Transcripts For BLOOMBERG Bloomberg Markets European Close 20171115

Where european and greece are trading 30 minutes until the end european stocks are trading 30 minutes until the end of the day. Bond yields are declining. Equity is declining. The currencies are falling against the dollar with commodities down for a seventh consecutive day in europe, the worst stretch in a year. This shows you the losing stretch we have had with seven consecutive days of declines, the worst stretch since the beginning of november of last year. Peak in november 1 which was the highest in over two years. The bullish momentum seems to have run out of steam as investors say the pullback was because of immediate catalyst to support gains after the recent outperformance. They are underperforming because the stoxx 600 is underperforming the country world index. It is therefore percent since japan gdp, is longest expansion since 2001. The was when that was other expansion. Lastple expansions in the couple of decades with rising Business Investment upsetting a drop in Consumer Spending with gdp annualized group 1. 4 with the estimate of 1. 5 . Not dropped from the First Quarters 2. 6 , the economy is expanded. Stimuluss of fiscal under shinzo abe with massive monetary easing from the bank of japan. Bloomberg economics says that will continue. All the focus on some bobwhite investor zimbabwe but concern in south korea with the yield on the country 10 year dollar denominated note less than 20 basis points shy of lower rate. In turkey, suggesting the market is pricing a downgrade in the africans credit rating. We have a review next week. Julie interesting, u. S. Stocks are selling off in a global downdraft, not just today but over the past week with energy and Technology Shares weighing the most. Supermarkets are participating in the selling today. The declines are already moderating. Only 90 minutes into the session. We are still seeing it in the oil complex. Coming out and showing an unexpected build though not as high as Industry Data had reported last night. Still, oil off the lows but under pressure, down 7 10 of 1 . Some of the various Oil Service Companies are trading lower as well. Cvrr is the first one. I think that is the right thing we are looking at. Carl icahn is the number one holder and cut to sell at ubs. And ever and Marathon Petroleum some of thehit things higher. Andere mentioning zimbabwe that is one of the things pushing bit going higher bitcoin higher is a but as there is a potential coup. , popular inng africa, zimbabwe in particular in the shortage of hard currency with the dollar the main currency in zimbabwe. Together,y are they square has taken bitcoin and will let users share it going on their mobile bitcoin on their mobile accounts. Ge tumbling after the revised Business Plan and the share price is in white and tumbling against today. At the same time, the total call open interest and he put to open interest has been soaring as people are buying bearish declines tothe ge continue as their shares are down more than 40 this year, which makes them by far the worst performing in the Dow Jones Industrial average. We have not seen a performance like this since goldman lost about 45 in 2011. Mark lets get to Deutsche Bank, shares of the act rising comedy private thats a private equity firm taking a 3 stake, making it the fourth biggest shareholder. Joining us is our german banks reporter who broke the story. And the Vice President of the shareholder protection group. Story, what ise cerberus up to . That is what we are asking ourselves. It is not entirely clear. Commerzbankstake in and out in georgia back. Deutsche bank. People are speculating if there is a connection, we do not know. Why is cerberus interested in commerzbank and now door expect Deutsche Bank . Nobody knows. Cerberus would not buy in german banks without any reason. If you have a look on the other Institutional Investors invested in Deutsche Bank, for example, morgan stanley, is increasing its shares in Deutsche Bank. Beginning ofthe some very interesting developments. Julie i want to point you some comments from earlier today. Whalen and chris asked him what the cerberus investment could meet mean for the future ceo of Deutsche Bank. Cerberus is in, how long does john cryan have . Weeks. He has to articulate a vision and tell us why this very impressive and long existing shop like cerberus has put a bet down on him. He has to tell us why. Do you agree, are john cryans days number if he does not articulate a vision for the bank were clearly . I do not agree that his days are numbered in weeks. This is a short time and too short for me. What is for sure is that we have always demanded, in the last 1218 months, demanded from john cryan that he is outlining his vision for the bank. Where are they earning money in the next two years, three years . Which are the areas of business where the bank will go the bank will be one of the first addresses of the world. What is the vision for the back . Marketsmissing, capital are missing a clear vision from john cryan where Deutsche Bank is going. Man to solve the problems from the past of Deutsche Bank. But we are still missing his vision for the future. Julie what, if anything, have we heard from Deutsche Bank in response to the cerberus investment . They have given us the boilerplate answer that they do not comment on individual investors. They are happy, if investors see a potential, a good value in Deutsche Bank but they declined to comment on individual investors. It is something that has pushed up the share price. It shows investors are interested. Many people in Deutsche Bank im sure are happy about it. Mark many suggesting this could be a prelude to a merger between Deutsche Bank and commerzbank. They were, according to people with familiar in talks before. Commerzbank has been the center thiskeover speculation, is the beginning of steps towards consolidation between, if not the two german lenders, some of the others i have talked about . I do not think it is the beginning of concrete merger talks. This is all very in concrete. It is normal for me that Deutsche Bank and commerzbank are thinking where are the points we can save money through corporation . It is clear that those banks are trying to cool operate in certain fields of business to lower their costs. Thee even on the basis of banks backing shops banking shops. , foror example in i. T. Example, do not think they would cool operate to save money. Do not think we are seeing the beginning of concrete merger talks and do not think that the investment of cerberus is the start signal for something very concrete. Maybe it is only a bet on the future of cerberus. It is clear that german banks have to consolidate. It is clear that Deutsche Bank has its own problems as well as commerzbank. They are turnaround candidates. It seems to me that cerberus is betting on the future, more than being the starting point of concrete merger talks. Mark we are just hearing from john cryan. He spoke at a ubs conference. We are getting his recording of those comments. The ipo of the Asset Management unit could be late First Quarter of 2018. We reported that various big shareholders are losing patience with john cryan. Cryan is not john on borrowed time. How much longer does he have . Give us a time he has to turn the company around. If i could give you the to gete time he has left turnaround,into the i would earn my money otherwise. Is clear that it john cryan has been or is the right man in solving the problems of the past. But we are still missing the vision for the future. I do not think he is the one who is leading Deutsche Bank into its business future. Candidates with a strong impact on the banking business, with strong vision, but not john cryan. Mark quickly, who would you like to be ceo of Deutsche Bank . I am sorry but i cannot answer that question. There is a bundle of candidates who are able to lead Deutsche Bank into the future. As i said, john cryan is still. He right man at the position but he has to give us a strong vision for the future and that is what we are missing. Mark thank you for joining us, great job. Coming up, troops on the streets and the military taking control and an apparent coup. We have the latest. This is bloomberg. Live from bloomberg World Headquarters in new york, i am julie hyman. Mark and i am mark barton. Upheaval in zimbabwe as the military takes control. Robert mugabe is under house arrest following weeks of political fighting. And tock index slit slid and bitcoin rising. What is it like on the ground . Clalm. S very i am not in the capital but the country is calm. Business as usual. A small part of the city center of the capital is being closed off around parliament and the central bank and the office of the president. The rest of the city is normal and traffic is flowing. People are going to work. True of the other cities. It is extraordinarily calm. Julie what do we know about what happens now . From a distance, it appears we know very little. What can you tell us . We do know very little and expect to learn more within the next hour. Have been, diplomats called to a hotel in the city center to be briefed about what is happening. Hopefully, we will find out more. We know very little. Mark is this the end of the Robert Mugabe regime . I think so. It appears he has nowhere to move. He will either be asked to resign, or a slight chance he will come back on a limited power and for a very limited time. Mark thank you. We will come back to you later. Here. Rica economist is take a step back. Ofl those who are not aware the despair the economy is in right now, even before this event. Paint the picture of the zimbabwe economy. It has been in a hole for more than a decade with hyperinflation, a centrally instituted dollar as a currency. You have had dollar shortages. Electronic notes, and a lot of people dont have confidence in the economy. When you have an old guard connected to the former vice aesident, who preferred reengagement with imf and other financial institutions, to get the economy back on track. Then you had younger guard of leaders close to Robert Mugabe who preferred radical policies, Government Spending a lot of money financed by the central bank. And the clash has been between them. The preference for the Vice President has been to buy their time and wait until Robert Mugabe is indisposed and moved out to clear out his wife. Mark the former Vice President who takes over. What hope does that provide for the zimbabwe and economy . A lot of things are still that the but likely supporters of the Vice President will look to engage International Financial institutions. We are far from imf and ethel support. A package financial support. A package could lead to debt relief but a small step at a trajectory to be expected after this move. I agree that Robert Mugabe days are over. Maybe he will remain as a symbolical president but the power has shifted to the former Vice President. And the army. Julie how does this fit into the region more broadly . It does not sound like there could be a spillover of any kind of instability. If we saw a stronger economy emerged in zimbabwe as a result of this, would that be positive for its neighbors . I definitely think the south africans have been worried about unrest in zimbabwe. They already have two or 3 Million People from zimbabwe working in the south african economy with 27 unemployment. They would not want to see an increased flow of people from zimbabwe into their economy. Smaller is a lot economy than south africa. Stronger growth in zimbabwe will have more than a marginal effect to stimulate the south african economy. Mark great job and thank you for joining us. Our african economist. Coming up, we go to the close with some drags on the ftse over the last week as the indexs wins and 28 index swims into a sea of red. This is bloomberg. Bloomberg World Headquarters in new york, i am julie hyman. Mark i am mark barton. Time for the Bloomberg Business flash. Squeezed bytting price more with walmart as Profit Margins at the discount retailer fell last quarter with target posting disappointing outlook. That was because in part of investments to lower prices and developing new brands. The biggest commercial airplane sale in airbus history. Got an order from american investor Indigo Partners for 430 airplanes. The deal is that it and almost 15 billion. Airbus and rival boeing scored its own megadeal with its selling 737s in a deal that he that 27 billion. Is guided at 27 billion. The crown prince of saudi arabia plans to build up to 10 billion dollars will go to saudi electricity or renewable energy. Take a look at where european markets are trading as we head to the close. The stoxx 600 down for the seventh day. This is bloomberg. Mark have a look at the european close. I am mark barton with julie hyman stocks finishing lower, down for a seventh day, the worst resins lowers since september 15. Basic resources, oil and gas the worst performers. Sinceesources falling november 5, quite a fall. To that in a few minutes. The earnings season continues. Switzerland biggest insurance says it expects commercial insurance pricing to improve after a yearlong slump. The executive in london for the companys investor day, restructuring zurich with acid disposals and job cuts and other changes to the organization. Nature of the market, down for 10th of 1 . What a day for airbus, its biggest commercial airplane deal in history in its history with a deal by that 50 billion for 430 airplanes. Neil line up dramatically. The pack with the u. S. Investor Indigo Partners gives it the upper hand in the dubai are shown where at is been air show. Data released today in the u. K. , wages, unemployment, unemployment at a 42 year low, that is the white line in the Third Quarter and signs the labor market is slowing the number of people. The jobless rate coming back to 4. 3 between july and september. Theoyment fell by 14,000, first decline since october of last year and the biggest drop since june of 2015. Basic wage growth above 2 . That is the blue line. Yesterday, we had inflation remaining at 3 with basic wage growth at to go to present. 2. 2 , meaning real wages are still negative. How is it looking, julie . Julie we have inflation data showing yearoveryear gain comics quitting food and energy of about 1. 8 . Still shy of the fed target but a little bit hotter than estimated by economist. Wage growth is still tepid, of just 4 10 of 1 on an inflationadjusted basis. Falling, stocks are ing the earlier declines now up a third of 1 on the s p 500 and energy under pressure though up off the lows. Trading 55 35 cents after Oil Inventories report that showed a bill of about 1. 8 billion barrels million barrels. The dollar going nowhere today. The dollar index not even a 10th of a percent change. The 10 year yield is a little bit lower. Buying in the treasury market, 2. 36 is the yield on the 10 year. If the yield is moving lower, a curious trait in Interest Rates. Financials are higher. Utilities are lower. You would think they would be the opposite. Energy stocks still under pressure and technology to a lesser degree than earlier. That is why overall not as big of a decline, although the selling in terms of the Industry Group is still relatively broadbased. Mark lets move on to the risk off move stripping markets. Our Bloomberg Markets reporter is here. Bonds are being desk junk bonds are the center of our focus for the last week but not just that investors with equity peers are doing it also with a chart. It perfectly illustrates this chart happened far before this junkbond, the idea that Bond Investors they are the smart guys, the pessimists, they know when there is trouble. If you have been paying attention to equities, this is u. S. Equities, globally, in europe. If you separate them by companies with the strongest Balance Sheets versus the weakest, investors have been shutting companies that have built up a lot of net debt. Late stages of the cycle and an idea that Central Banks will tighten monetary policy. People are getting nervous that the companies will not create shareholder value. Mark this has been happening for a while. Right now, whether junk bonds or commodities, everything coming to a head, why in the commodities space . It was too far, too fast. The speculative side, record length at if you look at the base complex, much the same thing, everyone went far too long. Regardless on whether china keeps expanding, the consensus is a key to expanding, fundamentally, you cannot have a 20 , 30 gain in a commodity and not have a fall back. At is what we are seeing here that is what we are seeing. Julie this is in stocks and highyield. In the last highyield destruction we saw, it had to do with commodities and commodity companies. What about the latest wave . What type of debt . And by extension stock is being affected . We are seeing Media Telecom Companies Taking a big hit. That is mostly in the credit space. There is a lot of idiosyncratic risks built into the highyield selloff as of the past couple of weeks but not the case in equities. You can break it down very well, based on how much leverage these companies are taking on. That the Concern Credit space is only recently caught on to and not as forcefully as Equity Investors. Bank of America Merrill lynch had a study today that 23 of Equity Investors are concerned about how much corporate leverage that is. That is a record amount in this study. The analysts said that that is usually the level you would see during a recession. And by all accounts we are not in a recession. People are concerned. Julie a fascinating study. To go back to commodities commodity investors as well, the situation in china, fears of a glut. That is affecting energy to some degree but much more affecting the metals, rubber is also down today. Talk to me about the china situation. It is a question of degree. The forecast for the year ahead, the Consensus Forecast is for Something Like 6. 4 in gdp, maybe 61 percent the year after. Most countries would be delighted but relative to the growth in china, it has an impact. Do they reversed the capacity cut made this year in the peoples congress, do they find this pivoting from an industrial type economy into a consumer led economy . Do they need to prop up the industrial sector, which is what we have seen before. If they do not prop it up, we get a glut and some of the market, oil in particular, the glut has been there a long time. Mark is russia getting wobbly feet . I do not think so. The president of russia, who has the final say on these matters, has emphatically said it would be a good idea. , maybeks off the meeting an element of managing expectations. Maybe they want to i would not read too much into it. Not a done deal. It is always fun. We never know until the last minute. Mark thank you. 4 38 in london. Julie time for the first word news with courtney donohoe. The fifth round of nafta talks underway in mexico city and the last session broke up a month ago. It highlighted the big differences between the u. S. , mexico, and canada with the new rounds may result on smaller issues as ago shooters are not expected to spend much time on highprofile demands concerning gary and cars. The u. S. Core Inflation Gains sped up last month on an annual basis for the First Time Since january. Food and energy were factored out and inflation climbed 1. 8 yearoveryear, driven by the cost of medical care, and used cars. Brexit could push the bank of england Interest Rate either way according to the Deputy Governor of the boe. Brexit, whaton of we think about what it does for inflation, is altogether more complex. And more uncertain. These effects are far too complex to justify any simple assertion. That brexit means lower Interest Rates. , officialsthis month voted to raise Interest Rates for the first time in a decade. Today we will hear from the three ucla basketball players detained in china over the alleged shoplifting of designer sunglasses. They returned to los angeles last night and the president brought up the case in a meeting with the chinese president xi jinping. He asked whether they will thank him. He said they were headed for 10 years in jail. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am courtney donohoe. This is bloomberg. Julie coming up, creating the next tech powerhouse, toronto mayor joins us to talk about amazon and the housing market. This is bloomberg. Mark live from london, i am mark barton. Julie i am julie hyman and this is the european close on Bloomberg Markets. Target shares are plunging, on pace for the worst day since february after the companys earnings report. Abigail doolittle has more details on the numbers. It seems like the price war in groceries is affecting target. It is affecting target. They put up a beat and boost quarter and shares are plunging. Income is down 21 yearoveryear and they are spending, not only on the price war with groceries but on remodeling stores. They remodeled 37 stores and raise the minimum wage to 11 per share. Spending. On the boosting of earnings, you would think it would be positive but less than what investors and analysts are looking for with raising a range of 4. 40 to 4. 46. The midpoint for consensus was 4. 53. A disappointment but relative to guidance, conservative in the beating. Looking at the earnings function on target, for the last three quarters, they have been beating desk trying to install a turnaround plan and have a history of putting up these conservative guidance numbers and beating them. Who knows . Maybe that is what they are doing. It could be smart they have a turnaround plan. Try to take on walmart in prices. Julie we have the numbers. Looking ahead. A commentary about the holiday. They were positive, their ceo says they were confident in the holiday which is a competitive time for not just target but walmart and other stores. Something about target, they have a special feeling. If they can pull it off for the holidays with a lower price point. It sounds like the lower prices brought back more shoppers. Lets look at 6995. After quarters of samestore sales in the wrong direction, we have growth. If they can bring growth back for the holiday season, it would be pretty attractive. There is reason to think shares are attractive for investors. A great function in the bloomberg with a summary of what is happening for target, the price, the average volume, a lot of selling. I want to point out valuations trading at 12. 4 times, chief at a 40 discount for the peers. For investors willing to dig a longterm view they have a turnaround, valuations attractive. Today may present a buying opportunity for the right investor. Julie we will see. Thank you, abigail doolittle. Silicon valley startups are tapping into torontos tech among thoseunt lyft as they plan to launch their next month to cash in on holiday demand. Joining us now is the toronto mayor john tory in new york in a mission to promote this growing tech ambition. Thank you for talking to us. What your sales pitch looks like and to him you are making it when trying to attract companies to toronto . We start with the basics because people do not know the Toronto Region as 6. 5 Million People, the city of toronto is the fourth biggest city in north america. We have one of the deepest talent pool with tech talent. A talent available at a much lower price. Lower cost to businesses that will set up, new businesses in toronto or a second office. We are a lower cost generally with real estate and other things. We are having to make the case from the ground up because people do not know about toronto. It is generally conceived to be one of the, if not the Global Company for artificial intelligence. And machine learning. We are telling our story. We are aiming it at Vice President s because we need investment to fuel our tech ecosystem which has grown a lot in the last five years. Who mayargeting people be looking to establish another office outside of the United States. Or if they have one on the west coast. I am pursuing jobs on behalf of the reason with my fellow mayors. 100 jobs at a time. We have a bid on the 50,000 jobs. Taking mark can we push you further on the amazon bid. Can you give us any exclusives . How is it going . I wish i had exquisite to give you. We put exclusives to give you. We put in our bid and now stories about apparently people who know who have the inside track. I know that we put a bit forward that bid forward with a powerhouse region. We have a deep talent pool and huge cost advantages. We did not enclose a check with , we said we will invest through a Public University system and training more stem graduates to make sure there is a supply of telling Going Forward in the region. We talk about our Health Care System where, if amazon or any other corporation came to toronto, they do not have to pay a separate check for health care. It is included in the lower Corporate Taxes they pay in the region than they would pay in the United States. Mark what about the plan for lyft to expand in toronto . Would you welcome them with open arms . We welcome them in that it provides greater choice for people who use ground transportation. We have an excellent taxi industry and have deregulated that to some extent and lowered the rates to allow them to compete. We have successfully regulated uber so it is more peaceful than in other places in the world. Lyft will provide competition taxicabs,ore so than which is good for the consumer and we will fit them under our existing Regulatory Regime that deals with uber. Julie when you talk about the attractiveness of toronto or canada more broadly and low cost being part of the selling point, in ontario and in toronto, some cost are set to go up in the next year or two. Talking about because of electricity, minimum wages, how is that offsetting some of the lower costs to do business . On the one hand, minimum wage is going up with target employees as well in the United States. On the other hand, an announcement by the government and the Small Business tax rate is going down. Our Corporate Tax rate not for Small Businesses but for general is 26 , 12 points below the u. S. R some such a big margin there are costs that are rising but we also are a lower cost or as diction with a 30 in the region 30 differential lower in favor of the Toronto Region for tech. That is before you take into account the benefits of the lower canadian currency. When you added up, we are a lowercost jurisdictions. We have an open approach to immigration. To the point where our government, when it comes to technology talent, has created a talent visa that says, if you have a smart person from anywhere in the world, we will welcome them and get them a decent in two weeks so companies can take advantage. Give them a visa in two weeks so companies can take it manage. We have the smartest people coming to fuel our boom in the tech ecosystem. Nafta. E will talk about if donald trump pulls out, can you outline the economic applications for your city . I will not have gloom and doom. I will just say that we have so many and are linking arrangements linking arrangements that it is what it intended to be, a seamless Economic Union backandforth between the countries so we can do business backandforth. There are goods and services that pass across the border more than a dozen times and being manufactured or put together. One of the reasons i am an optimist and look at the glass as being more than halffull is this 500,000 jobs in the United States depend on the relationship with canada. And through nafta and mexico. In the case of canada in particular, 35 states have some part of canada as their largest trading partner. I believe that when this comes to the final chapter, you may see some changes. You will. An agreement that was a few years old. The notion it will be ripped up and thrown away, i think that will not happen. I think it would be a bad mistake for the United States. Not up to me to make those judgments. We are in the negotiations in good faith, our country is, and im sure we will reach an agreement. Julie we could go on and on but unfortunately we are out of time. Thank you for coming in. The toronto mayor john tory. News, Richard Cordray announcing his resignation for the head of the Consumer Financial protection bureau. He is announcing his resignation from that regulatory body. We will give you more details when we have them on the resignation and on who may be in line to replace him. From new york, this is bloomberg. Hase Richard Cordray announced his resignation from the Consumer Financial protection bureau, following but we have to get to our battle of the charts. Taylor riggs against mark barton. Lets start with you, taylor. Highyield credit market, like a one off thing or something broader more indicative in terms of cracks in the spread in the highyield market . Classic is the on the right. Some say testing its march lows. Hyg eft. Julie the technicals maybe with a breakdown and could that lead the stock market be lower. Ark here is a question weaker pound some think will help the ftse 100 weather brexit, because many constituent i think most of their sales from overseas. Not Merrill Lynch Fund Managers because 37 of respondents from their survey are actually underweight u. K. Equities, the most since the crisis. This chart says everything you need to note with u. K. Stocks underperforming Global Equities by the most since 1988. But it down to brexit. Julie i am picking mark barton today on this brexit relevant chart although i love anything having to do with that. Still ahead, all eyes on etf. Julie noon and new york at 5 00 p. M. In london. I am julie hyman and for vonnie quinn. Andy i am shery ahn welcome to Bloomberg Markets. From bloomberg World Headquarters in new york, here are the top stories. A risk off wave lose their Financial Markets with Global Equities and oil sliding as bonds advanced and haven assets rally. Cerberus is ramping up its bid on Deutsche Bank, as they did a 3 stake through their founder. We will discuss this and more with Lovell Minnick partners president steven pierson. And part of mice whose of interview with the blackberry ceo, what and part of my interview with the ceo of blackberry. Doolittle is with us halfway into the trading day. A downdraft, though smaller than earlier. A pullback but well off of the lows. Major averages down for a second day in a