tv Bloomberg Markets European Close Bloomberg November 28, 2019 11:00am-12:00pm EST
u.k. election come about the u.k. could end up with another hung parliament. and ahead of a key opec meeting next week, it is looking increasingly likely that there will be more production cuts with lots of extra supply expected early next year. live from london, i'm guy johnson. we are now counting you down to the european close here on "bloomberg markets." ♪ guy: happy thanksgiving. u.s. is shut today. that means light volume around the world. certainly a feature of the european landscape. stocks a little softer -- stoxx a little softer, down 0.2%. rent certainly softening up. we will talk oil prices later
on. if we don't get more cuts, presume believe that is negative for oil prices. eurosterling around the 0.85 level. got closer to it a little later on. this is a big line of sand for that pair. we are now up by 0.2%. the hong kong story absolutely front and center. president trump signing a bill expressing u.s. support for the protesters in hong kong. it is a move that threatens to complicate trade talks with china. there was a lot of reaction around the world. not a welcomet is news, but the market reaction so far has been pretty calm, so to speak. >> basically, it's just another thing like having the tariffs. it's a thanksgiving present for everyone. >> this too shall pass. >> this was more posturing than
substance. >> this is a real headache for them to try to figure out what is going to be a violation of human rights. how are they going to decide that? >> it is a foregone conclusion that he would sign, so china is prepared or was prepared for this. >> the new bipartisan consensus from both the u.s. administration and congress is to prioritize human rights and democracy and not being override it by trade negotiations. > i don't think they have hong kong's freedoms, hong kong's democracy, and hong kong's human rights in mind. it is all about china. guy: for more we are joined by david riley, chief investment strategist at bluebay asset management. tworade and hong kong inexplicably linked stories now? david: no, i think there is still a bit of separation. i was talking with our chief economist who is very much of the view that the response from
beijing will still be two separate political issues, including hong kong, from any discussions around trade. that's been the approach more generally. so i think they will keep it separate, but it is also true to say hong kong is where dollar liquidity meets china. in that sense, it is a kind of stress point potentially for the financial system. guy: i guess one of the issues that china has said it will retaliate. it has said on a number of different occasions that it will tell you eight to interference in hong kong. it hasn't really done so the far. if they were to retaliate, that would further push the hawks in washington to maybe seek a tougher line. david: well, the person that matters is president trump, and i think trump once a deal. he's been carefully talking up the market in preparation for
such a deal. i know that we've been there before earlier this year, and then it sort of fell away, but i think when you look at how china and beijing has responded previously, it has generally .een measured chineseon't think the are going to ratchet it up, and i don't think therefore trump will do so. but what it does underscore is that even if we get a phase one trade deal, this political rivalry between the u.s. and china and ongoing tensions are going to be a feature of the landscape for the for siebel future. -- for the foreseeable future. guy: let's talk about what happens in the near-term. does it matter if we don't get a trade deal by the 15th? that is when the next round of tariffs go on. the assumption now seems to be that the u.s. will simply bypass
that and suspend the tariff increase for the time being. markets do think that are on hold in terms of that phase one trade deal. i think our own perspective in terms of positive inflection in global growth into 2020 is conditional that we do get at least some reduction in trade policy uncertainty. bed, but if out of there's ongoing trade negotiations, i think it would be pretty negatively. it is setting up for a bit of a rebound from what we saw this year. guy: it strikes me that in order for the global economy to do better next year, what you need is not status quo, but rollback. david: i don't know whether you necessarily need rollback because some of the impact of the tariffs that have been
imposed by the u.s. and in retaliation by china have already had some impact. so if we don't get any new tariffs, even if we get a skinny deal which doesn't involve some rollback, i still think that the headwind from the tariffs, from the trade policy uncertainty into 2020 will diminish. clearly it is a better outcome if there is at least some partial rollback. guy: what you think is priced in terms of the p1 deal? do you think rollback is priced at the moment? i am trying to work out, as you say, phase two looks really difficult. all the hard stuff is being left for what comes next. you get a skinny deal that doesn't have much rollback. already markets ok with that? -- are the markets ok with that? do the risk assets move higher on that, considering the next phase of the trade negotiations
looks increasingly difficult? that going think into the new year, there's going that quite a lot of money once the market to go higher. if there is a skinny deal, i think that will allow markets and risk assets to grind higher, even if there is no real risk prospect of phase two or some detailed negotiation occurring before this side of u.s. presidential elections. let's be clear, there isn't going to be a phase two deal november of next year. thereafter, i think we could be back into this sort of trade policy uncertainty. what actually i think could replace trade policy uncertainty is a drag on u.s. capex spending , the u.s. presidential election. we've got the primaries kicking in in the first quarter. given given that, -- guy:
that, what are you expecting for growth next year? david: i think the fundamentals are pretty strong, but in addition, i think we shouldn't underestimate the degree of monetary and financial conditions easing that we've had over the last four quarters. , ands been very meaningful markets react very quickly to that, but the real economy takes time. we are seeing some interest rate sensitive sectors start to pick up as well. i actually think we are going to get some positive sequential growth not only in the u.s., but for the global economy. guy: let's think about the impact of that. this year, stocks have gone up because of lower rates. that has generated a 25% return on the s&p. if the u.s. economy is cruising next year, that multiple expansion story is not going to be there.
so what drives markets higher? that we had noee profits growth this year. bottom up earnings estimates suggest something next year which should be coming out of an earnings recession. think some of the sectors within the s&p that have underperformed have been those with a lot of foreign sales. i think some of the global growth will moderately pick up in 2020, so that will provide a low bit of boost. but we are in a mediocre kind of growth world. i think emerging markets, both markets,d local debt or the way to play that parcel reflation trade. guy: you wonder whether that i'll are -- whether the dollar is going to move to make that happen. david will be sticking with us. let's update you on some of the
stories you need to know. here's the first word news. the white house is pushing to wrap up negotiations on a new trade deal with mexico and canada. the agreement has become president trump's top legislative priority. the democrats want to more enforcement of labor issues. bus mexco energy canada say there's been progress. this may be a new test for president trump over north korea. kim jong-un's regime has appeared to fire two short range ballistic missile tests. to end talksened if the u.s. doesn't ease sanctions by the end of this year. a poll of the british election campaign is protecting that boris johnson's conservative party will win its biggest majority in more than three decades, 68 seats in the november 12 -- in the december
that's the latest signal the group will probably stick with its output cuts for its meeting in vienna next week. joining us for a little bit more on this, annmarie hordern. opec isreak down what saying, they are basically talking about a year of two parts. the first half of the year, you see a lot of supply coming on. you will see a fairly lumpy oil price during the next year. annmarie: exactly. they say they will be able to offset this with a deficit at the end of 2020. you are seeing a lot of supply outside of opec coming on. -- shale,ray, brazil.guyana, maintainpanies want to want opec toies
cut deeper. opec said they would do whatever it takes. i think part of it has to do with the fact that the saudis have always been the ones to corral the group. they are probably getting very frustrated with the level of compliance. iraq is not complying. russia is sort is not complying. for november, it will be the eighth months of 2019. they are copartner in this whole opec+ alliance. guy: in terms of what the expectations are for the oil price next year, a dip followed by the rise. is that afflicted -- by a rise. is that reflect by the curve? annmarie: there are some of the things that opec hasn't been able to get a grip of. there's going to be this oversupply that every analyst is talking about. we will see prices go lower. do they have a special emergency meeting in early 2020? we don't know. if we get a trade agreement, that could help pick up the oil
market. the other thing we need to keep in mind, the unrest and the level of all these countries that belong to opec. iran has had protesters, iraq, algeria, libya. on one hand, the ministers can't go back to their countries and say we are going to lose market share. on the other hand, supplies could be disrupted. guy: let's talk a bit about aramco. ipo is coming up. it's too late for the saudis to manage the price around all of this, but it is not turning out the way they would have anticipated. it is covered on a retail basis one-for-one. that is kind of a risky play, isn't it? annmarie: it does beg some concern, considering all the stock the country has put out together excitement for this ipo. there's advertisements on the go to the atm, log onto twitter, there's advertisements. as you say, one time over, a bit
of a cause for concern. one of the banks that ipo to their was 23 times. we have seen saudi ipo's go well and subscribed well, but this is just the retail side. we so have to wait for the institutional side, and crown --nce mama been some on crown prince mohammed bin salman is in abu dhabi, and looks like he will get $1.5 billion from them. guy: let's get back to david riley, chief investment strategist at bluebay asset management. do you see upside or downside in the oil markets for 2020? david: it is certainly the case that u.s. energy has been taking a bit of a beating. u.s. high-yield energy is running at 8%. have oil producers basically been re-rated on the equity side as taken out the equity buffer.
some of the productivity gains people thought would continue haven't done so. i just wonder how much more we will get of that source because a hundred market to lynn into. -- to lend into. guy: at has also been a big employer. how much of a drag is this going to be on u.s. employment? david: it will be a drag on u.s. employment, but it's also been a pretty significant drag in terms of u.s. capex overall. that is 50% of the negative contribution of capex that has been coming from the energy sector. with defaults running at the level they are in the restructuring of that sector, i still think that is going to play as a drag for capex and employment through 2020. guy: if the global economy is going to do what you say, is the european economy going to be one
of the busiest beneficiaries of that? -- one of the biggest beneficiaries of that? it has been suffering from the down trough in chinese industrial numbers. does that change next year? is europe going to at least see a turn next year in its economic data? david: i do think that is going to happen. we could actually get a situation where, in terms of sequential growth, actually looks better for europe than the u.s. year for the euro area is going to be very weak, even if it just goes back to what i think will be some kind of trend level, 1.25%. that delta is actually going to look quite positive. therefore a situation with stabilization, china, some of the ems coming back as well,
i think growth x u.s. is going to have a stronger delta than the u.s. you typically expect to see a bit of a weaker dollar, stronger euro. good for european risk assets. guy: that kind of fits with the argument that says if europe and u.s. -- if you are a u.s. fund manager looking for where to generate outperformance, you say it is going to be ex-us. we are trading circa $1.10 on the euro. how big an effect does that have if flows are positive into europe? david: the extent to which largely depends on the strength we see in global trade and manufacturing in europe. our forecast quite a positive sequential path, but actually come underlying growth is still going to be pretty modest. essentially, europe is a one point -- is a 1% economy.
but i could certainly see 5% appreciation of the euro against the dollar. guy: there's another argument that goes a little like this, and i hear it more in the states then in europe, that in order for the euro to go up, the data out of germany in particular has to get worse to prompt fiscal easing, and that is what'll to millie generates a better growth trajectory, which really starts to pull money in against the euro. david: but to get a real break out, it's clear that we do need a demand boost within europe, are supplyere still and economic form issues that need to be addressed. i am just skeptical that we are going to get that. we are going to get some modest fiscal easing. that is already kind of baked in. it is modest.
what is going to be more important for europe in some respects is stabilization in china. guy: at the moment, the chinese industrial data does suggest that things are getting better, and it's not hard to extrapolate into may be suggesting the idea that pmi's, particularly in german manufacturing, are not going to improve from here. you could see those numbers getting worse again. david: you could come about some of the forward-looking segments of pmi's have actually been improving, middling from a very low base. , therek at new orders has been, along with this global slowdown, much of it related to china, also a sort of global auto and tech correction as well, but again, i think it is just going to fade. i think the concern that i've
china actually slows. i think we still got bad data chinahina, but that slows in a more pronounced fashion. even with modest stabilization in europe, it is not enough to stop service being contaminated. i think that certainly is a downside risk. we saw a little bit of that was in the pmi's, but i don't think that is the base case. employment is still strong. you're getting household income growth, credit growth. so i still think you are in a reasonable base case for potential growth coming out of europe, and that is going to be good for some of the assets in europe. guy: stick around. david riley, bluebay asset management chief investment strategist, is going to stay with us. remember, gtv allows you to browse some of the charts and
♪ minutes to go until the end of the european session. very light volume today, down circuit 40%, because of the -- down circa 40%, because of the thanksgiving holiday in the u.s. ,he car sector has been off understandably given the trade narrative concerns generated by the president signing that hong kong protest bill in the united states. we will give you the full breakdown. the close is next. this is bloomberg. ♪
away from today's session. if you're going to take anything, it is the trait risks have ratcheted up a little bit as a result of the president of the united states signing the hong kong protest bill. a very quiet session in europe. you can see that on the chart i have in front of me. this is the stoxx 600. such a tight range we have trading today. down .1%. let me show you the next chart. this highlights what the volume story looks like. let's first look at the main market, then we will go to the function. the main markets look like this. 40 down notx, cac by much. the spanish market up a touch but basically absolutely flat. the nordic markets were down more. very tight ranges.
about what the back function shows you. line, i hope it shows up on television, this is the average of the last 30 days, that is where we are. this panel below, we are down by 40% in terms of volume. we do get a spike coming into the close but not by much. let's talk about where we have seen big moves and that is in the single stop story. .et's go to vodafone, down 3.1% a big weight on the ftse 100. vodafone has gone ex dividend today. today is thursday. virgin money is interesting. branson still owns 13% of this. up by 19%. the company suspended its dividend and that is to do with ppi. is market likes what it saying going forward and likes
its capital ratios and that is provided the upswing in virgin money. remy cointreau is a cost story. a cost related story. the maker of cognac down 2.5% today. celebrations on that front. that is your european close. largely driven by the lack of the united states involvement. that has generated light trading ranges and light volume. however, there interesting stories going on elsewhere. the politics story is certainly one of those ones we are watching carefully right now. let's get back and talk about the u.k. elections. according to a poll released last night by yougov, boris johnson's conservative party is probably heading for its biggest majority in more than three decades, all the way back to margaret thatcher. yougov is known for being one of the few polls that came to call
the 2017 election correctly. bloombergs francine lacqua talked with yougov's research manager and asked if anything could change the outcome of the next two weeks. chris: i know we are saying there will be a big conservative majority, but if you look at the data, there does not seem to be a national -- a massive shift in terms of policy to change things. there are 30 seats where we have the conservatives ahead less than 5%. if you see the labour party starting to squeeze the national polls and squeeze the 5% cap, it is easy to see how we could end up in a hung parliament territory. it is definitely possible. francine: are voters voting on brexit or policies? is it spending for the character of the leaders? chris: i think it is all three. brexit is clearly important. one of the big changes we are seeing is conservatives getting voters and labor not doing well,
and that is why we are seeing big swings and the conservative seats in the north and the welands, the labor heartland would've previously called them. labor will try to turn the issues back onto spending, things they poll better on. the nhs being the key example. this not the crucial difficulty that boris johnson is significantly more popular than jeremy corbyn and they are hoping to close that gap as well. guy: yougov research manager chris curtis. still with us is david riley. two weeks ago can you believe that poll? it seems that this election is closer than the top line of that suggests. david: i agree. as chris curtis highlighted, it does not take that much of a move for there to be a hung parliament. it is important to remember that boris johnson, when he called
this election, he needs a working majority. guy: what is a working majority? is it 20, is it 30? is it 10? david: from a market perspective, i think he needs a working majority of 40 plus because the reason i say that is because what is assumed right now is no deal is off the table because of the withdrawal deal. if he can get a decent sized roomng majority, he has for maneuver as prime minister in terms of the subsequent trade potentially,. and , there will he said then be an extension of the transition period. if it is a small working majority he is back into the situation theresa may found herself in after the 2017
election. i think it is pretty much in the end, lots of young people registering to vote. registrations are moving up. guy: you tend to get that closing of the numbers as you get toward the election. it does seem as if labor consistently has a late surge. david: yes. in the squeeze of the middle party or the party in the middle and then going to labor and conservative. thoughtprised me is i the labor democrats would be doing better, galvanizing the remain vote. at the end of the remain vote, want tos -- leavers leave more than remainders want to remain. guy: i want to break news we have had coming up that relates to morgan stanley. the details are starting to appear on your screen. morgan stanley has ousted fx
traders, multiple fx traders amid a multimillion dollar loss. there are more details to follow. there is a story coming out of the bloomberg right now. we are hoping within the next few minutes to get the author of the story on television and explain all of the details. that is what is happening at the moment. morgan stanley ousting a number of fx traders as a result of the multimillion dollar loss. i think it involve e.m. foreign-exchange traders in a number of locations around the world. we will get to more details in just a moment. let's come back to brexit. done 20%, the ftse 100 has done 10%, does that spread why did next year? david: i think it depends -- guy: assume you get a brexit. you think that widens out? -- if i think if we get the u.k. gets the brexit deal,
the withdrawal agreement. guy: the withdrawal agreement, not the ultimate trade deal. david: i think that is important. the ultimate trade deal will have to be made by june of next year. if not, that it is going to be an exit or an end of the trading relationship the u.k. currently wto"n moving to "the relationship. that will be negative to for the and week economy, which is looking week. the data is not improving and the u.k. it does matter. in the short-term you get a working majority, the market ra, you get a decent pop in sterling, and then the realities of the situation will start to sink in again as we go through the first part of next
year. guy: in terms of what the bank is going to do, the bank of england, u.k. breakevens have been coming down sharply. inflation expectations are low. even if we get a brexit deal, even if there is some degree of movement associated with the exit regardless of where we go, do you think there is still looking at the global economy and thinking we do not have any inflict -- inflation expectations are coming by -- coming down. we have a tight labor market but that is starting to soften. you think a cut is more likely than a hike? a cut is more likely than a hike but i would not be placing a bet on that. i do not have a high conviction on that. irrespective of the outcome of the general election, we will get significant increase in guilt supply. are still very negative in the u.k..
if other central banks are on hold, i think the bank of england will be on hold as well. the issue of the ultimate trade deal -- do you think businesses will think i have to wait another year? ceo, cfo, you're trying to figure out if you're good to make the big investment. if you're an investment fund you have to figure out whether to make an investment into the u.k. is the uncertainty still great enough to prevent you making that decision? david: i think it will be, because from a business point of a still relatively close relationship with u.k. biggest trading partner, if that is one of your key end markets if you're investing in the u.k., it matters hugely. whether you have some kind of deal or whether you are leaving
the relationship without a deal at all and moving on to this wto test. it iseing said, i think probably still more likely that prime minister johnson, if he remains prime minister, will not necessarily keep to his redline that he will not ask for a transition, or he will muddy the waters. he will have room for that, the greatlitically british public will have concluded it is done, and then things like trade deals are secondary. guy: it is interesting you say that. there are schools of thought that go around. getting the deal done once you take politics out becomes an easier process to generate. there is also another argument
that says if he has a sizable majority, he can generate a softer brexit than currently is priced because he does not have the heart brexiteers sitting on his shoulder. david: which is what i think is the outcome that is sterling rallying on on december 13 will need. , if it is aight hung parliament, even if it is a small working majority for the conservatives, that will come back into play. to 140, do from 130 we need a weak dollar or will sterling do the heavy lifting on its own? i think there is still reasonable brexit premium in sterling. i do not think we need a weak dollar. guy: a broadly weaker dollar? david: that is a positive backdrop. even this year seeing some modest strengthening of sterling
and that has been against the backdrop where the trade-weighted dollar has gotten stronger as well during the course of this year. onid not think you can get cable through 1.35. guy: if you are looking around the world next year, is the u.k. going to be in outperform or? are u.k. domestic stocks going to be up performers? as investment managers try to figure out where my going to get a little bit of extra return if i am looking at a world that digitenerate mid-single return on my equity portfolio? david: a lot of investors are looking at u.k. assets because they are still in that brexit premium, both in high yield, sterling credit, as well as some of the small-cap. if we get a physical boost and a pickup and global manufacturing and the u.k. is still geared, a leverage play on global trade as
well, that i think against that backdrop u.k. assets can look quite attractive. thatnot fully buy into because i think this election does not necessarily resolve that potential for a cliff edge. i think that is delayed a deal for the u.k. economy. guy: we will leave it there. thanks for stopping by. david riley, bloomberg asset management keep invested strategist. let's check where the numbers are. not much action. the ftse 100 down 13 points. a light volume session all the way across europe as a result of what is happening in the united states, which is actually nothing because this is thanksgiving. those are your final numbers, the ftse down .2%, the dax and germany down .3% and the cac 40 down .2%. this is bloomberg. ♪
guy: from london, i'm guy johnson. this is the european close on "bloomberg markets." president trump has signed a bill backing the hong kong protesters and china is not happy. beijing some of the u.s. ambassador and told them to quit meddling in hong kong affairs. the chinese also warned the bill could affect cooperation in "important areas." the u.s. and china are in the midst of negotiating a trade deal. kim jong-un may be underscoring the threat he made to break off nuclear talks with united states. north korea appears to have fire
two short range ballistic missiles. they landed in waters between it and japan. kim has threatened to halt negotiations if the u.s. does not live nuclear sections by the end of the year president trump has been ignoring korean missile test. fires are still burning in a texas chemical plant after multiple explosions. three workers were injured in the blast 100 miles east of houston. the plant is located near the gulf coast oil refinery. in uruguay, there is finally a winner in the presidential election. a former center-right lawmaker. a one percentage point advantage over his rival, who has conceded. that puts an end to nearly 15 years of leftist rule in uruguay. breaking news a moment ago. that story. the story surrounding morgan stanley that has ousted at least
four fx traders into approach of ms. market of traits ranked to emerging-market currencies. let's hear from bloomberg opinion columnist who covers finance at bloomberg. >> we know little bit. it is more about what we do not know. we know they have been ousted for potentially miss market their possessions and we know the loss may be as high as $114 million. what is interesting is to understand how long does this go undetected, who did it involve, how did it become known? a lot of questions this raises about the internal controls and internal procedures and potentially if this is a one-off, is it a bad apple or is it more systemic of trading processes and controls that are not what they should be. guy: what we know about the
assets involved? anda: i believe fx options an area that has had some difficulty this year. this is obviously just breaking, so catching up on the details. it is going to be more interesting how the firm has dealt with it than the actual product. it could be equity derivatives. guy: these positions in the market ripples that come across from that. elisa: potentially, if the market positions itself against it. guy: in terms of what this tells us about how far banks have come, what did we learn? elisa: this will be interesting to learn more about. of the scale in excess of one billion pounds, but it does raise questions as to how this can come about in this day and age. guy: is this multiple
jurisdictions or a single jurisdiction? elisa: from what i have just read, it is across london and new york. guy: a number of regulators are likely to be involved and bringing up quite serious questions about risk controls. elisa: how quickly the institution elected those regulators will be of concern to outsiders. guy: we will watch with interest. great story. bloomberg opinion elisa martinuzzi on this story that will be filled in as we go. coming up, technical issues on social media as u.s. viewers get ready to share pictures of your turkeys. we are apparently having issues with instagram and facebook. more details on that coming up next. this is bloomberg. ♪ whether you're out here on lte.
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guy: from london, i'm guy johnson. this is the european close on bloomberg markets. time for the bloomberg business flash, a brief on some of the biggest business stories. issues on social media today. users in the united states and the u.k. and brazil affect issues affecting facebook and instagram accounts. hashtagile, the instagram down was the third top trending topic on twitter. the richest person in asia wants to get out of the news business. bloomberg has used a billionaire wants to sell his assets to india's time group. the world's largest sovereign wealth fund will expand its work for norway's $1.1 trillion fund reporting to expanding flood analysis for real estate assets. it has already cut a large part
of it exposure to coal production. apollo global management has raised tech data by 11%. aollo's move is proxied by competing offer from an unaffiliated distributor of tech products. that is your latest business flash. what if we got coming up? it is thanksgiving. joining smith will be us on daybreak asia to discuss the latest jobs in industrial production data coming out overnight. if you are watching in the united states, have a very happy thanksgiving. kind tohe weather is you and we look forward to return tomorrow. this is bloomberg. ♪
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