Skip to main content

tv   Bloomberg Markets European Open  Bloomberg  January 9, 2018 2:30am-4:00am EST

2:30 am
♪ guy: welcome, you are watching bloomberg markets. this is the european open. i'm died -- guy johnson in berlin. the cash equity trade now less than 30 minutes away. -- in london, matt miller is in berlin. , hit hard in q4 after a surge in 2017. is 2018 shaping up to be tougher? president
2:31 am
debt woes. we will bring you that trade. accelerates,or gaining 6% in five days. chrysler has jumped over 20%. it is 2018 going to be the year the sector regains traction? freddie lait we are less -- matt: less than half an hour to the start of cash trading. look at what futures indicate. we have to look across the whole sector, although i would say that is a fascinating story, the car story. that is what we will ask today. ftse futures up about .2 percent. not a lot of direction across the rest of the continent. dax futures up slightly, cac down slightly but also very little changed. what do you see in the gmm? guy: let's talk about what is happening right now. china is on the front foot right now. up .7%. --
2:32 am
the nikkei trading up by .6%. a great dayt have yesterday. the yen is trading stronger this morning. aussie trading stronger this morning. what ison why is happening with the commodities story. commodities are generally quite positive today. looking fairly solid. higher, koppers trading higher, oil picking up a little. generally a decent station. the only little thing, coffee down 2.57%. let's get a first word news update with juliette saly. u.s. president donald trump is very close to making a decision on his vice nominee of
2:33 am
the fed. that is according to a white house official. position has been vacant since stanley fischer retired in october. the nomination will be part of a wider leadership shakeup at the central bank after trump picked jerome powell to replace janet yellen. robert mueller has reportedly raised the likelihood with donald trump's legal team that his office will seek an with the president. he brought up the issue of meeting with mr. trump had a meeting with lawyers. council could interview trump soon on a limited portion of questions, possibly within the next several weeks. theresa may's attempt to give her government a new year reboot marred, as officers
2:34 am
refused to follow her orders. off went jeremy hunt, then education secretary were locked in discussions with her after rejecting proposed moves. it bodes ill for the next stage of brexit talks. developmentomic minister has said britain should be granted the trade deal that brexit secretary david davis has foretold. thelitically independent in body made the comments in interview with bloomberg. will be what we need to achieve. beyond that, it is a problem that we need to solve. brexit is another piece of the western world that is basically more and more fragmented. juliette: global news 24 hours a
2:35 am
day, powered by more than 2700 journalists and analysts in more .han 120 countries this is bloomberg. guy: thanks very much. ,amsung's trillion miss tracking down the -- by 3.3%. off while others have rallied. analysts remain bullish going forward. forecasts suggest a 33% gain for samsung over 12 months. what is the most important factor for south korea today? mark cudmore joins us out of singapore from the mliv team. why is samsung more important across the parallel this morning? it is an incremental step in what we know is a large and geopolitical situation. it is not like we have progress
2:36 am
participating in the olympics meaning the korean war is over. it doesn't mean tensions can't rise again. yes, it is good news but samsung is over 20% of the index, so its results were important. we saw the index finished lower, due to the samsung -- today. matt: is it samsung's actual operations that are the main concern, or the strength of the yuan? you on -- almostamsung has pulled 10% because earnings estimates were downgraded because of the strength of the juan already. we have seen a break to new levels up to yesterday when it suddenly reversed. that is a weight on earnings, samsung is expecting
2:37 am
double-digit growth in earnings. thatd exceptional growth could not be expected to be repeated. the story is still positive for korean equities, asian equities, positive for tech. overall, the story is positive. this is more of a bit of a correction based on maybe a little excess exuberance and it won't be quite as good as last year. guy: mark, the data are strong, why is the euro not rallying? a good question. i guess the simple answer is stack letters are already maxed long. there are recommendations in the euro, the price action has been terrible for the euro since the labor data out of the u.s. last friday. it was pretty much dollar negative and yet euro-dollar failed to break to the 120.92 multi-year high, even the last within 26 tips.
2:38 am
that is very negative price action and it looks like withine market is right for a pullback in euro-dollar, euro crosses. that is purely an element of positioning. assets at this across the moment. the start of the year, investors are piled in in this he asked a clean to a number of assets, whether the euro traded, the equity trade, and there may be a week or two of a little correction. this probably won't be a theme change, just a little consolidation of the themes we have seen already. matt: i can't remember if it was you or the macro man column talking about the importance of the dollar and the fact that maybe it is due for a bit of a pop. i wonder how that jives with this first time voting fed member striking a dovish tone. is more aboutit
2:39 am
positioning. i think the dollar probably is due for a little bang. veryarket is suddenly negative the dollar, even though the fundamentals aren't as negative as last year. positioning is slightly misaligned with fundamentals again. the outlook for the book -- dollar is eris, but not excitingly so. the market has been excited about trading the bearish dollar trade against currencies like the euro. the story of the new fed voter is a catalyst of the price. -- price action. rather than euro-dollar, the columns as you could see even bigger in euro-yen. guy: why doesn't the market like the aussie rally? think the market is being cynical about -- has been cynical about the aussie rally for a long time and got on the wrong side of this. bes -- there continues to
2:40 am
ongoing concerns about the housing market there and there is a general view that the ,verall economy in australia there are concerns the banks might be vulnerable if the property does pop or collapse. people have generally been cynical aussie. behind all that, and this feeds through from the economy, is the fact that the yield premium for australia has tended to be eradicated against the dollar -- erratic against the dollar in the months. you no longer see the yield -- the and that seems market has tended to be short aussie and are getting caught offside. now they are seeing metals rally so strongly. there could be more pain ahead for aussie bears. matt: we just got a red headline out of china. china said to suspend countercyclical factor in yuan fix.
2:41 am
what do you think about the importance of this? yuan fix is- something investors pay close attention to. that sounds like a sign of increased liberalization again, but i guess investors have learned if it ever goes too far, they won't be afraid of reinstituting these measures again. the overall path to last number slowlys is we are getting more liberalization in markets, but the pboc are quick to change those steps if it seems like it is going wrong. the yuan isn't particularly volatile anyway. it moves within its band, doesn't tend to test extreme ranges. i doubt we will see a big change in where the fix comes out in the weeks ahead on this. matt: mark cudmore, thanks very much. bloomberg mliv strategies. you can follow insights on mliv on your bloomberg. next, more live from korea on
2:42 am
the latest from the first high-level meeting between sinceang and seoul 2015. this is bloomberg. ♪
2:43 am
2:44 am
♪ guy: 15 minutes of the start of european equity trading. here is juliette saly. juliette: samsung electronics has missed fourth-quarter
2:45 am
profits estimates on memory chips and the strengthening won. operating income rose during the three-month end of december compared with the analyst estimate of 15.1 billion. a 7% surge in the korean currency came as prices for benchmark memory chips leveled off after a year of gains. altice let's patrick drahi maintain control of both companies as he pursues a turnaround plan for the debt laden european operation. will the -- be distributed to shareholders in the second quarter. his holding company will be 51% of the voting power of the u.s. company after the transaction. aston martin is targeting a valuation of as much as $6.8 billion in a potential ipo. familiar,to people the company has held preliminary talks with advisers about a valuation that would put it on
2:46 am
fox -- par with ferrari. investor interest in an ipo this year could be bolstered by the planned expansion into the sport-utility market, starting in 2019. top fives' net worth bit -- has am in shock -- amazon shares added a 12 months surge that shifted market value by all most 57%. the latest jump has pushed his above bill fortune gates reached in 1991. guy: thank you very much. have aramco is said to citigroup to help manage ipos. hsbc and morgan stanley are expected to be named global coordinators. for more, let's talk to bloomberg markets middle east
2:47 am
anchor yousef gamal el-din. give us the details of what we need to know here. the banks possibly winning those mandates would be a huge score for them. saudi aramco is the crown jewel of the saudi arabia and transformation story. the other key takeaway is possible valuations. people involved in conversations with the banks say some of the valuations stretch from one trillion to 1.5 trillion, which fits in an interesting sort of or interesting parts of the broader equation. we had heard some valuations of up to $2 trillion for that, and you are looking at $100 billion for the ipo. ultimately, it is a bit of a higher price than a lot of expect. we spoke to
2:48 am
a lot of it has to do with the higher oil prices. brent crude is up 30% in the last six months. better to do this sooner rather than later. keep in mind the list we talked about is not final yet. this means there might be some truth to that. a lot of exchanges around the world vying for this crown jewel. i am more interested in the saga of mbs jailing a bunch of his cousins. put in were detained and a maximum security prison, as far as i know, which is pretty hefty for young princes. why is it exactly? we get one account from an attorney general that they were protesting utility bills? that seems in can -- insignificant for a royal saudi prince. we also get another story along the lines of a fist fight that
2:49 am
broke out at a palace? what is the story here? official line is they were holding an illegal protest. clearlythe crown prince making a move toward economic consolidation and reforms, but also political consolidations which is why we saw that you turn in terms of state handouts, to make sure the reforms are not too hard on the average saudi system -- citizen, because it could backfire given what has been happening in the royal court. guy: we will leave it there. bloomberg markets, middle east's yousef them out of a leading -- yousef gamal el-din thing. go further into asia. north korea says it will send athletes and high-level delegations to south korea for the olympics next month. south korea says it wants to dividedissues on the
2:50 am
peninsula through dialogues and negotiation. joining us is bloomberg's stephen engle. detente?he taunt -- stephen: it is definitely a step in the right direction given all the stable -- saber rattling we have seen between the united states and the north over the last year or so. obviously, since donald trump took over as president of the united states. it is a step in the right direction to get the north and south korean's across the table. in the dmz,e bridge about five miles from here, is where they have been holding daylong talks. there was a lot to gain on both sides. the north would obviously like to participate in the upcoming winter olympics here in south korea one month from today. didn't want the
2:51 am
specter of war hanging over winterwo weeks or so of festivities, which should be a celebration of brotherhood and peace on earth. they both at least achieved those goals today. however, going by -- beyond the olympic games is a big question, whether the tension will be ratcheted up again when the u.s. and south korea maintain drills in april. matt: does this give the u.s. an in to sit down for talks, as well? didn't catch the question, but going forward is what we are looking for after the olympic games are over in march, april, may. willthe tension resume or this lead to further talks on the nuclear's asian -- denuclearization? when the south brought that up today, there was no reaction from the north koreans, when
2:52 am
they said they would like to restart those talks. thanks very much for your time. we will get more questions to you later. stephen engle in the dmz there. , we will look forward to a lot of stories coming out of asia, and we will continue to focus on those. here at home, as well. , the split there and airbus, the european-asian story we will cover for you. this is bloomberg. the open is seven minutes away. ♪
2:53 am
2:54 am
2:55 am
♪ five minutes till the start of european cash trading. keep an eye on altice, patrick from itsl sweep it debt laden parents. that should provide clarity for the business. it will be interesting to see how the stock opens on this one. a new organizational structure. keep an eye on the house eyeders persimmons, keep an on the employment company, morrison's could be a stock to move. the carmakers, matt? matt: i am looking at a bunch of the carmakers. i have charts up on the screen of some of them. this is volkswagen, it has come up a lot over the last few days. 7% so far year to date and backup. this is a five-year chart, to its 2015 highs. if i scroll through some of the
2:56 am
other charts, let me pull up for im, and show you how well this stock has done the last year. up 20% so far year to date, past its 2015 high.
2:57 am
2:58 am
2:59 am
♪ minute at the start of cash trading in europe. the euro is at session lows with sub 120, 19.52. 20 year highs on the nikkei as it rejoins the fray. itstracking lower off highs, but up by around 1.5%. look for that in the european open. the look -- global rally continues, apart from korea. let's take a look at where europe is expected to open. bit in be up a little europe. less than 1/10 of
3:00 am
1%. the continental markets look fairly flat going into the start of trade. watch altice, any feedthrough from what happened with the samsung story, watch the house builders out of the u.k., the employment companies out of the u.k.. plenty to think about, plus the carmakers. let's see how the ftse 100 is coming through. we expect it to outperform a little. 76.97 -- 7697 is where we are trading. europe is out of the gate on the front foot, not a great step forward, but we are at least seeing progress coming through. tack expected to deliver similar numbers. ftse performing .2% to the upside. ibex flat. let's look at the sector story. the market is up by 1/10 of 1%. health care day at the j.p. morgan conference in san francisco. you will see a new slope come
3:01 am
late to the start of trade tomorrow morning for the health care sector. financials well bid, materials look more mixed. we will keep an eye on the carmakers. the reasonably mixed, samsung news the big story. ces up and running, as well. what are you seeing in individual names? has: i should point out ces really been dominated by carmaker technology as well. we could expect technology out carmakers too. on the stoxx 600 right now, we are looking at 350 four gainers for 149 losers. almost three to one there. you did see a lot of green on your imap. column here, you
3:02 am
have some of the big consumer staple names in there. b.a.t. and nestle, as well as reckitt benckiser, but some of the drugmakers. roche, novartis is there this morning. then banks with hsbc and lloyds. don't forget the minors and oils, so royal dutch shell, rio tinto on that side of the ledger. looking at the losers, bank send barclays on the downside. deutsche's number 10 as far as that, so not a huge drop this morning. we just don't see a lot of losers compared to winners today. even though we don't see a lot of action as far as size in the market, you do see more gainers than losers this morning. stocks around the world continue to hit fresh news high -- new
3:03 am
highs. a pullback on the s&p lasted all of one day yesterday. even a one-day pullback we saw. three hours, and the nikkei closed at a 16-year high. we have seen 27 year highs out of japan most days of the last couple of weeks. we are seeing real strength across equities worldwide. freddie laitw, . does this make sense to you, this rally? foam?s just a bit of freddie: it is, but that makes sense to me. we have seen it does -- devaluation across the last 10 years and all of these bubbles
3:04 am
inflated across the world. one of the cheapest that remains is still equities. bonds are still more expensive, real estate is, money is something you don't want to hold medium to long-term. we are seeing frothiness encrypted currencies and new investments. in cryptocurrencies and new investments. growth is picking up in a global way, rates are not causing too much chaos, debt levels are manageable, it makes sense to me equities should grind higher. guy: usually equities enter a phase in the cycle where they shift -- shoot for the moon. are we getting to that point this morning? when does it become a loved rally? sincee lait --freddie: 2014, the market has hit a fair value, but this is still very bearish, cautious, you can see that by --
3:05 am
>> that is interesting, because mark cudmore was here last week and took a bunch of meetings in london and said he was struggling to find an equity bear. perception of the position. some people have been moving slowly in the last year. to be clear, his view was that most people think equities rally. he doesn't necessarily believe they are positioned for it. freddie: mine was based on position. which would imply there is more to go. matt: i often wonder about the valuations we see around the today, there is more data out about the european economy, the strength of it, expectations for a continued european growth at a two decade high, and yet european stocks valued as rich as u.s. stocks or japanese stocks. why is that? freddie: if you look at the last
3:06 am
20 or 30 years, stock markets have delivered in broadbrush strokes, u.s. has always performed better. the earnings and revenue growth has been higher and it has been fortter market to invest in a long-term investor. thate, with its landscape, has not been conducive to very long-term returns. while people are willing to pay more than a year ago for european equities, they are not willing to match the u.s. level of valuations, and i think they are right not to. has historically performed better for investors. the japanese story is different, but probably a two-pronged approach. they are the most geared market for global growth, so as global growth goes up, the japanese benefit more than most, and it is a story where they are still trying to change the governance policies in japanese companies and drive higher.
3:07 am
you have a higher beat at the global growth with an extra kicker from individual reforms in japan. that is why people are paying a price -- higher premium on the surface. stocke will talk to your picks later, but let's talk about a sector story. all i hear about when i listen to our output, notes is that we will see 2018 being the year of the capex, the cycle will turn and come back with a vengeance. is this the year i buy industrials? freddie: you could, i think they have been priced in and are relatively expensive. i think they are already pricing a resurgent into capex already. european industrials, some of the best in the world, trading more than historically. it is pricing a high growth rate the next three years. i think there is a reason to be skeptical about the capex. the u.s. might buy more
3:08 am
buybacks. guy: freddie lait, stays with us. billionaire altice is looking --patrick drahi is looking for expansion and focus on the debt story with the european parents. we will break down the strategy. what does that mean. this is bloomberg? ♪
3:09 am
3:10 am
3:11 am
nearly 11 minutes into the trading day. let's show you what is happening here. the standout story is what is happening in russia this morning. brighter green than anything else, the oil trade is on this morning. elsewhere in europe, we are .3% up. london is leading, germany is lagging, that seems to be the same. the balkans are a little ahead but they are not big markets. london is up .4 percent. some nordics are outperforming, the iberian peninsula a little soft. the oil story feeding into russia and the ruble on the move. let's get into the corporate stories we are watching. i will show you a chart to highlight the point. altice is spinning off its u.s. unit, patrick drahi to pursue the companies expansion plans while dealing with the debt
3:12 am
burden in europe. lt's altices --altice's debt. yields lower, prices higher and i will show you what is happening on the one year story. you see the spike up in yields. the market began to get freaked out by the debt load. connan in caroline paris. what is happening here and why is it happening? as you were just mentioning a few months ago in november, it investors hit the then,button and since since the ipo in the u.s. in june of last year, the altice u.s. shares have lost 30% of their value. clearly, the altice usa business has been affected by the
3:13 am
performance of the european operations. french mobilely business that has been losing a lot of customers. and hasquit back then since been named the coo of which is the u.s., also cutting as many as 5000 europeanall these operations have been weighing on the u.s. business. altice usa is a very young business. 's is part of patrick drahi spending spree in the u.s., he , trying toevision give back to some u.s. shareholders and as part of
3:14 am
this, going to give the u.s. shareholders $1.5 billion dividend. ist: does this mean he pulling back on some of his ambitions and putting them on hold for the moment? it doesn't look like that is what he is going to do, even though in november, he said he will put some acquisitions on hold. he wantso saying that to continue to participate in the consolidation of the u.s. pay-tv market and possibly enter the wireless business in the whole drama ons the markets. he attempted to finance a bid for charter communications in the u.s., the second largest cable company. that didn't happen, but still, he has been building his whole empire over the last four years entirely on credit, on debt. that debt amounts to about $60
3:15 am
billion currently. we will see if he can reinsurer investors. analysts are saying at least it will make altice usa more liquid and easy to sell in the future. matt: all right, thanks very much for that. caroline connan talking about the lt's -- altice story. from with us, freddie lait latitude management. what do you think about patrick drahi's moved here? you have seen the drop in yields guy just showed. freddie: and they have been for months. i am personally quite keen on the european and u.s. telco stories moving forward. that he didnt to me
3:16 am
take on too much debt and i was as nervous as the other investors. this will certainly go a long way to studying nerves and allowing him to continue to expand in the areas he wants to do so. i think europe has more opportunity than the u.s., but he has to balance out his empire somehow. guy: why do you like telcos? -- tradethey tread incredibly cheaply, they are at the end of a 15 year regulatory cycle where most prophets have been taxed by the regulator. capex see i think there is going to be digital infrastructure that goes into the ground in the next 15 years. that willnow what look like, but they are consolidating and becoming a greater source of incremental excess returns in the next five to 10 years. -- we will getu to your picks in a moment, but you do have a lot of telco and telco tech stocks. nokia,im a kpn, tdc --
3:17 am
kpn, tdc are the stocks you like right now. nokia strikes me as very interesting. this has been the darling of markets and left for dead a couple of times. why do you like that story? freddie: i like nokia because of the consolidated market. it is them and ericsson. we are between product cycles, which means there won't be a big revenue inflection from 5g or anything, because we are getting to the adoption of 4g globally, which means for the short term, people investing in the stocks with a 12 month view, there is nothing to get your teeth into, which means they trade cheaply. i believe we will have a 5g cycle and both businesses will .enefit from the consolidation i believe the ip pattern --tfolio, that the ikea
3:18 am
nokia ceo is putting out now, has a value hard to attribute. they have been in litigation with apple for seven years about certain things. for just agreed to settle something like a dollar content per phone. now they have a joint venture saying they can continue to monetize nokia technology into apple phones. guy: plenty more to come from freddie. we will dig into more of his picks on the equity side and figure well -- what is going on into 2018. next, what is going on in the market moves. u.k. supermarkets, matt's favorite subject on the move. there on the back of the morrison's numbers, seeming to be trading higher, as well. that is next. this is bloomberg. ♪
3:19 am
3:20 am
3:21 am
♪ welcome back, we are 20 minutes into the equity market session. we need to talk about kashmir and supermarkets. nejra: let's talk about supermarkets, because we have the numbers from a number of u.k. groceries moving today. morrison was a bit of a bumper christmas for them. sales beat estimates. consumers were quite conscious of inflation. the bloomberg story highlights
3:22 am
french yule logs. that means the stock has hit its highest since october. we are seeing it up about three point 8%, one of the best performers on the stoxx 600. looking at renault could janel met sales last year. ceo was fairly positive about the year ahead. cucinelli has hit its highest since its 2012 listening. on the downside, just group down almost 8% there. this after a sale of 5.3% stake. right, thank you very much. if you have been long equities, we have had a good start to the year. what stocks and sectors could you invest in the rest of 2018? 'st's get more of freddie lait
3:23 am
call. we are ready talked about the thats, tdc, kpn and nokia were your takes. i went through their debt and noticed they are a lot less than the 50 billion that altice has. 3 billion or 8 billion, so not debt laden telecommunications companies. what about the other sectors you are interested in beyond telcos? what are your top picks? freddie: one of the other stocks is tescos. i believe there is a positive story for the next five or 10 years in the u.k. supermarkets. some of my portfolios are invested in high-grade companies, but i do like having these more corporate restructurings at this stage of the market and things like the tescos, it has done a phenomenal job of improving suppliers, cutting costs. whying its costs in store
3:24 am
6% while increasing margins. it shows you how more viable they are making that business. largest online areery and the world and positioned for what will be a large portion of u.k. retail, which is food retail, proven to be difficult to disrupt why amazon and businesses that have yet to find a solution are positioned for what will to comt this. they are trading cheaply. guy: i want to bring up this chart, the bank stocks. they have taken another big leg higher. netflix seems to be gaining the they have continued the upward trajectory. will this end, why you still prefer google? i prefer alphabet because it is the cheapest in the group, it has a wonderful ability to have no operating leverage to the business but to
3:25 am
continue to reinvest in new projects. it is trading on 18 times operating profit in my view and yes, there is a potential for a large regulatory cycle against large tech. telco experience in 2014, -- 2007 2from 20 2015. inm much more overweight banks and telcos and my only real tech company of that sort, the fang sort, is alphabet. matt: you mentioned banks, what are the banks you like here? there are a lot to choose from. you have european banks, peripheral banks, u.s. banks, money center banks, what do you like? i like bank of america and goldman sachs. u.s. banks are more attractive than european banks. european banks have more bang for your buck and a trade cheaply, if you want to take a
3:26 am
short-term view on economic recovery in europe, they are reasonable. in terms of the long-term accretion of capital to shareholders come you can do no better than bank of america and goldman's as a pair. goldman is the most tech forward, it businesses like haveng eroded set -- they diminishing responsibility. there was a piece out earlier, saying they want aramco. it doesn't surprise me. these banks still trade cheaply, 1.5 times book value and book values are higher quality than before the crisis. since the crisis, their lending phenomenal.een they own twice the capital against back, supplies the buffer for risk against those wonderful assets. these can still double over the next three to five years and bank of america is more of a wholesale business, goldman sachs is an investment bank. guy: next, the car sector.
3:27 am
european auto stocks are leading the gains into 2018, about that next. this is bloomberg. ♪
3:28 am
3:29 am
3:30 am
♪ we are 30 minutes and tear trading day. let's give you the top headlines. samsung slides, the strong won hits harding q4. is 2018 shaping up to be a tougher year? altice splits. patrick drahi is to break the company into two to give its u.s. operations protection from its parent debt woes. shares opened sharply higher end of the debt drives higher, as well, dropping the yield like a rock. europe's auto sector and accelerates into the new year, gaining 6% in five days across the board. if you look at it one by one,
3:31 am
fiat chrysler jumped more than 20% in the first week of the year. is 2018 going to be the year the sector regains traction. good morning and welcome to the bloomberg markets. i'm matt miller in berlin alongside guy johnson at bloomberg's european headquarters in london. let's take a look at how stocks are faring so far. guy: bad news and good news. good news if you are freddie lait because telcos are doing well, up .6%. basic resources leading. headline, every morning so far this year, i have come around to this point and said look at the auto sector. look how well it is doing. to actually dode something about that, and we will talk about it next, is the day the auto sector delivers nothing. everything is in positive territory, but the auto parts
3:32 am
is now all the way down there. you could call that murphy's law. they have had an incredible run so far. let's get a first word news update. north korea has agreed to send athletes to the winter olympics in south korea next to resolveants issues on the peninsula through negotiations. south korea wants both nations to march together at the games as the two sides held talks in the village in the joint security area along the heavily fortified border. donald trump is very close to making a decision on his nominee to be the vice chairman of the fed. he also said pimco's richard clarida was not the president's trophy's. it -- choice. the nomination will be part of the centralakeup at bank after jerome powell replaced janet yellen when her term ends early next month.
3:33 am
italy's economic development minister has said britain should be canted the trade deal david davis has called for. a politically independent figure in the government made the comment in an exclusive interview with bloomberg. plus will benada what we need to achieve, but beyond that, there is a problem that we need to solve, which is the following. brexit, is another piece of the western world that is basically more and more fragmented. sebastian: south korea's coast guard has said the fire engulfing in iranian tanker off china is being fueled by oil on board. -- was ferrying a million barrels of hydrocarbon liquid used in petrol production when
3:34 am
it collided with a chinese cargo carrier saturday, leaving the iranian vessel's 30 crew members missing or dead. particles takes effect today in an effort to protect marine life. the plastic beads are typically so small they float through treatment filters, polluting waterways with particles to be eaten or observed by wildlife. the former president outlawed products in 2015, while new zealand and canada have also prohibited it. and canada have also prohibited it. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. guy: i want to take you to beijing, the story surrounding china. we have been waiting for news to come out on airbus, but xi jinping will welcome the french president.
3:35 am
we have live pictures from that story. we will have more details from this in a few minutes. we will have an alice on what is happening here and what it means for the french side of relations, european relationship, what both sides are looking for. plenty of details to come on this story in a few minutes. you are looking at live pictures coming to you from beijing. matt: let's talk about europe's auto sector, it outperformed most of the stoxx 600 by a significant margin. the best-performing group by far. chrysler surged more than 20% in one week's trading. let's look at the grr. i've got which i -- guy just showed you. it gives you the breakdown of industry groups in the stoxx 600 on a one-day period. auto parts are doing the worst, one of the only losers. if you click into this drop-down box and look at year to date and remember, it is only january 9,
3:36 am
but you can see auto parts, automakers and auto parts makers right there at the top. a gain of 6.3%. really lording it over everyone else in the s&p as far as sectors. why is that? for the answer, tom lavelle is standing by. 2018? it ispened in not just fiat chrysler, volkswagen is up 7% as a. daimler is up 5%, even bmw is up 3.5%. what is going on? tom: that is right, the auto-parts index for europe is year.d this period last it is a mix of thing. europe's economy is growing and the ecb actually raised its forecast for this year late last month. basically, what we see is
3:37 am
investor confidence that the european economy is going to help the european carmakers. less directly, but still influential is china's car market is supposed to expand again. a bit above one percent last year. the expansion is supposed to be higher this year. analyst you which are talking to. ,etween the two big markets important to the european carmakers, that is feeding into their performance. specifically for fiat chrysler, this is the last year for sergio marchionne, the ceo. he is implementing a business plan and part of that is going to include spinning off the car that fiat chrysler currently owns. that will be his big project before he retires at the beginning of next year. guy: just right on cue, we are
3:38 am
getting news from the chinese auto manufacturer, has volvo and very center names under its brand list. coming out and saying they expect full-year net income to ago.e from a year if you look at the global footprint, what is going on with european manufacturers? we saw strong data out from the united states and it was the luxury end of the market doing well. will this be the year that that upper and market comes up in asia and in the united states, and what is that likely to mean? the luxury carmakers tend to do better than the mass market anyway. -- only two mass car marke makers with a presence in the u.s. and europe are chrysler, italian-american and ford. germanu've got the
3:39 am
luxury carmakers bmw and largees-benz, they have a factory -- have large suv factories in the states and suvs are the segment of cars which are the best-performing large and they are also becoming more popular improves as mileage for those models. matt: let me quickly ask you, you mentioned this is sergio's att year in the ceo seat fiat chrysler. he has made over the years some really big statements about his particularly a couple of attempts to start talks with general motors about a sale. people lately have been talking about other possibilities for tieups, hyundai has been one talked about as a possible collaborator. even google has been one that ed niedermayer has been talking
3:40 am
about as a partner for fca. do you think investors expect them to start looking for another buyer or unloading pieces of the business, for example, jeep to unlock value the way he did with ferrari? tom: the jeep -- i have seen one analyst saying jeep might be the next target for a spin off, but the thing is, jeep actually fits in as a mass-market brand with the fiat and alfa romeo, a bit higher end but it is still considered a mass-market, in a way. basically, jeep -- that would on the corekage manufacturer. takeovers, possible that would be a pretty big project for him to undertake. after being rejected by eat gm
3:41 am
in his overtures for a merger, he has indicated he is not ready to take a project like that unless it could be easily done with a willing partner. at this point, it is probably so complicated and he really is .ooking at retiring next year he would be able to set up a project, but nothing like that would probably be taking place until a couple of years from now. guy: we will leave it there. thank you, european transport editor tom lavelle joining us on the car said -- car story. freddie lait still with us from latitude. the ces is turning into a car show. that is the venn diagram more and more. google could buy fiat, that is pure speculation, but sk istheless, mu
3:42 am
struggling. will car companies win or technology companies? freddie lait the technology -- technology will win. it is an arms race to build up technology and it seems they are starting on the back foot. i think the smart car of the future will be a huge winning revenue-generating item for somebody, but it is more likely to be the software, not the hardware. at the end of the day, if you are not driving the car, you care more about the seats and onboard technology than the mechanical components. that is really what is going to be designed into it. don't we see from elon musk's continued struggles to mass produce automobiles that it would be better handled by an incumbent automaker that already knows the production process? i don't know, freddie, white gm or ford hasn't come out and out-tesla'd tesla already. freddie: i agree, considering
3:43 am
they are all trying to do it. they have been slow followers and that is a shame for the industry. there is a huge industry, and i don't think the tech companies should be manufacturing the cars, but unless ford get ahead of tesla and become the best ,lectric vehicle technology they are just going to end up building shells like the handset manufacturers for apple. margin is so thin, you didn't get an economic profit. guy: thank you for coming to see us at bloomberg, freddie lait, cio and founder of latitude asset management. he will be joining us on dab judicial. -- digital. i want to show you this chart into break. the treasury u.s. 10 year has just popped north of 2.5, the highest level we have seen its march.
3:44 am
we will talk about that next. plus, we have to talk about what is happening in china. the macron story underway, we will talk about what that means for the currency and the country. that is next. this is bloomberg. ♪ oomberg. ♪
3:45 am
3:46 am
♪ 46 minutes into the equity market session in europe. let's talk china. the country's central bank has made a change to the regime used
3:47 am
to manage the yuan. pboc has modified guidelines to calculate submissions to the currency's daily reference rate. what does that mean? what is going on, emma? matt: it is a bit -- >> it is a very complicated regime they used to manage the yuan, to keep it moving the way the pboc wants it to move. what we are seeing is basically about relinquishing a little bit of that control. with the removal of the rooms --clical factor, removes an element of the formula banks are required to use when determining the level the yuan should move that each day. banks usee commercial these parameters to come up with a level of the yuan based on
3:48 am
overnight trading, other things like that, that they submit to -- pboc, which decides this is the level the yuan will trade 2% either side of each day. this is known as the fixing. ist they have done last week they have removed one of those components of that formula, which will have the result of having a little less control. emma, does this mean china is trying to get back on track with its slow drive to make the don'tore flexible -- i want to go that far now, but eventually, free-floating? if we do hear any public comments, which are unlikely, that is probably the rhetoric they are trying to push, but it probably isn't about that. they know they can do this now because of the dollar being in freefall.
3:49 am
it has been declining since the second half of last year. that has resulted in a very strong and a significant upward trend in the yuan. they introduced the countercyclical factor when the the was very volatile, when dollar's direction wasn't has firm, and they were worried it would end the year down again as it had for the previous three years. issues withreate trading partners like the u.s., donald trump made a lot during his campaign about you on weakness. weakness. they introduced this factor, which is hard to describe, but it basically gave banks a little discretion to pump up the yuan if it was weaker in overnight trading, so the reference rate was a little stronger and they could guide the currency stronger. now that the dollar is weakening , the yuan is doing that on their own.
3:50 am
they don't really need this factor in the formula, but i would caution that they only really suspended it, so they could reactivate it i suppose, if the direction of the yuan changes. guy:they don't really need this factor in the formula, great str explaining. m o'brien joining us out of beijing. macron the other big story in china. its first deal with what is happening with the currency story and get a sense of what is going on. the head of china thematic research joins us. does that all make sense to you? it means we have a bit of liberalization. the renminbi has been very tightly controlled and yes, it is going to help in the liberalization, but the key difference is there is no longer an expectation of a one-way liberalization process. a few years ago, people were thinking liberalization, internationalization, we will get more trading and that was going to be how it was going to
3:51 am
be by 2020. a free-floating currency. if it goes too far away from where the pboc wants it, they will pull it back again. it will be where the pboc wants it. there,mmanuel macron is he has made the speech, is making a speech that is fairly tod in asking president xi finally deliver on the globalization picture he painted in davos last year. timeds move planned or for macron's visit to say we are making a little headway on this? to make it is not going a massive difference because a lot of the stuff macron is talking about is opening up the --ustrial markets, creating
3:52 am
for french companies, in particular and a little tweaking on the renminbi is not going to make a huge difference in how it is used internationally or to the french relationship. withey is what happens trade deals, whether there is more opening up. after the trump visit, they didn't announce this during the trump visit, but the next day, they opened up the financial markets to international companies far more. if it was something like that, consumer finance business, that would be more interesting. the europeanof financial companies into china would be more interesting than what happened. guy: how do the chinese see the french? europeans, how does it work from the beijing point of view? this comes from european weakness. every time china deals with europe, it is dealing with
3:53 am
individual countries and companies compete with each other with china. renminbi access is an example. all competing to try to get a greater share of renminbi and beijing can play all of those against each other. you are not speaking with one european voice, it is france speaking to china and china going, if i speak to france and the next day, i speak to germany, it creates a divide and rule. this has been the case for many years. are we going to get a bigger opening up of china in the relatively near-term? yesterday, sergio ermotti said he wanted to take a majority stake in his chinese joint venture. are these things going to be allowed? are the chinese going to make it a two-way street? thenda: it depends on sector, because they are opening up a lot of sectors under the negative list system, where most
3:54 am
of the industries have been opened up significantly. you can get much more access there, but the trouble is now, you are facing a bigger competitive threat from chinese companies. you are allowed into a market where you will struggle for because of the strength of the chinese company. it is opening up when china is already strong. the interesting bits are more on the services side were a lot of companies are competitive. financial services and things like travel. companies like apple are doing well against china at the moment. the luxury goods, as well. up and could open that the alliance announced they would help that, it really depends on the sector. it is more competitive than it used to be. maranda, short and sweet.
3:55 am
hopefully we do more next time. we need to update you, we are nearly done with the market open. here is nejra cehic. nejra: one of the best performers in the session is altice, gaining after the spinoff of its cable tv business. altice will pay a dividend to shareholder and then the 57% stake in the u.s. will be distributed by the second quarter. patrick drahi will keep control a majority.a by we upgraded to outperform by bernstein, more dividend growth potential than the market expects. on the downside, persimmon. it was gaining initially after its numbers, but now is down 1.5%. guy: thank you very much.
3:56 am
that about wraps things up for this team, but the coverage continues and it will be fantastic. next on bloomberg television, francine lacqua and "the turbulence -- the surveillance team. she will be joined by tom keene out of new york later on. plenty of politics out of washington worth considering right now. matt and i are about to rejoin bloomberg radio's dab. we will carry on the conversation. i think we should talk more about these car stocks. absolutely, fiat chrysler up more than 21% in the first week of trading of 2018. it is an incredible story and the question is, what is driving this? m&a speculation, the possibility of a spinoff to unlock value from jeep like they did with ferrari? that is anley think possibility. on the other hand, a lot of car stocks have been doing quite
3:57 am
well. daimler is up 5%, volkswagen 7%, bmw 3.5% to date. it is a story we are focused on today. this is bloomberg. ♪
3:58 am
3:59 am
4:00 am
♪ francine: future of the fed. president trump is said to be very close to choosing the vice chair. korea talks. the north and south hold their highest level discussions in two years. slow demand for memory chips and slow want hits china. can it fight back? ♪ francine: good morning, everyone. welcome to bloomberg. let's check in on your markets. i'm interested in the end.


info Stream Only

Uploaded by TV Archive on