tv Bloomberg Markets European Close Bloomberg October 20, 2016 11:00am-12:01pm EDT
watching the european close on bloomberg markets. mark: we will take you from new york to frankfurt. we will cover stories out of brussels, the u.k., in washington in the next hour. here is what we are watching today. mario draghi signals the ecb probably will not stop the program without tapering its first. we will dig into the comments and all of the market reaction, next. pullingpostdebate tells us hillary clinton came out on top. we have highlights as well as a loophole on who the republicans want to be decent interface of the party -- the center ice of the party.
mark: we are under 30 minutes away from the end of the first day session. global movers is your function. we had a soaring of assets during the mario draghi q&a or during the testimony because initially he said we did not discuss tapering or extending, but that that pushed the euro reversend then the happened when he set an abrupt unlikely,chases is suggesting the box program will be extended when it comes to its conclusion in march 2017. stocks are rising. by half of 1%, the lowest level since march. these are the bond yields. german 10 year yields falling.
it is rising in some of the periphery nations. busy day today. i want to get to nestlé, the world's biggest food company. it cut its forecast. shares down by eight cents of 1%. 1%.0 o/10 of third-quarter revenues missed analyst estimates. shares are 5.6% lower, draghi down by the loss of several north american media accounts in the last year. among the big losers in europe today, the world's second-biggest distiller shares up by 1.2% today. it reported sales growth that beat estimates.
the irish whiskey surging in the u.s.. is reiterating his forecast for earnings growth between 2% and 4% this year. what the company is trying to do right now is tap the spending power of china's emerging middle class after previously focusing on the country's more affluent. demand for that has waned due to crack down on extravagant spending. in the u.s., jamison is driving growth in the irish whiskey category, which has expanded alongside the bourbon revival. shares up by 1.1%. let's get to the markets desk. how is it looking? julie: things are looking worse than they were happen hour ago let alone one hour ago with the nasdaq aching a turn for the worst. the dow is in the red by 52 point. if you look at the s&p over the course of the day, you will see
the project 38 little more clearly. this after we got the home sales data that was better than estimated. i'm looking at some of these earnings laggards we have been watching today driving down the s&p 500. union pacific, the railroads profit falling short estimates. it is seeing continuing declines in freight demand and struggling to produce prices. sales forecast was unchanged, and that means it was below estimates. the company continues to seek economic headwinds. it shows exposure. a lot of stores in the oil exposed parts of the u.s. the insurance company drop it down 23% of the fourth straight quarterly decline. it's all weather-related costs
and investment income going down. we are watching amazon today. analysts are cutting down the already below consensus estimates, seeing a slight deceleration in orders, but they consider amazon's business to be healthy. it reports on october 27 to its members. backve nymex crude pulling from the 15 month high yesterday. gold prices down a little bit. the dollar is gaining a little background up .5%. vonnie: thanks. back to our top story, the european central bank is leaving his interest rates unchanged. for more, caroline hyde joins us from frankfurt. pretty much as expected, i guess. caroline: exactly when it comes to the policy of today. not a single economist thought we would see the changes on the
interest rates today, but much being built around december. behind me is the conference. that is where a few fireworks seem to be coming from mario draghi. he seems angered about the talk of tapering rising already. angered by uninformed sources that was communicated to the market. he did say there will be no abrupt end. that it will be extended past the march 17 current deadline. many feeling than enough and come in december when we get an updated forecast. at the moment, inflation is well off target. that is something mario draghi hinted at the inflation is not ramping up the way they need. mark: something you suggested and talked about just after the meeting when we came to you was how on earth did the ecb not even discussed the notion of
tapering or extending the when it is all we have been talking about for the last month? caroline: it is phenomenal. have today's words of ecb meeting. the governing council gathered together. wondering what they did talk about. this scarcity is something that has been at the forefront as far back as the previous meeting. euros they buy 80 billion worth of bonds went a percentage of german debt is available to them? they cannot buy bonds that yield less than the deposit rate, which is at 9.4%. that rules out most of germany's bonds, lebanon's bonds. that has been an issue, they have been talking about it but they have not three the
quantitative easing will base for themselves. the committee will decide by december as well. mark: great job today. good to see you. caroline hyde from paper on the day of the ecb non-decision. let's get an investor's perspective on today's decision. mario draghi said an abrupt end is unlikely. you recently sent european equities are looking increasingly attractive. mario draghi has been held by the backup in yields for the last month or so. >> that's right. it has expanded his universe and bought him enough time to december. that is what they wanted. mark: it is only a matter of time now. the program will be extended. >> it will be extended, and they will see how it goes. they are being helped by the oil prices watching through the system. you'll get a little bit of a pickup in inflation, which will
help them a little bit. there is no real sign that he pointed this out of the pickup in the underlying forces of inflation. recovery atuggish the moment. more to do, i think. vonnie: it is the old mario draghi it seems who is able to move the market. >> that's right. it has been stable for a few months now. that is the first time we have seen it move, but we will see where it sells in the coming days. settles in the coming days. vonnie: are you making any structural changes to how you are managing your portfolio or how you are recommending your portfolio be built at the moment given all of the things that have changed in the last few months actually? >> generally, most of our
investors we encourage to be long-term investors, globally diversified. this has been a somewhat to is here. we had a beginning -- this has tumultuous year.t have obviously taken the diversification, but equities still look the best right now. your excess returns look more or less than what you got in the last 100 years or so. to us, stocks do not look that remarkably valued. two parts. investor return and some of the perils of being too gloomy, too early, too often.
what are the perils? what is the evidence? >> generally if you look at you since the lates 19 century, overtime, they have gone up. they have reinvested dividends and you factor in inflation, over time, you have managed to benefit from being optimistic. your ability to time the cycle is more important than we are told. many market commentators advertise themselves on the fact that they got 2007 rail. how long did they call those talks? the reality is when you look at the median returns in and around their markets since the second world war, you only really win if you get it within six months. and 24 months too early, you lose, even if you include the bear market. with every bear market, you get
a rush of blood before the bloodletting. generally, the rest of blood outweighs the bloodletting that follows. mark: this is a three-part question. you have to answer each part in a fairly brief way to allow vonnie to ask more questions. u.s. recession, china hard bondng, missy end upof bubble go. >> u.s. recession>> looking less likely at the moment. credit metrics are picking up so it feels like when you can push to the back of it. china are lending, it looks like the policymakers have managed to kick several cans at once down the road for a little bit. an orderly slowdown feels likely. mark: the end of the bond
market bubble? >> they have picked up inflation before, suggesting it will be the risk that you get a bit of turmoil and that takes into other markets. that could make people a little bit more unsettled. generally, the degree of central bank ownership now, the control they are exerting, that should be the uncertainty that is something we do not know yet. that is probably the stuff the market has unknown, which is the threat. vonnie: you are being quite frank about the outlook. we don't often get to hear that. tell us what your favorite trade is at the moment? what will be better over the longer-term? >> over the longer term, still developed stocks for us right now. gete is a possibility to emerging stocks right now i'm sure, but right now, developed thoughts, u.s. stocks. european stocks has the greatest earnings site, but the u.s., the
big thing is there is a lot of gloomy strategists and analysts right now. they are worrying about all the .hings in our path focusing on the fundamentals, it is more likely this to economic recovery continues, and you have the return of some inflation that is not quite priced into market. you have to make a choice between that being result and the depression and inflation required by the bond market on these levels with the success you get before the end of the cycle is probably the cyclical hubris. it was addressed to me that the return of economic hubris is not as far off as we are talking about. mark: great to see you, william. 4:14 in london. coming up, the outlook over the
london, counting you down to the european close. just about 13 minutes to the end of the european equity session. vonnie: i am vonnie quinn. it is time now for our latest bloomberg business flash. sales of previously owned homes rose more than expected last month. existing home sales were up 2.2% in september. the annual rates almost $5.5 million. in the last year, the median
sales price in the u.s. rose almost 6%. unemployment benefits rose last month for the most since july. they rose to 260,000. they spent several weeks at a four decade low. it is the longest streak since 1970. plan cut of $4 billion of the volkswagen car brand according to people familiar with the brand. there went to safeguard the investment in future vehicle technology. german factories will account for most of the savings. that is your bloomberg business flash this hour. mark: the banking industry in the u.k. continues to prepare for a hard brexit. , not parliament
saying there are many options on the table. >> i think they are also realistic and looking at other options beyond passporting to look at the interests. we are working closely with the industry and looking at all the options for future protection of london's financial services. tax breaks help them keep their operation in london as britain exits the trading block. the chief executive of the british bankers associations has passporting is key for commerce. >> we think having integrated financial market in europe has been good for growth across europe, and we should try to keep the integrated market and financial services and free trade in financial services. it is important when you go to debates to ask for what you want. i do not ask less than you want. it is clearly in the national interest to have continuation of
vonnie: live from london and new york, on vonnie quinn. -- i am vonnie quinn. mark: the close of the european markets just under 10 minutes. one of the big companies in the world is seeing some challenges ahead. nicely forecasting the slowest sales growth in more than a decade. barker explained the slowdown in growth and rising earlier today on bloomberg television. >> global environment as low growth for a while. and pricingowly will pick up very slowly, slower than we thought, hence our
projection for the year. this goes down to pricing. >> i think it is also nicely deciding not to increase pricing in some markets. for the long-term, it is hard to get in. mark: it is not working for dannon. the volume growth is declining. can sustain an increase behind the volume growth? >> it can't if it keeps innovating properly, and that is the key. it looks like nestlé is doing that. as we sit here today, i think they are doing the right thing on protecting volume rather than price. vonnie: what is behind the week consumer demand. the products have not gotten any less delicious for the most part? duncan: certainly not for me anyway. the problem you see some
commodity deflation for three or four years now. after getting price increases through the developed markets, it is the result when you have and will notnd accept a price rise. the emerging markets, is different. you have currencies doing quite horrible things and pushing inflation, so you have to react on pricing. it is the worst of both worlds at this moment in time for company like nestlé. vonnie: over the last year, it is down 4/10 of a percent. how much of a deal is this for a slower forecast for nestlé? in the short-term, most people were expecting it will happen because they were disappointing for a couple of years now. on nestlé attly the moment, you have a chief executive so essentially we are
in a holding pattern until he comes in and know exactly how he was change is this. -- the business. they are leaving in seven of the top growing categories within food maybe putting more emphasis research willnk be there to make us feel better. he has a hard job to do. it'll take him two or three years. mark: really quick comment on sterling decline. will he keep prices lower have to push through price increases? duncan: at some point, prices have to go up, but we don't know what they cover.
in the next six months, i suspect prices will move higher. mark: thanks a lot. duncan fox with bloomberg intelligence. take a look at where european markets are treating. we are five minutes away from the close when mario draghi did absolutely nothing. he said a few comments that the currency,ped bonds, the stock market as well, which was higher. than big comment had to be the abrupt end to purchases is unlikely communicating we will see more stimulus after the end of march. this is bloomberg. ♪
the mario draghi conference earlier. the governing council did not discuss extending or tapering qe, but he said the abrupt end to purchases is unlikely, indicating there will be more stimulus at the end of march. concurrently, shares up by a fifth of 1%. let's talk with some of the individual stories. busy earnings season well underway. yearsggest increase in 13 for lufthansa. the carrier raised its profit forecast this year, reversing a three-month-old protection of an earnings decline because of the premium class bookings exceeded expectations and a decline in fuel costs. bounceback for shares in the tens o lufthansa. in the analyses.
top line is that it. the white light is the boj. the euro is the red line, the ecb. this is percentage moved in the balance sheets of all of the central banks, and the record bond buying by global central banks has of course swollen the balance sheet since 2008 these. central banks held $12.7 trillion in government debt, loans, and other assets. the pboc is somewhat of an exception. the blue line is not moving in an upward trajectory. its total assets have declined by 10% from october 2014. it spent reserves to prop up the beginning currency -- the weakening currency. we had sales data. this is the employment chart. i want to show you the retail sales chart. am i going to get lucky? yes i am.
is alsomy bacon, there field unchanged. -- auto field unchanged. rising prices and more weather. sales excluding auto were unchanged from august. a big take away is consumers are expected to come under pressure as the weaker pound stilts inflation. as the weaker pound boosts inflation, that will put pressure on real wages. is that going to put measure on retail sales? one of the questions we will have to answer in coming months. vonnie: we will enjoy asking it and getting some answers as well. i am starting with a two-year yield. 81 basis points. that is a gain of two basis points. if you look at the spread, it is down a couple basis points since
when i came in this morning, but the trend is the same. way our steepening -- we are steepening. it continues to weaken. not against a basket of currencies. crude oil has something to do with today's trade down 2%. let's take a look at the broader u.s. markets now. there is not much of an impact today. the dow is down 2/10 of a person. s&p is down 3/10 of a percent. nasdaq is down one third of a percent. let's get more from the nasdaq now. abigail is line from manhattan. >> witnessing a decent amount of injure volatility.
one hour ago, it was down 6/10 a 1%. what really pressured the nasdaq about one hour ago, these stocks are all still down. off of those, it includes apple, microsoft, amazon. we look at the stocks, amazon is perhaps a fundamental cause. a research firm has taken the below estimate revenue even lower. from a more macro standpoint, drag is ebay. the same thing is true for ebay. ebay offered disappointing fourth-quarter outlook. they said the growth margin volume was a little light so this stock is getting whacked o
n this. it seems as though some investors are looking ahead to the fourth quarter. we have a very unrelated big-name. investors will be curious to see what is ahead. 4433, this is a six-month chart. up.hows a bearish set we have ebay down today. it ebay drops a bit more to about $27 per share, will be confirmed for an equal and opposite move back down to this year's low, which supports the outlook and the idea that the holiday season may be a little lackluster for investors. vonnie: pretty phenomenal chart. thank you. let's check on the bloomberg first word news. >> it was in a strawberry statement in a campaign that has a number of them.
thought from refusing to say whether he will accept the election results if he loses. his comments came at last night third and final debate in las vegas. he was responding to a question from moderator chris wallace. >> are you say you are not prepared? >> i will tell you at the time. i will keep you in suspense, ok? >> when he responded that because that is horrifying. thesetime donald thinks are not going to his direction, he things it is rigged against him. >> the two candidates squaring off on a number of other topics, including the supreme court, abortion, and the economy. according to a cnn poll, 52% compared to 39% that's a tru say trump.
a meeting in china. the u.s. is its biggest military ally. iraqi special forces have continued to rejoin the battle to retakemosul from -- retake mosul from isis. the attack is now in its fourth day. theresa may telling eu leaders there will be no turning back from brexit. is according to two senior british officials. may is in brussels and sending her first summit as prime minister. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. i am courtney donohoe. this is bloomberg markets. mark: thank you very much indy. the leaders are meeting in brussels. first meetingay's
since the brexit vote. has theresa may been given any int of her negotiation style? >> she has already. in fact, she arrived more than one hour before all of the other eu leaders. she wanted to have some one-to-one meetings with every single eu leader by december. what she said on her way in was no surprise. there is no turning back from brexit. buthe uk's leaving the eu, we will continue to play a full role until we leave, and we will be a strong and dependable partner after we have left. it is in the interest of the u.k. and the eu that we continue to work closely together, including at the summit. >> to the leaders will be able
to hear more from theresa may over dinner tonight. she will have 10 or 15 minutes of the dinner to present her views on how she sees the process is going to go. mark: let's like we have lost caroline. apologies. ,e will try to get back to her but a big night for theresa may during the official dinner where she will essentially get 15 minutes to tell the latest on the brexit process. vonnie: they will be speaking about russia as well. coming up, we will hear from cap staley -- jeff staley. how his bank is handling the comeback plan. this is bloomberg. ♪
mark: live from london and new york, this is the european close on bloomberg markets. time now for the bloomberg business flash, a look at some of the biggest business stories in the news right now. retail sales in the u.k. stagnated for a second month in a row. rising prices and warm weather led to a drop in closing sales. food was down also. july helped.g third quarter revenue rose one and 4% face to sales of two new breast cancer therapies. sales came just short of estimates. lufthansa jumped after
the german airline reversed a three-month-old profit warning. in july, lufthansa cut its forecast. today, the airline raised its forecast with an increase in reservations for premium seats. that is the latest bloomberg business flash. we will have to wait until next thursday for the latest earnings from barclays chief executive jeff staley. regarding chief executive in december, he has shifted priorities in the u.k. and the u.s.. he has shared global non-core assets. he shared his perspective on the state of the banking industry as well as european rival deutsche bank. >> from march 1 this year when we announced our strategy the
night of the bicycle, we had a number one bank. brexit took a lot of wind out of our sales and cost 30% of our market cap in 2 days. we have climbed back to the level we were at almost prior to the brazzaville. vote.exit >> how soon do you think it will happen? >> when we close non-core sometime in 2017, we will be revisiting the issues. >> let's talk about brexit. are you hoping that banks like yourself will have access to the eu market? recognized it needed to reregulate the banking industry globally. it has done a lot of that and has been a heavy lift by everyone since the financial crisis, with the other important it said was let's not reregulate the banks and create barriers to the free flow of
capital. whether it is the flow of capital from singapore to china or from paris to london or vice versa, i think by the european union, the u.k., and the rest of the major financial centers will stay connected to this let's let capital flows freely. let's not put protection barriers. there will be changes because of brexit and we will have to adopt to it, but the market i think will be -- >> we saw inflation -- month> lt month. what you expect it to do in the coming months and 2017? >> i derek carr and credit card picks up 50% to 60% of the payment those in the u.k. everyday. what we saw in september and august was consumer spending in the u.k. has grown 4% plus versus last year, which is a pretty robust number.
a reduction by the bank of wasand from 50 basis points the right thing. if inflation is picking up and consumer spending is growing and they are feeling the impact of depreciated sterling, let's see where we go. >> if you have to place a bet, would it be 25, 15? >> the trick here will be let's see what happens with the fed in the u.s.. if they continue the slow progress but steady progress of raising rates, if there is inflation coming back to the u.k., i think it may question a lot in terms of where the monetary policy is going wobbly. -- globally. u.k. will not go to throw rates or negative interest rates. the prime minister has talked about lowering to help people
take out mortgage hurt savers. hopefully we are down at 25 basis points. mark: barclays chief executive jeff staley earlier on bloomberg television from singapore. we are back with caroline. we were saying how theresa may was basically going to say there is no turning back from brexit to the obvious question of, how are other eu leaders responding to this? seems to be ae consensus among eu leaders in brussels that this is not free negotiation -- pre-negotiation. that will happen by march of next year. the italians offered to do a special brexit summit in rome at the end of march. said on hisesident
way in that if wants to have brexit, that means it will be a hard negotiation. i also spoke with the luxembourg prime minister in brussels, and he repeated it will be no cherry picking deal. >> if we show that it is jerking, everybody will say they want the same statute as the u.k. they asked for the divorce. now we have to proceed to the divorce. it is like i said before, there is no complicated status. is married or not. european the presidents and theresa may is not entering a lions den but rather the best of -- nest of doves and she is safe. mark: what are the priorities at
the eu summit? caroline: migration, the continuous flow of refugees we are seeing from the central italy, thean to trade deal with canada that is currently being blasted by beltre belgiu. and depreciation with russia. theresa may talked about russia on her way in. she said she was willing to add more pressure on russia over the syrian crisis, a way for her to remind everyone that the u.k. is still a full eu member until brexit happens and that she is certainly aware that this is not nogetiation -- prenegotiation.
>> it is not about decisions, but i want to underline that the eu should keep all options open, including sanctions. if the crimes continue. a little early for new sanctions on russia over syria according to some countries like austria. more sanctions will require the unanimous approval of the 28th still at the moment eu members. mark: great job. we will see you no doubt tomorrow. battle of the charts next. trump trails in the polls. we will see what investors are skipping of in anticipation of a clinton victory. this is bloomberg. ♪
mark: time now for the global battle of the charts. we take a look at some of the most compelling and telling chart of the day and what they mean for you, the investor. charts oncess the the bloomberg. taking things out today, mr. oliver yo. vonnie: i guess it is my turn so i will show you a chart i did not know existed. it is fascinating. particularly because we know they have been many accusations that the media is biased when it comes to donald trump. you can see that the philadelphia fed, which is an apolitical agency if you like, this this on articles and references to various different partisan conflicts. you can see it was at its
highest weight back a couple years ago when the budget impasse shut down the government. it got a little bit elevated here when it came to the super tuesday primary contest, but as candidates begin to drop out and it became clinton versus trump, it thdeclined. according to the philadelphia fed, if you take a look at what is mentioned in your paper articles, it is a decline. you can see that chart on bloomberg 4383. mark: oliver. >> now i can hear you. these could not be more different charts right now. vonnie's is more topical. here is what is going on here. i am looking at equity versus currency volatility. i think this is pretty
interesting because you see a bit of a divergence between what happens when you look at volatility in the equity market versus volatility in a basket of different swaps. the white line at the top shows the average three-month imp lied. all these different major market currencies, their average three-month implied. the blue is basically a three-month fix. what you are seeing is a bit of a divergence at the past couple of months with a currency, even though it has not gone up, has remained pretty high relative to resort levels. the volatility in the s&p 500 is getting pretty low relative to where it started the year when we were selling off. the spread is shown at the bottom. in the past six months, it has been pretty wide. volatility in the s&p 500 for
the three months is 1.5 times out of the currency market, which is pretty low by all standards. ge. of these has to conver the last time they converged was the spike in august, and it was not a pretty seen. 4420. mark: anything with convergence, diverges normally gets my vote, ms.missed topicality -- topicality has to get my vote. both. to you you are watching bloomberg television. loads of interviews, coming up. ♪
>> from bloomberg's world headquarters in new york we are covering stories from new york to brussels. hillary clinton and donald trump doubled down on their strategy in the final presidential debate. exclusive interview with tom steyer and the activist for environmental changes and we sit down with bank of america ceo brian moynahan. trading day,e julie hyman joins us with an update on where things stand. julie: they bounced off off lows in the session, still in the red across the board. we have a lot to focus on today. let's start with earnings. we see the laggards weighing on the major averages. a verizon coming out with profit that beat estimates, but subscriber