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tv   Bloomberg Markets European Close  Bloomberg  January 16, 2018 11:00am-12:00pm EST

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bloomberg markets. mark: here of top stories we are covering. stocks racing to records. the dow topic 26,000 for the first time. the dollar strengthening as the earnings season picks up steam today. the latest round of economic data and what it means for consumers in the u.k. as the eu steps up its demands for more concessions in the next round of brexit talks. expecting a windfall from u.s. tax cuts. citigroup says it will shower profits on investors. the bank sticking with its payout of at least $60 billion to shareholders. a look at what's happening to european equities. we are 30 minutes away from the
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end of the tuesday session. we are up for the second day in three today. basic resource stocks are falling. oil stocks are falling for the first day in 10. earnings driving the rally in the u.s. we have the world's biggest maker of high-end chocolates today missing it's already reduced sales growth target thanks to poor demand in north america. it said it was optimistic for the outlook. it did confirm its midterm target. completing the acquisition of russell stover, the biggest maker of boxed chocolate. the third biggest producer in the region. shares have lifted by 3.5% today. let's talk about the correlation between the euro and euro zone stocks. the negative correlation between the single currency and eurozone stocks to the lowest level since early august.
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bottom line is the negative correlation. not as low as it was. interesting growth momentum is the most important driver of aggregate earnings. goldman sachs expects a 1% interest in gdp weighted according to sales exposure. adds 11 basis points -- percentage points to the earnings growth. would take away one point five percentage points from earnings growth. let's talk about the spanish .pread since to the lowest level march 2015. upgrade driven by this improving economy.
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appetitespark greater for the debt according to bbva which sees the move upwards of highly possible despite political turbulence in the rebel region of catalonia. spanish forecast to extend for your recovery is unemployment continues to fall. 90 minutes into the session. julie: we are seeing records across the board. we are seeing a real pairing of the earlier gains here. the dow just about having its earlier gain which was as much as 280 points or so. we are seeing still strength but a little bit of moderation of the games we were watching earlier in the session. utilities and the s&p are lower along with energy stocks and telecoms. still higher the casino stocks are rising today.
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that's after morgan stanley raised its forecast for 2022 gross gaming revenue in that region. up 13% to $60 billion. it has to do with smaller tier cities in china. morgan stanley doing a survey of the casinos and saying a lot of the demand is coming from smaller cities and a smaller cities should start to benefit more from income growth in china which should benefit the casinos. las vegas and mgm fire today. discretionary movers in today's session. we've got general motors coming with an earnings forecast for 2018 that surprised analysts that going to hold steady. helped in part by the tax overhaul which will disadvantage the company in the fourth quarter from last year but then help it going forward. see an earnings increase which was also a surprise. aftershares are rising
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the price target was raised from 124 to 180. armour is the real consumer discretionary laggard. it was cut to underperform from neutral over at mccrory. the analysts raising the specter that they will need to raise capital if revenue and gross margin continue to deteriorate. we are also watching the cryptocurrencies today. we've got the big cryptocurrencies like bitcoin itself. ripple which is blue. looking at the last month or so of what we have seen in action and you see the selloff on concern over increasing regulation. particularly in south korea and china. that is having a ripple effect. if i may. all those crypto stocks getting a big boost is the cryptocurrencies are going up
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now many of them are selling off. brexit and get to the u.k. economy. we have some data today on cpi showing inflation for the first time in six months. it could ease pressure on consumers who have been squeezed by rising prices. commons resuming its debate over brexit as the eu steps of demands for more concessions from the u.k. joining us now, marcus ashworth. commons resuming its debate overis the sterling ? >> possibly. it might be. it is not really a sterling rally so much as dollar collapse. from ay fragile things domestic side which was maybe inflation is not going to come , that's one row that has been pulled out. the other thing is a soft brexit thing. in reality something is about to brexit very soon
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because it always does. ofk: what are we to make comments from policymakers in recent days? notable comments. what's the take away from what they have said in the outlook for policy and the prospect for rates? much into't read too it. he is a pretty middle-of-the-road guy. he follows carney. he is more a technocrat. his comments were modestly bullish. slightly on the hawkish side. not enough to get on it. never fully laid out her views. the first time we saw her last night clearly lay out what she thinks. and productivity is the thing policymakers focus on way more than they need to. saying it isn't quite the whole everyone has been fretting about mark:. which has implications for
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rates. >> certainly for growth. she was perhaps less dovish than people have marked her down to be. if another rate hike was to come push by carney she's not going to be pushing against it. vonnie: as you say in your column that sterling may be headed lower and inflation may be topping out, reconcile those because sterling has lowered. surely that provides ammo for more inflation. yes indeed. don't get technical on me please. of course an economist would say the might feed through to breakaway. the reality is the bank of england has been pushing almost for excuses to convince the bond market particularly sterling futures that there might be another rate hike this year.
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i don't think they will actually be able to do it and it's going to be very hard for them if inflation is on the turn lower and it looks like the core inflation is the key here. they are going to be able to look at this and say as we expected in november we are getting the fall in inflation which the price gains have been pushed up for import prices. taking about six months more than you might expect. they always take a little bit longer. now it is starting to get the base effect of things dropping a way which means that inflation is dropping and therefore it's going to go down the path towards 2%. very difficult to raise rates in a declining inflation environment along with brexit to buzz. i think that's taking a little bit of support away from sterling. vonnie: what if anything happens
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to the bank of england thesis if and when the fed raises in march? >> i think they are not really linked unfortunately or fortunately at the moment. if the fed is on its own it will pass. it is very clearly stated. why the dollar is weak at the moment is the fed has done its job magnificently. it has told everyone what it is going to do and it has actually done it. i don't think the bank of england has that luxury at the moment. people like the ecb and bank of england look like they have been making noises about stopping qe or looking at possibly raising rates again. the federalis reserve will raise rates this year.
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the ecb certainly won't. they may stop back on qe and there's a chance at most. that is what's moving currency. isk: the eu withdrawal bill being debated in the house of commons. the suggestion is there won't be any comments until it moves up to the lord's later this month. tusk say today if you -- it was thatd timing that they mentioned that if you change your mind. >> utter rubbish on both sides. farah's was playing -- f arage was playing games. good -- tusk and
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one that crown is pushing for more immigration controls and things like that. they are trying to cause as much upset on the british side. mark: thank you, marcus ashworth. theie: let's check in on first word news. >> homeland security step -- secretary kristen -- kiersten nielsen says the president was using tough language in the meeting on immigration where the president reportedly made controversial remarks.
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she also said she wants a permanent solution on daca. republican congressional leaders are trying to avert a government shutdown on friday and they are struggling to separate the immigration blowup set off by president trump from a spending bill needed to keep the government in business. democrats say the bill must include a measure that keeps young undocumented immigrants from being deported. turkish president erdogan is calling on nato to form the border security force in syria. he said nato is obligated to take a stand against those who harass and violate the borders of your members. ties between turkey and the u.s. have deteriorated over u.s. support of the kurdish militia. calls those fighters a major threat to security. russia may go on a spending spree after years of austerity. the kremlin is considering a plan to boost spending on transport and roads by about 30% over three years. spending on health care and education would rise about 20%.
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russia is coming out of the longest recession since vladimir putin came to power almost two decades ago. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. vonnie: coming up, citigroup rises after posting results that include a commitment to its capital plan. more on the big results next. this is bloomberg. ♪
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mark: live from london, i'm mark barton. vonnie: in new york, i am vonnie quinn. citigroup is at its highest in nearly a decade after revealing plans to shower investors with profits.
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the bank is sticking to its out $60r plan to pay billion to shareholders after it has booked a larger than forecast charge of $22 million to adjust to the new u.s. tax structure. the ceo spoke earlier on conference call. >> turning to tax reform we believe it will citi greatly benefit -- greatly benefit citi shareholders. the implementation of a territorial tax system and the tax on deemed repatriation. in alisont's bring williams. to a large extent this charge was a gift to citigroup right? it allows them to bestow all sorts of things on its shareholders. with regard tog the charge and capital return is they had made clear in early december we are going to have a huge charge but it's not going
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to stop us from the 60 billion capital return. they did make that announcement before we got the final bill. the charge was 22 billion that included 3 billion related to repatriation. the key things that we learned today for the one thing -- or the one thing is better than expected. trading is better than expected. presumablyarge related to steinhoff. citigroup has differed from confirming who that client was but i think it's safe to assume that. we did see revenue growth. they said their strategy is working in terms of repricing some of those balances. 1% year-over-year revenue growth . basically in line with their expectations and growth pretty strong. vonnie: credit losses ticked up a little. ficc was better than
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forecast. >> that is really more important to citi than most of its fears -- peers. better thantle expected. that tends to be more meaningful to earnings. equities if you are about to steinhoff are the one time charge related to a client presumably steinhoff then you get equities basically in line. multiples as their equity business so that is the key positive. mark: on goldman sachs and bank of america tomorrow, what's the outlook? >> we just saw the headline earlier today that their commodities trading is going to be the worst ever in their public history. that shouldn't be a surprise. it has been trending all year. the fourth quarter tends to be the weakest for fixed income trading.
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they talked about inventory losses that had contributed to that over the year. i think people are going to look at the broader strategy. how are they doing across different clients. citigroup give a little bit of detail on that. also from goldman we have the potential to get a surprise from their investing and lending gains. with the strength we have had an asset prices especially equity aices i think that's potential for the upside and theyully that will offset are also expected to take a big charge. what we are going to be listening to from goldman and bank of america what is the ongoing tax rate. citigroup and 25% is a little better than analysts had thought. jpmorgan came in 19% on the bullish side of things. that's really what investors are looking for. vonnie: still up .6% on the session. alison williams, thank you. let's chat about bloomberg
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business flash. general electric will take a 6.2 in the dollar charge fourth quarter because of lingering problems in its insurance business. ge capital will make reserve in the fourth quarter because of lingeringcontributions of about5 billion over the next seven --rs following a report review of the north american life and health long-term care portfolio. chief executive john flannery called the charge deeply disappointing. general motors has a surprise for wall street. the biggest automaker in the u.s. has forecast steady earnings for this year. what analysts predicted profit would fall. p two capital partners have -- which offers a broad range of gift cards and other prepaid products. the price three $.5 billion in cash.
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black hawk warned last year that competitive pressures in the u.s. would hurt sales. that's your latest bloomberg business flash. we are heading for the close of trading. here's a look at some of the big gainers and the big decliners in the stoxx 600 today. this is bloomberg. ♪
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you will u.s.o sales after the diesel emissions scandal. they spoke to david westin at the north american international auto show in detroit. >> there's a big shift in the past year in the suv market. people keep forgetting that basically still there is a huge market for sedans in this country. loyale a very strong and -- younger generation that have
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a lot of positive emotions a in the nextt orientation is family oriented and slightly bigger. we believe it's important for our growth plan in the united states. we have two strong suvs launched and this is the next big movement into the sedans. we should not forget sedans just because everyone is launching suvs. david: volkswagen has had some difficulty in recent years in the united states. you are coming back. how much of 2017 was driven by the suv? >> that was a key model for us. it is probably the most american car we have built in the united states. they are very proud with the achievements we have achieved so far.
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wellse the car really fits to the streets of america. it's a car that actually is perfectly blending with the american culture. actually it has all of the ingredients that people love about volkswagen. high technology in the car. beautiful execution and the reaction of the customers is extremely positive. it's a start for our future plan. there's more to come. volkswagen board member at the detroit international auto show. the close is just minutes away. that's what's happening. this is bloomberg. ♪
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mark: this is "bloomberg markets ." this is the european close. we are up marginally, we were up
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.5% today. uncertainty about the ability of germany to come together and forged this new government weighing on the euro today, which is down for the first day in five. still marginally positive on the day. oil and gas stocks, basic resource stocks fo down for the first day in nine. oil stocks falling for the first day since the longest run since october. let's talk about u.k. inflation, using for the first time in six s in december. that 3.1% rate was the fastest in five years. the core measure of consumer price growth came down to 2.5%. effect of the pound's
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depreciation following the brexit referendum. keep an eye on that. keep an eye on the euro. hedge funds and other large speculative investors amounting the heaviest long positions on the euro ever. 201710's best currency in getting fresh momentum over the prospect of a september end to ecb stimulus. on tuesday, the euro rose to its highs level since december 2014. finally, i want to talk about brent. we've had a rally in brent crude. the global glut has lifted the benchmark to $70 a barrel. the benchmark for half the world's oil rebounding. could encounter some resistance
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while trying to move even higher. we will try to get back to that chart. vonnie: the dollar is on everybody's minds these days. we resumed the downtrend. this is the dxy which is mainly versus the euro and the yen. the 10 year yield firmly at 2.55%. we've had another setback for crude oil. at $ --ertheless, still at bitcoin down another 12% today. wm.s move on to the vie we are in the green. the is the united states, s&p 500 setting more records today. mexico influencing things a little bit.
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we have a potential new candidate in brazil for president. he happens to be a reality tv star. everybody's heads turned. we will have to see how that planans out. mark: stocks still higher. we of the chief investment officer of cross bridge capital. let's start today's chat on bitcoin. a full and his money are soon parted. let's start with bitcoin. your words were proven true. $16,000.oint was at they are down to the 5% from -- 25% from thei
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i am more excited about blockchain. does it have a value? it is the value that matters. mark: you saw the bloomberg today --d summi story surely, that makes you celebrate. >> not really. these are short-term trades. reporting to client and making them happy, that's fine. while it fallss to 5% -- 25%, you pay for it. i would not advocate my investors -- mark: the euro coming down today. are you beginning to have doubts germany's ability to forge
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a government? merkel is finding it hard to be the leader of her own party. germany has a working government. we look at the eurozone, it's easy to look at aggregate numbers, which is exactly what germany represents, and forget what happens in the rest of the eurozone economy. there are more people entering retirement in italy than entering the job market. that is dire. it's the third largest economy in the eurozone. where are they going to find these pensions from? you have to look into what is andening below the bonnet
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not look at aggregate numbers that germany represents. people have been wrong in shorting the euro -- you have to bear in mind what you're looking at. mark: will the ecb stop in september? the hawkish commentary is stepping up a gear, isn't it? >> look at data wise what's happening in the eurozone, i have a view that they might stop qe in september. people are going long euro. euro strengthening is not in favor of the eurozone economy. if you look at what qe has done, it has brought our when costs down -- in italy, corporate are paying 2% what they were last year.
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worry about the euro. i maintain my u.s. overweight position, despite everything that's happening. mark: are we in a bond bear market? >> not a bond bear market. we have put a bottom. yield, at the 10 year the five-year, only the three-month is below the index. the asset is becoming more attractive than dividend paying stocks. rates are going back to where people start finding bonds attractive. i don't think we are in a bond bear market. not yet. is whene best selloff analysts are --
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>> that is not happening. there is a small room for disappointment. --t it is being buffeted by we are in an interesting scenario where we have a fiscal expansion in terms of tax benefits and monetary tightening. as the fed wants to raise rates. we have both of these things going on at the same time. 3.4% -- cpi at citigroup is talking about raising wages. mark: is inflation here? >> the signs are it's helping the cause. is this global or just u.s.? >> the u.s. definitely. it's also happening in emerging markets.
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people are raising expectations of gdp growth in china as well. this will help the euro -- be cautious of where you put your overweight. if you start growing at 3.5% and emerging markets are growing at a rapid pace, that creates headroom for euro to come out of this rate and give them room so they can come back to a slightly more normal monetary policy. vonnie: fascinating conversation. thank you. let's check the first word news. secretaryd security kristen nielsen is testifying before the senate judiciary committee today. she says she does not recall how the president labeled african countries during a meeting on immigration. she said the president was simply using coupling which. desktop language. -- simply using coupling which.
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halfmply using half tough language. --ders said of the president if the president was who his why would hee is, be on nbc for decades? last friday's exam -- johnson will provide a full readout of the checkup and will take questions from reporters. the new u.s. embassy in london criticized as too expensive and poorly located open its doors to today.lic's toda mr. trump tweeted last week that he would not come to london to open the building because it represented a poor investment. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. bloomberg.
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vonnie: thank you. coming up, we will tell you about mcdonald's latest recycling push. this is bloomberg. ♪
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mark: live from london, i am mark barton. vonnie: i'm vonnie quinn. time for our stock of the hour. blockchain down sharply as bitcoin plunges. abigail: another day for the craze. we have seen big swings up and down. when bitcoin goes up, these companies go up.
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it's not just riot blockchain. we have kodak down. someive to bitcoin itself, are pointing to the fundamentals that south korea is cracking down. when you have something parabolic like bitcoin, sometimes you want to just look at the technicals, the buyers and the sellers, to see what happened behind that and what could be ahead. this is a one-year chart. from $1000 big rise to nearly $20,000. in the blue, we have the 100 day moving average. momentum. in orange, we have the 50 day moving average, and more near-term indicator of momentum. in the past, when bitcoin goes today, it's day --
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likely to go down abo below $9,0 per bitcoin because it is below that 50 day moving trend. mark: what about long island iced tea? some deal action is helping? abigail: these shares have been all over the map. now, they are down just slightly. the company is merging with satyr blockchain, a u.k. cryptocurrency brokerage. you have to take into account that not so long ago, this company was long island iced tea, almost delisted from the nasdaq, after changing its name to long blockchain, a huge move
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higher, suggesting this is a bit of a bubble. charlestly spoke about describing this as euphoria at the top of the peak. -- perhapsto swindle this is a sign of that, some of the air coming out of the bubble. abigail doolittle with our stock of the hour. thank you. the asset is beating class food chains, helping the 75% since 2014. today, they are adding more recycling. theing us from chicago, mcdonald's cheap supply-chain and sustainability officer -- chief supply-chain and sustainability officer.
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there's a lot you can recycle from a mcdonald's meal. >> first of all, thank you so much for having me on your show. today, we are making an announcement in two areas, improving our packaging and reducing waste. by 2025, 100% of our packaging will come from renewable, recycled or certified sources. we will have recycling available at all of our restaurants. why now? mcdonald's has the opportunity and the responsibility to use our scale for good to address environmental challenges. our customers care about it. the top environmental concern they want us to address is packaging waste. this is about as being a better mcdonald's and doing things that both us and our customers care about. vonnie: you always cared about sustainability. why a bigger marketing push now?
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maybe getting the stock into , social indices? >> this is about us listening to our customers and being a better mcdonald's. we've been on this journey for the last several years. we want to do things that are important to our customers and also invents environment all -- advance environmental issues. vonnie: i imagine you've already had that you were probably forced to put in more recycling capabilities in your restaurants. variescling certainly market to market. we have great examples already. in the u.k., 80% of our restaurants have recycling and sorting bins in the restaurants. in germany and austria --
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vonnie: they have to because of governmental regulations in those countries. how much more are you doing than what the governments are requiring? >> today, we only have recycling in 10% of our restaurants. this wills by 2025, be in 100% of our restaurants. the infrastructure related to recycling makes this very complicated. vonnie: i'm wondering how much is being dictated by governments broad and howa much you do on your own behalf. >> we want to be ahead of legislation in the markets where we are. we are making a global commitment. to our markets that are further ahead. to our markets that don't have the infrastructure available today. we want to make a difference everywhere globally.
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vonnie: how is this impacting mcdonald's bottom line? it's really hard to put a number to the investment that we will be making because infrastructure varies so much market by market. we will be using our global supply chain to get the most efficient packaging we can. by reducing the amount of packaging we use, that will save money that we will be able to reinvest to meet our goals. vonnie: our thanks to you, chiefsca, mcdonald's supply-chain and sustainability officer. mark: the former chief strategist for donald trump has been subpoenaed to testify before the grand jury being run by robert mueller. robert mueller is said to have subpoenaed steve bannon before
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the grand jury. steve bannon, the former top aide to president trump. they've had a very public falling out this year following the release of that book that provided alleged insights into the white house, donald trump's first year of his presidency. ig breaking b news in "the new york times." monitor thisnue to story and bring you any further developments. this is bloomberg. ♪
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mark: time for our global battle of the charts. you can access these charts on the bloomberg by running the functions featured at the bottom of your screen.
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kicking things off today, kevin kelly. kevin: stock bears rejoicing a bit because we have another in blue, weetric -- have the s&p 500 forward p/e ratio hovering around eight 18.5 times earnings. stocks are fairly valued when the p/e ratio is 20 less inflation. last week, we had cpi come out and headlinwe inflation that headline inflation running about 2%. we crossed the threshold above this rule 20. valuation is a difficult timing mechanism. as we get into earnings season -- we see tax reform
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don't need to get too worried about valuations quite yet. to get. -- pretty good. i will keep it very simple. taking a look at negative yielding debt. in the last week or two, we are raised $1 trillion that he raced -- erased $1 trillion of negative fielding that. -- negative yielding debt. an erasing oft of that debt last week. make your choice, mark.
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mark: i'm feeling less negative. i'm afraid you won. i love the rule of 20, but vonnie is the victor today. vonnie: i will lord it over kevin at all. president trump and the president of kazakhstan said to speak at the white house . steve bannon was subpoenaed by robert mueller in the rush investigation. -- rush investigation. -- russia investigation. we will be on top of all of the headlines. this is bloomberg. ♪
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mark: former white house strategist steve bannon has been subpoenaed by robert mueller. that is according to "the new york times."
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steve bannon will testify before the grand jury investigating possible link between russia and president trump's associates. earlier today, been in testified behind closed doors. sir huckabee sanders -- sarah huckabee sanders as the president will not apologize for trying to fix the immigration system. speaking to reporters today, sanders claims the president -- sanders and said claims the president is racist are "outrageous." oliver was gunned down in northern coast o kosovo. he was shot at least five times by assailant to escape in a car found burned out. convicted himrt of war crimes during the 1999 war. th


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