 2016.
a lot of piling in. both of them are seen as proxies for global risk appetite. this is another indication of the confidence, optimism, or complacency. on interesting thing going below the surface investors have polled $680 million from jpmorgan's emerging-market debt last month. that is the biggest-ever reversal inflows. even though they are buying the overall debt, we are seeing some pulling out from the emerging-market debt. vonnie: fantastic chart. very interesting. mark? mark: one of the difference between japan now and the 1990's ande have overlaid the -- the exchange rate. in 1998, the nikkei fell to a
low. as bloomberg fx rates strategist confidence began in the second quarter of 2013 looks stretched. europe that a stronger is the last thing that the ecb needs. two completely different periods of time, similar performing charts. vonnie: i love that chart, mark. everybody should take a look at the euro. post.ust picked it at the we spoke to a few people looking for a stronger euro. this is bloomberg. ♪ we check our phones 85 times a day.
from bloomberg world headquarters in new york, here are the top stories on the bloomberg and around the world today.top this -- world this bank is stepping up efforts to find a buyer for sprint by reviving talks with t-mobile as competition heats up. two titans of the bond market are pinning their floats -- an inflation come back. and opec -- talks underway in abu dhabi. oil producers coming up shorts on their measurements to alleviate the global oil glut. a lot to cover. julie hyman is here halfway into the trading day. >> the nasdaq is getting the most of the temperatures. but as a flip of what we have seen over the last week.
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