tv Bloomberg Markets European Close Bloomberg December 8, 2017 11:00am-12:00pm EST
this is the european close on bloomberg markets. ♪ mark: here are the top stories from the bloomberg and around the world, brexit break through the u.k. and eu strike a deal on divorce talks, paving the way for critically important trade talks. we look into the next steps. we will discuss the market moves around brexit and the u.s. jobs report and which currency is better positioned for gains in the coming year. we both hear from rbs chief executive ross mcewan and an exclusive interview, what he says about the business impact of brexit on the banking landscape. europeanok at where equities are trading 30 minutes away from the end of the friday session. gmm is the function. .he ftse up 1%
sterling down 7/10 of 1% to. a breakthrough in brexit talks. , sterling down and the ftse is that what european markets are rising today with the u.k. 10 year yield up for basis points today and commodities. economy andcovering profits helped $41 billion in stock rises -- into its stocks this year, compared to $591 million for u.s. funds and returns have lagged the u.s. markets once again. , the u.s.rd pe basis is the most expensive versus europe in 10 years. analysts say that it is not clear what europe is all that she -- earnings estimates need
to rise for u.s. companies because of tax cuts, the u.s. looks better to ask. -- better to us. this is the yield difference room between germany and italy -- yield differential between germany and italy. the dutchassing of and french elections, without political upsets, the risk is that investors wrote too complacent about the next political worried in the region, italy, they select before may and the anti-establishment five-star movement currently leads in the polls. chaseoup, j.p. morgan recommending various positions in italian bonds into the new year. that is the italy-german spread. this is japan gdp, the economy expanding at a faster than expected 2.5% in the third quarter, the year-long recovery
in exports helping fuel business estimates. the economy growing for seven straight quarters. it registers at the longest expansion since the mid-1990's, following government revisions to previous data released on friday. key october indicators, while growth is slowing a bit right now. gdp expansion will continue in the fourth quarter. seven in a row for the japanese economy. how is it looking in the u.s.? julie: stocks are rising with on aow and s&p at records closing basis, not an intraday basis with the nasdaq not quite getting there. we are seeing across the board strength today. the drugmaker,er the stock went to be highs at
the session, up 5.5%. they are considering cutting as many as 10,000 jobs. cut down ony to costs and reduce expenses by 1.52 $2 billion over the next two years. less than half of the cuts tied to research and development spending according to people familiar with the matter. it may not end up be the eventually number of job cuts, there may be none, but something they are considering. notle said that teva does plan to proceed with an equity offering in the near term which could be helping the stock today. we are watching technology shares more broadly as we have seen a rotation out of and then seemingly back into the group appeared that is reflected in the drop on monday and the rocky trading throughout the week that infoteche s&p 500 index gaining on the week by 4/10 of 1%.
you see the games. -- gains over that time. the most within the group, you look at what is doing the best today as an example, ebay, , sigma western digital agreed to being acquired. that is sending those shares surging. generally, a list and some of lift in names-- with the best momentum. the gunmakers led lower by american outdoor brands, the maker of smith & wesson which changed its name, they are slashing their forecast -- earnings missed estimates. it seems to be a factor of the political environment. under the obama administration, when there were various gun related incidences and the tax -- and attacks in the country, you would can see -- you would
see an increase in gun ownership because of worries of increased legislation. now that donald trump to be an ally of the gun industry, there is not that motivation to something the ceo of american outdoor talked about and says the motivation has been replaced by the search for bargains and that gunmakers are overproducing . and steep price cuts could continue for the near future. its rivals are also down. .onnie: julie hyman, thank you let's get back to the brexit breakthrough as it is being termed with the impact of the market. stocks today, that is intraday, on my bloomberg, a three-day chart of the pound. it rose when the deal was sealed and now on the decline again. joining us is daragh maher. hsbc outlook the and a little bit but let's talk about the news today. we got a deal.
great news for some people and britain can move on to the trade part. what is going on with sterling? ,> this will be the easy part this was just like a little bit of talks at the beginning of the process and we can get to the bigger stuff. look how hard it has felt. it has gone down to the wire. i think there was relief. they have the headlines they wanted and can move on. but now we have the tricky bit. maybe not the transition negotiations but transition to what> ? not clear the u.k. government knows to what and they have to negotiate that with the eu. that is what we are seeing in sterling this morning. vonnie: talk to us about the medium outlook for the pound. how do you factor in these unknowns? >> we love doing that because
you have good excuses when it goes wrong. we have a straightforward view of the pound, we are bearish. it has become nearly fashionable to be bullish of the pound, bloomberg ran a story yesterday talking about how we number of strategists, this is the big trade for 2018 but i do not see it. the politics are still very messy. the cycle in the u.k. is turning over, if anything and not revising up u.k. gdp forecast as we are in the u.s. or the eurozone or major economies, seven consecutive quarters of growth in japan. we have always talked about the u.k. structure deficiencies and twin deficits which are not getting much better, despite the weakness in sterling. it still feels we have to be looking on the downside. taking sickhe boe -- six or so days await next week, how does this play into the bank of england in the past
-- path of rate hikes in 2018, if there will be any? >> there will be a sigh of relief because they have taken the brave assumption in the forecast that the transition through brexit is relatively benign. that could be how it plays out. they will be encouraged by that. any signal is -- that points in the opposite direction is a challenge to their view because they say they have taken this benign relatively optimistic spin. they will be relieved, it should not have a material impact on the rate hike or rate of you. -- rate view. relief and sterling. mark: i will chat about the ecb with you, we have the ecb next week. we did a survey and most suggest -- most economists suggest the year hase ecb next
reduced its bond purchasing program to 30 billion and will come down to zero in the final three months. does the ecb give anything away next week or has it done everything it needs to do in its last meeting and can just hang on until maybe the middle of next year? >> i sense they are looking to a holiday break. --o not see where they can we may get more of an upbeat view from mario draghi on the state of the eurozone economy. i do not think he will feel the need to say much about the euro, particularly if it is not trading above 120. you are right, we will look towards getting into 2018 and see where inflation is and whether they can begin the next excruciatingly long runway towards the next iteration of policy which is to drop the qe altogether. vonnie: i have to give this a plug. >> like a book launch.
vonnie: the u.s. dollar is soaring, are we ignoring? let's look at this chart. 3293, which shows the yield spreads. look out flat everything is. can the dollar continued to strengthen? how is the correlation going to play out? >> the title -- are we ignoring? we have a view that the dollar will not do anything next year. the fed is baked in any tax reform is baked in. in september, we had a decent rally and it got is nervous and sometimes we challenge our own view. we decided was -- at the core of the view was the for a benign dollar, you need benign way growth, the was employment report, that benign print again on wages, i think it reinforces our view that not much is happening with the dollar, it is not just in for being the big
story in 2018. vonnie: is there a danger it will do the opposite? a lot of dangers in the federal reserve, likely going to move in december. why would not it be -- risk on both sides? >> a few people saying i am four dollar weakness but there are if the fed has to capitulate on their view that this inflation softens -- it is temporary -- and set of three hikes, we have to hikes. -- two hikes. if we get stronger than expected growth in the eurozone and maybe japan, some of the other emerging markets, that can play. for now, we have a nice balancing act in terms of upside and downside risk of the dollar throughout the year and it should offset each other before you get sideways in the
currency. vonnie: daragh maher, good to securities, ahead of fx strategy in the u.s. let's get the first word news with courtney donohoe. >> the u.s. economy added more jobs than expected last month as added to hundred 20,000 in november and the unemployment rate is at 4.1% still, almost a 17 year low. wages increased less than forecast. congress has put off making tough choices on the budget as lawmakers averted a government shutdown tomorrow by passing a two-week extension of federal funding. -- thece a september summer 22nd deadline about what to do with spending on defense and domestic programs. another member of congress has resigned over congress -- over allegations of inappropriate behavior, trent franks of arizona says he will quit at the end of next month and says the ethics committee is investigating him for discussing surrogate motherhood with two female staff members.
social democratic party in germany is once again considering a so-called brand coalition with angela merkel. the party leaders have gotten the go-ahead from the wrist to begin talks with her, 10 weeks ago the social democrats vowed they would not establish an alliance with angela merkel and her christian democratic led bloc. global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am courtney donohoe appeared this is bloomberg. -- i am courtney donohoe. this is bloomberg. mark: does the brexit deal change the outlook for banks, we hear from ross mcewan next. ♪
vonnie: live from bloomberg will take orders in new york, i am -- bloomberg world headquarters in new york, i am. mark: i am mark barton. the u.k. and eu have managed to unlock the stalled talks opening the way for negotiations to move on to trade, what banks and businesses have been looking for but officials warning that the toughest challenges are ahead. rbs chief executive ross mcewan spoke to us in an exclusive interview about the latest developments. >> this is the good news to come before christmas and be real conversation about how can we trade with the eu. that is the important piece and this is really good news for all businesses. >> they talk about a two-year
transition. bank, withof a major business to do in europe, two years enough? >> two years will be enough as long as we get detail early. this misses like ours hate to move forward as if we are not going to get any form of deal that would be good for banking. we look at the worst scenario so that we can build a bank that works for our customers. if we get a longer transition and get the rules established, that is good news for us. we have had to move forward anyway. institutions, the people that run the institutions, if you get more detailed news on transition and financial services in the first three months of the year, could that make you paul's forethought? pause foror --
though? >> it does help. we can slowdown activity if we think this will be a slow two-year transition and we can find out what the rules are. >> the canadians do not have a certain -- financial services element. this is mission-critical for you in terms of regulatory. i am hearing alignment. take me do your vision of alignment with europe. ande have total alignment are running on the same rules as europe. it is -- what is the difference going to be? some people want a lot of difference and to be more flexible in europe. i think, given one of their major trading partners, the closest we could get to his -- >> let's talk about the
customers because this is good news with movement in sterling, it is moving come up and down, a volatile currency. your customer has been battered. consumer confidence at levels we have not seen since we voted for brexit. what is the borrowing like for the customer? >> we are pleasantly surprised about how resilient the consumer, retail customer, small businesses and medium businesses, have been since brexit. 52% voted that this was a good thing, there has to be some buoyancy. usually uncertainty brings some slowdown in people's habits of borrowing. that has not been seen. we have had good growth in our lending books, particularly around the consumer and small businesses. >> what about mark carney? he said complacency. you people who run the institutions are complacent.
would you agree that there may be a little bit of complacency in terms of the banking system at the moment? >> i do not think so. we have been looking and looking to see if there are early signs of the difficulties, we have seen none. arger corporations are in difficult situation and our view has been it has not been systemic in the industry, more around the management or structuring of the businesses, as opposed to issues running through a cigna. all banks have been keeping a close watch on early indicators to see if there is anything dramatically changing, we have not seen it. changing,ng that is 259 branches are too close. this is about business migration, me, my mom, my sister not using the branch and about me going digital. closing, the foothills of closure are or their more dramatic steps to
come? when yousues are large take away 259 branches out of the network. it is a big move and has come because customer behavior has changed dramatically. click statistics that show how dramatic this has been, it has taken me by surprise. , 40% decline in the foot traffic and branch network. in the last 10 months, 25% increase in the number of our customers using the mobile phone as their major portal into our bank. dramatic numbers so quickly. we have decided to get the branch network in as close to shape as we can so that we do not keep having to negatively surprise customers with a branch closure here and another one in another year. two as close a shape as weekend given what we know today. the customers are changing their behavior. mark: rbs chief executive ross
mcewan speaking to us earlier today. breaking news, shares of objectionsgher, eu to the monsanto deal with the eu filing said to layout regulators antitrust concerns as merger objectives on what remedies to offer. bayer will face eu objections to the monsanto deal. the $66 billion deal and the hope was for the chief executive of bayer to complete the deal by early next year, already selling a seat and agricole -- ere big headline is bay facing eu objections to the monsanto deal. monsanto falling to a session low on the back of that. that is the big news crossing the bloomberg terminal. this is bloomberg.
mark: take a look at where european markets are trading until the close, four minutes until the end of the friday session with stocks rallying and tax-cut hopes in the united states. u.s. nonfarm payroll up and stocks rallying. let's get to the currency board, what a day for sterling and brexit breakthrough, sterling and initially rising but came back down against the dollar, down against the euro today and we will talk more in detail about this with our next guest. the close is next. this is bloomberg. ♪
every industry group rising on the stoxx 600 led by banks rallying by speculation that new capital rules will free up more cash than expected for dividends and basic resources, travel, also rising. of health higher by u.s. economic data with the brexit breakthrough and hopes over u.s. tax cuts. let's get to brexit feared this is pound versus dollar. , monday feelsek like a long time ago in brexit land, that was a head of the meeting between theresa may and jean-claude juncker, the big lunch that led to a failed momentum feared at the end of the week, we got the breakthrough and sterling is lower. jones, byes, neal rumor appeared manufacturing data in the u.k., record car manufacturing.
factory output rising by .1% from september, marking six consecutive increases for the first time since modern records began in 1997. for the biggest weekly drop since may as investors anticipate higher u.s. rates, progress on tax reform, a spectacular reversal for the precious metal. two weeks ago flirting with the $1300 level and bowl jan its first back-to-back annual advance since 2012. vonnie: there has been so much with the brexit deal going on and everything else that we have not mentioned the reprieve for the government, two weeks more spending. vix below 10. 10 year yield up to 2.38%. whichbs data this morning
did not derail any prospect for a federal reserve rate increase according to most people we are speaking to. the 210 spread widened back to 57 basis points. the yen is weakening. it broke through the 113.50 mark, which is interesting and a substantial piece of market moving, primarily thanks to dollar strength. that is what is going on in the u.s. mark: let's check in on the first word news with courtney donohoe. declaredent trump jerusalem at the is really capital but maybe it while before the u.s. opens its embassy there as rex tillerson spoke today in paris. >> this is not something that will happen this year, probably not next year. the president wants us to move in a very concrete and steadfast way to ensure the embassy is located in jerusalem when we are able to do so at the earliest possible time. >> rex tillerson also says the
decision to move the embassy to jerusalem does not indicate any final status for the city, including its borders. in eastern congo, at least 14 united nations peacekeepers were killed and more than 50 wounded. .ost were from pennsylvania the peacekeeping mission in the congo is the largest in the world and forces are trying to keep a number of armed groups from fighting. in southern california, while far stretch for a couple hundred miles from san diego to north of los angeles. the biggest fire has burned all most 180 square miles in ventura county this right more than 400 buildings and is only 5% contained. the weather conditions are abnormally dry and breezy. --ew twist in the mystery
mark: she now faces a crucial second phase. her counterpart in scotland today said that "move to phase two of talks, the devil is in the details, things get tough now and brexit is happening. customs union is the only sensible option with any special arrangement for northern ireland must be available to other u.k. nations." joining us is michael russell. deal leave open the possibility of the u.k. staying in the customs union?
>> i think it does and the ambiguity of the indicates that. it -- iris commentators said ireland had saved the u.k. from a harsh brexit. -- issue of regulator jury regulatory alignment is a crucial issue because it indicates that between ireland and northern ireland, there will have to be regulatory alignment feared if that is the case, single market cannot be cherry picked and it will have to apply to other parts of the u.k. which we believe is the right thing because leaving the single market, the customers union, would be pretty disastrous for the scottish economy. tok: that does not seem follow what those who voted for brexit and those pro-brexit ministers within the cabinet want. they want to extricate ourselves from the single market and customers union. how do you marry the viewpoints? >> they are foolish. vote fordid not
brexit, substantially against it and the latest poll would indicate the majority is even bigger against it than 18 months ago. is ambiguity of the deal what will be tested in the coming year. i cannot see this deal being effective, unless it does meet -- lead to that type of single market customs union arrangement. it may have to be called something else but it is undoubtedly what is right. undoubtedly what the deal is leading towards. theresa may specialize in saying one thing to one group of people and another to another group of people. when you have to write down a deal, this will be incredibly hard, the deal being written down will have to include membership or involvement in the single market in the customs union in a way that is meaningful. otherwise, the deal does not mean anything. mark: given this was meant to be the easy part, progressing to the trade portion of the negotiations, what hopes have you for the next round, given,
since we trickled article 50 in march, it has taken nine months to get here. do you worry we are running out of time? about thei worry ability of the u.k. to negotiate in a meaningful way. on the reports of the market you had come you said the roller coaster ride of single week. business require certainty and knowing what will take place, not presently possible. people have highs and lows. we have not had a group of negotiators who appear to know what they are doing. as you say, this was the easier part. some issues required to be resolved and now talking about many, many issues requiring resolving. union number should is the framework to which they all fit. if u.k. ministers are trying to avoid that, putting themselves in a position for a very difficult 2018, much more difficult than twice 17.
-- 2017. mark: are you now more confident that the integrity of the union is now intact for real? >> that seems to be the of session of the conservatives including the scottish conservative leader. my interest is in making sure the people of scotland are not greatly disadvantaged by any deal and are able to enjoy the type of economic conditions which would allow them to flourish. brexit does not do that, even single market membership and customs union membership will not be the same as full never ship. we have to fight to mitigate the harm. i will leave others or the minutia of the union, i just want to make sure the people of scotland are not put into an impossible position. mark: thank you for joining us. the brexit minister in scotland. let's get an investors take on the brexit breakthrough.
talk to me about sterling. is it a case of, buy the rumor and sell the fat? >> i have the opinion, unless you have the final deal, no rally in sterling which means you see -- sterling over the last 12 months is 128-134, could he go to 140? it should but we do not have the full detail of the final deal. there will be a transition time. many aspects to it that are still uncertainty feared mark: you are not sterling ball? many are positive on sterling because of the health that we will get the breakthrough which we did today and that could lead to better things down the road. >> not sterling bull or bear. and said itcome would go down to 1.05 and 1.10, i do not see any basis of sterling going there. bem not able or -- a bull or
ar. it will be in the same range because every week we have something coming up that is good or a congregation. until we see the final -- vonnie: what have markets priced in money? >> in terms of brexit? vonnie: yes. >> what has happened is that, if there was no progress, i never thought there would not be progress. deals are done on friday and sunday. if there was no progress, that would be worrying because it would mean businesses are preparing for a hard brexit and they would have had to accelerate their plan. that has been postponed. that is a positive and progress. nobody expected to have had all the details hashed out at this meeting or even over the next 12 months. there is no negative nuance to
it, and people continue business as usual in the hope that there will be a transition of two years, which means it gets you two years or three years where things will be status quo. vonnie: what markets have priced in right now, are they pricing in some relief for the moment? if the upside is trade negotiations begin and things look looking up? >> the ftse has done well, benefiting from week sterling number,tter bmi manufacturing has been good. if you compare it to the rest of the world, you are doing ok. u.k. doing much better, growth has slowed down but it is by no means week. -- weak. marketing -- the market is not pricing in positive scenarios but not a negative scenario.
when it comes to the fed or projection of rate hikes for 2018 and the outlook for the stock market? >> not really, you have low unemployment rates, 4.1%, 2.5% growth, gdp growth of the last quarter to 3.3% but not wage growth. .ou will have a tax cut the tax reform bill is coming. everything has been done to help people who have money already. they have plenty of cash, companies do, not making investments. the wealthy are roaring at nearly 0% dust borrowing and nearly 0%. -- borrowing a nearly 0%. what is the point of tax cuts for corporations and they have enough money. ? unless that part is addressed, no inflation -- businesses will
make investments and pay high wages which could lead to inflation. if that does not happen, another even if you do- nothing, unemployment rate close --3.5%, that should feed and nothing has changed for me. you will get a rate rise next week because it seems to be a done deal. mark: you like the u.s. equity market, a big fan of japan, that stays. one thing to worry about nem, the top 10 holdings, five are tech. >>em has done very well. five of the top companies are tech. -- you maynology have pullback.
markets rally is not over yet. it is not going single-line. not a huge strengthen u.s. dollar. oil moving but not running away with the high prices. rateave a decent -- growth in the u.s. and emerging markets, and in europe which should feed into a better number. you want to be overweight in emerging markets. -- manywhich ones opinions in the last few days, some talked about countries associated with oil like norway. russia feared turkey. -- russia. turkey. others looking towards china. where are you talking about? >> when i say emerging markets,
i look at the etf and not doing country analysis. economies doing well, you have chinaoverweight in india, for all the good stories and reforms. brazil, we will see what happens in the elections or how the new government and new policies are being worked out. i do not taken to account the ones you mentioned. ,n an asset allocation bases should you be putting your money in emerging markets, i think yes. we have not talked about japan. .nother thing to look at you saw the gdp number at 2.5%. the careful not to be a big cheerleader of japan because the personal consumption number which makes up 60% of the gdp is down 0.5%. not exciting. it is on the right path.
what a prime minister has achieved, if it is one thing, now that the japanese feel the next generation will not be poorer, that is a big achievement. you half reforms on the corporate side to make investment. he is moving corporations to pay higher. good stories to play into. someone said the yen is turning into the new euro because things are working. everybody seems to be positive on japan, is that not a warning signal? happens.ally , everyone was worried and they had a bit of a selloff but now rallying. if you have fundamental reasons to be excited, just because the positioning is too much, sell and move on.
investment horizon comes into play and leverage comes in two point, if you are a leverage player and see something is positioning too much along, you .ave to be careful here investing medium-term to long-term, it should not were -- were you. -- worry you. mark: there is what you said about bitcoin, a fool and his money are soon parted, a fool and his bitcoin will be parted but it may take longer. thank you manish singh. time for the bloomberg business flash. isael drugmaker teva considering cutting 10,000 jobs, 50% of its staff. want to -- 15% of its staff and cut expenses $2 billion in the next two years with $35 billion of debt and it is the world's biggest generic drug maker. european union has antitrust
concerns that could lead it to r's $66 billion takeover of monsanto. bayer will get a list of objections from the eu and they want to make sure farmers will still have affordable prices when it comes to seeds and pesticides. the chief executive of royal bank of scotland appears to be a skeptic when it comes to bitcoin . ross mcewan spoke to bloomberg television today. >> anything that goes from one dollar to $20,000 and back to $16,000 with nothing behind it, i think it is dangerous. mark: bitcoin so far this year has risen more than 1500%. ♪ mark: that is religious bloomberg business flash. -- bloomberg business flash. time for battle of the charts.
♪ vonnie: it is time for the global battle of the tracks where we look at some of the most telling chart of the day and what they may mean for investors. accept these on the bloomberg a running the function on the bottom of your screen. a cross channel battle and starting is abigail doolittle. >> one of the biggest stories is bitcoin, up 56% this year. up more than 1500% this year, what is next? i am hearing about it and it reminds me of two of the other bubbles more recently, the housing bubble in 2007-2008 and the tech bubble in 2000. let's put bitcoin in
perspective. over the last three years, this is bitcoin over the last few months, a truly parabolic uptrend. i have never seen anything like this relative to the nasdaq in 1999 and 2000, gaining 100% in six months but the peak parabolic move up in bitcoin mushrooming, much bigger than in tech. maybe the gains will not last. see my chart on the bloomberg. vonnie: great stuff. mark you are up. mark: brexit versus bitcoin. i thought we would look at assets in the u.k. since the big brexit vote. seems like a long time ago. days until the u.k. leaves the eu with no time to waste. the hard part begins now.
u.k. bonds, worst-performing asset class according to our bloomberg-barclays index. ,he white line is euro-dollar euro has beaten the pound to the tune of 50% since brexit. 16% gain for the ftse, all share index has not done badly because of the decline in sterling. i would throw in the msci oil country world index, shattered them all, up 24%. vonnie: you have to take it and you are the winner. stay tuned, more markets ahead. this is bloomberg. ♪
shery: from bloomberg world headquarters in new york, here are the top stories. report november jobs reinforcing the possibility of a december rate hike next week as u.s. payrolls rose 228,000. bitcoin interest intensifies as traders prepare for futures sunday by demand for the cryptocurrency not just limited to the u.s. why bitcoin is getting love in latin america. the ceo of rbs does not see settlement with the u.s. over a mortgage investigation this month. part of our exclusive interview with ross mcewan later this hour. vonnie: julie hyman is with us, halfway into the friday trading session. what have we missed out on?