tv Bloomberg Markets European Close Bloomberg August 17, 2017 11:00am-12:00pm EDT
bloomberg markets. ♪ nejra here the top stories we are following from the bloomberg and around the world. president trump's comments on charlottesville are serving to weigh on key economic advisers like steve mnuchin. will they look past it? the ecb minutes show the central bank is starting to worry about a stronger euro. how could the currency gains affect plans to unwind qe? chinese -- chinese e-commerce giant alibaba posted big gains across the board. we will look at how this recorder could fuel alibaba's content push. let's have a look at where european equities are trading,
just under 30 minutes to the close of trading. the stoxx 600 snapping three days of gains, the longest run in a month for europe's equity benchmark. financials leading the losses. part of that driven by lower bond yields we were seeing earlier in the session. most industry groups in the red and in the green, you do have utilities outperforming. i will about metals in just a moment, but first, a great chart showing european docs. the price-to-book ratio compared to the s&p 500 price-to-book, european stocks are at their cheapest versus u.s. stocks on record by this measure at least. that is something to keep an eye on when we talk about where investors should be putting their money in the equity markets. looking at the euro, i talked about the ecb accounts and the
fact that we got some signals that the ecb with concerns about a stronger euro, so we did see the euro dipped just after the's accounts came out. it has recovered ever so slightly, but we are down to 10 support -- of a percent on euro-dollar and then finally, i talked about metals, so metals have been really big. chart, the end of the you could see we are getting a little bit of a pullback. zinc.s where we are on julie: a lot of talk on wall street and beyond about gary cohn, the president's economic advisor and whether he will stay in that position. there has been some speculation circulating that he was departing. a reporter tweeted that he was not departing at this present time.
we have seen stocks bouncing around. if he did depart, that would be another negative for the --sident tax reform resident's tax reform and economic agenda. agenda, of economic factory output down a 10th of 1%. industrial production, we have a chart on the bloomberg showing the trajectory of industrial production. negative andit was had been negative for much of the last year. we have seen some positive readings, but the growth is slowing. motor vehicle production in particular has been weak. we are watching industrial companies. many of them with individual news. briggs & stratton, the company coming out with a forecast for the earnings per share that missed estimates and is down 12%. , thatis tool works
company downgraded to underweight at jpmorgan. we've got the big danish wind turbine maker, that company's quarterly results missing estimates. it is going ahead with the plan to buy back 6 million euros of shares. downgo bridge in iron is 40% -- bridge and iron is down 40% since last year. cisco predicting yet another revenue decline. we are digging more into that company's numbers a little later in the show as the shares fall. europe,rning back to the ecb releasing the accounts of its latest meeting.
the central bank expressing concern over the risk of the euro overshooting. joining us to dive into the minutes and what they tell us about monetary policy is bloomberg markets live -- richard jones in berlin and from frankfurt, bloombergs paul gordon. -- bloomberg's paul gordon. paul, let me start with you. concernific comment about the risk of the exchange future,rshooting in the some people pointing out this is actually quite soft common tree compared to what we got in the past. -- commentary compared to what we got in the past. paul: very serious concerns about the euro, but then it was almost at once or do. the concern of the ecb has always been not so much that the euro is rising, that is part of
the economic recovery, but the speed at which it is rising. they were saying the concern is whether they would overshoot in the future. there is no particular concern about current levels. that fits in with the message that the ecb was signaling. there is concern there that has to be noted. richard, we certainly did see concern on the euro-dollar and there was real contrast with the clarity from the ecb versus what we got from the fed. how has that played out in euro-dollar? seeard: is interesting to the dynamic in euro-dollar. we have the actual selloff and now little bit of a bounce back, but it has been quite broad-based. we are up against a very high 9130 -- 91.3, 91.4.
thing that is of interest to investors is that is this the first sign of an ecb -- a concerted ecb push back against the currency? -- in case the euro maintains ever traction from here? that is the thing going forward and it is too soon to tell it that is going to be the case. i read this and i thought this message was put out that perhaps there was concern, somewhere in the ecb about a stronger euro and mario draghi does not even have to say anything in the market is already complying. is the ecb just brilliant at signaling to the markets, better than the federal reserve, or is this genuine concern and am i being way too cynical? the ecb signaling is
patchy, as is the fed. which sent a message the euro soaring and then the ecb dialback on their match -- on their message. draghi is well aware that words can move markets and therefore affect my internal policy and sometimes that works and sometimes it doesn't. today, they are not all that concerned about the message that is out there. vonnie: richard, what about jackson hole? always looking at anything -- looking for anything to come out of that symposium? richard: from a monetary policy standpoint, it is something investors can really sing their not, into, probably think it will be something more theoretical and academic. there is always a chance we could get something market moving, but it does not look like that is going to be the
case. nejra paul, i want to get a little more clarity about the phrase on more policy space and facility to adjust policy -- and for stability to adjust policy -- and flexibility to adjust policy. paul: that is the intriguing statement from the accounts. this is a summary account, not a full record of what was said. clearly, we are approaching the end or we should be approaching the end of quantitative easing. timescale to be determined, but it will not go on forever. inflation remains muted, so it may want to keep his options open. what else can it do it wants to send a signal that it will maintain the stance? nejra just before you go, richard, a quick question on the
dollar. richard: i think it depends on what the headline flow is, out of washington. the fed is one thing to make the dollar, i think politics is really driving the dollar as much as anything and that news flow is fast and furious. it is difficult to say, but that is the thing to keep an eye on is what is going on out of washington and how that story develops. nejra: we will certainly be doing that, bloomberg's richard jones and paul gordon. vonnie: coming up, turmoil in the trump administration. some of the president's key advisors did -- did see -- distancing themselves from his comments about charlottesville. gary cohn lands to remain in his position as national economic council director. that is the white house confirming gary cohn is staying
♪ live from nejra: london, i am nejra cehic counting you down to the european close. vonnie: in u.s. politics, turmoil in the trump administration, senior aides looking to distance themselves trump's statement that he blames both sides for the violence in charlottesville. treasury secretary steven mnuchin says he does not stand but noump on neo-nazis one has resigned. rather have a publicly criticized the president -- neither have they publicly criticize the president.
gary cohn plans to remain in his position as the director of the national economic council. joining us with more perspective, treasury reporter saleha mohsin and craig gordon. we were speaking with the former director about the difficulties of filling the spots. is it going to get even more difficult? there were members to exit that offers of mid-level positions at different federal agencies including treasury who are now having second thoughts, where the president, the boss does make such comments. juste: steve bannon has spoken to the daily mail in the wake of this controversial issue. been in telling the daily mail
that the article was a positive for the white house and the slow down the media's momentum and covering president trump's remarks about the weekend violence in virginia. he says the remarks drew fire away and change the narrative. there is nothing that cannot be spun positively in steve bannon's world, is there? craig: he is a master at it. he is half right and half wrong. it is helpful to donald trump to have steve bannon who a lot of people -- former publisher of breitbart news, has fought to be a channeler of that so-called alt-right coming out and saying that the white supremacist was quote a collection of clowns. that is useful to trump. what is less useful is what else he said that is of more interest to our viewers which is that he is continuing to be at war with , someohn, steve mnuchin of the goldman sachs lobbyists around town.
right now, trump needs to circle the wagons and show the world his white house is unified and standing with him. been in's remarks show the opposite -- ban on's -- bannon's remarks show the opposite. nejra: is that mean the trump agenda remains on track -- on track? craig: gary cohn was in the unfortunate position of standing next to the president as trump went on and on about white supremacists, etc. for gary cohn to signal he is staying is very helpful. he is in the camp that people refer to as the grown-ups. rex tillerson and jim mattis. the idea that he is sticking by trump for now is good news for trump's agenda. he is going to have some tough
sliding on the hill. nejra: at the treasury, are those working there concerned that their boss supports president trump's views expressed during that presser? saleha: it did like the chairman of the department did see that concern could grow. the day after that press conference the main message in a routine morning huddle was mnuchin was standing next to the president during a press conference that was intended to be all about infrastructure. he did not go to new york to join that press conference with the intent to lend any support or credibility to comments that they say mnuchin did not know trump was going to make. are talking about career staffers and political employed -- appointees who want to be public servant, that some of whom have worked in civil service in -- for decades. they want another the person they are working for, the agency they are working or has
credibility and mnuchin is the spokesman of the world reserve currency. he oversees the $14 trillion u.s. government debt market. they want to know where he stands on this issue and he did said that -- send that message. it remains to be seen where he is heading. vonnie: plenty of agencies represented. john kelly who was also in attendance. president trump clearly likes conflict and friction. he is better able to work in environments like that. can john kelly? craig: that is the question. in most important question to hang over washington, d.c. john kelly in that camp of grown-ups is a four-star general and brought onto right the ship at the white house. his boss felt it was ok to stand at the podium and say some of
the things he did on tuesday as john kelly and mnuchin and cohn looked on. john kelly probably thought his biggest problem was trump tweeting but the problem is trump himself. he is willing to say outlandish things that many people would find offensive and there is john kelly having to clean up the mess. the question is, can he get ahead of these things and convinced trump this is not helping his agenda or his leadership staff -- his leadership stance? bloomberg's craig gordon, thank you. saleha mohsin as well. nejra: still ahead, theresa may says brexit talks are off to a positive start, but ireland warns it will not be a pawn in the negotiations. this is bloomberg. ♪
vonnie: live from bloomberg world headquarters in new york, i am vonnie quinn. nejra: and from london, i am nejra cehic with the european close minutes away. let's turn to the political drama. prime minister theresa may saying brexit negotiations are off to a positive and constructive start. this as the u.k. says it plans these a free travel for europeans after its divorce from the eu. joining us with the latest is bloomberg's emma ross-thomas. good to see you. on immigration, what have we learned? emma: we still don't have a clear policy on what immigration will look like after brexit. basically, eu citizens will be able to come in, to visit and for tourism, but if they want to stay or work or resign here,
that is when it kicks in. border,t just about the it's about a comprehensive is in order to rent a house, get a bank account, have access to social security, that is where the controls come in. it is very useful, when looking at the institute of northern island. they want to maintain that common travel area. if you leave the border open on the island of ireland, is considered a backdoor for european immigrants, but elected -- but if you let them in, and all the borders, to visitors, then you kind of stuff that problem. nejra: speaking of backdoors and those sorts of issues, the institute for government, a think tank morning the deal is
not enough to secure post-brexit trade. and we had any signs that the u.k. government has been consulting businesses about these papers? it seems very much they are in listening mode. all the businesses we spoke to said tariffs, we can deal with. the tricky thing is what people called nontariff barriers, the bureaucracy, the rules on origin, the regulation. all that stuff that the companies have been -- have not been used to dealing with if they only export or import from the eu. it is that sort of bureaucratic burden that they seem worried about. nejra: we also had data, retail sales. power consumers responding to brexit? -- how are consumers responding to brexit? emma: wages have not increased.
squeeze on real incomes and this is something of the bank of england has mentioned. one of the things putting off a rate hike. arelso showed how consumers saving money, whether it is on reducing grocery bills, stopping spending money on clothes. there is evidence of how they are scaling back spending. as we have is just really just got the negotiations underway. very briefly. could we see any delay to those? emma: after that round of negotiations in july, it was unlikely that negotiations would be able to move on to the next phase, it is the trade phase until october. if that does not happen, it will
be december. nejra: thank you so much, emma ross-thomas. vonnie: breaking news. -- plotting his escape from the federal reserve's top oversight -- tough oversight. this would lay the groundwork for it to escape the important title. metlife won the legal victory last year which might be setting the table for prudential financial to do the exact same thing. this is according to people familiar with the matter. the federal stability oversight council going to be making that decision. the european closes next. ♪ ♪
market action starting with equities. can see some broad-based losses across european equity markets, both in the core and the periphery. a lot of these indices down by more than 1%. the euro lower by 2/10 of a percent, 1.17. the accounts around midday, london time with suggested the ecb officials are starting to get concerned with the strength of the euro. the euro has recovered a little bit since then. in the bond markets, we are seeing yields move lower, both in the core and the periphery and looking at commodities, brent is $68 a barrel and we are seeing weakness come through on the metals on the london metal exchange after we did see them strongly over the last couple of days. highw zinc hit a decade but it is pulling back along with aluminum and lead.
600 snapping three days of gains, the longest stretch of gains in a month for you -- for europe's equity benchmark. lower,dustry groups are with financials very much underperforming, probably dragged down by those lower bond yields. it is only utilities that are in the green. a comparison on this chart, it is the spread between u.s. small caps and european small caps and that spread narrowing. that is a trend to keep an eye on as that u.s. premium has been drinking in the small-cap space and finally taking a look, it is the euro aussie. thatwe have been seeing is top there, this trade really coming away from that and i will be analyzing blogs and commentary saying the realistic
target for aussie is that today -- is that two day -- let's get back to that breaking news on prudential financial. the life insurer who employs about 50,000 people said to be laying the groundwork to escape the government's label that is too big to fail, something that would dramatically reduce federal oversight. escape theaged to same designation last year in a legal decision. what prompted prudential to wait so long? >> metlife went a completely different direction and combating this designation by the government for nonbank firms that pose a sportive -- a sort of special risk to the financial system if they were to collapse.
the designation was put in place after the financial crisis and metlife chose to challenge that in court while prudential went through the process that is run by a council of regulators in d.c. metlife was successful in its challenge and prudential is looking at that success and plotting its own course to get out. it is hoping that the arrival of itstrump administration and official put on that counsel, the financial stability oversight council, will be an advantage to prudential, so that they are starting to strategize how to get out of this. vonnie: they are assuming the f sock actually stays and is not just done away with. what is the strategy anymore micro sense? what arguments are they making for why they should not be considered systemically
important? jesse: unlike some of the others like metlifegnated and aig, prudential's business model has not significantly changed. to argue thatng their definition was inappropriate in the first place and they are hoping that the incoming regulators who are members of that counsel will be of the same mind as them, that the process is flawed and that they should not have been designated back when they were. what advantages does it confer on in life insurer? jesse: there are tremendous requirements for these companies that are under this mark, including having to go through complex annual stress test by the federal reserve and having
to style these complex plans for their own hypothetical bankruptcies, without threatening the system. vonnie: would it have to spin off some units are get rid of some parts of its business in order to satisfy regulators? aig went through a lot a restructuring. bits and pieces were broken off. what would have to happen? people coming in to take over the council are of a similar mind. they might agree with prudential, that its business model should never have been flagged in the first place. it is possible they can get through this review that they will be asking for, without having to make substantial changes. vonnie: jesse hamilton of bloomberg news. thank you. let's check in on the "first
word news." courtney: america's top general in beijing says war with north korea would be horrific. the chairman of the joint chiefs of staff said it north korea develop the ability to launch a nuclear attack on the u.s., it is unimaginable. in hong kong, a young activist is going to prison. other student leaders of the 2014 democracy protests will survey month sentences. the court overturned sentences of a prosecutor said were too light. factory output in the u.s. took a fall last month. manufacturing declined 1/10 of 1% in july. it was the second drop in 10 months. eu citizens allow to visit without a visa after brexit according to a british official. eu nationals would still have to get permission before working or living in the u.k..
doing us now from the university of chicago is professor randy kroszner. and 2009, very familiar with the fed's dealings 's monetary policy continuing to work, and what should be the next step? randy: you can see from the minutes that there is a debate going on about how much inflation pressure we are going to get. some people saying be traditional models, unemployment is down and inflation is just around the corner. think there is a tension that is going to leave them to delay at least until december and beyond that before the next rate hike. vonnie: when should they move? we always thought the consensus beginning the balance tapering in september and hiking in december. are you saying that is changing with this debate? to announce likely
something about the timing of the balance sheet reduction. i do think that there is a reasonable chance that they could delay beyond december at the next rate hike because inflation has been running even soer than they had expected, rather than continue to move to their 2% goal, depending on which measure you are looking at, many of them are moving down. nejra: i don't think we can really make too much about the fact that these fed minutes seem to ask for questions than they answer. is the fed facing a crisis of confidence? randy: i would not say crisis of confidence, but they are much less certain that they are on a path towards getting to their 2% inflation goal. they showed a fair amount of confidence of that late, last year and the beginning of this year and that is why we had a few rate increases. now that they are going to start
a reduction of the balance sheet, i think they would probably be a bit cautious because they are afraid of a one-two punch that could move things more than they expect. we keep talking about the phillips curve and whether it is broken and coming back to this discussion as to why wage growth is not responding. fact that inflation is there, but the fed is just looking at the wrong ends? -- wrong things? randy: it is hard to see a lot of inflation, whether you look in wages, different measures of inflation, i just don't see it being there, so i don't think it is a measurement problem. i think it is a bit of surprise because there has been so little inflation and that is different than has been the tradition, but i think that is one of the things that they need to come to grips with. nejra: if we could also get your
reaction to some tweets that we i will readom -- you some and i believe we have a graphic showing them. he said i have said the president trump should reappoint janet yellen to the fed chair, but then he also says i am lucky enough to know janet yellen well and i know that her vision for america is highly distinct from that of trump, excepting the fed chair jump from him would send a signal that she would regret and perhaps deeply. do you agree? i agree with the first part because i know janet yellen well, also. i worked with her when she was the head of the san francisco fed during the financial crisis and i have deep respect for janet yellen. know,k that we just don't going forward, exactly what will happen. i think the fed has a reasonable
about of independence from the white house, so i would hope that the fed could maintain that and whoever might be the fed chair can operate reasonably independently of the administration, as has been the tradition for most of the fed history. vonnie: we saw two sentences dedicated to the view of one person in the leadership of the committee and that person said a rate hike would strike the appropriate balance. does this mean we are definitely getting on this? it sounds like it could be the fed chair or stanley fischer or william dudley. randy: will depend on how the economy evolves -- it will depend on how the economy evolves. the u.s. economy seems to move along at about 2%, the matter what happens -- no matter what happens. we will have to see what happens with inflation.
they were expecting inflation to move up more than it is. if they continue to start to go down, that will delay the next hike. vonnie: is the fellow's curve broken -- phillips curve broken? this is the big debate at the jackson hole meeting a couple years ago. is it broken or are we going to go back to our normal relationship? unfortunately, as with many things when academics are presenting papers, we did not get a definitive answer. you can see that in the notes in the minutes. -- and the minutes. one of the reasons we have not seen inflation move-up is employment has been higher than typical. now we have that spread between the traditional measure and the broad measures.
people that want to be part-time, full-time. people that have not looked recently but do want a job. will have pressure going forward, but perhaps not as much as we have seen in the past. vonnie: our thanks to professor randy kroszner. nejra: some breaking news coming from barcelona in spain. many injured by a van on -- a white ram blood man has mounted a sidewalk and struck several people in the city of lots from the -- of las ramblas. the police are saying that many are possibly injured by this van and advising people to remain in place near the incident.
nejra: breaking news out of barcelona where police in barcelona are saying a white van mounted the sidewalk and struck several people in the city of city's lasy of -- ramblas district. police saying the van incident is a terrorist attack. sayinglso got tweets they should out in barcelona market. las ramblas is where the main thoroughfare running down to the beach is. a very busy area. usually a lot of busy people walking around. no -- we alsoo
and the metro and train stations are closed and there are unconfirmed reports that it butd be a terrorist attack it has not been confirmed. it has its own domestic issues, right? >> there is no indication that there is any relation between the separatist issue and the situation. there is no evidence or indication. those are separate issues. much, estek you so ban duarte. we will continue to follow this breaking story and bring you the news as we get it. turning to tech and alibaba, shares on the rise after the
e-commerce giant topped earnings and sales estimates. in the last 56% quarter, helped by improvement in its advertising algorithms. us from west palm beach florida is rob sanderson, managing director of mkm partners. he has a buy rating on alibaba. thank you for joining us. can i get your initial reaction to these earnings following on from $.10? rob: my one-word takeaway is affirmation. we have been noting accelerating trends in the chinese consumption environment. alibaba's position is very strong. they have been seeing some very notable monetization improvements. combined with good volume growth and a strong operating environment and a high range business model. affirmation is my initial take away. nejra: what about the cloud
computing? that dipped below triple digit growth of the first time in several quarters. is that a concern? rob: it is not. there in market development phase and the offset here is the number of paying customer record,s was by far a the previous high bar being 103,000. their primary objective is to win the land grab. they have had some aggressive pricing actions over the past couple of quarters that the plates the top line growth but as long as there is -- they are successful in getting the early adopters on their cloud in mass, they are in position to win this market. one area notonnie: doing as well as entertainment. why is it not performing as well ? of: they have made a couple
the acquisitions in this space. required, they took that business and really started to break it down and reform it and integrate it throughout the alibaba ecosystem. it is a work in progress and they have been clear to position the turnaround time as a matter of years, not quarters or months. they are doing what they think they need to do in terms of rowing audience. the advertising revenues really decelerated because they defocused that part of the business and they take long-term views on the investments that they make. time will tell whether they can be successful in the wide-open division -- digital media field, in china. vonnie: it is putting money into brick and mortar stores, it is recognizing even the big lers.lers -- big e-tai
more than 80% of purchases in china are done by hand. rob: i would like to say that unlike the amazon acquisitions, this is less about an infrastructure investment. amazon is clearly interested in whole food for its space in affluent markets and the extension of their logistics infrastructure. alibaba's model is very different. they are not a first party seller. their acquisition of in time retail, this was more of a large-scale experiment to understand how they can expand their value to the brick-and-mortar retailers. i don't envision the making a big asset play, but i think in order to really understand the complexity of the hybrid model, owning it is probably a more strategic position. thank you so much to rob
sanderson, managing director of mkm partners. recapping that breaking news from barcelona. police, a vanocal has mowed down pedestrians on las ramblas. a popular road running down to the beach. police described the scene as a massive mowing down of people. trains and metros have closed in the area. emergency services have told people to stay indoors. police are asking people to avoid the center of barcelona. this is a breaking story. this is bloomberg. ♪
from bloomberg world headquarters in new york, here are the top stories on the bloomberg and from around the world that we are following. president trump slamming some republican senators who are publicly rebuking him over his charlottesville comments. making freshnnon comments to "the daily mail," theowing an interview with american prospect that made news overnight -- how toxic are relations between the president and the american -- congress right now. is there any hope to get things like tax reform passed? the turnaround at cisco has not taken hold. we'll hear from ceo chuck robbins on the company's plan to become less dependent on hardware. big to is spending compete with amazon, and it is showing up in earnings. shares are lower as walmart