Transcripts For BLOOMBERG The Pulse 20160914

Mark welcome to the pulse. I am mark barton. Check out what is happening with european stocks. The stoxx 600 is rising for the first time in five days. When it comes to percentage terms, there is the stocks to europe 600. The u. K. 10 year yield is rising. Or its six consecutive day that is the longest stretch since november 2015 since the u. K. Referendum, u. K. Bonds have been the best performing sovereign indices according to bloomberg sovereign bond indices did the dollar pound pounded a little bit lower. A big Employment Data big implement data will cross the test will cross the bloomberg. That is big for the bank of england. Brent crude is up today. We have had an interesting day. The iea saying yesterday the glut will stretch into next year. Stockpiles increasing by 1. 4 Million Barrels according to the ati. Today we will hear from the eia data. It is forecast to show that supplies rose by 4 Million Barrels. Lets get to bloomberg first word news with nejra cehic. Nejra monsantos Management Board is set to support an improved offer from bayer. According to people familiar, final approval is pending. According to people, the German Company is going to raise its shareto about 129 per and double the antitrust break free break fee. Both companies have declined to comment. President obama has criticized what he called Donald Trumps adulation of vladimir putin. Path part of a broader after the obama after obama spoke at a rally for Hillary Clinton in philadelphia. The ceo of one of the worlds biggest goods makers says britains decision to leave the European Union happened because the citizens felt let down. On aver ceo gave his views more inclusive economy. Many have not seen the incomes oh up for the last have not seen their incomes go up for the last 20 to 30 years. Not as much a safe a vote against the Current System as what is according to some people for brussels or immigrants or other things. Nejra sellers of luxury homes in london are lowering prices following the brexit vote as Political Uncertainty discourage buyers. Cuts on a prime homes in the u. K. Capital jumped 75 in the 10 weeks followed following the referendum. Global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. I am nejra cehic and this is bloomberg. Mark a year ago, Jeanclaude Juncker told his audience there is enough there is not enough union in this union. The european commissions president has doubled down on that message in his annual address. Francine lacqua is at the European Parliament. Mr. Cine, how much has juncker said about brexit today . Francine he has touched on brexit. He reminded everyone the same political line that there will be no cherry picking. This is not an a la carte menu that they cannot decide to curb immigration and have access to the single market. This the first time that Jeanclaude Juncker and just parliament postbrexit. Juncker addressed parliament postbrexit. He is trying to regain a little bit of credibility by saying i am sad, this is not the end of the world, but it is an introspection. Markets very much on the frailties of europe, on the fact that it is an existential question on whether the European Union wants to integrate more or whether it disintegrates. He is very cautious. He talked a little bit about brexit. He reminded article 50 is not triggered yet. He says again, the eu will stay together, but it was not as optimistic as i thought it would be he was very cautious. Mark did he say anything about fiscal spending . Francine he did. He announced a couple of funds. This is very broad brushed. The details will be unveiled in a series of new, new sconces today. News conferences we are hoping for more details and coming weeks. What he wants to create is a defense fund. How much money is in it . We do not know yet. What exactly this fund will do is unclear. Negotiateand they can bigger orders for planes. You can get better prices on some of the deals on the materials they need to buy. He put in place the juncker plan. If individual countries are frail then it makes it difficult for the commission to be strong. There is a diplomat that put it well yesterday telling me the commission can only be a strong as its Member States because it overviews but it is not an executive arm. It cannot force countries to do anything. Climate change, digital and the fight against terrorism. Mark francine, thank you. Lets introduce our first guest. Hatefullyully mark he oversees Investment Strategy for 2 million. Thank you for joining us. You pose the question what might it take to see a potential bright side for the must to the much discussed brexit vote . Answer . Wing this the i think you touched on interesting subs subject. There is a moment where we do have to look to the positive side. Does the u. K. Have the opportunity to move in a positive direction from some of the problems that we have seen in the European Union. In switzerland, they chose not to go into the union. They have increased their competitiveness. They are an open society but they have done things like deregulate in key areas. Are there things u. K. Can use to improve its Competitive Position in the world . Mark in many of these countries, you have to accept some rules which may not be so appetizing for those prebrexit tears. That is exactly right. There is freedom of movement and compared to the u. K. , switzerland is very parsimonious and use of debt. In the use of debt. Right now there is this moment to change but as you said, this issue around the Free Movement of people is something that is going to need to be resolved. Over the near term, there remains a lot of uncertainty around what brexit mark the initial uncertainty do not last when it came to markets. He saw the initial reaction in the days after, but as we have seen, orchids have rebounded and then some. Mark h. you are right if youre looking at the equity markets. The pound for the brunt of it. That is where you are going to have to look to know the fate of u. K. Markets as we move into the fall, because if the pound weakens further on policy action or uncertainty, that can paradoxically be good for things like the ftse 100 which gets so many of its earnings from outside. Mark versus the dollar as low as 128, we bounce back to 132. It seems to have found a level for now. Where are we going to be in six months . Mark h. we could be seen this we could see it go back to the 128 level in six months or so. It is worth noting that we dont see another explosion in the dollar from here as well. Mark it will be interesting. Explosion meeting . Rise. sorry, meaning a mark is that linked to the fed . Mark h. that is linked to a variety of things. The dollar rose so much and there is uncertainty in the u. S. Still about the u. S. Election. Mark and uncertainty about the fed as well. One hike this year . Height mark h. we see one hike in december. U. S. Data is very strong. It is this global uncertainty which as we have heard from the fed is making this test making on the making them err side of prudence which means you dont hike rates when the economy is doing well. Mark just get on with it. It is 25 basis points. Why are we becoming so fixated on such a small move, mark . Mark h. we have come out of apo of exceptionally come out of a period of exceptionally low volatility. Mark we are not talking about talk we are not talking about moving to 3 . It is 25 basis points. In the anyone rate hike month it is done in, you are right, that alone is not going to determine the future of the world economy. The key thing here is the people of project out, what is the mindset of the fed. How are they going to think about this environment . ,ecause as you know, fed policy centralbank policy around qe and other monetary instruments are at an Inflection Point where they are going to have to change. Mark we are going to talk more about Central Banks in a moment. Mark haefele stays with us for another 20 minutes. Plenty coming up including how is the u. K. Economy faring in the wake of the brexit . We will bring you analysis in the latest job numbers. Serving up a deal as bayer is said to up its offer for monsanto. Well ask if investors will bite. In two months before the u. S. Goes to the polls, we will be live from new york. This is bloomberg. Mark breaking news out of china. Bolstering evidence the nations growth stabilization does remain intact. Aggregate financing 1. 7 trillion. That is to 20 billion for the month of august. Yuan. An loans 947 billion the economy is showing first signs of strength, factory output, investment retail sales all exceeding economic estimates in august amid a boost from the property markets. Is something authorities are keeping a close eye on. I am mark barton. Lets get to Bloomberg Business flash with nejra cehic. Nejra monsantos Management Board is set to support an improved offer from bayer according to two people familiar with the matter. Final approval is attending buyers vote. According to people earlier, the German Company is going to raise its offer to 129 per share and the double its antitrust rate fee to about 3 billion spokesman for both companies 3 billion. Spokesmen for both companies declined to comment. It buys back unsold watches from hong kong. Europe suffers a decrease in tourism. Estimates. Analyst a fallen operating profit includes 65 million euros. Its target. Bandoned the space the company says it is no longer forecasting annual Revenue Growth at 6 , instead it says it has an ambitious goal for growth. Its firsthalf earnings beat analyst estimates. Warren buffett had 1. 4 billion wiped from its fortune after wells fargo fell yesterday. , atshire hathaway fell 2 the same time wells fargo lost its position as the worlds most viable bank to jpmorgan. The share price has been hit with the revelation that employees opened more than 2 million accounts without clients approval. Mark Financial Markets is wiped up showing signs of easing today european stocks advancing for the first time in five days. Mark haefele at ubs. Alm over the summer some are saying this calm good this calm could lead to periods of volatility. What has been the driver . Mark h. the calm itself was historic in nature. So little volatility. In part because of some of the things you have been mentioning, the response to brexit from the bank of england made people say ok, at least mark carney gets it. You use this centralbank playbook of more monetary stimulus when you face issues that could rise up in a nation. We saw it china plying stimulus and having an impact. That was one of the things that really calmed us down. Now we are seeing the fed still on hold, but they try to reassert their dominance in the picture every once in a while. What shadow that was a little bit of questioning about the fed, but lets not read too much into this. There is people back from vacation. The volatility has risen for a few days. That may lead to some d risking in some portfolios, but given the strength of the u. S. Consumer, given what we are seeing in china, we still think you want to be in equities over bonds. Mark is a d risking in some portfolios apt right now . Is that how one should be looking at it . Mark h. when you get these periods of stock markets selling off more than 2 , people Start Talking about the risk, parity models. If people want to bet on this low volatility lasting, then some of them will be risk. We are trying to look a lot of the political risks, some of these shorterterm volatility moves to focus on the earnings and the continued centralbank policy. Mark five quarters earned five quarters running, we have at negative earnings in the u. S. Where are these earnings we keep on hearing about . Ink h. we are overweight the United States because we think in the second half of the year, you are going to start to see yearoveryear some Earnings Growth in the United States. Why is that . The devastation wrought by the Energy Complex as that collapsed last year sibley cannot be repeated this year. Mark mark haefele, he stays with us for another section. Investing in a world of lower negative rates. We are going to get more thoughts from mark haefele. This is bloomberg. Mark lets get some final thoughts from mark haefele, global chief Investment Officer of ubs. We discussed Central Banks and there has been a thought some of the reasons why some say we have seen the end of this calm. Some banks are be assessing the efficacy of stimulus, looking at the boj ahead of next week. Given last week are we reaching the limits of stimulus . Of easing measures from the worlds leading Central Banks . Mark h. if you look at what the markets are telling us, they do not like negative rates because it impacts the Financial System through Financial Intermediaries like banks and insurance companies. In that sense, given the importance of financials to global markets, you can say for the negative rates are going to be deflationary. That can be managed with centralbank language and other policies, but there is this increasing belief that negative rates are less likely to be used , and that the back end of the curve may start to pick up. Rates are going up. Is been is in japan, it a real lead up to the boj meeting, all sorts of rhetoric coming out. We have seen a big pickup in the yield curve, havent we . The boj seems to have achieved something by not doing anything. Mark h. i dont think we can see their aim yet. There are many people hope it is big. The boj will react with large stimulus measures. It is really unclear. The comments from kuroda and others seem to be designed to keep us guessing. Mark we will learn more next week. Overweight emergingmarket equities over swiss equities. I was reading earlier, emergingmarket equities and currencies worse selloff since june. Is this a pause in the emergingmarket rebound we have seen . Should come as no surprise but emergingmarket equities are volatile. They are more volatile than global index indexes. There is more room for emerging markets as they have been hit so hard in previous years and we are starting to see the earnings momentum improve. It is at the beginning of that cycle in the emerging markets, but that is something we place a lot of weight on. Mark d have preference . Countries . Mark h. and our global portfolio, we do not distant wish that much. In the emergingmarket or asian portfolio, in particular, we have had overweight in china and india, where again we are seeing in india, cps growth. In china, we see the stimulus efforts continuing to play through into the economy. Mark mobile Development Desk have we seen the have we seen the low for yields or not in sovereign and corporate debt . Mark h. i think theres some spread that you can still take advantage of given the fact that the ecb is running out of rings that it can buy. We think the sovereign bonds are at a low. It is a historic low. Therefore, we would prefer to be in the equities. Mark mark, great to see you. Our carefully, noble chief Investment Officer mark haefele, noble chief Investment Officer at ubs. We will bring you the latest jobs numbers as they break. This is bloomberg. Stay with us. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Welcome to the pulse live from bloombergs European Headquarters in london. Im mark barton, getting some unEmployment Data in the u. K. Fewit is continuing to show signs of cooling the labor market. The number of people at work rose by 174,000 in the three months through july. Unemployment fell 39,000 leaving the jobless rate at 4. 9 . Estimates for july show unemployment falling to 4. 7 . The figures add to evidence the economy has fared better than predicted. Unemployment is widely forecast to rise as Economic Growth slows, though the boe is predicting only a gradual increase. Experimental data showed the jobless rate at the lowest level since september 2005. Employment now stands at a record 31. 8 million. There are some signs of fragility. 2400 inclaims rose by august. Byloyment meanwhile fell 105,000, the biggest decline since march 2015. A whole array of numbers to talk about. Lets talk more about that and this morning state of the Union Address by jeanclaude junker. Joining us to discuss that is sony kapoor. The economy is continually showing signs of resilience. The only negative was jobless claims, which rose slightly, employment falling in july, but the number of people at work rising 174,000. Of course july is just after june, but you have to say the economy is proving resilient. I think it is neither here nor there. There isnt enough information. The things to keep in mind are one, the economy had positive momentum before the brexit discussion started, and second, we have had a significant loosening of Monetary Policy, significant new action already taken and being promised by the bank of england, as well as the promise of removing austerity, which was weighing the economy down. Had both the bank of england and the treasury acted as they are going to war they are now, had the brexit vote gone the other way, the economy would be doing significantly better. That is the comparison to make, not what was the trend before. Mark how are you feeling about brexit . Weve had all sorts of comments in the last week. Bespoke deal him a that is the word of the day. We are going to somehow managed to create our own deal. Dont talk norway, canada, switzerland. We can create our own deal. How realistic do you think that is . Sony based on conversations i had with other eu leaders, it seems like a total pie in the sky. I think what has happened since the vote is we have seen the emperor is naked but nobody has called it out loud yet. And maybe there is a bunch in the crowd that still hasnt seen that the emperor is Walking Around naked. Mark at what juncture do we accept that the emperor might well be naked . Sony i think that she will probably be moving in that direction . She is still very fresh in her job and she has only done one round of meetings with the other eu leaders. I think they are going to play hardball. Britain in the past two or three years has been a bull in the china shop, not having made a productive contribution to the eu. If we set a precedent, this could lead to a further disintegration. Theres a very strong incentive on behalf of the other countries not to let britain get what looks like a sweet a la carte deal. Mark which is what junker said today. There can be no a la cart access to the single market. Sony he is correct. That is the construct of the single market. It is about the Free Movement of goods, services, capital, and people. Given the political stability, he is spot on. We cannot be seen to be playing hardball as other countries are starting to and get concessions out of it. This will cost us heavily. If we want to restrict movement from the eu, it is going to cost us heavily. Mark but that seems to be the only redline that theresa may has removed on. Freedom of movement. Do you think that eventually is going to have to go . Sony i think she will face a very difficult choice between letting go of control of freedom of movement or actually taking a serious hit to the economy. Depending on who the advisors to, whether she listens to businesses or not, she will have to make that difficult choice. Theresa may is probably the most hardline Prime Minister on immigration that we have had at least in the past few decades. She was as home secretary extremely hardline, made some very controversial moves about limiting migrant numbers, deporting migrants, etc. I think it is not obvious what her personal belief is, which seems to be very antilarge numbers of immigrants, versus what part of this she is doing in response to the brexit vote. In the end, she will be the person making that call. Mark that will be a massive call. It will underline all those people who voted for brexit, having some sort of control over our borders. It was primarily a vote about immigration. Mark if you backtrack on that, youve primarily said brexit aint going to happen. Sony i think theres a very real chance that brexit will not happen. Mark so article 50 wont be triggered . Is this post triggering or it just wont be triggered . Sony i would hope article 50 is not triggered, but i think given the momentum it is likely it will be triggered in some form. The alternative to the present deal we have is mark you are in the twoyear process. If we dont reach some deal, wto rules straight away. What happens then . Sony i dont think chancellor merkel will allow that to happen. She has a very sensible head on her shoulders. Unlikely thatly the chancellor will allow a that wethat as regret cannot agree to this alternative to actually be booted out of the European Union. It is not obvious what article 50 mechanics actually supposed to look like. It has not happened before. Everything is up in the air. Mark brexit isnt going to happen, that is your bottom line. But if article 50 is triggered, you then have to come to a deal. Will the deal be essentially the same deal as we had before . Couldi think that britain , in the two years that we have, withdraw its application to leave. And if it decides to, then chancellor merkel and whoever the next french president is, they will probably make sure that we are allowed to withdraw that. Mark withdraw your application to withdraw. How is that going to go down . The we are already facing most fragmented body politic vote in terms of the citizenry and the voters as well as within Political Parties that i can remember. I think that we are a divided country, straight down the middle, the between people who want open society, people who are closed, fearful of the other , and this debate is not going to go away. This is the british equivalent of the u. S. Culture wars. The u. S. Culture wars have divided the country evermore. Mark europe is having a populism debate. Juncker today said populism doesnt solve problems. That as i think dangerous as the euro crisis was in terms of posing existential threat to europe, but we have today is far more serious. To the financial crisis and the euro crisis squeezed out political space more and more. Warning thatssion unless we change our approach to the crisis, political space would shrink to a point where we may no longer have enough political space to do what it takes in order to get out of the crisis. And it is possible that we may not have not only do we not have political space, we are running out of Monetary Policy space. We are stretched on fiscal policy space. It is hard to see what europe will do to respond were another crisis to hit. So yes, growth is starting to slowly come back. Capita isal gdp per still lower than it was in 1999. Theyve had 16 years of lost decade and a half. It is a poor situation, but at least the arrow is pointing upwards, but it is far more fragile than 2009 or later. We simply do not have the political space, the economic space, the financial, and the Monetary Policy space to react to another shock. Mark sony, i could talk to you for the rest of the hour but weve run out of time. Great to chat again. Sony kapoor. Lets get the bloomberg first word news. Heres nejra cehic. Nejra monsantos Management Board is said to support an improved offer from bayer. According to people familiar with the matter, final approval is pending. According to people earlier, the German Company is willing to raise its offer to about 129 a share and double the antitrust rake fee. President obama has criticized what he calls Donald Trumps adulation of vladimir putin. It was part of a broad attack on the republican nominees fitness for the presidency as obama spoke at a Campaign Rally or Hillary Clinton in philadelphia. Chinas broadest measure of new credit exceeded estimates in august. The peoples bank of china said aggregate financing was 220 billion last month. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im nejra cehic. Mark thank you. B stay with bloomberg. Said to up its offer for monsanto. Clinton returns to the campaign trail. Can she recover her lead over trump . And we are live in strasburg after junckers state of the union. We will talk to the European Parliament president and pierre moscovici. This is bloomberg. Mark stocks are uptodate and bloomberg. Heres nejra cehic. Nejra rebounding on the stoxx 600, up 0. 5 at the moment. This after we saw losses in asia. I want to show you some of the underperformers. They are in the luxury industries. Richemont down. Saidis after richemont firsthalf operating profit will whilely decline about 45 hermes abandoned its annual sales growth target. This adds to the gloom spreading across the luxury industry. Weve seen swatch Group Heading lower as well. The Swiss Watch Group is declining. This is how the Luxury Companies are performing. I want to talk about bonds. We saw the selloff resumed yesterday, but we are seeing yields ticked lower across europe. In the gilt market, the treasury yield was heading lower 20. This is the Bloomberg Barclays total aggregate return index. Sovereign bond yields have risen to their highest level in almost three months. You can see a recovery there back up to levels in june. This is the close on tuesday. 1. 24 . Dont think weve got the number yet for today. A bit of a recovery in yield. Is it a correction or Inflection Point . People divided on that. Goldman very much maintaining its oldish stance on llish stance onu the dollar because of the fed outlook. Steepest backtoback decline against the dollar this month. This is amid speculation rates will slip further toward zero in japan. Mark thank you very much indeed. Lets turn to todays top corporate story. Months and does Management Board is said to support a new offer from bayer according to people familiar with the matter. Baye approval is pending rs vote. Joining us is bloombergs deals team leader. Is today the day . I think everyone hopes so. After sleepless nights, it looks like we are finally there. R are finally getting closer to the 130 amount monsanto has been pushing for. Mark what happens today . Whose boards meet . Whose boards already met . Monsantos board met yesterday. We hear they are throwing their weight behind the offer. The important meeting today is bayers supervisory board. We expect after that something to be announced. Mark around 129. 130 seemed to be the golden price. Bayer . Much for clearly not. Is above 130, 135 . It seems to be. Bayer went in at 120. This is an fall cash offer, the biggest in m a history. Monsantos last quarterly numbers were quite weak. They are saying even going up to premium above22 the Closing Price of monsanto on tuesday. Is that gap going to close . A deal is reached, that gap will close. Will it disappear . No. You mentioned antitrust. Weve seen two other megadeals in this case. Those need to be approved as well. People want to see how it plays out. Mark talk to me about this breakup fee. That seems big. I think the concern is monsanto kept pushing back on the topic of, we dont want to enter this deal with that much risk unless you help us with a safety pin. Thinkup to 3 billion i sends a signal, we are confident we can get this done. That is why we are willing to offer this. Mark off your head, im going to put you on the spot, can you remember bigger breakup fees . Weve seen some sizable ones. Deutsche telekom a couple years back agreed to sell their u. S. Unit and i want to say there was Something Like 5 billion. We have seen these before. Chem china syngenta also had a sizable breakup fee. Megadeals,ind of there are such big breakup fees. This is the biggest german takeover of all time and the biggest deal of the year. Mark great. See you later as well. Takes a sicklinton day. Obama hits the campaign trail. Trump closes in. With eight weeks to go, can hillary recover her lead . This is bloomberg. Ahead of next weeks central bank. Europe opens in the green. Backing the bid. Support buyers new 46 billion offer. And not enough union in this union. He first post dasheds. Good morning, this is bloomberg s surveillance