Transcripts For BLOOMBERG Bloomberg Markets 20160630

Run the world may be ready to to ease andgger calm the markets. Up by one and a quarter percent. The nasdaq is up by more than 1 . We are inching closer and closer to most of the losses. Down by about 100 points. The s p 500 is down and the nasdaq is down the most, the biggest fall in the two days after the brexit happened. It is green across the board with energy being the least of the winners. Commodities leaving that rally. Consumers stay for up. Umer staples another function here, for the most part, you are generally seeing moderate against the 20 day moving average. Consumer staples, also the most by them up by 80 against the moving average. My next chart, we have been talking about it the entire day. It has to do with her shes in the table bit. Lets show that to everyone. Up 15. 7 . In the last the flatline right here, shares resuming 16 , onand by 15 or track for a record close. Lets talk about some other deals at risk today. Cigna in the health care space. Down by 100 quarter percent. Threatens competition and probably cannot be fixed by selling parts of its assets there. I also want to show you what is happening in the medias days particularly the movie space. Amc is up here. The bid for cinemas valued at one point billion dollars now under threat because it says it is prepared to walk away because of opposition from stockholders. They say that share offer is too low. Looking for energy at the bottom with the rally the last couple of days. What has happened . Energy is coming off by little bit. Oil right now is off by 3 here. Gains rebalancing that happened. Past two days. The eia came out saying it is still out six weeks in a row. Up helping to push this right now. Lets look at what is happening with natural gas. On the up and up. On track for the best Second Quarter gain. In the past 16 years. Asller than expected gain well. Lets take a look at what is happening. Gold is down. Down 28ce brexit, it is aces points still. Lets get a check of the headlines. Mark crumpton has more. Says the bank of england will probably have to ease policy in the near future to counter the fallout from last weeks it vote. In london, he warned there was only so much that can be done to protect the economy. Uncertainty could be elevated for a long time. Moreover, its effects will likely be reinforced by tighter financial conditions and possible negative spillover growth for trading partners. Mark he said the central bank will not hesitate to act when it comes to safeguarding the economy on the financial system. Three u. S. Senators say a similar crisis could spiral into meddling andourage destabilize an important u. S. Ally in the persian gulf. In a letter sent to by john kerry, chris murphy of connecticut and marco rubio of they are deeply alarmed by the iranian governments crackdown of free speech. Hillary clinton picked up an endorsement from europe. The french president is backing up he says Donald Trumps president puts them on the same level as europes extreme right and says it would hurt europes ties with the u. S. Americans are more worried about , thatthan the zika virus is the finding of a New Washington post abc news poll. Two thirds of americans say they are not at all worried about zika affecting them or a family member. Dayal news 24 hours a powered by more than 120 countries. Back to you. How well were investors prepared for the brexit vote . Very well according to one investor. Explain ks following. For more, lets ring in jack, ceo and chief investment strategist. What has been the most surprising thing . The most surprising thing and maybe it should not have in a surprise, that johnson had no clue as to what to do. Having withdrawn from the Prime Minister race is an indication , whichy has no clue means most of britain has no clue how to really deal with this problem and theyre having to depend on mark carney, much as the rest of the world is, to soften the blow here. He do well by Financial Markets . I think he did well by speaking the truth. It probably was not enough for the Financial Markets on one level, and he may find himself having to do more, but there is only so much Central Banks can do. This is really going to be a problem for the united kingdom. I am not sure it will be in as much of a problem for the rest of the world. The big winner is the matter what happens, germany. David talking about political volatility in the united kingdom, what is your forecast for it . How much longer do you inc. We will have it . Think were in for a long time of what we calls as of volatility. Everybody knows when Central Banks ease, theyre pulling forward future growth. Growth Going Forward is likely to be disappointing here. You get into a low growth by country and buy stocks, but you will also see spikes in volatility because we are too close to accidents. Vonnie we actually got a central bank that made a move today. Moving Interest Rates higher, will we see more of this from emerging markets and what turmoil will that was the markets into . Again, it will cause a significant amount of dispersion. I look at what max co is doing the u. S. , canada, and mexico, i think the countries are in relatively good shape versus the rest of the world. The world looking and at investment opportunities, one does not have to go to the rest of the world in any sense here, and any confusion in the world are not as confused with Boris Johnson but certainly confused. Britain or anything can to do with it, but youre looking at the countries . It is stock buy stock and country by country as we look at the americas. Is stockn, i think it buy stock. Certain sectors, one might want to avoid. There are decent companies and with the pound down, some dopanies will actually better, with the euro down, you will see certain countries and Certain Companies to better with the rest of europe. David oil continue to be here Going Forward in light of the end turnkey designated to the u. K. And europe. Will it always play as big a role . I think oil has played a in what is part going on up until now with a big benefit, that has been a big plus and we have to understand it has in a part of the earnings picture away from the oil industry. I suspect we see Oil Prices Rise and we will see disappointments in much of the rest of the economy. With oilno sense to me going up. I suspect they will raise once this year and maybe twice. I think the second half will be very different from the first half. We will have to wait until july to see the numbers. The u. S. Economy is moving along here ok. We have to watch what is really but the with women, theers, 38,000 people, adjusted numbers look pretty good right now. It will be a problem for companies in the u. S. Because wages and labor cost will go up, they are going up. Friday the eighth and not tomorrow. Jack, ceo and chief investment strategist, you for joining us. David following the markets near the session highs here this is bloomberg. David this is Bloomberg Markets. It is time now for the bloomberg is this flash, a look at the biggest business stories in the news right now. The victims of the deadly shooting rampage, nearly 700,000 in legal fees after they are excessively sued the movie chain, the attacks killed 12 people and left more than seven others injured. Vonnie the settlement came after trait groups sued the charging the00 stores for handling credit card payments. Volkswagen told a federal judge they needed months 85,000 more vehicles. Reached this week for volkswagens cheating scandal. That is your update. Vonnie take a listen. If investors are really saying there is on weak spot him i would contest that. I do not think that british banks are weak in the sense of them fully capitalized. The fact that we has had a tough regulator over the past few years, it is probablys something rather good instead. If i look at the Capital Position include my own, i am not anxious about it. The key thing is we are heavily influenced the u. K. Economy. Goes down, then it will go up. Not so much you can do about it. I hope you make good decisions, manager rate of actively through what will be a slightly turbulent time. I think the downgrading of all u. K. Banks has an overdone. I am not sure the recession is likely, if there is one, that it is likely to be that dad, and the rest of the stock market is not really telling you that. You asked questions about what the city of london might he come, banks, shares in general. Began terms of regulators and politicians that would help you fear what rbs may cut maybe come in the next few years good at leveraging to the markets. In the case of rbs, we made the decision that we would essentially be u. K. Vocus. Some of the issues about the status of Capital Markets in are of less importance. Significantly less importance to banks like us. They continue to be able to use the passport and the rest . It is bigger for them is for us. Tom i want to cut to the chase. Economics with a regulatory background. What will italy do about banks. Nothing nothing compared to the italian banks. I know you will not badmouth the time they. Foresee as the process of the Italian Government to bail out the industry . It is clear they need more capital in there. Europe, if youn have that resolution, it is rather awkward because it means the market is not really open to banks were they think there is a possibility of a resolution. Foundl will have to be through some state entity of one sort of another and brussels about thea hard implications of that and whether they will that. If it is essential, it will eventually get done. Tom would you please explain to the audience the rationalization that the equity share price does not matter. I understand from m. I. T. A million years ago, but you cannot tell me a lower equity share price does not matter to solvency and liquidity. That clicks into confidence, doesnt it . At some point but you have to ask yourself what situation youre in and whether you are on the edge of meeting capital. This is where the italian problem that you raise rightly is closer to the wire because if you are in a situation where it more equityyou need capital and the share price falls, that is different from where you do not have any plans to issue the capital anyway so you can afford to wait a while. Will not be serious because perhaps it will come back. David chairman of the royal bank of scotland. An update to the story. Did include a guarantee for italy banks but it is separate from the potential recapitalization for banks. Around what is happening midday. Still ahead on markets, todays options inside which takes a look at emerging markets. Did here is the index today. David time now for options insight with ramy inocencio. Ramy dan is manager at kkm financial. Good to see you. I know we will be speaking about emerging markets. That, letst to talk about the markets here in the united states. Signify to you . Do you think this is all overdone and we are in the clear . That is a good question. There is more headshaking going on here today. This is an impressive run up. The fallout from here as far as how the market will move forward, now, what is the economic ramifications. You have got a for yield going on. A positive, reinforced loop Going Forward. It did at this time as well. Right back uptor this time. Today underility pressure. Down at about 16 and below that now. Usually a time slower volatility. The futures are higher right now. I expect it will change the landscape for the short term. See a lot of Central Banks command in the fed chairman does not see a list. A risk. 11. 5 join dollars of negative yield bonds, you see money flowing toward any chance. I think that will play out longer but ultimately, the pendulum keeps pushing toward the risk front where we will see at some point, it will be a little more severe. Action. Erging market what is your trade . It was better than a lot of the other markets around the globe. Money further east, looking atope, i am a call spread, its a caps off 35. And the ratio of 35. Bility looking at emerging markets, if you had to single out one company that you say, that is the one to keep an eye on, where would it take . Class of think you would look at india as one. Ultimately, china will sway the whole region as a whole. It will influence a lot of these other countries. India right now. We have to leave it there. For Bloomberg Markets next. More Bloomberg Markets next. From bloomberg World Headquarters in midtown manhattan, you are watching Bloomberg Markets. Matt lets start off with a check of the headlines. Here is mark crimson from the newsroom. Mark paul ryan says lawmakers will act next week on a terrorism package that includes a provision to prevent suspected terrorist from buying guns. Sit inws last week by democrats demanding guncontrol measures. Speaker ryan is also getting recommendations from houses koreans on how to respond to future demonstrations. Likely says he cannot endorse donald trump. He says he accused my best friends father of conspiring to kill jfk. He is referring to the father of texas senator ted cruz. He says he is concerned that trumps plan to restrict muslim immigration in the u. S. Amounts to religious intolerance. Journal and can chancellor Anglo American anglo Merkel Angela merkel is not commenting exit clause should not be invoked by the end of the merkelancellor moke spoke to import reporters. You will understand if i do not want to comment on every statement. Lets wait to see how a new government acts and then we can evaluate it. I am following the discussion like many others but do not want to comment here. Mark she will not support a second referendum on the u. K. Membership. Forced labor is still widespread in the nations lucrative seafood industry. The state Department Data assessment in the annual report released today by john kerry. The report examines the efforts of 188 governments fighting modernday slavery. A quarterback has been suspended for the first four games of the upcoming nfl season for violating the Substance Abuse policy. Subject to the suspension if he signs with another team. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Back to you. Scarlet the stock market closes in just under 30 minutes. Gains near session highs. To abigailve doolittle. Abigail we have the nasdaq in rally mode. The best rally since the middle of february. The amazing. Less than 1 on the quarter. Where the quarterly nasdaq is on pace for the Second Quarterly decline in a letter in a row, the longest since september of 2011. Helping the nasdaq the most this color is not technology with the exception of amazon. Up a whopping 20 . Think about the fact it is Pretty Amazing it gained more than 20 in the Second Quarter. Names they did put in an offer for hersheys, rejected by the hersheys lord. Plus monster beverage. The winners from a point standpoint are really a mixed standpoint. As for technology, this is the reason the nasdaq is down just slightly. The biggest this quarter came from the big tex names including apple, microsoft, and share classes of apple net. You mentioned it was a volatile quarter. That was a case in the last couple of trading days. Amazing. It is from a technical perspective, last thursday we had the nasdaq trading above 200 averages. Friday, monday, or tuesday below those averages. Today, back above. A big data between the bulls and the bears. A big question of whether or not this valley after the breck it selloff is for real. If you technical experts to find out what they thought. Believes the nasdaq 100 is handcuffed in the near term. Analysis says another down graft. S life likely a bit of a wait and see their from technical experts. Joe thank you for joining us. Matt the governor, the bank of england said it would continue its liquidity and continue a host of other measures. Will relentlessly pursue monetary facility and facilitate the adjustments needed. Consistent with those plans and for the economy to reach a full potential. Now is theus professor of economics from the university of birmingham. Thank you for joining us. What do you think about the moves to stabilize the economy but we also heard from the ecb that they would we willing to broaden the measures determined to buy bonds. Not that surprising. For a membernusual to signal their own future votes. That is something to be encouraged. I was a little surprised they did not consider an immediate Interest Rate cut. Nevertheless, the response to it is welcome. Joe one of the striking charts in the announcement he had was three arrows of uncertainty and you talk about geopolitical, financial uncertainty, and now you can policy uncertainty. From the central bank perspective, how does this u. K. Policy uncertainty makes the job harder . Policy uncertainty means anyone thinking of spending or investing will be less sure about the returns on that or whether they can afford it. The uncertainty will depress demand and push down on there is anobably argument that uncertainty also inhibits supply but my guess is those effects are slower moving. Scarlet one of the Big Questions is inflation. The u. K. , europe, and the u. S. Have been looking in search of inflation anywhere they can wind it here it it was like we will get some in the weakening pound. That is starting to shop a little bit but not the extent. Ou might and his weight when do we start to see these move higher . Expect the rate to come in in the next few months. That kind of welcome and inflation will move back to target for a little bit to show it is not permanently stuck away from the target. That effect will be shortlived. Of increased uncertainty will weigh heavily. I think it will only be a short response. Prior to the vote, you organized a group of economists who wrote an open letter advocating for a remain vote. I want to read a specific line you said. The uncertainty over precisely what relationship u. K. Refinance often with the eu and the rest of the world would also weigh heavily or many years. Shock to confidence if we were to see a vote on june 23. Does everything you have seen so far since the vote confirm what you thought and furthermore, what kind of shocked are we looking at during this negotiation . I think the text of the letter stands up well. Maybe there are some that are more ambiguous that it is still early days there is a lot more uncertainties whether crist allies or be amplified in the weeks or months ahead. The political situation is far chaotic than i or the colleagues i speak to could have dreamt of. I think things will get worse. Matt it seems like the kind of thing that will sort itself out by october, right . But im not sure that would be the end of it. Between the liberal leaders and the conservative party who would be more in favor of free trade, the norway style option. Leaders are to control immigration and we have to pay for that in terms of access to markets. Matt i do not want to ask you politicalhis pick outcome to back any other candidate, but theresa may was a eurosceptic who was not campaign,by the leave this is for the conservative party . Depends what you think the objectivist. Matt the objective is to keep as oakton acted open access as possible with the open market while controlling your borders to the extent you can. Pretty hawkish on immigration in many remarks in the past three and worse that. Clear that needs to be part of the solution and that will be paid for with reduced assets on the market. I do not think she is the ideal candidate. Matt i think well have about 10 more questions but we have to go. Professor of economics, scarlet . Scarlet coming up, we will still hear from the barclays ceo saying the Banking Industry is in strong shape. We will get his comments next. Matt a gorgeous shot of the london even in their. Time for a bloombergs newsflash come a look at some of the theest is the stories in news right now. Boeing is considering a way to deliver a knockout blow to airbusstruggling superjumbo jet. According to people knowledgeable, boeing may stretch on his longest 777 model so it can carry up to 450. It can hold up to 600 and 15 people. Airbus has not won a single order this year. That is the first time it happens once the year 2005. Amazon says it is renewing its prime days july sales promotion. The ecommerce powerhouse plans to make it an annual event. Helpedsaid the sales hundreds of new prime members last year. Walmart says it is also offering shopping discount july as well as a free child retrial of unlimited shipping Services Similar to amazon prime. Do you love the taste of cookie go . Keep your hands off. The agency says people should not eat raw dough or batter of any kind because of illnesses related to a strain of e. Coli bacteria in some batches of flour. You probably knew that. General mills has voluntarily recalled 10 Million Pounds of on the signature kitchen brands, so watch out for that. Bloomberg is this flash update. Scarlet chairman of the biggest banks are defending london. 45 billion from the nations lenders. Barclays ceo spoke with her chest earlier today in london. He says the u. K. Banking industry is in strong shape. Discount and it was not helped on friday or monday. To correct that, we announced last march a major strategic change in barclays. We are in the process of selling all of our Retail Banking assets in europe. We have got out of the Wealth Management business in the interest is asia and announced we would sell down to a nonconsolidated place in africa. We started that process a couple of months ago. We need to close the businesses. We close to investment banks in nine countries. The core bank of barclays today equity of double digits. We need to close noncore so the core bank as it is today. That bank is generating the profitability that could lead to a significant depreciation of the stock prices. We need to not take their death of the eye off of that strategy. We should not let the vote change the strategy Going Forward nor the execution of the strategy we started on march 1. Might you not have to be more aggressive . Might you have been more aggressive in cost cuts and asset disposals . Because youre going to be under pressure. The european economy will affect Financial Results and the tolity to build capital and support the restructuring effort in the investment bank. You talked about the leadership issue. Im not sure we can push faster or harder than we are. To close the management businesses, to sell a management business and close that, to sell business in portugal, spain, italy, the process of doing that in france, to sell an index business to bloomberg and close an investment bank, reduce our headcount, we will reduce our headcount by tens of thousands of people over the course of the year. About 52 billion pounds of assets, we will get that done in 2017. You cannot move much faster than that. Your foot is already on the floor. We do not sleep at this level with stock prices. What gives us the capital facility we need, we must close lightre so it shines the on our core business. If that is the case and you cannot move faster on the asset disposal, job cuts, etc. , and your revenues under pressure in your ability to generate capitals under pressure and you need to be there for the government and the british people, might you be faced with inevitability of having to raise capital . No. Closing noncore freeze up capital. The amount of capital we free up by selling our stake is quite significant here at all the capital and all the liquidity we need, we will free up more capital as we get out of noncore. We do not need more capital. We are fine. We have the profitability in the core business to generate significant returns for our shareholders. Us challenge this faces for as we settled on the investment. Ank the u. K. Economy will impact the you take u. K. Retail bank. The whole issue of how the European Union will deal with the u. K. In terms of not putting up tensions between the industries, how do we react as a major bank in london, that is a new challenge. Will not determine the timing will not deter the timing, done by sometime in 2017. Perhaps even the regulators begin to use confidence in your capital adequacy. We obviously saw a significant move in top prizes. There was a whiff of that on friday and monday for sure. You look at where the credit spreads were trading, more a ,eflection of capital , veryusly liquid comfortable facing of barclays as a counterparty that said we were there for across the country providing credit and currency. , we closed three leverage finance deals over the weekend, raising debt for the major corporations just this morning. About no sense of concern capital liquidity. Properly so. There is a concern about trayvon with this concern of u. K. Economy Going Forward. In fact there is a challenge between the European Union and london at the financial center. Jo that was barclays ceo speaking with erik schatzker. Scarlet the close of trading minutes away. Higherindustries groups and the utilities. This is bloomberg. Scarlet this is Bloomberg Markets. It is the last day of the Second Quarter here looking back at the First Six Months of the year, starting with the vix in the s p 500. You have got a chart showing up. Matt the s p 500 year in purple. In blue, i have got the ftse 100. The white line is the vix. This is interesting because we have gains in the first half. For the s p and the ftse for the stocks indexes, it has come down. And interesting, if i edit pull into the normalization and normalize the entire panel, it is interesting to see how volatile the vix is. I have done that, the index is almost flatlining, climbing 4 for the ftse. The vix is up and down. It has come so far down even after the brexit vote, it seems volatility in fear has left the market. Me, definitely stronger in the first half of the year when it comes to equities. This is between the s p 500 equal weighted index and the s p 500. The weighted index gives each of the members the same weighting. Down at the end of 2015i should say come one companys were underperforming the most heavyweight companies and that it reversed in 2016. This is a pretty significant and it means the s p 500 is entering the second half with strong underlying support. I looking at gold because gold has had a monster year. Lets look at a year to date chart of gold. You go. Everyone who was making fun of gold at the beginning of the hikes,he lack of rate concerns over brexit, one of its best starts of the year in several years. Pretty impressive. Scarlet it came through right after the vote. If it had not been for all of that, it might not have been so good. Scarlet what did you miss and the market close is next. Take a look at where you are trading heading into the close right now. Set to round off its biggest threeday rally since february. This is bloomberg. Alix steel is on assignment. U. S. Stocks closing higher now up 2. 5 for the year. The question is whatd you miss. The first half of the year, we break down the market news. What does the rest of europe want in the brexit negotiations . We look at the key players, including germany and france. And its bloombergs focus on farma and we will hear from bill gates on gene therapy that could save your life. We begin with our market 2. 5 gain has a with the dow adding 200 points within the industry groups. All 10 sectors are imagining. And joe, a lot of attention spent