Transcripts For BLOOMBERG Bloomberg Markets European Close 2

Youre in the United States, we are seeing stocks come off their highs. The s p up 0. 1 . Apple contributing big, up 0. 5 on a positive note. Tesla is down about 0. 3 . Lets get straight to someone who can tell us more about all of that. Joining us from dallas is Burns Mckinney, Allianz Global Investors managing director and Portfolio Manager. We are seeing a mill top in the stock market a melt up in the market through christmas. Nothing major, but we didnt really make any losses. We didnt lose anything we gain through the year. Tot you attribute that what do you attribute that . Burns volumes are very low this time of year, so it doesnt take a lot to drive markets up. This is probably just a bit of a continuation of the early Christmas Gift that the markets got in middecember, where they resolved several geopolitical issues that had been weighing on uncertainty. Namely, the resolution or the detente in the u. S. China trade relations, as well as brexit, and establishment that the fed does intend to keep rates lower longer. Once we got past a lot of those uncertainties, the markets have continued to drift upward and really take advantage of the fact theres been a very strong holiday season. The consumer appears to be very strong. Central bankers around the world are keeping money pretty loose. Vonnie do we continue this move higher . What stock moves from here . Burns the only things that probably could stop us would also be a resumption of geopolitical uncertainty, whether it would be a resumption or a ratcheting up of the trade situation, or i think we could see some volatility going into 2020 with the election. Short of that, earnings are expected to rebound nicely next year. We are talking about 10 Earnings Growth for the s p in 2020. The consumer is still in very good shape, and again, Central Banks are easing. You typically dont have too much of a downturn, and you dont want to fight the fed the rest of the central bankers around the world. Vonnie are you quite confident that we know the direction of the major developed global Central Banks into 2020 . Do you know what the ecb is thinking and the federal reserve, in terms of whether it is to tighten or ease Monetary Policy next year . Burns it seems that there is a coordinated easing around the world. I am not an expert on what the ecb will be doing, but the fed has made it very clear that they intend to stay under most circumstances on hold next year. 2019, athe goal after year in which the fed and centralbank uncertainty was one of the biggest things weighing 2020, markets, going into they really strongly telegraphed their intention of keeping rates on hold. I think jay powell just intends to try to be fairly invisible in 2020. When i was in grad school, if i didnt want to answer if i didnt know the answer, i would sit in the back, not make eye contact. I think jay powell may not be doing that with all of the political pressures this year. Vonnie you like industrials, health care, and energy. Why industrials, first . Burns one of the things that has been weighing on Corporate Capital spending that typically would drive the industrials has been the uncertainty. Ceo confidence hasnt been high because of, again, really just getting back to the u. S. China trade relations. Now that we have at least reached a point where we havent removed a lot of the tariffs, but it seems they have reached a point where the u. S. And china have both reached a pain threshold, and although the tariffs might not be removed, it at least seems that the trajectory is starting to improve, with that, you have industrial Capacity Utilization that is very high. That basically means whether Companies Like it or not, they are going to have to replace he quit because stuff starts breaking. You have a sector that, although it did rally a bit late in the year, is still trading below average compared to the market. In many ways, some of the cyclical sectors, i think investors worry about the next recession. Some of those still price in a bit of recession. Vonnie tell me if you disagree with me, but it feels like people were extorted nearly worried a few months ago were extraordinarily worried a few months ago and couldnt help but see a recession at some point in your future, and now they are suddenly relaxed. Not only theres not going to be a global recession, but the fed is going to stay accommodative, the ecb is not going to get in the way, and we all continue to enjoy the party. Why the shift . Burns that is exactly right. If you look at one year ago right now, the markets had pretty much determined that the next recession was right around the corner, and now weve had a complete 180 shift where investors, if you listen to strategists, listen to the market forecasters, no one is really accepting a recession at all in the year 2020. Again, the shift is that you had two primary uncertainties driving volatility last year. What is the fed going to do with Interest Rates . A year ago, they were still in the process of tightening rates. At least the first of those has been settled. With the phase i agreement with china, the second one is largely been taken off the table as well, so investors can kind of go back to focusing on what they want to, and that is just stock market fundamentals. Vonnie what are the chances of an errant tweet or pointed tweet, or some thing else happening that would cause the market bottom to fall out . Is that even on the table at all . Burns an errant tweet is always on the table. It is highly likely. I think often times, with the trade situation, it is two steps forward, one step back. There probably will be some tweets that bring some uncertainty back into the picture in 2020. Placeskets have in some gotten a little bit numb to that. But as long as the trajectory is positive, that is something that should is least that should at least stay out of the markets way. Nothave inflation in check, quantitative easing, how are the , low andrding it employment, and fairly solid wage gains. Vonnie youre are staying with us. That is Burns Mckinney of Allianz Global Investors. Lets check Global Markets abigail doolittle. Abigail we are still looking at small gains around the world on this holiday shortened week. In the u. S. , at this point we are looking at small gains once again. Earlier we were flipping between gains and losses. Either way, we have record highs. The s p 500 and the nasdaq up slightly, but both indexes have already put in another round of alltime highs. The nasdaq right now up for the 12th day in a row, the longest winning streak doing all the way back to 2009. The stoxx 600 up about 0. 2 , and the ftse 100 up about 0. 1 . It seems as though many traders and investors on holiday. Volumes low average. Also below average is the put to call ratio. In blue, we are looking at the s p 500 doing pretty much straight up. In white come of the 10 Day Moving Average on the. Put to call ratio put on the call ratio. On the put to call ratio. It tells you the bears are in control of that way of looking at the market. When it goes down, they are losing. Right now, those bears are really coming out. What makes this interesting, that is similar to what we are. Eeing this is at five year lows, perhaps in the complicity around the smelt up. Oil, we see a bit of a roller coaster ride on the day. It had been sharply lower, now down just slightly on a bigger drawdown than expected. Very quickly, the bloomberg Commodity Index on the year not quite joining in on the rally the s p 500 had, but crude oil the big winner for that commodity complex. Vonnie abigail, thank you. Remember the function gtv on the bloomberg allows you to browse all of the recent charts featured on bloomberg tv. Catch up on analysis and save your favorites for future reference. This is bloomberg. York, imve from new vonnie quinn. This is the european close on bloomberg markets. Lets check in on the bloomberg first word news. Heres mark crumpton. Mark European Commission president ursula von der leyen tells a french newspaper she is worried by how little time is a longterm trade deal with the eu by the end of 2020. She says that as optimistic. After a landslide primary victory, is really Prime Minister Benjamin Netanyahu is looking ahead. He will need a big win in elections in march to stay ahead , and gain an majority in Parliament Willing to grant him immunity. In australia, temperatures soared to a blistering 108 degrees today, 42 degrees celsius. Further east, firefighters continue to battle brushfires, trying to gain more ground on the blazes for a heat wave hits this weekend. About 70 fires are burning across australia. Nearly half are not contained. They have destroyed dozens of homes. Russia has confirmed it will appeal its four year olympic man for manipulating olympic ban for manipulating doping data. The Russian Antidoping Agency disagrees with the sanctions imposed by the world antidoping agency. The case now heads to an arbitration court. Russian teams are banned from a includingmpetitions, next years limbics including next years olympics and the world cup. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im mark crumpton. This is bloomberg. Vonnie thank you for that. Still with us, Allianz Global Investors managing director and Portfolio Manager Burns Mckinney. We were talking about u. S. Equities, but you like value stocks anyway. Is it more and more difficult to find value stocks and some of those have had doubledigit gains . Right, it absolutely is. Generally speaking, when you have a stock market trading at above average levels relative to its own history, we as value investors, the best thing we can really look for our companies , those at relative value that trade with discount of the market, or simply those that have oftentimes gained less than the broader markets. Certainly, it depends on what type of valuation metrics you look for. It is aike vonda lees, value stock because it is a name that trades in line with the market, whereas a lot of their competitors, hershey, pepsi, nestle trade in the mid 20 times earnings. They have grown their dividends by doubledigit rates over the last five years. They really have a lot less label pressures in things like chocolate, salty snacks then you do and a lot of other segments. Theres emergingmarket growth. Peter lynch once said buy what you know. I have a daughter thats always buying oreo cookies. I have some wheat thins in my bag right now. It is a name that most dont realize their pantry is full of. Vonnie what other products do you have . Burns quite a few. Johnson johnson is an interesting story because of the fact that, within the Big Drug Company space, you have pricing pressures for the Drug Companies , but j j has a very strong medical device business, as well as the consumer business. They do have products people are using every day, whether it is tylenol, sudafed, listerine. If youve got a couple of kids in your house, you are always needing a bandaid. You have one of the last remaining aaa Balance Sheets the u. S. Markets to weather the storm if we have more volatility next year. Vonnie why are Investors Undervaluing Johnson Johnson then, burns . Burns i think you have a stock that i mean, you say undervaluing. It is probably trading at a steeper discount to the market then it historically has. It typically goes for a premium. Theyve had a lot of headline risk, but it appears the market is overvaluing a lot of those legal and litigation liabilities by tens of billions of dollars. S thenk that is often time place that investors like to look, were you have that solid balance sheet, a solid credit situation, to help get them through. Vonnie ok. European health care stocks, we were just talking about them. The index is up 30 this year. A lot of positives to some of those stocks, including demand out of china, china accepting more of their therapies, so on. Do you look at European Health care stocks at all . Burns we periodically take a look at some of the european names as well. Gsk, wheremes like theres typically a 5 dividend yield. Theyve done a really good job, although they do face some generic pressures. Theyve done a really good job of continuing to develop and overcome those, and overcome that patent expiration type risk. Theres certainly some names within the European Drug space that have some of the best dividends in the market. As a value investor, what do you look for in value . Good dividend yield is probably one of the best things these days. Vonnie burns, things for coming on. Managinginney is the director and Portfolio Manager for Allianz Global Investors. This is bloomberg. Vonnie live from new york, im vonnie quinn. This is the european close on bloomberg markets. Lets look at one of the top interviews of 2019. Our matt spoke to Goldman Sachss our matt miller spoke to Goldman Sachss David Solomon about thanking consolidation and what goldmans focus is for its european business. David weve been investing. We have new leadership in our Wealth Management business, and we are focused on expanding our market share is. If the right acquisition came along, we would certainly consider it, but we also see good organic opportunity but growing our foot meant our footprint here in europe. Matt theres a lot of talk about Bank Consolidation in europe. There are a number of regulatory hurdles especially, but did you ect banking elevation banking consolidation for ks, and does Goldman Sachs want to play a role in that . David i think there are lots of compelling reasons why some consolidation here would benefit the strength of the european market, but i think it is hard, and it is not clear that it will actually happen. I do think that it would be good for the european market, for the European Capital markets, if you had more of a european leader in some way. Whether or not the local politics or the business pressure now allows that to happen, im not sure, but i will watch it is you do. I think there is certainly an opportunity to strengthen the position of one or two of the players here through m a and consolidation. But it is hard, and may not happen. Matt mario draghi, and his final ecb press conference, said we are very happy with our negative rates experiment. Christine lagarde expected to tow the same line. Are negative rates helping to boost inflation and bring growth back . Matt i think david i think when the book is written, it is not going to look like a great experiment. I dont think negative rates are bringing the benefit we would like to see. Theres no question that growth in this part of the world has been lagging, and negative rates have not allowed acceleration of that growth, and my opinion. I dont think negative rates are constructive, but we will have to wait to see how this all plays out. I worry that we will look back at this and not like what we see when it is all over. Matt one of the things the central bankers say is that fiscal stimulus is needed to mitigate the unwanted side effects. I know you are going to be talking to companies around germany. Surely they will have something to say about negative rates. They will probably also want to talk about Infrastructure Spending they think is needed. Do you feel like fiscal spending is needed . David if you talk to people here in germany, theres a significant amount of fiscal stimulus that is being spent. If you look at the end missions around sustainability and some of the capital that is being spent to move germany tomorrow at the admissions around sustainability and some of the capital that is being spent to move germany toward a more green economy, there is significant stimulus. Find hasavid bauer died in a snorkeling accident. The Company Spokesman says the 51yearold died while on vacation with family in mauritius. S death comes as the company is looking for a successor to the ceo. Banks around the world are unveiling the biggest rounds of job cuts in four years. More than 50 lenders have announced this have announced plans this year to cut a most 78,000 jobs. Morgan stanley is the latest to issue pink slips. About 1500 jobs have been slashed. Another highranking boeing executive is stepping down in the wake of the 737 max crisis. The plane maker says the Legal Advisor is retiring at the end of the year. He served as boeing general counsel, but was reassigned in may to advise former ceo Dennis Muilenburg and the board of directors on matters related to those two deadly max crashes. That is your latest Bloomberg Business flash. Checking u. S. Markets now, we are still in the green for all of the major averages. The s p 500 up just more than 0. 1 , being led higher right now by the likes of centurylink, internationa flavors and fragrances, and amazon. Com, continuing to do well on those blowout holiday numbers. The nasdaq staying above 9000, 9027 right now. We have seen a pretty positive session in europe after a two day holiday. Just the ftse mid is lower is lower. Ib we will dive into