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tv   Bloomberg Markets European Open  Bloomberg  January 5, 2017 2:30am-4:01am EST

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guy: good morning. welcome to bloomberg markets. this is the european open. i'm guy johnson. what are we watching? the fed's new worry. policymakers fretting over faster growth under a trump presidency. this was in the december meeting minutes. the dollar falling, go figure, on that one. overnight borrowing costs surge in china. are we heading for a repeat of january 2016?
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deutsche bank is said to be considering funding private equity firms to buy distressed loans. how will the u.s. authorities react? let's talk about the markets. i'm going to do gmm first. a quick look at what is happening around the world. japanese yen, big move. trading 116.01. we are seeing a weaker dollar. the bloomberg dollar index down 0.6%. the danish krone is moving. the euro is up 0.5% against the dollar. the dollar, despite fed fears, is actually going down. take a look at the commodity markets as well. there's a big china story. zinc on the move today. you are also seeing copper on the move as well. familiar to the beginning of last year. lunar new year is coming up very shortly.
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the markets on the move. here's the bloomberg first word news with juliette saly. juliette: thank you. donald trump has picked a wall street insider to the his top regulator despite railing against the industry on the campaign trail. clayton toinate jay head the sec. clayton has represented financial firms throughout his career, including goldman sachs during the 2008 bailout. trump has attacked his opponents for their ties to goldman and other wall street banks. will the perceived influence of goldman sachs on the incoming administration spark a demonstration at the bank's new york headquarters. about 40 protesters unfurled banners in the lobby before being ejected. they criticized goldman's role in the u.s. housing crisis and a history of former executive taking senior posts in government. they vowed to demonstrate again on january 17.
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the former head of the u.k.'s financial regulator has issued a rebuke to president elect donald trump. turner, who headed britain's , told bloomberg that saying economies are held back by too much regulation is a childish approach. >> how does one know what donald trump is going to do as president? certainly there is no good case for a major deregulation. i think the idea that america or any other economy is held back by too much regulation, i think this is a fantasy, a childish approach to the economy, which has no justification whatsoever. juliette: the u.k. prime minister has named korea diplomat tim barrow as the country's next ambassador to the european union. the move came barely 24 hours after his predecessor resigned. in a message to his staff, he informed them of his
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resignation. criticized the government for not having a clear brexit plan. bitcoin has hit a record high as its popularity grows in countries where traditional currencies are tightly controlled. according to bloomberg data, it 1140 .60 yesterday. continued adoption of the currency in china and india has helped it. news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. guy: thank you very much indeed. minutes from the federal reserve's december meeting show officials are grappling with a fresh concern, faster growth. central bankers focused on the impact of potential fiscal stimulus under a donald trump presidency. almost all of the policymakers
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signaled rater upside risks to their forecast. meanwhile, the dollar has dipped on the fomc minutes. the long dollar positions are continuing to rise, which is interesting, and that would seem to indicate -- that is with the dollar is -- that gives you an impression that maybe the dollar has had room. that is not being felt today. cio of is jonathan bell, stanhope capital, where he outs oversee $9.5 billion. also joining us, mark cudmore, bloomberg strategist. mark, explain why the dollar is going down. mark: there's quite a few factors. positioning is at a complete extreme. what we had last night is, the fed emphasized growth but it also said that some of the forecast or rate hikes defended on fiscal stimulus. there's no guarantee that will come through yet.
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earlier, when the statement came out during the fed meeting in december, the implied they didn't care whether there was fiscal stimulus or not. now we're getting a lot of consensusm a very position. there could be a real position squeeze here. guy: without ruining the long-term trend. so jonathan, talk about what the dollar has done of late, moved aggressively to the upside. is this an unwind? we got payrolls friday as well. maybe the market has gone too far, too fast. jonathan: it is better to travel then arrive. that is the phrase you use when you see something like this. appreciationd a 5% on a trade weighted basis in the third quarter. you get these minutes out and it didn't really say anything that surprises us. we know that interest rates are heading up. the question is how much. it is a difficult job for the
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fomc. they don't know what trump is going to do or be able to achieve. minutes were what we would have expected and there's a little bit of market moving. guy: they are still pretty hawkish. mark, how much of what we're seeing is down to the fact that we are starting to see, after a big move in the treasury curve, a follow on move in other bond markets? mark: i think there's part of that. part of that is that we didn't really see yields climb again this week, even on good u.s. data. i think that price action has shown that u.s. yields couldn't go any further, yet we seeing the squeeze in other markets. another important factor is the yuan today. the yuan is being short squeezed. that is helping way on the whole brought dollar index. it is another blow for those positions. guy: we're going to get there. that is what the next block is about.
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you are trying to from run our program. you talked about the long-term trend still being in place. is that the case or is the dollar likely to go through consolidation here? what do you mean by long-term? how long could it last? mark: funny you should say that. many people have contacted me this morning saying, do you think there's a real bear market chance in the dollar? with trump coming in in a couple weeks, and we still don't know what his policies will be or what his administration will do, there's too much uncertainty to make a long-term call. dollar-yen has gone from a postelection low of near 100, up to 118. that means it can pull back to 111 and still be in a long-term uptrend. we've got room for a correction. jonathan, you talk about traveling and arriving. the budget is going to have to deliver an awful lot for the inket to continue to believe
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the bulk of the fiscal stimulus that people have priced in. how critical is that? how would you position yourself around that kind of moment in time when he lays out his plans in black and white and presents them? jonathan: i think what he will be able to achieve is the tax cuts. that, he can get through congress. the spending element is going to be much harder. cuts,d focus on the tax which should be a pretty immediate boost, and the repatriation tax. i think there's an immediate boost that will be positive for markets, but the spending, i think that is a long way down the line. guy: and it takes a long time to kick in. jonathan bell and mark cudmore staying with us. as markets already indicated, we will be talking about what is happening in china. this feels reminiscent of what
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happened in 2016. don't miss our exclusive interview with the dallas fed president. he will join us from the annual meeting in chicago. that is at 5:00 p.m. u.k. time. coming up on this program, china's currency chokehold takes effect. the onshore yuan surge the most on record. then we bring you our stocks to watch, including persimmon. and deutsche bank may be looking to dodge the spirit of the hit that the doj intended for it by partly funding its $7.2 billion fines with distressed loans. that is to come. this is bloomberg. the open, 20 minutes away. ♪
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guy: 7:43 in london. here's the bloomberg business flash. here is juliette saly. juliette: thank you. deutsche bank is considering an unusual approach to giving relief to subprime mortgage borrowers. as part of a $7.2 billion settlement with the u.s. government. that is lending money to private equity firms and hedge funds. according to a person with knowledge of the matter, it is reviewing the option to lend to firms which specialize in buying governmentes from options and lowering consumers'
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obligations. a spokesman declined to comment. macy's plans to cut 6200 jobs by early 2017, about 4% of its workforce, after holiday sales came in at the low end of its forecast. the largest department store company in the u.s. cut its annual earnings forecast for 2016. mrs. shares fell more than 10% in after-hours trading. volkswagen has been told it must face claims it misled u.s. investors after installing so-called defeat devices in diesel vehicles. a san francisco federal judge rejected a request to dismiss shareholder claims against former chairman martin winterkorn, who said investors in vw's american depository receipts couldn't prove he knew the extent of the diesel issues. a spokeswoman didn't immediately respond to requests for comment. that is your bloomberg business flash. guy: thank you very much indeed.
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china's efforts to choke capital outflows are beginning to pay off, with the offshore yuan surging the most on record. the overnight deposit rate in hong kong has gone a little north as well. i've got on my screen here the offshore overnight deposit rate for the offshore yuan up here. that is january, last year. let's cross to robin ganguly. robin, what is going on here? is this a repeat of last year? is this lunar new year? what is going on? this feels awfully familiar. robin: it does. we are not really getting the new year honeymoon. i didn't get it last year as well. what is happening this time around is slightly different. we are seeing china try to impose pretty drastic capital controls, trying to even -- we
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had this $50,000 u.s. are year conversion quota, and we had the state administration of foreign exchange saying that citizens must say what they are going to use the money for. they have to sign a pledge not to use it to buy property, etc. that is sending a signal to people that china is looking very carefully at what money that is being used to buy dollars is being used for. that is what we're seeing now in hong kong, kind of an offshore yuan squeeze of the country -- the currency, because very little is coming from on sure to offshore. this is china trying to preserve its capital within its borders. the onshore yuan fell about 6.5% against the dollar last year. that is more than 20 years.
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things are a bit frightening at the moment. there's also in other speculation that china is trying to keep the currency a little takes before donald trump office as the president of the united states, because he has threatened to brand china a currency manipulator and threatened to impose tariffs. guy: let's bring in mark cudmore. he's very excited to talk about this. what is your sense of this? there is clearly a squeeze going on. what will the chinese do after the inauguration, after the lunar new year, etc.? walk us through the timeline for this one. mark: lunar new year is still a couple weeks away and the inauguration is still over a week away. this has a chance to get quite secular. what we will see tomorrow is that the bloomberg dollar index is lower, unless it reverses substantially today, which means
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the index will be down again. we are seeing dollar-yen decreasing lower, which will further increase pressure to lower the dollar again. we are shorts really squeeze. the overnight rate in hong kong has spiked above 100%. that is crazy. last january, it only went to 72.5%. guy: i've got that on my screen now. i think we are trading 90%. definitely showing up 90% at the moment on my screen. you can see the order of the magnitude versus what we saw last year. jon bell, what do you make of this? is this something the chinese authorities can keep doing? is this something that happens in january ever year from now on? where is the endgame for the chinese authorities? jonathan: if the dollar is strong, we're going to see you on weakness overtime. they want to manage it so it is
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not too fast a fall, so that is why you get the moves they are doing at the moment, preventing people from converting yuan into dollars, encouraging state owned enterprises to buy yuan, to repatriate money to china, and getting, as a result, a shortage overseas, to try to get short-sellers out of the market. this is all of them trying to control the rate at which the currency might depreciate. you,robin, coming back to we've seen the bitcoin stories. we've seen the chinese try to get money out of the country and circumventing the rules that are currently in place. how creative are the chinese getting? seen evidence of them trying to find all sorts of alternative assets, hiding it in trade, falsifying imports data,
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but i think what jonathan mentioned was, he hit the nail on the head. what we're seeing now is, people trying -- it is a big coincidence, right? the annual conversion quarters get reset and we have the yuan rising the most since 2010. fixings, we have seen over the past couple of days, the pboc setting fixings which are not as weak as expected. yesterday, they said 0.18% weaker, when the fixing models showed it should be 0.3% weaker. the pboc doesn't necessarily have to follow the fixing models. tomorrow, what will happen is very difficult to say. is lastingnk this even maybe until the end of next week or so.
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guy: we're going to leave it there. thank you very much indeed for all joining in. mark cudmore, robin ganguly, jonathan bell. we are minutes away from the market open. up next, we going to take a look at today's movers, which could include persimmon, the housebuilder, which has seen a rise in revenue. that story next. this is bloomberg. ♪
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guy: 7:53 in london, 8:53 in frankfurt. minutes away from the equity market open. let's talk about the stocks we are watching. persimmon. the stock collapsed post-brexit. the housing market does seem to be fairly firm at the moment. the company is talking about a rise in completions, average selling prices being of 4%, the forward sales also in terms of value up very strongly. the housing market is certainly still with us, despite the predictions of a great deal of bleakness, and it does look as if the government is going to provide some release on the supply side. looks like we are going to see some decent moves when it comes to supply side.
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so, we look forward to seeing how that stock opens. we're also going to watch deutsche very carefully. back last year, it had the deal with the doj. is it trying to find a way to be created with that deal? there is a bloomberg story itlking about the fact that may be looking to -- [indiscernible] is that in the spirit of the deal it did with the doj? ever, got to admire, as bankers' creativity when it comes to dealing with these difficulties. it will be interesting to see how the regulators react. we will see how that story feeds through into the stock. the banking sector has been on a tear over the last few days. stocks like credit suisse have really been providing the outperformance. chris wiese at one point yesterday up 10% around over the start of the year.
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market open is four minutes away. we will see how the individual stocks perform. that is london. the market open, four minutes away. this is bloomberg. ♪
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guy: morning. welcome. you are watching bloomberg markets. this is the european open. we are here in the city of london. let us talk about your morning brief. policymakers fret over faster growth under a trump presidency in the december minutes. the dollar falls. go figure. overnight borrowing costs surge in china. trying -- the spirit of its lender. they want to buy distressed loans. how will the u.s. authorities react? we are expecting a slightly more negative start to european equity trading when cash opened in 20 seconds time. we have seen some fairly solid
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sessions. we saw a rally yesterday. the banks have been doing well. china once again dominating january. we are watching very closely what the fed is doing, looking at the payroll number on friday. expected down around .4%. picture.he let us show you how to european open is progressing. london unchanged, 7189. there is the first negative come through. london coming through with a positive. holding firm at the moment. let us see if that turns red over the next few moments. some new 189. 7989. it does look as if maybe the french market is feeling at the most. let us get the details. manus cranny come over to you. manus: ftse 100 is the only future that was holding on to some gains. stoxx 600, later this morning despite the u.s. doing better.
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this is how we look. financials off by .2% pure deutsche bank story will be more interesting. markets are absolutely focused on a number of different things but the fed repeatedly concerned about the headwinds in the dollar. let me take you to this, dollar yuan, and this is the biggest today move on record by the yuan, the biggest today move. -- two they move. day move. they are making it harder and harder and harder to fight against the yuan. company was -- derek said that would be such a loaded gun. the bond markets. the gilt markets getting set up for the day. best performing bond markets
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around the developed markets of 2016. you are still seeing foreign markets. never buyers with 16 billion pounds. that is the most since 2016, up for for six months. indicating one dollar 20. is that the floor? will the bond market remain good? that is the markets. i'm off to digital radio. join me there, myself, and caroline. nejra.ore with >> persimmon first of all, you can see, up 1.9%. the second half of 2016 was particularly strong. nejra: the average selling price was up 4%. the ceo talking to bloomberg tv and saying the u.k. planning system is improving so we are up 2.2% at the open on persimmon. i am highlighting of the mh -- l
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vmh. a negative read from what we got from macy's and goakohl's. cutting its annual earnings forecast. also planning to cut 6200 jobs by early this year. that is about 4% of its workforce, and that is after holiday sales came in at the low end of its forecast. shares fell. it looks like we are seeing that read across volkswagen must face claims it misled u.s. investors after installing so-called defeat devices in diesel vehicles, used to cheat emissions tests. you can see that is down at the open. matt. guy: that is on holiday. i'm sure he is enjoying watching, though. i think he is somewhere very sunny.
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let us talk about what is going on in terms of the markets and a little bit more detail. a few upgrades, downgrades, moving things around. airbus has an upgrade. rsa has a downgrade and that is affecting its stock, down by 2.43. the metal stocks are doing, they are reacting strongly to what is happening surrounding china this morning and we are just seeing a decent bounce in some of the metal stocks. the banking story is ill there. dr. trading softer the -- sto ckgen trading softer on this. according to a person with knowledge of the matter, one option being considered is lending to firms which specialize in buying bad mortgages, the idea that you would therefore provide relief for mortgage holders. let us stick with the spirit of the deal with the doj. let us bring in bloombergs michael moore. will this fly in washington?
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they have to provide 4.1 billion of consumer relief. this may be allowed to be a piece of it, but i imagine it will not be the biggest piece. you know, this broader debate in the settlement, not just with georgia, but the other banks. on one hand, this is supposed to be a punishment. on the other hand, you want consumers to feel relief. so sometimes, there is an economic benefit to just doing consumer relief, you know, modifying mortgages for the business impact of it. on the other hand, deutsche bank would be lending to these friends anyway. so, doesn't really provide an additional relief? guy: just expand exactly what they are doing. how does the mechanic work? michael: the idea is that there are private equity firms that by up distressed loans and modify them and the idea is the consumers with the lower debt
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burden will be more like we do pay it back, so there is an atomic reason to do it. deutsche bank would just be providing some funding for these avid equity firms to do what they are doing already. on one hand, that provide more funding to do that. on the other hand, some of the activists say these private equity firms don't have any problem finding funding, so it is not providing an additional amount. jonathan, itguy: is trading significantly below one. it is on that metric in some ways, credibly cheap. we have a lot more clarity on understanding exactly what litigation is going to look like. we are beginning to get our arms around understanding it. is 2017 the year you can search buying some happy of the more distressed european banking institutions?" jonathan: the problem with looking at price-to-book for banks is, do you believe the
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book value? and the book value, first of all, nonperforming loans, unrecognized to the extent they should be recognized, and second, they lost capital to all these fines and settlements they had to deal with over the last few years. hopefully, that is coming to an end. i do not think the nonperforming loan issue has yet been for recognized in europe. guy: is that an italian problem or more broadly? jonathan: pan-european. look at the u.s., the amount of loans they wrote off and compare that to what has happened in europe. european banks have not made the same sort of provisions they made in the u.s., have not recapitalized to the same extent. clearly, places like italy, that is in spades. unicredit, you have to think how much they got to raise. when you look at german banks, that is still an issue you have to be aware of. you cannot quite trust the have-to-book, however, i
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not been invested in european banks because of that and i preferred u.s. banks, however, if you are bullish on the european economy, these provisions may start sorting themselves out. that is why you get the strong rally in the banks that you have had in the last few weeks. people think there could be recapitalization going on, in which case, they could look very cheap, but it is a higher risk trade because of the loan loss provision not being recognized. guy: michael, one quick question to you. this tells me that deutsche bank feels a little bit more on the front foot, and one of the issues it had last year that it was trying to keep clients and staff on board, trying to feel maybe that it was being knocked back at every turn, not feeling like it was being knocks back at every turn. will we feel that with deutsche bank in play 17? -- in 2017? michael: i think the worst, you know, this was the worst single piece and getting that done, you
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know, is a nice thing. it definitely will change a bit of the town. they still have a lot to do, but from the legal side and the cost side, but getting this out of the way, and on this latest thing, they can ask for it. whether or not they get it, it could be a slight help to the capital ratio. know.ou never michael moore, thank you very much for joining us indeed. jonathan will stay with us. up next, swift move to silence the critics. theresa may has named a new british ambassador to the e.u. we will bring you that. it. s&p sovereign ratings, protectionism is the bigger risk for 2017. more on that, coming up. later, chat ipo have it saying -- snapchat ipo has its things out for facebook. ces is on in the states. all of that, coming out. this is bloomberg. ♪
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guy: while combat. you are watching the european market open. interesting market open this morning. let us check in on the markets. london market holding on to its gains. the reason for that is the miners trading higher. you have some of the house builders doing fairly decent business this morning. unchanged, not a bad performance. down by .4%. let me wanting to it is going on
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here. and trading up by 3.48. some upgrades in the aerospace sector. g4 s helping london as well. helping miners that are doing better. certainly helping the story out as well. french banks look to be under a little bit of pressure, ckgenas and stop down. a lot of interest in rolls-royce this morning. we'll come back and find out what is happening with the engine maker later on in the program. down by 2.55. i cannot see anything else. we will get to the bottom of that later on. we will talk about more detail later on in the program. let us stay in britain. theresa may has replaced the u.k. ambassador to the european union after his predisaster
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resigned. tim barrow was picked predecessor -- predecessor resigned. tim barrow was picked. u.k. companies will have no choice but to raise prices as the weak pound continues to force the cost of imports higher. bell still with us. the data out of the u.k. looks fairly solid. consumer lending is impressive point yet there is mounting evidence from the survey, you saw in the next numbers yesterday, start to see it in the inflation data that the cost is beginning to come through. when do we actually clearly see that and how far will inflation go? jonathan: we are seeing cost pressures come through. at the moment, it is not being passed on fully into consumer prices, but it is moving up, and the sort of view that inflation might go up 3% in the u.k. seems
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very realistic given the fall in sterling. and perhaps through by the end of the first quarter, it will be in the numbers far more than it is today. guy: when does the bank raise rates in that scenario? jonathan: that is the key. i felt that the interest-rate cut we had after the brexit vote was a necessary, particularly given how sterling had fallen, knowing that some point, there is going to be pressure. at the moment, the market is saying we are not going to get a rate hike in the u.k. and what the bank will do will allow an overshooting rate time, because this is for a short-term overshoot due to the performance in sterling. that will come through because it is expecting weaker growth. if you do not get the weaker growth and growth is on the upside throughout, at some point, there may be a reassessment of strategy.
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so i think the floor on the pound is around 120. when it gets to below that, you add to sterling. guy: you don't think it goes higher than 120? jonathan: i think, you cannot sterling, you start earning back at that point. concern over brexit and hard brexit is going to continue, you cannot see much strength. you see weakness every time, word about hard brexit, and it starts to balance, and selloff. ?uy: is 120 enough there does seem to be data suggesting the rich economy is doing alright because it is being questioned by the weaker sterling. jonathan: i think it is. there are going to be negative impacts of brexit, but they are
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not as big of people originally were talking about. aople were saying if you have hard brexit, no one is going to invest in the u.k.. they will invest elsewhere. init is not as though invest france and it will be easy. you have got an election coming up in france that we do not quite know what is going to there. the fact that there are concerns in the u.k. does not dismiss the fact that there are concerned elsewhere in the world, so you can have investment. brexit is a hit, but it does not mean you need to go into a recession the way people were forecast prior to the vote. guy: sterling below 120. jonathan bell staying with us. up next, the risk in opportunities and the trump presidency. the rolls-royce story is a downgrade, i am cold. we'll get the sovereign story next on trump. this is bloomberg. ♪
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guy: welcome back. you are watching the european open. it is 20 past the hour, since the market open. that is get a bloomberg first word news update. here is sebastian salek. sebastian: spending may force rate hikes. inicy makers saw an increase the upside risks to their growth forecast.
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f1 season at session is due to start at the end of this month with its decision announced on every first. donald trump has spent a wall street insider to be his top -- jay clayton will run the fcc. has run goldman sachs during the 2008 bailout. trump has attacked his opponents for their ties to goldman and other wall street banks. one of opec loudest proponents for cutting production has been ousted as venezuela's oil minister. he has been in the role since 2015. he will be succeeded by nelson martinez, ceo of the u.s. subsidiary. the president made the in an address on state television. global news, 24 hours a day, powered by journalists and analysts in 120 countries.
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this is bloomberg. s&p's chief rating says the u.s. economy is in fairly good shape. speaking to "bloomberg markets: middle east," he said it comes with risks and opportunities. >> we have to recognize the change of government, presidency in the u.s., probably comes with more uncertainty than any other change in the presidency and our living memory. venture to say that. this comes with lots of risks, obviously. it may come with opportunities, but we will focus on the risks probably here. guy: he also said protectionism probably is the key risk for markets in 2017. >> the biggest risk that we all need to try to gauge is more protectionism. you know, some of the nominations, the appointments donald trump been suggesting seem to suggest this is a real risk. we need to remember, the u.s. is
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a system with lots of checks and balances, and while the republicans world the majority in both houses, and in the senate as well, you know, it is not that, you know, the president can decree any sort of policy -- it is not that the president can decree any sort of policy. guy: how bigger risk is protectionism? ford and itsg decision not to build a plant in mexico rather than build extra in michigan is protectionism, but it is starting to feel like that. jonathan: there is a big shift for the last decade, longer than a decade, what we have seen is global growth and global trade growth, growing faster than global growth. forecast,k at wto's they are saying they think going into 2017, trade growth will only be 1.7%, which will be about half what global gdp growth is.
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issue. already an what has been happening in the world is fast growth in international trade. that is slowing down and protectionism will slow it down even further. the issue you have with trump's we don't actually know what he is going to support. , as i was saying earlier, tax cuts are the thing we can be most sure of that will go through, but in terms of whether he really becomes a whetheronist president, he is able to cut regulation, all of those sorts of issues are unknowns at the moment. if he does become protectionist, clearly that is a negative on there growth and although may be a short-term boost for the u.s. economy, it would not be longer than that. guy: who would be the biggest loser? the u.s. economy is pretty insular. jonathan: it does not affect the u.s. economy significantly, but it does affect the rest of the world. emerging markets would clearly
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suffer in terms of the growth they have achieved by being able to export to the u.s.. mexico clearly is right on the front line. they have appointed a new foreign minister who trump previously described as a wonderful man, so maybe they will be in a slightly better position in negotiations than they would have been in the the previoushan foreign minister. they have the greatest to lose. guy: let us take a step back and money inut how -- 2017. you are confident u.s. rates are going to go higher and we get up to the 10 year of around 3%, somewhere around there. the dollar, you can look at the rates, there is a dollars squeeze, yuan squeeze going on. that is not great news for the emerging markets. are the emerging markets something to step away from in 2017? jonathan: if the dollar carries on being as strong as it was,
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that would be negative for emerging markets. gentle appreciation, they can live with that. what you know is tax cuts in the u.s., interest rate rises, you will have good gdp growth. those are all positive. is certainlyh positive. what we don't know about is whether they will be this protectionism and how strong the dollar will be. if it only goes up a little bit, that will not be a problem. i suspect there will not be that much protectionism, and so, that does not hinder emerging markets. i would stick with investments in emerging markets because you have stronger growth and lower multiples in terms of valuations. guy: great to see you this morning jonathan. ofathan bell, the cio stanhope capital. just as we were mentioning, this is probably the chart of the morning. this is the overnight deposit rate on the offshore in china, and as you can see, this huge
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spike up as the authorities are trying to stabilize the situation. now down to 65. we were up in the 90's. we had a touch your 100. up next, talking more about the u.k.. 100.arer up next, talking more about the u.k. ♪
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guy: welcome back. it well watching bloomberg markets, -- you are watching bloomberg markets, the european open. of the see the book european equities bases negative when it comes to the major indices. the london market holding up. 03, thatt could -- 72 could be new territory. persimmon is doing quite well. there are a few downgrades. get some of the stock stories in a bit more detail. here is nejra cehic. it has fallen as much as
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3.5%, the most since december. down 3.3% on its right now. i can also tell you that looking at various functionalities on the bloomberg, the news interest has particularly increased in s today in terms of leader interest. basically airbus, yesterday, we heard about the reachedh -- boeing that an agreement with the upgraded 737 eight jet. boeing shares increased on this. there is still some healthy interest in single aisle aircraft, but also airbuses. downturn in the arab gets. we are seeing airbus higher today, one of the best
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performance on the stock at 600, up two point 5%. persimmon, one of the best performers on the docket 600, stoxx 600. -- jeffrey fairburn thing the second half of 2016 was particularly strong, but i will lead you to talk about that some more. guy: they will be happy. think very much indeed. let us talk more about persimmon. the ceo of eight. he tells us the company is starting the year in a good position. >> we are really pleased with the performance during the course of last year, and the second half of the year particularly was very strong. we saw a confident market, and buyers are still keen to buy and we did not see any changes. so a relatively affordable price
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in any event. in that market, we are seeing good demand and that continues, so i think that yes, there is some uncertainty around the , but nevertheless, underlying demand is very strong. people still want to buy houses are get onto the housing ladder. guy: the persimmon ceo. let us talk about the u.k. housing sector in more detail. with us now, charlie campbell. good morning. charlie: good morning. the market like twitter and heard from persimmon this morning. why? liked what it heard from persimmon this morning. why? charlie: sales are strong in the second half of last year, up 15%. we thought they were up 12%. a bit unexpected. the market has cash on a balance sheet, $9.13 million cash at the end of the year. cash at the end,
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and that underpins the dividend into 2017 and 2018. guy: headwinds for 2018? charlie: we think so. there is value on the sector on a 12 month view. there are some headwinds, and the key is the spring selling season is very important. there is a third of industry volumes have been february and april and that is the time when article 50 make it trivial -- might get triggered in the middle of that. it is an important time. slightly nervous about the white paper that comes out month.his guy: persimmon trading 1870. long-term price target at the 1942 for the market average. where are you? charlie: we are at 19 but we last looked at that a month or
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so ago. i think the dividend will be a key support because it is yielding around six, which is very healthy. on dividend is well covered a cash basis, but 2.5 years of dividend on the balance sheet at year-end. guy: is persimmon -- has persimmon had its best moment? are the big house builders were the government sees the focus ? the government in the uk's talking about a lot of houses. they talked about building a lot of houses a lot and maybe this time it will actually happen, but nevertheless, it is going to be something they need the entire industry for and that could have an effect on the bigger boys in a more negative way, i guess. the government has been very helpful for the big builders. planning has been probably helpful, but it has been helpful to those with money who have been able to buy land, so i think the focus of the
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government from now on is to try to get the smaller dollars building more and will do that by giving them access to public lands and possibly some finance as well. housebuilding,al so i expect to see more contractors building houses for local authorities. that might mean persimmon might find it harder to get rid of bricklayers without getting more help from the government. it might be incrementally negative. guy: what kind of rate could be we be talking about? was certainly increasing as a percentage and materials has come back to life again, so probably labor ought to moderate this year because commercial construction is probably a bit softer than it was, but material inflation might pick up a bit, but on balance, we will see three or four. guy: how much of an average house? build a three bedroom house in
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the u k, two-bedroom house -- the u.k., two-bedroom house, how much comes from abroad? charlie: i think we can do it, it, and00 pounds, call the build costs of that in terms of labor, 100,000. labor is about 60% of that, which is in the u.k.. people like berkeley more into london would have more labor in london. the materials i suppose i then then 40,000 pounds on a 200,000 pound house. so it is a fair bit, but the u.k. andously is the the labor largely u.k.. guy: how does persimmon stack up against its pure group? charlie: -- it is more affordable.
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it tends to be in the parts of the country where house prices have been sort of, shall we say, less heated. the house prices are coming from a lower base and therefore more upside. you tend to see the northern parts of the country and scotland being lagging. london, the southeast. it is in those parts of the country. guy: the better parts of the country? charlie: for now, yes. guy: for now. are the london has bowlers, how are they going to be feeling in 2017? what is the picture? charlie: london has seen quite an adjustment. you might argue that the adjustment has already happened, possibly a bit more, but probably most of thinking the prime london is down a little remaining7, and now pretty strong. basically will ripple out, still continuing, so i would imagine pretty strong, actually, as a lot of it depends on the demand
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for labor in london and how that responds to article 50 and brexit and all of that. matzo think about, charlie. thank you for coming out. housebuilding analyst at - what is a trump presidency mean for the industry outlook? we will discuss that next. this is bloomberg. ♪
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guy: welcome back. this is the open. let us get the bloomberg business flash. here is sebastian salek. sebastian: deutsche bank considering an unusual approach. it is part of the seven point $2 billion settlement with the u.s. government, lending money to private equity firms and hedge funds. according to a person familiar with the matter, one option is considering it, which specializes in in buying bad ones from the government. a spokesperson declined to comment. macy's plans to cut dog fight lead 2017, 4% of its work force after holiday -- they cut the annual earnings forecast for 2016. macy's shares 10% in after-hours trading. volkswagen has been told it must face claims it led u.s. investors after installing so-called deceit devices in diesel vehicles used to cheat
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commission task. a judge rejected the request to shareholder claims against the chairman. could notvestors prove he knew the extent of the company's diesel issue. vw spokeswoman did not -- a spokeswoman did not comment. it adds to the iphone maker's name to a growing list. that is due in london this year. qualcomm says that according to a person familiar with the matter, foxconn and oracle intend to contribute. that is your bloomberg business flash. guy. guy: talking about what is happening with apple. thank you very much indeed. self driving cars, smart homes, and virtual reality, a few of the themes at the consumer electronics show that kicks off in vegas. tes will forecast the future of tech. it will be impacted by donald
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trump's policies. joining us now, oliver herington. good morning. what companies do this year in terms of their ability to grow, and what happens with policies that come out of the white house and treasury? oliver: the fundamentals are very strong. i think the issue is trump's election has really not changed that from a fundamental perspective but sucked a lot of money out of the core tech names that have done very well in the first nine months of last year. the googles, the stocks, essentially, adobe, salesforce, etc. these stocks are really the police to be and you have a perfect storm whereby energy really came back into play. you had the election results that did not go the way people expected it to. trump came in and a lot of people were hiding in the wrong stops or sitting in the wrong stocks, i should say, and needed
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a source of funds for the likes of caterpillar, the energy names, the heavy industrials, the cyclical stocks that have gone on a tear, financials, etc. all have done very well post trump election. the expensive tech. you are seeing this broader .heme, grows into value if you look at the russell growth index versus value, it is on a relative basis down 20% over the past 3-4 months. value is where it is at. banks, financials, seemingly at the front of people's mind and tech is playing second fiddle to that. guy: do i treat them as a group or do i need to separate them because they do seem to trend in the same direction. they do. obviously, they are different businesses. i tend to look at google and facebook in a similar light. i think amazon clearly, if you look at the macy's headlines you just read out there, you look at
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traditional retail, it is in a tough place. amazon news out with a glowing press release yesterday, talking up its holiday season, strong as ever. so i think they get looked at as a group. fang, medicine word everyone uses. you have to look at them on an individual basis. we like to go valuation, very attractive. it is trading at a submarket multiple. exactly, growing significantly faster than markets. amazon, as i said, great name within retail. i am personally a big bowl on netflix -- bull on netflix. we can pitch it to death, but it is difficult to get people to buy trade. net neutrality is an issue. that is one of the changes trump is potentially going to put through. you have a new fcc chair, and it is not clear what that will mean for net neutrality and what that issue essentially does is it puts pressure on youtube and netflix who they have hometially got a common
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alongside every other piece of internet traffic and what net neutrality can do is throttle that and say you have to pay for this fast axis ace. access talk about the -- base. guy: everything seems to work with the echo and that point is very much here. , and christmas sales of those devices have been strong. can we pick a winner in that space here? oliver: i don't think so as of yet. a couple people back to the office got these things for christmas and are raving about them. i have not got one myself although i probably should. if you look at who is leading that it is amazon, google. thele's product is arguably better of the two, but the issue for google, including the pixel phone, is distribution. amazon has this phenomenal this tradition channel. the first thing you see is amazon ago and that just gets it out there into people's homes, and that is not what google has
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got although arguably the underlying hardware is better. you will hear more about that going into 2017. guy: where does that lead apple? it is going into the softbank fund, and people have often talked about the fact that apple has gone x innovation. that appears to my mind to be another example of that. oliver: you look at what apple are doing behind the scenes, apple tv has never really got anywhere. we have not seen anything on that front. the car, it is questionable. seemingly, they were going alone and now they seem to be partnering. meanwhile, you have google who has basically taken the car product out of google ventures. when they do that, it typically means they believe this thing has got legs and wheels, obviously. piece is ase car relevant today as it was last year. guy: what are the relevant constraints?
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for house builders, it is labor. how big an issue is labor under a trump presidency? oliver: it is an issue because a lot of the challenges global talent and anything that put a wall up is going to be tricky for a lot of these guys. you look at the outsourcing names, they obviously have fallen afoul of this, bringing in talent to the u.s. is potentially going to be a trickier thing for them. guy: where am i going to get my offering 2017 for the expos? oliver: you have an interesting ipo coming with snapchat. that is when i'm sure we will look to pick up coverage of her there can be a lot of client interest. guy: does that take you away from other big names? oliver: i think it does. people in facebook need to be conscious of that. facebook has its own issues around some of these stats around advertising that they have been called out on. that is a pretty big issue we will hear more of this year. a big move to digital
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advertising, a lot of consumer goods companies coming out and saying we are not sure this works and actually, these sorts of stats don't do anything to reassure people this is where they need to be putting it. iny: we need to be i advance of the ipo's? oliver: nothing fundamental from a long-term perspective broken with facebook but as we get closer to the event, it is likely to see pressure from people taking money out to fund snapchat purchase potentially. i would not necessarily be selling aggressively ahead of that. guy: nice to see you this morning, oliver herington, atlantics from equities. next, the opec story front and center. as ever, outlook has -- output has fallen. it has nothing to do with the production deal we saw on the back end. live in abu dhabi with the details, next.
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this is bloomberg. ♪
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welcome back. you are watching the market open. let us talk about what is going on in the tiny story this morning, circle back to what is happening here. the ticket you charts and show you what is going on. this is the story today. let us show you what has been going on. this is the offshore overnight deposit rate, which spiked up to the high 90's. we may have got a touch up in the hundreds. we have come back down again
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sharply on that, but this is part of an ongoing theme which is seen bitcoin continuing to spike as chinese people try to find ways of moving money out of the country. we have also seen obviously a fairly big move overnight in the offshore chinese yuan. there is effectively a shortage of you on going on. -- yuan going on. that is all quite keenly in the market, two weeks away. let us talk about how this is rippling around the world because of the dollar story in all of this as well. .he dollar index trading down the bloomberg dollar index down by .3%. fed minutes, quite hawkish. positioning has been quite extreme of late and pushed the dollar quite a long way, so the japanese yen, probably one of the biggest gainers this morning in terms of the majors, trading 116. we have seen a move in the euro as well. the british pound down by 3%. just keep an eye on that one.
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a story in asia and what is happening with fed minutes does seem to be the dominant theme at the moment, so circle back. take a look at your gmm. equity markets fairly mixed. you can do this quite clearly appear by taking this off. we do have the luxenberg markets trading a little bit higher. denmark is trading higher but the bold of european equities are seeing weakness. a lot of upgrade and downgrade coming through. the fed, though, probably in some ways, the chinese story reflects a number of issues. the fed story i think is quite interesting. the federal reserve time figure out exactly what is going on here, but it is in some ways a new problem. it is basically dealing with faster growth. it does not know how to exactly calculate how fast that growth is. what happened when we had last week, when we had the hike, the fed toilets it was agnostic when it came to the policies that were likely to come out of the white house and the treasury in terms of setting its policy. now it seems as if maybe
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actually those policies are likely to feed back into their current thinking, therefore any disappointment maybe takes some of the wind out of the sails. coming out of the u.s. economy this year. that is something to keep our eye on as we work our way through the rest of the session. in terms of the performance of the european equities space, a quick look at weei. we have a fairly mixed market. you have stocks flat, the cap trading down. the dax is trading down. -- stoxx flat, the cap trading cac trading down. keep an eye thing on the chinese story. the dollar move is a big theme running through all of these markets. that is a conversation we are going to carry on here on bloomberg. the realtor coming up next with francine. i'm going to go to the bloomberg radio and we will carry on the
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conversation on dab digital radio. keep an eye on the dollar. it is an interesting trade right now. london, fantastic morning. the ftse up .2%. ♪
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francine: a trump shaped shadow looms over the fed, minutes from the december meeting show policy uncertainties and the possible impact on growth. demonstrators descend on goldman's new york headquarters as the president-elect picks a wall street insider to be his top regulator. is this draining the swamp? the offshore yuan posts its biggest two-day gain on record. and, with the pound under pressure u.k. businesses see themselves having to up their prices.


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