tv Bloomberg Markets European Close Bloomberg February 15, 2018 11:00am-12:00pm EST
i vonnie quinn this is "the european close" on "bloomberg markets." ♪ mark: here are the top stories. stocks are holding on to gains in the u.s.. european equities are rebounding from the worst of this month's correction. africahakeup in south as president zuma steps down. what it means for the market and economy. president trump is scheduled to speak on the tragic florida school shooting. we will bring you that as soon as it happens. trading with 30 minutes away from the end of the thursday session. rising across the european equity space led by greece. we are up for a third day for the biggest weekly drop in 2
years. the two-day gain is the biggest since january 5. all of the currencies are rising against the u.s. dollar. the british pound is up for 4%. sovereign bond yield is rising in the third column. that is gmm. nestle is opening the door to a possible sell of l'oreal. that would give the chief executive march night or ammunition to sharpen the swiss giant's portfolio. the updates came as the revenue rose by 2.4% last year on inorganic races. 2.7%.timate was it was a miss. upped supplements. nestle is down by 2.6% today.
the eem bond yields come the threat of u.s. inflation rises, the benchmark treasury yields approach 3%. bond yields are offering investors a wider spread since 2010 over the developed market counterparts. that is because of the recent global route triggered an increase in yield in developing nation debt. inflation remains benign based on the average of 10 a.m. markets compiled by bloomberg contrasted to consumer prices in japan accelerating based on the most recent readings. the blue line is the average spread going back to 2010. , the finish with ramaphosa new south african president. south african banks are rallying to a record high. south african stocks jumping the most in three years after zuma resigned. yesterday. ramaphosa is the new president.
the hope is that he will overhaul the economy. growth has averaged 1.6% a year cents assume took office in 2009 , undermined partly by policy missteps and appointments that rocked business and investor confidence. toaphosa is widely expected adopt more business-friendly policies, shooting up the banking sector today to a record. we will be speaking to a chief executive of one of those banks in a few minutes. 90-minutes into the session of the u.s.. it is looking worse if you are a bowl. all africa's have turned negative. the s&p and the dow are leading the decline. both are down 1/5 of 1%. i want to take you into the bloomberg.
energy shares are down particularly sharply, one .8%. financials are selling off, as staplesmaterials as maintain their gains. as we watch the energy shares decline, oil prices, this is wti at the lows of the session off by 1.3% after an overnight recovery in oil prices and yesterday. we will watch this to see what exactly is going on. on the same token we have earnings winners to talk about. what is interesting is that some of these are not necessarily high quality earnings winners. when you look at tripadvisor come of for example, the earnings-per-share missed estimates in the third quarter. they will do a buy back. they say the 2018 consolidated adjusted ebit is expected to be flat. that is perhaps not as bad as
analysts anticipated. one main holdings, a mortgage beating shares estimates. those are higher. centurylink is having what morgan stanley called a messy fourth quarter. morgan stanley still expects that that will help shares in the near-term. looking at mortgage rates, which we are seeing go back higher as we see interest rates on the rise, that is something to watch as we see the treasury rates rise. this is a real-world effects of that on potential homebuyers. mark: thank you. let's check on the markets. the socgen fx strategist, sterling holding above 140. hikexpectations for a rate in may have risen. is it down to the transition? carest what the market
about, the details of the transition? kit: to appoint you can narrow it down to say that we have been priced on terrible news for over a year. we have had a little bit of a balance in -- of a bounce. it has not weakened against the euro. we would react well to any good news on the transition where we to get any. we are still waiting. mark: the expectation form a rate hike you think is pretty solid? kit: if it was delayed by couple not make at would big difference. the bigger question is how people think the economy looks in 2019. the focus will shift from that. the economy has not fallen off the edge of the cliff, we get it, but that is as far as it goes. rate hikes, there is more price
pressure which people hopeful fadeaway. it won't do much to support them on their own. vonnie: what is it mean that fx set out the recent turmoil? is more volatility, but during the two days there was nothing. kit: you cannot create or destroy energy in the markets. it moves around. it wasn't the foreign exchange market's time. that is not necessarily surprising. haveof the moves that we seen in rates markets we had preempted in the currency market in the way that the euro, for example, and emerging-market currencies raptly last year. -- rallied last year. we will pick up the pieces in the foreign exchange going forward. curious, when you read something like radel euro thehis $18 billion short on
euro, a lot of the companies in germany are shorting as well, what does that mean to you? kit: i think it is interesting. i do not know what is driving individual banks, but what we have seen so far as money coming into the european equity market where money could not come into the european fixed income market. the ecb is keeping yields down. individual banks, but what we have seen so far as money coming into the european equity the improving economic story is felt in the equity market. that has been a recent driver of the euro's jump. eventually jobs, we have to cope with what will happen to bond yields when the ecb steps away. i think it is trying to get the sequencing of which trade you want. the foreign exchange market moved first and fastest.
it may now need to slow down while the focus shifts to what is happening with equities and bonds. vonnie: there was an outflow last week from one of the major investment-grade corporate indexes in the u.s., almost $1 billion came out of it. i was wondering if you could compare and contrast the health of corporate america with the health of corporate europe. kit: i think corporate everywhere is in good health. they have had low interest rates with a synchronized recovery. in a sense, some of the outflows reflect that the supply has dried up. large, across europe, look at the health of the corporates. leveraged.t overly it is one of the things that held the economic recovery back time.they are in a reasonably good position to enjoy the economic upswing that is underway. 1.25,the euro is almost
are you comfortable? 1.29we average almost decade. he, like me, would have liked a bigger correction and more of a slowdown for longer. mark: when do they end qe? the month? dribble it out to a slow pace, but it will end this year. mark: it is good to see you. thanks for sticking around. vonnie: let's check in on the first word news. courtney donohoe has that. courtney: an orphaned 19-year-old with a troubled past. necklace cruz has been charged with premeditated murder after an attack on his old high school in south florida. 15 people are hospitalized. was armed with a
semiautomatic rifle and smoke grenades. he warned the fbi about someone with the same name as the suspect. he left a comment on youtube saying that he would be a school shooter. is --ump administration the department of homeland security calls it an amnesty bill that would make it impossible to enforce immigration laws. the measure would provide a passage to sedition ship for young undocumented immigrants. a sign that inflation is picking up in the u.s. is wholesale prices rose last month thanks to high energy and hospital costs. in south africa, cyril ramaphosa has been sworn in as president. his nomination was unopposed in assembly, the members of one opposition party walked out saying that early elections should be called.
jacob zuma finally gave in to demands that he resign. his nine years in office were marred by scandal. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. i am courtney donohoe. this is bloomberg. mark: thank you. sticking with south africa we will speak with the chief executive of nedbank. this is bloomberg. ♪
company posted its weakest sales growth in 20 years. they spoke about how the recent market turbulence is impacting nestle's business. frozen business is a very good channel to fulfill health and wellness ambitions. frozen food does not depend on the freezing, it depends on what you put in if something is healthy or not. we have been consistently and patiently upgrading our program to better and healthier options. the portfolio will grow and develop in the sense that we develop new products and put them in the market. most of that has been happening through internal developments. >> how do you see as the ceo of the biggest company in europe the recent market turbulences? >> market turbulences will come and go. life.s a fact of
what is more important is a company to have resilient operations and financing, to be deeply rooted in the markets, and perform day in and day out. we are known for defensive, reliable, successful growth in difficult and easy markets. these are the moments that a company like nestle can shine. >> were you surprised by the correction? >> do i know when a correction will happen? no i don't. will corrections happen? yes, they will. >> how does that affect financing cuts? >> in terms of interest rates, we are not a highly leveraged company. there are firms where the impact will be stronger. i think that in lean meaningful forecast for interest rate development is conservatively baked into our financial projections. vonnie: speaking with the nestle
ceo mark schneider. .ark: let's go to south africa they began a new chapter as cyril ramaphosa was elected president one day after former president jacobson the resigned. mike brown is the chief executive of nedbank, who stock hit an all-time high today. he joins us over the phone. think you for joining us. why do you think that your stock, and other banks' stock, rose to record levels today? mike: south africa has clearly been through a painful transition of presidents. the damage that has been done to our economy over the last eight-10 years has been large. i think that the market in general is looking forward to a much more market-friendly policy and overall high levels of growth in south africa. that immediately translate into improved bank stock prices.
mark: what are the big hurdles that the new president faces in trying to achieve those market-friendly policies and turnaround this economy? has enormousainly hurdles in front of them. clearly, there are significant structural challenges to our economy, education, infrastructure, and the fiscal deficit has ballooned. theaps, most importantly, undermining of corporate governance and corruption of state-owned enterprises. that would be the initial focus areas. annie: you worked against downgrade as part of a ceo group. would you imagine will happen with the ratings agency? will you continue to request that south africa be reappraised? of some a consequence of the challenges facing our economy we were downgraded below i numeral twode
agencies. one has retained south africa's investment grade. i suspect that they would continue to retain that investment grade. he will be the state of the nation address which we will hear on friday night and the budget that will follow next week. in downgrading south africa last year, i believe they were waiting for political change. vonnie: this ceo initiative, will it continue? will ramaphosa have ceo's way -- weigh in? mike: i'm am certain the initiative will continue. , themes like this responsibility of business is to work alongside social partners to improve the lives of everybody in our country. it is elevated more than ever. mark: how can nedbank support and try to help the new
?resident ramaphosa what can you do as an institution to help the process? , we have, and are, already partners in the s&e fund , money we have invested with other corporate in south africa to drive and grow our economy with the objective of creating jobs. ofare also going to be one the initial participants in the yes campaign,, the youth employment scheme,, to give one million kids a chance at an internship. clearly, from an nedbank point of view, we are funders of their important infrastructure projects in our country. there are many other ways that we can be of use. those would be three examples. mark: there have been a number of pieces written today about who might be the potential winners and losers from a ramaphosa presidency.
banks and financials are among the winners. retailers, miners. the losers are those who have hedged the brand small-cap prophecy. will this lift all boats, the boats?tide lifts all who do you see as the winners and the losers? mike: generally, i would think that anybody with exposure to a net winner call would be that we are projecting higher levels of growth than we would have. the rand hedges would be the losers as a result. very cautious also that it is the early days. there is a lot of initial confidence. as i said in my opening piece, the real hard work lies ahead. vonnie: give us your impressions on valuation. where should the rand bu versus the u.s. dollar? it has been strengthening more than .6% since the beginning of
the year. where's a good level? what about the stock market? versushe rand we look at purchasing power parity. it has been undervalued for a long time. exchangelooked at the rate today, but a week ago it was back trading in line with purchasing power parity for the first time in 2-3 years. i would think that the rand is relatively fairly valued at the current level and the price can fluctuate on either side of valuation. if you look at the south african south africa has generally been underweight in global emergency market portfolios given the challenges that the company has been going through. the particular leadership challenges. vonnie: we have to leave it there. we are going to go to the president of the united states. president trump: today i speak to a nation in grief.
yesterday, a school filled with innocent children and caring teachers became the scene of terrible violence, hatred, and evil. afternoon, yesterday police responded to reports of gunfire at marjory stoneman douglas high school in parkland, florida, a great and safe community. there, a shooter was now in custody, opened fire on defenseless students and teachers. and badlyd 17 people, wounded at least 14 others. our entire nation, with one heavy heart, is praying for the victims and their families. , teacher, andt
child who is hurting so badly, we are here for you, whatever you need, whatever we can do to ease your pain. we are all joined together as one american family. your suffering is our burden also. teacher, should ever be in danger in an american school. no parent should ever have to fear for their sons and daughters when they kissed them goodbye in the morning. was stolen from us yesterday had a full life ahead of them. a life filled with wondrous beauty and unlimited potential and promise. each one had dreams to pursue,
love to give, and talents to share with the world. each one had a family, to whom they meant everything in the world. today, we mourn for all those that lost their lives. recovered the grieving and the wounded. -- we comfort the grieving and the wounded. we heard for the entire community of parkland, florida pain., andhock, searching for answers to law enforcement teachersesponders, and who responded bravely in the face of danger, we thank you for your courage. i spokeer the shooting, with governor scott to convey our deepest sympathies to the people of florida, and our determination to assist in any
way that we can. i also spoke with the florida attorney general and the broward county sheriff. i am making plans to visit parkland, to meet with families and local officials, and to continue coordinating the federal response. in these moments of heartache and darkness, we hold onto god's word in scripture. i have urge your prayer and seen your tears. i will heal you. we trust in that promise, and we hold fast to our fellow americans in their time of sorrow. i want to speak now directly to america's children, especially those who feel lost, alone, confused, or even scared. i want you to know you are never alone, and you never will be.
you have people who care about and who will you, do anything at all to protect you. if you need help, turn to a teacher, a family member, a local police officer, or a faith leader. with love, answer cruelty with kindness. we must work together to create thatture in our country embraces the dignity of life that creates deep and meaningful human connections, and turns classmates and colleagues into friends and neighbors. our administration is looking closely withrking local authorities to investigate the shooting and learn can.thing we we are committed to working with state and local leaders to secure our schools and tackle the difficult issue of mental
health. later this month, i will be meeting with the nation's governors and attorney general's. we are making our schools and our children safer, it will be our top priority. it is not enough to simply take actions that makes us feel like we're making a difference. we must actually make that difference. in times of tragedy, the bonds that sustain us are those of family, faith, community, and country. these bonds are stronger than the forces of hatred and evil. these bonds grow even stronger in the hours of our greatest need. today, but especially let us hold our loved ones close. let us pray for healing and
peace. let us come together as one nation to wipe away the tears, and strive for a much better thank you and got bless you all. thank you very much. vonnie: the president not choosing to address that question. a shooting in the florida that claimed the lives of 17 students. let's begin kevin cirilli to go through this. you heard the president's address about the florida school shooting. as we see it from our gun stocks, weirdly, are rising and always happens after these events. this anything change
legislatively in the future? the president said he plans to visit apartment but did not give a timeframe on that. he did speak with a lot emotion and quoting scripture and assuring to the concerns of children, but this is not a policy driven speech and no mention of gun control laws. we should know on capitol hill to talk of gun control is being discussed. steven mnuchin going as far as saying to reporters earlier today that he thinks that gun laws should be something that should be taken a look at, but i think unfortunately we have the same segment time and time again. it is unclear whether or not washington dc gets it. what will the president be doing later in the day --
there is work being done to help other children at the moment. i am not sure you can see but it is ate me, half mast for the victims and families of this horrific school shooting, the latest mass shooting in our country. president trump today is scheduled to meet with you when ambassador nikki haley here at the white house and vice president mike pence has no public scheduled events. talk turns to capitol hill about whether or not something will get done. based on my reporting and conversations, i just don't see how that happens. kevin cirilli, thanks to you. mark. mark: delete it go is the function, and highs of the day,
it comes to the back of the if wet weekly drop -- rise this week, it will be towards the weekly run. the two-day gain is the best since january 5. this is one of the big corporate stories of the day, the european playmaker in the 2017 with a record order a record order of backlog and delivered more just than ever before even so the billion dollar charge for the military and they werel, dependent on overcoming engine singleaffecting their engine jets. this is an interesting chart, u.k. government bonds no exception to this generation sweeping global financial markets. swings are being spread by
domestic policy outlook. the highest level in a month, and that was after the bank of england said it could raise rates sooner than expected. the market pricing is more than an 80% chance as early as may. the data that supports or lessens the probability of a move will create big market swings. let's finish with one of the big moving stocks of the day, this is aberdeen shares down, lloyds banking group planning to terminate an agreement with this company which is britain's active money manager. that $100 billion in assets, saying your disappointed by the decision that will affect less than 5% of annual revenue. a 40 million pound impairment charge on those for
your results. that is the look at european markets. u.s. we are in the just below that, 2.89, but more and more economists are raising forecasts for those fed rate hikes. now it is expected to have three in 2019 -- and they are skewed higher. and we can see continued weakness in the dollar index -- benefiting for one currency, the japanese yen, which is at 106.24. and then crude oil, we're down in the session, from the above $60. and then let's take a look at
wm. markets, into equity but it started in asia with positive tone, and in south africa you can see is decidedly in the green. the new president has been sworn in by the countries chief justice. equities in other regions -- bridgewater has $18 billion against some of europe's sevillecompanies, and has less than 2 billion. "bloomberg markets" reporter -- not a lot of love for european stocks. love, there iso a short bet, but i want assume to know what is going on in dalio's mind.
but i will point to a linkedin post, you know he loves linkedin, saying we are at the late stage of an economic cycle like we might be in europe. central banks grow more hawkish and growth has been picking up. at this point is one stocks to an about-face and do a downturn and he ties that the rising interest rates and growing banks. tfrom central this is conjecture here, but this is the short side we are seeing and we don't know what the long pet looks like. bullishssible he is with the euro. but thisecture here, is a huge position. mark: as we indicated in the introduction, we know not many are betting to that extreme
against european stocks. >> we to started just and people are bullish, even more so in the u.s.. using the u.s. as a comparison, the u.s. looks very frothy and some views. quite gotten there, it is a little behind on valuation, so a lot of strategists are saying this is where the next leg up in global equities come some. emerging markets, europe, so he is on in island on this bet. so 5 billion less than his europe shores? >> exactly, but one thing to keep in mind is that while we have regulatory requirements that will need him to disclose the shorts, don't know what the short position looks like in the for all we know he could be
building a short position there too. what is clear is that there is a distinct view he is taking on with this bet. some of that has to do with andaps holding the index, some of that has to do if you are betting against europe will want to hold more short positions. it is a more easier and logical way to express that view. in davoshe spoke an and maybe he is being tarnished a little today with hypocrisy or what have you, but that doesn't necessarily contradict the fact he is building a short position in europe, does it? >> absolutely not, i think some of that is nerves that he was being kept on the sidelines and
the market couldn't sustain themselves. view,taking a directional but unfortunately his comments came shortly before we had a quick market dip. that was unfortunate if you got into the market at that point, but he is not sitting on the sidelines right now with these shorts. playbook ins the the rising yields market? what is the answer? it gets complicated because there are different headwinds and different interactions between different asset classes, but the main thing we see happen with rising interest rates are a huge hit to bond proxies. think of utilities and stocks that pay heavy dividends. when you can get that yield from safer assets, those are going to hurt, and we forget how the bull market was lifted up by these payments.
but those have been a crucial part of this market, which is part of the reason why you hear when the tenure gets to three, everything is going to look awful. thatyou have the fed model looks less favorable, but bond proxies is an area to watch out for. mark: bennie come up next for joining us -- dani. vonnie: a check of first world news. makingident trump said big safer is a priority. a 19-year-old former student in south florida has been charged unts ofmething co premeditated murder and was arrested a mile away from the school. he was kicked out of the school last year.
president trump plans to meet with mexico's president in the coming weeks. relations between the two countries are strained and president trump has insisted that mexico pay for a wall on haveorder plus he has to mexico to agree to changes to nafta. economists are expecting interest-rate increases this year, and the reason is that the $300 billion spending package that they see lifting economic growth and inflation. bloomberg survey economists this week. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. how mexico'sg up, central bank response to what could be a wild year for mexican politics. we will discuss it all. this is bloomberg. ♪
mark: live from london, i am mark barton. vonnie: this is the european close, and the back of mexico raised interest rates to 7.5% last week, and they have been unable rate hike since march of late 2015, but volatility didn't give the bank's policy. joining us now, i apologize for my pronunciation, but tell us about the rate hike cycle in a's position now, what happens next? bank ofw that the mexico has not passed yet, as you mentioned before, politics will dictate a lot of
uncertainty in the country. this is welcome uncertainty, because, it means that we are a democracy. gabriel: the central bank must act, some are expecting another rate hike that will take place on july 1. i should mention you work at the back of mexico so you know the central operations quite well. what is a good level that the mexican central bank will be comfortable with? gabriel: it is the trend, the trend is showing appreciation, so it is good. tend to be concerned about an election in emerging markets three or four month before the election, so this means that change will reflect in april or may.
in that context, that is when we expect them back of mexico to hike rates. there is the big unknown to which catalysts or currency will respond more? i think elections, the seventh round of nafta negotiations start in february 25th, and in the world be -- and then there will be a summit. there was an interview with president trump in which they will probably postpone this is in talks until the election, then i think the market will come down a lot with respect to nafta and the risk they see and ask us, it is about the election. vonnie: how soon can the central bank ease again? gabriel: actually, very soon.
centrale a more dynamic bank, and in the second half of the year, will see inflation trending towards the target. after the election, there is certainty and hikes that will be off the table, then we think there be central bank to ease rates. vonnie: in the second half of this year. headwinds out there, what is the biggest risk to your picture? gabriel: the biggest risk will either be nafta -- if it breaks apart. i think that is the biggest risk, number one. the second one is the post electoral conflict. regardless who wins, we see the rally opening afterwards. risk iuld be the second would like to highlight -- it is
not our scenario but it is a risk i would highlight. tell us about the equity market in mexico and where you see major gains coming in the next six or seven months. before the elections i think the markets will express concerns. in the central market, but also equity market, will see losses there. nevertheless, the correction we have seen in global markets and shellingrtainty of the and markets in mexico, we could market. again very good companies are doing well and all the bad things happening in the third quarter of last year are gone, so we see a very good market in mexico. vonnie: gabrielle, thank you. it is time now for the stock of the hour, airbus.
after the company's fourth-quarter reports, abigail doolittle is with us to tell us more. they put up impressive quarter and year, they also delivered a record number of planes in 2017 in the fourth quarter. planes, and looking ahead to 2018 it is expected to continue and deliver 800 lanes in 2018 -- planes in 2018. it hinges on fixing aircraft program issues. plane neededlitary a million dollar charge, and they have a narrow body plane issue with the engine, an innocent on friday, but with the stock trading higher -- should be 80% of deliveries last year suggest investors are looking past it, and the stock is
trending higher. mark: why is that? abigail: it is a matter of confidence that they will be able to get that issue fixed. it was just discovered, plus it was only 40% of those planes, it is an issue with the geared turbo fan. of planes come from ge -- and it was suggested that it will get fixed. >> there is a new glitch that was discovered a week ago and we are assessing the implications, but this happened early in the year and i am quite confident that we can work through this and recover whatever needs to be recovered in terms of deliveries throughout the year. anders was ceo tom confident it will get this fixed and they have seven years of
back lock on the plane so investors are cheering the possibility that it does get fixed and a half that very strong backlog. vonnie: abigail, thank you for that. mark: coming up, the battle of the charts that will focus on financials. the banks become markets during a correction, we have a chart for that next. this is bloomberg. ♪
relatively outperforming the s&p 500 to market correction, and my eyes are here on the recent correction we had, the 10% it the s&p. why? volatility spike up, and we know volatility helps bank trading. that is something they talk a lot about, and then hide her yields. -- higher yields. so all signs point to maybe banks outperforming going forward. vonnie: love the chart. mark you have something very good in store for us, however. mark: i always try. is there a bigger geopolitical story than what occurred in south africa? withnow i like to do big, president zuma stepping down -- the get the reaction, this is
quite sizable and this is the benchmark of south african index. in the biggest increase years, propelling the industry higher. had thetocks rising, we rent rise to the highest level in a couple of years, and bond yields in south africa falling to a two-year low. will randow plaza the able to push through those reforms needed to reform this leader economy he faces. he needs to reshuffle the anc, and he faces headwinds on many fronts, but the market reaction has been quite staggering today the south african benchmark as measured by this wonderful chart, this tells you how volatile the index is being since 2014. biggest increase since 2014. vonnie: here is the deal, i love
with attorney general's and we are making our schools and our children safer, it will be our top priority. mark: the president did not call for any action on guns. florida, a 19-year-old identified as nicholas cruz has been charged with something counts of murder after a night attack on his high school yesterday, and more than a dozen others are being treated for wounds. the department of homeland security criticized the amendment on backa, a statement an egregiousposal violation of president trump's ramework.on fine w mass amnesty as a bill for the illegals that will make it impossible to enforce immigration laws. in south africa
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