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tv   Bloomberg Markets Americas  Bloomberg  January 12, 2018 10:00am-11:00am EST

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markets." here are the top stories we are covering from the bloomberg and around the world. u.s. stocks hitting records with equities at an all-time high. inc explains why picks are insurance not tech hardware. jpmorgan reports a 26% drop. wells fargo earnings take a hit due to ongoing litigation costs. facebook shares tumbling after the company makes changes to its news feed. will that transition lead to people spending less time on the website? 30 minutes into the trading day. we have records. abigail doolittle has been tracking the action.
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not big gains are necessary to get to that record. abigail: the rally continues. eight days are looking at gains averages.jor a lot of optimism around tax reform. results for the big banks, but the effect on the markets overall is a tailwind, especially with jamie dimon talking about how it will be a positive for the country going forward. where there is not a lot of optimism is facebook. we have an intraday chart of facebook cover which i can pull up. it is right here. there we go. facebook is down 4%. his worst day since the end of november after the company prioritizehanges to not,
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mark zuckerberg says people might disband less time on the changes,ecause of the but the time will be more valuable. investors are a little shocked by the declines. the s&p 500, looking at some of the department store-related rbc and jpraded morgan went overweight from neutral. citing tax reform, brick and mortar stabilization, and other factors. this is giving a tailwind to the entire department store space. let's look at the 10 year yield. up three basis points after cpi inflation data came in hotter yields rise.lping the bloomberg dollar index is fluctuating on for its worst day on the year. typically when yields rise a should support the dollar.
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last year we had the worst decline since 2003 for the dollar. the bear sentiment on the dollar continuing into this year. this is a long-term two-year yield. it is above 2% for the first data mark. cpi it is above 2% for the first time since september of 2008 before the financial crisis kicked off with the fall of lehman. pretty remarkable. european stocks up by 1.2%. first gain on track for the second weekly gain. the best run since november 3. that is the european benchmark. grr is the function. controllinquishing after a decade sending shares down by 7%.
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that sharesg rest with gucci instead of the track and field developer. hoping a buyer would pay a premium. that is why shares are down 7%. it did fall 15%, the biggest decline on record, earlier. the german 10-year yield rising, the highest since december 22. dominated by hawkish commentary from policymakers. 13, is the close on july the highest level in 18 months. the euro against the dollar, rising for a third day, the highest level since december 2014. angela merkel and the social democrats reaching a preliminary accord to negotiate a coalition
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government. on track for the fourth weekly gain. 120.68 is the close on january 28. as of now, we will talk more in detail about the euro later. story,the facebook shares are following after the social network announced major changes to its news feed. the changes could mean users will spend less time on the website. thank you so much for joining us on short notice as we see the shares fall. -- the thought is that facebook will give you fewer news stories and more interaction with your friends and family. it sounds warm and fuzzy. you think it will lead to user spending less time? .> there will be an impact
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if you look at the total time on facebook, the core facebook platform has been coming down because content from businesses is increasing. and a lot of users are using instagram more. it is good for facebook long term, but there will be a slight impact on revenue near-term. bloomberg writer for technology on gadfly says it is a depressing stressful, though says facebook did not put it that way. will this succeed in making it a more positive experience to be on facebook? is that what users want? or, do they want the charge from arguing over the news stories or interacting with the news stories? a longer-term will be better experience. keep in mind instagram is growing rapidly. they expected to double their
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revenues. instagram growth is increasing at pricing. advertising is going up. this would offset some of the issues, but overall it should be positive. mark: mark zuckerberg said his resolution for this year was to fix the social network that he cofounded. what are the measures and 2018? >> increasing investments to fake news and content security issues. all of the steps, like fake news and what they are doing with audience engagement, this is geared towards long-term. it might depress revenue growth a little, let's not forget the rapid growth instagram is facing. they have some offset. julie: covering the internet and electronics for bloomberg intelligence on the facebook story as it falls. thanks, earning season underway. 30 7% whileported
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wells fargo's earnings took a hit from litigation. the question is how tax cuts will affect profits. jamie morgan addressed that issue in today's conference call. the effect of retained capital and increasing competitive american companies that drive jobs. there's no question we will be better off year after year for having done this. julie: joining us is allison williams. thank you for joining us. argument? the how much of a boost will this be for the banks? in the short term they took a hit. how is it going to translate this year, next year, going forward?
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allison: jpmorgan did the best job possible laying out what they think the fx will be. broadly, the announcements were in line with expectations. the tax rate at 9% is more in line with the bullish expectations for the bank. in terms of positive impacts for the economy, we will see hopefully a pickup in loan growth, a boost to equity, more negative on the debt capital markets side. overall for jpmorgan solid quarter, solid on tax guidance. expectations coming down into the quarter. the guidance was an early september, but we saw the most for fixed income trading coming down reflecting that. we are starting with a lower risk run rate that is negative, but not new news julie:. it seems like trading revenue news, that narrative has not changed as we are into 2018. volatility is still depressed.
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is that something you don't count on in the near term to change? alison: if you look at volatility and believe in cycles, we are hitting new lows across several asset classes last year. if you believe in cycles, you will see a pickup. goldman has talked about the correlation between volatility and the magnifying effect on revenues when you get to pick up in volatility. that has been the issue for volatility and equity trading. that is why we are seeing a decline from jp morgan and worse for morgan stanley and goldman last week who had the strongest quarters -- fourth quarter's last year. for wells fargo, the net interest market and was a bit of a surprise in the form of the biggest legal charge yet. is it not yet passed the
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consumer banking scandal? alison: what we expected at wells fargo was a big charge. this is a bigger charge than we expected, but the offsets that they had with tax benefits from the new reforms, they had a of aive impact of the sale business. when we get those one-time gains we see one-time charges. wells fargo is the one bank that has outstanding litigation related to the department of justice and legacy securityrates backed issues. it was bigger than expected here they have taken a $1 million charge last quarter. how much of that is related to the doj and how much is ongoing issues? to the extent they are saying let's be as conservative as we can, that is a positive for investors.
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the other thing is a negative in ongoingter which is operating expenses. the guidance is a little higher than people expected, but investor day in may gives them another bite of the apple in terms of how are things running at that point? it will be the guidance and what terms of they in ongoing profitability. hopefully most of the issues are behind them at that point. standpoint iny the fourth quarter and moving on. julie: thank you, so much. bloomberg intelligence senior analyst for banks. bloomberg first word news. : president trump denies saying anything derogatory about haiti here are the president is said to have used foul language while asking lawmakers why the
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u.s. exits immigrants from south haiti, but not places like norway. the president says he has a wonderful relationship with haiti but those made oval office say that the president used the hateful words. sanctions to iran, according to a person familiar with the matter, the white house will announce the president will leave the 2015 nuclear accord congress tolow develop legislation to impose new restrictions. a holiday gift for u.s. retailers. .4% after jumping .9% in november. the strongest again for november and december since 2010. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. i am emma chandra. coming up, stocks are up.
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still be value from insurance to technology. we look at the sectors. this is bloomberg. ♪
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♪ mark: live from london, i am mark barton. i am julie new york, hyman. stocks rising in the u.s. to records, and in europe. joining us is the global equity hsbc security. looks like potentially more upside from here, though not as big of again as 2017, which seems to be the consensus.
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with this momentum, do you rethink that irma or do you think it will moderate? -- or do you think it will moderate? >> i think it will moderate. i do not think he will see a repeat of the blowout from last year. strong earnings growth, double digits will be delivered. the question is, what do you pay for that? was central banks paying for a interestg, raising rates, whether it be the ecb, the bank of england, or the fed, where you going to pay for the multiples? we're seeing a big beginning of the year reallocation from local investors and retail investors. a lot of growth momentum, oil prices, $70, that is fueling the beginning of the year rally. julie: the bond market, we see
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the deals hitting 2%. are rising yields going to be a headwind for stocks this year, or will we see rotation out of bonds into stocks? ben: i think they've become a headwind. that is one of the ingredients of valuation multiples. historically, when the fed does proxy by high bond yields come you see a 10 percentage point decline in equity valuations. we saw the opposite last year. we think we will see some of the valuation compression that will offset some of the strong earnings growth we expect to see, especially in the u.s. mark: you are seeing a divergence among defensive's? ben: things like consumer staples are looking good. quite out of favor but with earnings recovering things like utilities are very sensitive to the rise in bond yields.
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on a positive side, the only 2 industries globally that are out of favor between positive earnings and momentum is tech hardware, which even after last year's out-of-favor, and insurance. if you want to be overweight financials, which a lot of people do, insurance is the place to be. mark: you talk about thematic investing. you have a new barometer. what is the highlight, what is flashing? ben: the two things out of favor? one is the lower for longer investment same. inflation and bond yields staying low, the market doesn't believe that. people are going to come back to that theme. interestingly, the facebook story, environmental, social, and governance investing is an out-of-favor theme.
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some of the companies are beginning to be forced to take some of these themes more seriously. we could see people revisit that . more broadly, the investment world is changing and we will be investing more on a thematic aces than a sector and country basis. julie: the key things are the future consumer and tech disruptions. what is the way to play them right now? ben: we have a bunch of screens on ways to play it. the consumer and tech theme is and tech theme is an em and asia theme. basically all of the young tech adopting consumer growth is coming out of asia. it is a very em it theme. julie: good to see you. global equity strategist at hsbc securities. dialing up concerns. whether telecom etf's are about to take off.
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from new york, this is bloomberg. ♪
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♪ mark: this is "bloomberg markets." i am mark barton from london. julie: i am julie hyman. rejiggeringhey are sectors and which companies go into sectors. telecom's etf's, in no man's land for a decade, are about to get an influx of hot stock. bloomberg intelligence is here to explain. what does the reclassification look like? >> it was announced 12 months ago but they gave the specifics. i have numbers for you. 52 companies moving to telecom, which will be renamed the
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communications services sector. netflix, disney, the total market cap is $2.5 trillion. the total market cap now is $500 billion. this is five times coming in on top of the telecom sector. etf assets are almost invisible compared to other sectors. whatis 1/40th of technology has. this is like all of the cool moving to ait -- farm town and making a cool again. this is what i think will happen. ,hen real estate came a sector i'm guessing a new sector will be launched and do a dividend in the new etf. there will be capital gains. if you look at the telecom are, there are five etf's.
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vanguard has one, vox is the biggest. ishares hast, and one, fidelity. five etf's. that will quadruple. julie: they will be renamed communication -- mark: you will see the whole product line get launched. would imagine this means money into the individual telecom stocks as they are jiggered in the re etf. >> they're are having all of the money being dumped into them the way that a-shares are moving into bigger benchmarks. julie: really quickly, the first etf's are launching next week, before any bitcoin etf's. , it isity shares
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anticipated, not certain, but on wednesday they will hold companies like accenture, ibm. anything with blockchain in the name goes to the men. it is interesting with 2 launching in the same day. within a couple of weeks, it will be which one people choose. julie: blockchain, bitcoin, crypto, it is all been going up. thank you. mark: still ahead, retail sales continue. of theef executive national retail federation and looking at the drama surrounding germany's thinking today.
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♪ julie: live from bloomberg world headquarters in new york, i am julie hyman. mark: in london, i am mark
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barton. this is "bloomberg markets." president trump insists he did not use foul language to describe haiti, el salvador, and africa during an oval office meeting on immigration. a democratic senator disagrees, saying the president said things that were hate-filled and racist. commerce department put together a report on whether foreign shipments are harming national security. the president has 90 days to decide if to impose tariffs or enter talks with foreign steel producers. u.s. core inflation rate accelerated more than expected. they consumer price index increased 1.8% over a year ago. costsg region was higher for housing thanks to lower energy prices. wealthy russians do not want to
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be on the list. u.s. treasury department finishing its list of oligarchs close to president putin'. the report will amount to a blacklist of russian elite. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. julie: after a year of dark headlines, u.s. retail is hopeful for the 2017 holiday season. sales data was released and holiday sales were up 5.5% year over year. with us is the ceo of the nrs. 5.5% growth, nearly $692 billion. what was driving this? it was a rocky year for retail,
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particularly certain areas. >> one ceo described it as a hockey stick year. the beginning was at that good and in november and december things took off. that is due to stronger than expected employment gains in october and november that led to increased wages and consumer spending. closer to the holiday season, thanksgiving weekend had strong numbers. we knew that we were in for a good year. closer to the end result the tax reform deal come together. the animal spirits were unleashed. people felt confident. companies were announcing bonuses and wage increases. a lot of positive momentum carried through because of that. of sectors,reakdown the biggest increase was building materials and supplies. not something you think of coming in your holiday stocking.
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was this a lingering effect of hurricanes and people rebuilding? was there something there are fundamental retail spending? matthew: probably a combination. virtually every category was up. in electronics, clothing, home goods, that one just happens to be of the highest. 8.7%, something, a pretty big number. nice distribution across the segments. some of that could be recovery after the hurricanes. that was input that would into a lot of the forecasts put out. when you are doing your report in october you're looking at hurricanes in the third quarter. that created uncertainty, and things turned out better than expected. julie: i think that we ran a chart recently showing amazon took 89% of online holiday sales. when you talk to members, how
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are they learning, participating, in that and trying to get some of that share back? matthew: we represent amazon and walmart. we have everyone from a to w, or a to z if you include set -- if you include zappos. of the top 10 e-commerce platforms, they are operated by retailers that have been in the bricks and mortar business for a long time. the ceo of the walmart e-commerce business is the founder of lastid at a conference september that e-commerce is only supposed to make us better merchants. means to an end, how do we become better merchants? the holiday season demonstrated that. department stores under pressure did well.
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ulta, inlmart, target, every category they have found ways to compete in the hyper repetitive -- hyper-competitive environment. smaller base, but they are making great strides and connecting with consumers. julie: so it is not online versus brick and but amazon versus everyone else. amazon is in ember of the it must feel but like when walmart was expanding in the 1980's and 1990's and taking retail from others. is that a challenge that you remember? matthew: with retailers, there has always been disruption. 125 years ago sears was disrupting general stores on the prairie because they had a catalog. 50 years ago, it was walmart. there has always been
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disruption. now it is taking place with the level of velocity unlike anything we have seen before. that is true in entertainment, health care, everywhere. it is transparent because we all have relationships as consumers with businesses here to we think we know what is happening because we see a store and question what is happening in the store. it is about helping people understand that it is not us versus them, it is all retail here at online, bricks and mortar, it is all a part of retail. julie: i want to ask you about wages and walmart is raising the minimum wage. that will probably have a ripple effect. is that something we will see from other retailers, not just because of the tax cuts, but because there are fewer workers? matthew: more wage growth and ultimately pressure on wages that will hopefully drive
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containable inflation. three to four years, the retail industry was leading in this area already. walmart made an announcement about increasing wages on predictive scheduling. target has done a gap here mcdonald's, starbucks, and cosco . it is reflected in the way that retailers are the largest employer.ctor retail has experienced issues in the labor market more quickly and more acutely than others when it gets competitive. retailers recognize that if they will compete successfully in an environment with so much competition and a premium place in the way you engage with customers, they need people that are well trained and educated to deliver results they need. walmart made an announcement the other day. you are right others will look at the increasingly tight labor market and have to do similar
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things. walmart is the biggest here they see it first, before anyone else does. julie: retailers were describing the year as a hockey stick. what does 2018 look like? is the holiday season a reset or a blip? windew: we have a lot of at our backs coming off of the holiday season, tax cuts that will implement in itself this year. consumers will have more money in their pockets. the announcements we have done with the joint tax committee shows this could result in $100 billion of consumer spending. a year ago when there could be the imposition of a border adjustment tax we went from work to first. consumers will be in a better place this year. julie: ceo of the national retail federation. appreciate it. mark: in europe, it of german sports apparel company puma
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tumbling. 70% of shares will be distributed to it shareholders. bloomberg intelligence, great and -- great headlines. returning it though fitting pumas. does it not fit anymore in the luxury wardrobe? luxury.s never about it was about the sports-like style area. kering has so many brands that are luxury. they have done well with the biggest brands and they did not feel there was much more that ma. could do with pu 16%. it was down
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it is 6% lower. did investors expect a company to pay a big premium? >> perhaps it was a sellout. if we look, the majority share was 29%. they're well-equipped to do well with the brand. it will be the management of puma who continue to manage the brand and they are doing well. changed? has puma 2007 is when kering picked it up. we have seen the expansion into the rihanna type shoe. they also shift the marketplace. the underlying industry, too. they acquired expensively. the margin at the time was growing nicely with the sports lifestyle phase we have gone through 30 years, every seven years switching between the heavy-and sports industry increasing fashion elements.
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it was maybe at the wrong time then. at the end of last year, they're turning around margin. the best in the last four years, but it is only about a quarter. mark: the key metrics? growtherms of sales against the base and probably 200 to 300 basis points behind adidas and nike with the kind of range. mark: after kering, what next? >> it was 70% luxury goods and 30% sports, mostly puma. brands20% of kering's are not really performing as well as they could. they have a huge amount he could do with that 20%. it raises the top line because luxury should grow 8% and kering
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has been doing so. it also raises 400 basis points putting it at the top range of its group on margin. mark: luxury goods analyst for bloomberg intelligence. julie: coming up, facebook is the stock of the hour. it is falling on changes to its news feed. this is bloomberg. ♪
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mark: live from london, i am mark barton. julie: in new york, i am julie hyman. this is "bloomberg markets."
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facebook falling 5% after the company says it is making major changes to the flagship social network shifting news feeds back to posts from friends and family and away from businesses and media outlets. it will likely see people spending less time on the website. it is interesting. it is something that users have been asking for. facebook short-term pain. taylor: an analyst highlighted that say this is a change that was built in. people wanted. good on facebook even though it might not necessarily be good in the short term for business. julie: one key thing is that it might mean less time spent on the website. chart of daily active users. it exceeded 2 billion in june, but that has been slowing you
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are seeing growth of monthly users going to 15% versus 16.5% in the fourth quarter of 2016. this is daily active users as a percentage of daily active users here at has also been slowing down. the daily use is not as much. mark zuckerberg came out and said that community feedback has shown that the public personals crowding out interactions, which takes away from the primary goal. the whole point is to have better interactions and highlight posts more where you can interact with other people. julie: we have a chart showing revenue. rts came up what
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does this mean for revenue? it may be slowing quinn we talking about if this had been priced in. revenue growth expecting to slow to 26% in 2019, down from when it was growing as much as 60% four years ago. the company is saying this will , just the ways you see the posts on the news feed. mark: is instagram going to be facebook's saving grace given the younger user base? taylor: i think that that will be key. facebook already owns instagram and they are seeing at revenue increase. they are able to monetize, give facebook time to create a better user experience. instagram ad revenue climbing to $11 billion. it is making up 20% of the overall ad revenue coming in from mobile. that could be a good thing.
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julie: you don't see much of the news stories you are talking about. you see photos. taylor: exactly. julie: thank you, so much here general motors wants to launch a self driving car without a steering wheel or pedals. why he is handing robots the keys to the self-driving chevy volt. 220t is an exciting next at 19 -- next step to 2019. everything we are doing is about safety, safety being the overriding priority weird we think we are on track to deliver that in an environment at scale at 2019. >> you will have to go through the national highway safety administration. are you confident you will get approval? >> as i said, the overall approach and biggest benefit of
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the technology is safety. that is the objective we are focused on as well. we look forward to explain the approach to the technology and why we think we will be ready to deploy in 2019. >> give us a sense of how much more complex it is to be in an urban environment with a fully autonomous vehicle than what we have seen already? >> we are testing in san francisco and in phoenix, arizona. quite different environments. the vehicles in san francisco seem more than one minute then int vehicles and phoenix see one hour. that gives you a level of the complexity we see in a complex of an environment. that is why we are focused on testing in that environment because vehicles will learn more quickly and put us more in a position to launch in those environments in the 2019
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timeframe. >> we're showing viewers the volt with the cruise beside it. where are we in the longer curve of the adoption as well as right sharing? early or middle innings? >> it is obviously still the very early days. the very beginning of what we see as a long-term fundamental transformation. we believe the autonomous technology will change the world in a significant way. first appointment in 2019 -- 2019 will beent in the beginning of a big rollout of this technology overtime. mark: that was the general motors president on bloomberg television earlier today. approaching the european close. a cautionary tale for hedge funds that will lie on a single investor. this is bloomberg.
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julie: i am julie hyman. mark: from london, i am mark barton. this is "bloomberg markets." more trouble in the hedge fund industry. shutting down after his biggest investor pulled out according to a person with knowledge of the matter. investor,s biggest whoever it is, pulling out? diversifying be their business, or finding something else more tractive. not to say that if all th -- di'ssaying that ival performance was bad. 13% is more than the average hedge fund industry.
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is more than equity loans by hedge friends but -- by hedge funds were this is being operated. how commonplace is it for a hedge fund to be dominated by a single investor? it is not very common. investors don't like one investor dominating a fund, because obviously if they pull out all of a sudden business plans go off track. a hedge fund is maintaining the -- maintaininge the infrastructure. that a key investor risk no investor likes to take. by 3: ivaldi was founded
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prime brokers. one would assume they would try to get different funding and relaunch in some fashion. >> not for the time being. they are clear that they have 2 offices, one in london and 2 in singapore, they are shutting down operations. they may relaunch in the future, but for now they are shutting down the business. 22-28 employees that they have. ofk: the latest in a series money managers to return to client speared what was it like in prior years on that front? >> 2016 was worse. more shutting down and starting. more than 700 hedge funds shut down. and 2017.5
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it is slowing down, though there are fewer hedge funds left. 2015, there2016 or are fewer. the industry is shrinking by number. it may not be a bad thing because there are too many funds in the world. .ark: on the fate of ivaldi coming up, following stocks. less than 35 minutes away from the end of the friday session, the first full trading week of 2018. check it out. led by autos, the currency boards. we will talk currencies. this is bloomberg. ♪
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mark: 11:00 a.m. in new york and midnight in hong kong. from the european headquarters, i am mark barton. julie: i am julie hyman and for vonnie quinn and this is the
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european close on bloomberg markets. ♪ mark: the top stories we're covering, donald trump ditches plans to visit london to open a new u.s. embassy next month, saying it is a bad location. theresa may defending the south london area. with angelaping merkel reaching a culinary deal with social democrats to end the political gridlock and the european biggest economy. stocks in europe and the u.s. extending gains after core inflation in the u.s. unexpectedly accelerated and we will talk with a global strategist. what is happening to european equities 30 minutes away from the and of the fri


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