Are trading now, under 30 minutes until the finish of the friday session, stocks riding after a fourday drop. All of these currencies gaining against the dollar. Hitting a boost from the jobs report. Euro is up by three quarters of 1 . Sovereign. Odities, i want to talk about the big election that is taking place next week. Traders tend to increase hedging before an event such as an election, sending expectations for equity volatility high. This is not the case for next wednesdays dutch vote. And investors in the netherlands appear to be a bit more concern about a strong showing by euro skeptic Marine Le Pen in the april 23 French Election than politics and their own country. The benchmark and the netherlands is up by 6 this year versus a 3. 5 rise in the european benchmark. The best performance of the ax, axonal bell, unilever, they have been boosting boosted by takeover. They have been takeover targets that they both rejected. We have had data in the u. K. , manufacturing, construction, both shrinking in january, pointing to a loss of momentum in the economy in the First Quarter. Factory output is shrinking by. 9 from december. Total industrial declining, building firms cutting out output by. 4 . Emerging markets, equity traders could be in for a reality check with Rising Profit forecasts and confidence that developing nations can withstand a hike in rates have sent stocks to the best start of the year since 2012. But stock prices and volatility moving in opposite directions. The gauge has risen 6. 8 this year versus a 16 gain in a measure of expected price. Volatility has fallen to levels that preceded market decline in the past. 90 minutes into the trading day in the u. S. Gains for the major averages in the u. S. But well off of the highs. The dow has slipped negative, unchanged. The dow had been on pay for a second that higher. On pace forasdaq third day higher but makes trading action in the u. S. After the better than expected jobs report. All three averages are on pace for weekly declines for both the s p 500 and the nasdaq, first time in seven weeks. The s p 500 last friday at six weeks in a row, its best weekly winning streak since the november of 2015. We may be looking at an Inflection Point for the s p 500. We look at the imap, a great way to look at what is happening sector wise, the gains may be small but broadbased. Most higher led by technology which had been materials. One piece of the jobs report that was broncos to the fact that manufacturing and. Onstruction was a big piece a bit of a rally in but euros but overall gains. The idea we may be seeing an Inflection Point for stocks. This tells us that 45 of the s p 500 is oversold per the year. Almost at a year low. Katie stockton, this is not her chart but she has been very good, she had been bullish calling for the s p 500 to go to 2400 and now looking for a pullback. One of her index indicators this looks pretty bearish, almost at the lows of the year. Vonnie obviously bearish from the chart. Thank you. Lets get back to the jobs report, u. S. Employers added 235,000 positions in february, following an increase of 238,000 in january. That was more than the original number. That is the best backtoback rise since july. What does it mean for federal route reserve policy this year . Now is a professor from m. I. T. Who has advised the Federal Reserve and a former member of the Ecb Governing Council and former governor of the central bank of cyprus. We are fortunate to have him. What do you make of the u. S. Economy and its health right now . Good to be with you. This is very good news for the u. S. Economy. Confirms that the Federal Reserve was quite right in preparing markets for the tightening next week. This is baked in the cake. I see easily for moves this year euros for this year and good news for the u. S. Economy and europe because, with the fed tightening, we can expect a weakening of the euro which is about the only way we can see easy monetary condition and the eu. Vonnie what we need fiscal reality and become your assessment, or can this happen even if we do not get any movement from congress . The economy, in my view, is somewhat overheated already in the United States. We will need to see the fed hikes, even if there is continuing lack of clarity from the administration about fiscal policy. If we do have an additional fiscal expansion that has been talked about, then potentially we would see additional increases by the Federal Reserve in order to counteract them. Face of thethe best Business Cycle to be talking about a fiscal expansion. If that comes, the Federal Reserve would have to take it into account. Mark taking that into account, what growth rate can the u. S. Economy achieve in coming years given that there is a goal of achieving growth between 3 and 4 . Is that achievable . To tell you the truth, this has less to do with the short run Monetary Policy or the cyclical fiscal response and everything to do with whether the new administration will go ahead with the Structural Reforms that will encourage growth in the economy. The problem with growth in the past several years is that potential output growth has been very low. Productivity growth has been very low. If we see measures to the tax reform, regulation reform, that raise productivity, then and only then, can we hope to achieve the Growth Numbers the administration is hoping for. I think those numbers are achievable but not with a policy that are in place right now. Those would be too optimistic with the policies in place right now. Mark donald trump, the president will have the opportunity to remold the somc in his liking, given that a number of governors have disappeared and ultimately the fed chair yellen and possibly deputy chair fisher will disappear. How well the changing nature of and how changes outlook will it move on rates . Let me point out that the Federal Reserve is a market is a robust institution. The people there are real professionals. I respect what the Federal Reserve has been doing. The republican members of congress, over the past few years, have been suggesting proposals that would make the Federal Reserve even more robust to make policy more systematic. Ahead withe to go the pieces of legislation that have been proposed in the last couple of years, this would fed,nue to safeguard the he reliably handling of Monetary Policy in the future. And will make it less important about exactly what are the personalities that are coming in. We should not be as worried about the personalities change allthe fomc the time, we need to focus on whether the framework that the fed is using to govern Monetary Policy is appropriate and whether there is no political interference, it is important to keep the fed independent and whether we keep them honest to price stability. And the 2 objective we have. With an overheated economy, one of the risks is to push the feds to do more than it should which would not be good for the economy in the long run and not good for growth. Vonnie speaking of jobs and this president , who touts the fact he will create a lot more jobs. We saw 95,000 jobs in good producing goods producing of theast month, mining 9000 and construction employment of 50,000. Is the labor force in the United States changing . Is that desirable and what happens if we get border adjustment taxes . I really cannot predict what would happen if we have a major adjustment in trade so i cannot comment on that. I will say that of course there is change in the composition of the labor force in the economy. This is something that is expected. And is healthy. In the long run, we should not expect to have the United States to keep a lot of manufacturing jobs. We should not be concerned if we do not have a strong recovery in manufacturing jobs. As some people are suggesting. It is more important to realize the importance of services, and most important for the u. S. To retain its global leading position in technological innovation. This is where the value added is very high skill jobs. This is what we see in the hightech industry. If we see happier more and more jobs moving in that direction. This is where the global gains will be in the future. Vonnie professor is staying with us from m. I. T. , former ecb and bank of cyprus governor. Lets talk more in a few moments , we have the ecb decision to talk about, brexit, and the impact of elections in europe among our subjects. This is bloomberg. From bloomberg World Headquarters in new york vonnie , i am vonnie quinn. Mark i am mark barton. I want to focus on european Monetary Policy. The ecb consider the question of whether rates could rise the four the Bond Buying Program comes to an end before the Bond Buying Program comes to an end. We are with athanasios orphanides. Bloomberg has come out with a story that the ecb policymakers considered the question of whether rates could rise before the qe program ends. Ecbhe ecd entering entering a new phase of discussions . Mr. Orphanides i do not think they are. This is a very strange year for europe. All of the elections that you mentioned earlier in the program, the netherlands, france, germany. Draghi cocounsel the Meetings Council the meetings , he would have done that, the ecb does not want to be part of the debate until they are finished with the elections. There will be talking the background around the exit strategy. I do not expect any news to come out of the ecb in the coming months. Mark you are suggesting, not suggesting, saying clearly that talk that the ecb may begin to processate the tapering , even if it begins next year. You are suggesting that even the Forward Guidance will not begin this year. Mr. Orphanides to tell you the truth, to the extent mario draghi can completely avoid it, i think he would like to completely avoid it. And did. I have to mention two things, we note, this is very clear, from some circles in europe, in particular, those worried about the German Economy overheating, there are girls for the ecb calls for the ecb to start tapering, potentially start raising rates and winding the commission will measures. This is part of the debate. If we look at the performance of the economy overall, the ecb, if anything, is still too tight in its policy. Let me remind you that the latest readings of core inflation, which is the underlying measure we should be focusing on, not oil prices. This has been stuck below 1 . This is much lower than what the ecb should have been delivering. By any measure, ecb Monetary Policy is still too tight, they need the accommodation and to continue to do qe well into next year. If they can avoid giving any signals about 20 tapering will start, they will avoid it until september. Vonnie the euro strengthening since the press conference. Not a lot of strengthening but still up. What happens next when it comes to the banking problems in italy and france . The elections . Do you see further problems ahead and another country perhaps exiting . Mr. Orphanides we have been talking about the ecb and as soon as you mentioned banks, i need to remind you that the difficulty we have, since 2009 in the euro area which is still not been fixed, is the fact that the euro area and government have been unable to adopt a policy that will clean up the economy and allow growth to return in europe. The banking problems we are talking about, i saw headlights about mps and deutche and unicredit to vizio. Two weeks ago. These problems are not fixed and there are still questions about monte dei paschi in italy. I hope they are fixed going forward. The political environment that makes it difficult. We should not be looking at the ecb for this. The question is what can governments deliver to restore health and the Banking System . Vonnie you know cyprus well, will greece survived this . They are still stuck it seems like. Mr. Orphanides greece is a tragedy. You can tell from my name i have greek roots. Proof of the ultimate the failure of the original design of the european project. Ece can only survive and be a member of the European Union and the euro area, if the other governments in the euro area, in particular germany, actually listen to the technocrats at the. Mf and what they have put on the table for a restructuring of the greek debt and reforms that will put the Greek Economy on a cap to recovery. On a path to recovery. Mark thank you, we look forward to having you next time. Athanasios orphanides, the former ecb member. Next week is big for the fed. Announcements from the bank of england and the boj. This is bloomberg. Vonnie the new york i am vonnie quinn. Mark i am mark barton, this is the european close. Seven minutes until the end of the friday session. The debt expected to announce a rate hike on wednesday, Big Decisions the following day from the bank of england and bank of japan. Joining us is richard jones. Lets start with the boe. Is it time to start introducing gflation withf staf the u. S. U. K. Economy . With slow growth, perhaps contraction in gdp, we are not there yet and i do not think it is anything that is on anybodys radar. The bank of england has warned ,s, mark carney specifically that the u. K. Economy will face headwinds. Im i do not think we will get messaging from the bank of england different than we heard in the quarterly Inflation Report and any inflation rise they will haves mark talking about inflation rises, you have inflation in the boe, wherever it comes from, oil prices, weak sterling. In japan, inflation of. 1 . Saying, it is not it will not lead to much from the boj next week . Like the professor was saying about the ecb, japan has a bigger problem because their core inflation is a lot lower than the ecbs. Both Central Banks with an accommodative Monetary Policy and probably will not add more accommodation but will not reduce it through the end of 2017 as they want to see inflation measures, core measures, underlying ones, get upward traction because they have been missing in both economies for a very long time. Vonnie when all of the Central Banks take stock later on in the year, what will they come up with . The idea they need to start changing Monetary Policy or that they can continue on this road and it is all coming out as planned . I guess it depends on what the core inflation measure shows. If you look at what the ecb forecasts were, even through headlinebably on inflation about 1. 7 and core inflation even lower. I understand the idea that they want to get out of this altar accommodative stance but the Inflation Numbers will not be racing high enough for them to change that much. That is the point mario draghi has been making, he foresees the recovery in the eurozone is underpinned by current Monetary Policy. I can change but the numbers will probably have to change for that to be a reality. Mark i heard there will be an unofficial unofficial range in the eurozone, 1 to 2 , which will allow them to take their foot off the pedal because actually this target will not be reached by 2019 and they will have a 1 to 2 unofficial range. They want that to be at the upper end of that range. Mark exactly. Stake in for bloomberg real yield at the end of this hour. Mark live from london and new york, this is the european close with vonnie quinn. Companies have fallen over the week because of the big selloff in the price of crude on wednesday because of a big. Ncrease in the Inventory Data worst week since november and it began today at one point 2 with the stoxx 600 up for third day after a fourday drop. On track for a second weekly drop in three after a biggest weekly gain in three months. I do like this chart which is the inverse correlation between the ftse 100, which is the blue line, and sterling. Sterling dollar is the white line, since brexit, the weak pound has boosted the ftse 100 to record highs and sterling falling 18 against the dollar since brexit. In the last week or so, both have been moving in the same way, both downward. Today the inverse relation is holding. Expect the question has the weak pound is good good for u. K. Stocks idea run out of steam . Getting for 10 days out we getting for tenday weaking for 10 days out of 11. It is worth keeping a watch on. I love when correlations or inverse correlations breakdown. Talking about differentgerman 10 year spread. After falling almost 16 basis points last week has widened for basis points this week. 22. Eeks of widening out of both french and german yields have risen for two consecutive weeks. April yesterday from harris said macron would lead the worst rout of voting with 26 compared to. 5 from Marine Le Pen while most other polls give Marine Le Pen a slight advantage in the first round. Acron what the Marine Le Pen by 30 points in the runoff. And france, former Prime Minister said he is backing fillon for the president ial election. The spread, cannot get enough of it. I am looking at the dollar index. Coming off, mostly thanks to strengthen the euro falling the announcement following the announcement by mario draghi. It is not helping the yen which is at 115. 09. Crude oil is still flirting with the 49 a barrel mark, no rebound. 2. 60. Year u. S. Treasury, good market moves this week. Equities, still the trading range, up a quarter to a third of a percent when it comes to u. S. Majors. We are higher you could say, not taking much of a cause pause. The australian currencies expressing strength this week. Some spreads and yields interesting, especially following the jobs data. Lets get you Abigail Doolittle with a deeper look and treasuries and trends. What a day for treasuries, the 10 year yield down ever so slightly, represented in green which tells us that haven bonds are rallying. The reason this is a big movement is because bonds have been selling off for nine days. The first time in 10 days, a little bit of a rally in bonds but almost unchanged. Interesting to see how this plays out. If the 10 year yield climbs higher on the day, the longest selloff for bonds, the longest climb for the 10 year yield since 1974 and the water gets in the. Watergate scandal. Lets but the move into perspective. This is a sixmonth chart of the 10 year yield we have been showing. The big back up and rates we saw after the election. After the last rate rise in december, we see that investors bought bonds. We had a range of uncertainty, flirting with a 10 year yield an overall if the 10 year yield does not climb back above 2. 65 , is suggest we could see the 10 year yield dropped down into that range and perhaps down to the downside. So much Energy Investors ahead of the fed, do not know what is happening. Very quickly to put this into perspective with the twoyear yield, this is a longerterm chart. A big selloff in bonds but again length and not so much in terms of percentage. We are still well below 2 for the twoyear yield. The last year last time it was like this was in 2008. Amazing a selloff in bonds but rate still exceptionally low. Mark fantastic, thank you. U. S. Stocks advancing after the strong jobs report, is the rally regains steam . Joining us as vicechairman of equities at robert w baird, Patrick Spencer been. We had a guest earlier michael shaoul, he was almost dismissive not dismissive but saying everyone is at best with low volatility, looking for reasons. Not preaching to the converted. All week too obsessed with finding a reason for this rally to an end . That is our job. The markets are always worried. , a a lot ofy clients talking about trying to find reasons to question this rally. Certainly, we have not had a major correction since january of last year. We are looking at, rather than valuation talks, which looked at allocation tools. You remember famous people talked about the equity risk premium with people forget about. When you dust off the allocation tools, you look at the risk premium and decided to implant tips rather than treasuries because that is what we believe deep your free risk straight. As you know, you just get exactly the inflation and top of the coupon as opposed to the implied way to get in treasuries. We feel that is the right way to look at the equity risk premium. If you subtract the earnings yield from equities, you get 3 . Aboutere advocates 2. 5 , a reasonable view to good returns in the market. That is the same level, 3 , as we had in 2008. There is good rationale for being in equities, irrespective of all the noise and all the concern of mr. Trump and bad trade policies. The allocation tools are still telling us that we should be in equities. Mark what else besides tips . The basic thing, over 50 years, i looked yesterday, the strongest months in the market are march and april, because that is usually when the pension fund flows come in. U. S. Pension flows come in. This fight everybody looking for correction, you are about to hit a big wall of money coming in from the pension funds. Mark where will he go . I would of thought into equities. You have cash levels of 5 already with the institutions. Most people are long bonds anyway. As i said, when the dow hit 20,000, this is the most unloved bull market i have ever seen. Sentiment is changing and that is becoming more enthusiastic. Vonnie what do the crowded trades you advise people to avoid . It is interesting, the last time i came here i talked about interesting you talk about the backup and yields, when yields are rising the best place to be a cyclical stocks. I talked last time about cyclical stocks and oil stocks, the financials and material stocks. Those are the stocks i believe you should be in. People have rotated out of those recently because they are concerned about growth, or concerned about china, etc. , concerned about that policies from donald trump. People have been rotating out of those and hiding back in stables and utilities have been going up. Think ared trades i the staples. The growth stocks. I think it is time to revisit the cyclical stocks in a rising rate environment. You are in the later stages of a bull market and i feel those are the areas that will do well going out for the balance of the year. Vonnie what about learning season . It kicks off earnings season . It kicks off from next friday, what are you anticipating the typical numbers be, three companies, earning buyback dividends, anything interesting . Looking for 125 on the s p, u. S. , versus 109 four last year, 10 growth. 5 thiss of 4 or quarter. The thing that excites me is the oil stocks. There have been they have been hit quite hard and sentiment has moved against that group. Because of the supplies. The inventory levels. Toyou think you are about start the driving season in the state, spring and summer, the earnings season i think you see for the oil stocks, you had dreadful quarterly earnings, First Quarter earning for Oil Last Year and you are about to come to those which will be considerably better. The oil stocks will surprise everybody this quarter. They will be the standout. Certainly, donald trump is very supportive of the domestic oil patch with keystone and those things. The standout for me this quarter will be the oil stocks. Mark great to see you, Patrick Spencer. Vonnie thank you. Lets check in on the bloomberg first word news with courtney donohoe. Eu leaders are ready for british Prime Minister theresa may to trigger brexit at any time. The eu president said the block can respond to the notification and 48 hours. Theresa may is waiting for parliament to agree on the wording of draft law authorizing her to start the formal process for leaving the eu. Him his man of the south korean president opens the door for a reset in relationships with north korea and china. The Constitutional Court ousted the president today, and set the stage for elections in 60 days. The leading candidates to replace her have a softer touch with the north Korean Leader and may rethink the deployment of an antimissile system that china opposes. President trump will have his first phone call with palestinian president Mahmoud Abbas today. Unpopularresident is with palestinians because of his frowning this with the Israeli Government and taken a big stance on palestinian statehood. Native americans and others opposed to the Dakota Access pipeline are demonstrating in washington today. A federal judge refused to halt construction of the final section of the pipeline. Oil may start flowing through next week. The pipeline would pass under a reservoir that provides water to native american reservations. Global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. I am courtney donohoe. This is bloomberg. Live inwe are washington, d. C. Next with an energy chief executive officer who just wrapped up a meeting with the trump administration. This is bloomberg. Mark this is Bloomberg Markets. The big european close. I am mark barton in london. Vonnie in new york i am vonnie quinn. Turning to policy of washington, d. C. Fresh from a meeting with the white house, we are talking with the ceo of canadabased verizon that operates Energy Assets across north america. Take it away. The ceo whore with just left the white house from a meeting with gary cohen. What did you talk about . A great project called jordan go. Cove. It needs the targets from president trump, getting money off the sidelines and into work. We were talking about what it would take to get the project built and get it going. Administration, this project was caught in a regulatory quagmire which has direct applications for the specific connector gas pipeline. Did you get assurances from the white house that they will move this project forward . What we got was the commitment to work with us to make sure that there was oversight for the federal groups that are going to be on the permitting process which will be very important and very helpful. How many jobs are we talking . For000 construction jobs the first five years in tuesday, oregon. 240 permanent jobs ongoing. These will be high paying jobs, 75,000 to 85,000 per job and in that town, the average job is 32,000 so a big boost to the port and the city. Infrastructure has been a huge priority for the administration, they want to talk about a 1 trillion infrastructure project. This Energy Sector a part of that but is there a timeline that you got from this administration for when they want to see in the prefectural package move through congress . We did not get anything about that. We will fund this package, and 8 billion to 10 billion project that will be privately funded. The white house will help us get through the permitting process as quickly and as efficiently and the message to us was, hurry up and get going. What is the timeline to move the project along . We hope to get through to fid by men 2019 but if we can speed up the permitting, we can get into the beginning of 2019 or 2018. Final question, what do you make of this administration from a regulatory standpoint, compared to the last demonstration and what it means for your companys bottom line . It is usually helpful, a big difference. It makes a big difference for the project and adjust as efficiency and certainty to the process, which is a big help when you want to move a big project like this forward. You are confident jordan cove will move forward . A great project that meets all the components and with a little help from the white house, we can get there. Thank you for coming by bloomberg to talk about this jordan cove initiative and infrastructure spending. Back to you in new york. Busy as ever, thank you for the interview. In washington, d. C. Right now, we have a president and Vice President and a health care discussion. Participants are House Republican Committee Chairmans such as sam black, kevin brady, greg walden, Virginia Foxx from north carolina, and Bob Goodlatte of virginia. We will bring you headlines. Mark time for the Bloomberg Business flash, the biggest business stories in the news now. The british has rebounded investment banks trying to boost income from existing clients. Whobanks of a customers told executive the Standard Chartered whas 2 was too cumbersome to deal with. Ubs has reduced its bonus full by 17 and the chief executive passes pay cut slightly to 13. 5 million. The profit of the swiss bank had to restate net income to reflect an agreement to settle a legal case. An island has racked up close to 250 million in production costs and marketing expenses. That requires 500 million in global sales to break even. The film hits theaters this weekend and a Strong International showing is crucially. Domestically, it faces competition from logan and beauty and the beast which opens march 17. That is given is bloomberg is this flash. What you watch skull island . Vonnie of course i am. Apocalypse now has been mentioned, spiders. Mark it is a dream, i cannot wait. 500 million. You will contribute 15 when you see it . Not much to make up. Vonnie a split between the u. K. And u. S. Critics. U. K. Critics liking it but u. S. Critics not liking it. Mark who cares, these films are criticsproof. Botcs next, we look at volatility lows and animal spirits. Stay tuned. This is bloomberg. Vonnie it is time for our global battle of the drugs where we look at some of the most telling chart of the day and what they mean for investors. 0 access these on the bloomberg. Can directly him mail the contestants email the contestants. First e up hot topic, record lows on the bottom in yellow, historical volatility, it is catching up to the mix catching up to the next. This is a 100 day moving volatility for the s p. Based on historical volatility. As volatility has hit, its lowest point on a realized the basis, the last time we saw these levels, we saw a pretty big jumps and the s p. Talk about valuation but last time we saw this, volatility was low. We saw some pretty big moves in the s p. You can find that chart on g b tv6670. , also inhecking out the equity market, i will expand beyond the equity market with stocks and economic measurements. I am trying to assess the animal spirits. We talked to jamie dimon and he says he feels like theres animal spirits across markets. Osed trump post trump the white line is the university of Michigan Consumer confidence level and the blue line is the fed. Yellow is looking at the bearish to bullish ratio. , huge jump inere the degree of bullishness on the stock market and as well as with companies and individuals. How does that manifest itself in the markets . Longlasting . Spy flow since november 8, 26 billion of inflows, quite a bit, including a massive jump about one month ago. And howcks at the highs long can i continue but no debating with jamie dimon that it shows animals. Shows animal spirits. Vonnie did you do that yourself . This is adapted, i took it from a chart from yesterday and put on a float to give a personal touch. Vonnie a little bit of Gordon Ramsay going on. I do not know. Charts with kevins historical volatility and the way he said it cuts deep. It pains me but i will give it to oliver. He gets my vote. Vonnie oliver gets my vote. Mark well done. Breaking headlines from the president , he has been meeting with lawmakers about the health care will. Bill. The applause the diligent work on the Obamacare Repeal and has been meeting with house lawmakers about this bill. He says the Obamacare Repeal will happen shortly. It will happen shortly. Making these remarks and meeting with lawmakers about the health care bill. That is the latest from the meeting between the president and house lawmakers about the health care bill. This is Bloomberg Markets americas. This is bloomberg. City, i amew york jonathan ferro. With 30 minutes dedicated to fixed income, this is bloomberg real yield. Coming up, death, taxes and a rate hike how long before the ecb follows suit . Racking up and ugly week for treasury bulls u. S. Bonds continue the lowest slide to slide 12 longest license 2012
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