tv Bloomberg Markets European Open Bloomberg April 5, 2018 2:30am-4:00am EDT
guy: good morning. this is the european open. i am alongside matt miller in berlin. cash trade less than 30 minutes away. trumps economic advisers said there is time to negotiate and the market listen. stocks rebound sharply in the u.s., european futures point higher. barclays credit rating is cut to capitall above junk and
market division will see more earnings volatility as a result. facebook says most of its users data is vulnerable. ceo mark zuckerberg will testify in washington next week. sheryl sandberg joins us live today on bloomberg television. matt: we are less than half an hour away from the open and european markets. european equity markets. while get futures i did a double take because we're looking at substantial gains and index futures, 1.5% across-the-board area that does not come through in other asset classes, that risk on feeling. not to that extent. see yields up but not by much. we recovered in the afternoon as investors sold off bonds but they are not pumping them up fast -- out fast enough to align
with the 1.5% gain and index futures so it is interesting to see that big move. what do you see in the other asset classes? guy: you see that in asia and the nneka i. china will be closed and back on monday. europeani rising, equities are playing catch-up. the s&p rallying into the close, up 1.2 percent. focusing on the brazilian real. an interesting session for brazil. lula has had his conviction upheld. he was the front runner in the upcoming election as a result, you could see a double whammy on the upside for brazilian markets. one is what is happening on the political and legal front and the agricultural commodity front with this china story. both factors could come through. the bloomberg dollar index is up right .1 of 1%. that's a show you what is s.ppening in the safe haven
not much activity as a result of what we have seen in equities. and trading down by .51%, copper is bid by around one third. let's get a bloomberg first word news up weight -- update. add: china has continued to indicate they will negotiate. fears that a tit-for-tat war could affect markets. larry kudlow said much of -- spent much of yesterday trying to calm markets after the country's unannounced -- announced tariffs. saying his first choice would be to consult washington over trade. u.s. president donald trump is sending national guard forces to assist border authorities along the u.s.-mexico border. the move was due to america's security being under threat from "drastic illegal activity including drug smuggling." and
citing the threat of gangs. the memorandum did not say how many national guard troops will be sent to the border or for how long. the white house has signaled the u.s. is keep -- committed to keeping troops in syria. saiday after donald trump he wants to get out of the seven-year civil war "very soon" and bring the troops back home. america remains committed to the limiting isis -- eliminating isis. and lula da silva's plea to remain at liberty while appealing a sentence for colette -- corruption. prosecuted lula must decide whether to authorize his detention. one order could get him behind bars immediately. standard procedure suggest a one or two week delay.
the bank of japan is raising its yield target within a year according to the central banks former chief economist who says inflation is accelerating faster than expected. the former chief economist says it will its -- adjust its target. court will inflation gauge is at a factor of 5%. and amc-- print entertainment is planning more than 100 theaters. the marvel experience is opening and national geographic plans a series of events. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.
matt: thanks for that. stocks in asia has followed u.s. analystshigher as assess the danger. china and hong kong, those the chinge closed for ming festival. also joining us from singapore is mike -- mark cranfield. do we the ching ming festival. see the gains in equities reflecting in other asset classes? i do not see it coming through in fixed income. it looks like the bond market does not know what to do. mark: it is fair to say that bonds and currencies did not participate in to much of the turmoil that was going on in the past few days of the equity market. they were pretty much on the sidelines watching what was going on. you can see that reflected in the volatility indices, currency volatility hard they picked up
at the same time as the equity volatility was going crazy. both bonds and equity volatility was subdued. there is no reason why bonds should have a huge reaction now. because equities are feeling better today. you may see that come through over the next few days if china and the u.s. start talking and it looks more optimistic. the fed will refocus back on the strong growth in the u.s. and that they can raise interest rates. the bond market may start to come alive in a few days time. guy: should we ignore yesterday's price action in the s&p? what is the lesson i can learn from what we got yesterday? mark: it is pretty hard to ignore a percent turnaround. when the market is down so much a reverses and you have to take away something from it. it is highly volatile
short-term. what you can see is people want to be optimistic. trade talks will work out well, they want to have reasons to buy into the american equity story. american companies are making good money. the economy is doing well. the global economy should be doing pretty well. a few doubts about the biggest layers in the trade can get on with each other. if you put that to one side, if china and america can agree than the outlook for the global economy is good. people would have reasons to get into the equity market. you can say it was a wild day. it has ended very well. if it continues to have a good finish people will forget about the turmoil we saw in late march. matt: i saw an interesting chart on daybreak that shows donald trump's approval rating
contrasted with the s&p 500 and it looks like they are inversely correlated. trumpgh we think because bragged about his policies reducing market, that it matters to him, it looks like his base not only does not care but maybe even cheers him on when he drives wall street down. what do you think? mark: it is a little bit misleading. it is an interesting chart. the turning trump's approval tends to do more with the time he started attacking china. that is what goes down well with trump supporters. not so much about the s&p 500. the s&p 500 became volatile at the same time. it is the case that some of the things that trump says appeals to a particular kind of people and they may not work on wall street or have anything to do with wall street.
it is a little bit confusing. it is interesting the effect that the stock market can go down at the same time the president can appear to be more popular. his investors should be worried. fight the pound? suggesting that sterling is going up. mark: i cannot tell you if it will happen today. the situation for the pound has improved a lot. you can see that the negatives are starting to fall away. people are more optimistic on brexit, more central banks are buying the pound for their reserves. there is a good story about the outlook, 148 by the end of the year. bloombergk on the seasonality feature, the pound rises during april. it has had it good start. that is a good time to hold pounds. manus: thank you.
markets, this is the european open. 60 minutes to go until the start of cash trading and equity futures are positive, 1.5%. we want to get out to edlund -- ed ludlow. barclays's has cut reading one level next to junk. moody's said ratings for other big u.k. banks could be affected by the rules known as ring fencing. the changes to mean bigger earnings swings for capital markets. on most has said data of its 2 billion users could have been accessed improperly. the admission serves as fresh evidence of the ways the social media giant failed to protect people's privacy while generating billions of dollars in revenue. the company has removed the features that let users enter addressesers or email
to find other people. >> it did not take a broad in a few of what our responsibilities were. it is important to keep in mind that there are billions of people who love the services that we are building because they are getting real value and being able to connect and build relationships on a day-to-day basis. that is something i am proud of our company for doing at i know you will keep on doing that. coo, sheryl's sandberg, joins us for her first interview of the day at 8:00 p.m. u.k. time. oracles co-ceo criticized the bidding process for a cloud computing contract in a private dinner with donald trump. complaining that it seems designed for amazon to win. they say trump wants the competition to be fair but made no indication he is interested in the bidding. the president has attacked there isd its ceo and
a potential to hurt the company. let's get more on the global trade story. stocks rallied after larry kudlow downplayed tensions with china. speaking of a -- in a interview theaid remember none of tariffs have been put in place. these are all proposals. that hed to suggest should buy stocks. let's get the latest. want to start off with the kudlow stuff. what is larry up to? >> we are seeing something we comes out himself hard and they, with the policy and his at pfizer's ad -- his advisers add measures. guy: this is a planned strategy.
>> whether it is planned or ad employ, neither here nor there but something we have seen before. i do not know that anyone tells trump what to say. we have seen in the past where trump's top at pfizer's will fact, after hehe tweets something and say it here is what we meant by that. i think in some ways it functions well for the administration. they're able to throw a bone for their base. trump can be the hero and say i am proposing these extreme things. the administration can temper that. his lieutenants can temper that. they can end up somewhere in between and hope the base do not notice. matt: i wonder what the risks
are here for trump. europe pfizer's or the tenants are going out there and telling the world that what you said is a negotiating tactic. that takes the sting off it a little bit. >> that is true. how thecomes to international, the u.s. and trump is viewed, that does undercut a bit on the president's bully pulpit, his ability to say something and be taken seriously. when it comes to domestically, we are talking about the midterms and we talked about this yesterday. as they get closer to midterms and we know more about what the retaliatory tariffs from china look like, it could hit areas of veryountry and republicans hard and that could be damaging for republicans in the midterms. they are trying to keep control of the house and senate. if you are a republican member,
the stance is not necessarily helping you. even if what they follow through on is less severe. that is a big if. even if that ends up happening that could still have a negative impact. the optics might not be good in the heartland where republicans need to keep their seats. is the timetable compressed? >> that is something. the cat is out of the bag. democrats will talk about this. republicans wanted to be talking exclusively about the tax bill and how they pass this legislation they claim is really good for middle-class people. that is what republicans wanted to talk about and they had a midterm strategy and this is taking away from that. the latest ins on
matt: we are minutes away from the european open. looking at your stocks to watch, joining us now is albertina. talk to us about barclays. this is the theme we have heard it in the last couple of days. albertina: absolutely. , cut thatwngraded to its lowest investment grade. one level above junk. this is because of the new rules that barclays has had to comply with. that wereng rules put into place after the crisis. separate the invest in
banking operations from retail to protect retailers and people going to the bank. moody's said this will have an impact on other u.k. banks, the biggest u.k. banks. something, a trend we have to look forward to. is the ceo checking out? albertina: absolutely. the current deputy ceo who was chief integration officer after the delays in the merger. people believe this could mean further integration ahead. bernstein said in february when rumors started circulating he wo uld be the right person to
a second operation. matt: we have had a lot circulating around deutsche bank. german regulators were out with a warning yesterday. albertina: except the. we are expecting german banks like commerzbank, deutsche bank to open higher. , had anlator is saying interview that big mergers are a risk trade they do not produce the probe -- problems every bank's have. have a merging you will bigger problem. people should be aware of this. guy: thank you very much. joining us from our equities team, the latest here.
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oh boy. wi-fi fast enough for the whole family is simple, easy, awesome. in many cultures, young men would stay with their families until their 40's. guy: one minute to go. cash trading about to start in europe for european equities. sharply higher this morning, futures. let's give you the context. the reason for it, a decent rally yesterday of some ugly, ugly initial members. the s&p finished up by 1.2% yesterday. ally kudlow, mr. ross, trying to get the market going, trying to downplay the trade story. the dollars better bid. the euro trading at 122 .64. oil trading reasonably positively at 68. let's show you what the futures look like.
very positive for europe. euro stoxx 50, one .7, good. ftse is 1.4. cac, 1.5. dax, 1.7. day the day today -- divvy today. the london market might underperform. a positive start. cash trading about to start. let's show you numbers. 304 where the ftse 100 is right now. barclays could be focused. be german banks expected to reasonably well bid. the cac 40 expected to open up around 1.7. the ftse already up over 1% this morning. int sectors are firmly positive territory through the ibex up by 1.2%. we will come back to some of these numbers to show you them in more details and a few minutes time as markets open up. , up by out of the gate 1.5%.
everything is in positive territory. hotspots and materials look quite positive. financial cooking quite strong. as. looking quite strong well. a lot of stocks going ex-dividend. when you look at the downside, you need to back those divvies out. matt: as far as the names, i should say we have 474 stocks gaining and 13 down. typically, when you go ex-dividend, you have obviously the stock drops because that payment is no longer available to shareholders buying the stock on this day. 20 companies going ex-dividend in the bloomberg european 500, yet only 13 losers. this market is very strong. take a look at the big gainers here. are gains of, all more than 1%, and many are more than 2%. gaining.sml
the chipmaker signifies tech is bouncing bank that today. glencore up 3%. bnp paribas, more than 2%. interesting to see the banks. hsbc is again or as well. with astanley came out note saying european banks are not going to grow profit as quickly as the u.s. things. we have the downgrade on barclays to think about today. look at the laggards. only 13 on this screen. the 10 that are weighing on the bloomberg euro 500 index, the most. some of the dividend names. you have smaller names or smaller moves. telecoms down by .25%. most markets are gaining. most stocks in this with a
rising tide. boats.ifting all guy: the market trading very strongly. ftse up by 1.3. dax open.r a don't have a full open on the german market. there we go. 1.6% for the german market. financials expected to be reasonably well bid. also expected to trade quite strongly. the initial knee-jerk response. it was only half an hour after where we are now. we saw this china story come out. the market started selling aggressively. a sell first ask questions later mentality. we saw the 1.6% drop. stocks climbed back strongly, up 1.2%.
stocks following suit, but remember, china, the mainland market, both closed for the festival today. whatproviding details of exactly that means earlier on in the program. i will get him to repeat that. what do we make of this rapid turnaround we saw yesterday? let's bring in some voices. dani burger is with us on set. , another guest. it was an amazing turnaround. dani: a lot of whiplash from this turnaround. these markets are finally reactive. we have not seen this kind of market in a wild. did dot shorted stock very well. right when we had that turnaround was the short interest stocks that really led the market up. not saying this is all a short squeeze. i do have a chart here, the goldman sachs basket in the white.
we did have administrators coming out, trying to downplay the trade tensions. when this outperforms, most likely it has an element here. matt: how narrow of a reaction has the latest iteration of the trade skirmish been? dani: that has been something that's really interesting to observe. the beginning, it was a risk off. we barely saw any move in the dollar-yen. 10 year yields in the u.s. barely moved. it was very concentrated on equities, which would be strange, because international trade -- i mean, how more macro can you get as a factor for moving around markets, but still is really concentrated in equities. really, the only movement i could see. volatility for bonds, for fx, trending downwards. it's really surprising, if trade
up,sions are whipping you think this is where we would see the most change, and we are not seeing it. guy: this was an equity story. why was it just an equity story? >> obviously, equities are the knee-jerk reaction. they have been the with the reaction over the course of the last couple months since we had the jobs report in early february. the inflation aspect and then the trade aspect that has driven equity volatility. bonds have been fairly muted in this offering. you expect this big rally in bonds, but you have the federal reserve in the process of continuing to normalize rates, rally inch can bonds an environment where we are also going to see rate hikes? equities have taken the brunt at the moment. matt: i wonder why we have not seen bonds react. i guess there is the argument that china may be curtailing its purchases of treasuries, and
$1.2 trillion player in the market. do you buy that? iain: that is one of the things people are talking about, china, the fact that inflation is likely to pick up. the fiscal side on the u.s. is likely to pick up and it could well be inflationary. you have got the fed. all of those should be bond negative. although you would typically expect that flighty quality -- we were at 295. 10 year treasuries back a few years ago. it has not been as aggressive as you would have expected given the reaction to the equity market. away?hat can we take what can we deduce from what we saw yesterday about how models have been performing? give us the background picture. dani: isn't it strange when no one is claiming models?
i barely heard it at all yesterday, which is a bit of a relief. fard followers are up so this year, whereas the s&p 500 is declining a bit, which would indicate their exposure to u.s. equities and equities as a whole are not as great as it used to be. remember when we breached the 200 day moving average? it was very anticlimactic. perhaps models right now are more attuned to different asset classes, and you can't blame them. discussing, been other asset classes have barely been moving. volatility is not there. i think models give a little bit of a pass. in general, managers have been really low to the ground. we have seen hedge funds from j.p. morgan, data services recently reduced their beta a lot. people are pretty low to the ground. around the to punch market seems muted at this moment. guy: we didn't get that kind of selloff and an aggressive led
lower. i wonder how the markets are set up at the moment in terms of where do you think the bias lies right now? is it actually to buy? dani: so, it's actually this weird moment with a lot of these models, where they have been tuned to buying. if you buy, you are going to make money, but think about what markets have been to recently -- doing recently, within around. unless they manually go in and redo the model, then they are going to be set to buy. they will buy to the long side at the moment. guy: thank you very much indeed, dani burger. j.p.stealey at morgan asset management will stay with us it up next, the stocks this morning including this one. barclays, trading a pretty much in line with the market this morning. financials are generally well bid despite the downgrade we
recovery from the drop we have seen of late, looking at gains of 1.5% more across the board. 1.8% here on the dax in germany. let's get our top stop stores, look under the hood. for that, we go to nejra cehic. nejra: let's start with barclays having its debt rating cut to one level above junk by moody's. moody's referencing the impact, saying it expects the change to andlt in bigger swings earnings for barclays capital markets business. barclays shrugging that off, up almost 2%, with a number of financials. gainsalysts pointing to with a 10 year treasury yields above 2.8%. barclays on the front foot. telecom italia, also one of the gainers i'm looking at. thatts an italian media the state lenders me today to review the proposal to acquire a stake of between 2% and 5%. italian gaining.
a specialty chemicals company higher after targeting $2 billion in north american sales by 2021. that would make north america its second-biggest global market. matt matt:. guy. thanks very much. us, iain stealey. we are getting a lot of data out on europe, and it seems that in that weces, the growth are seeing is still stable but slowing. what is your take on european growth? iain: that's a fair point. the problem we had is when we looked at the pmi data that we were seeing over the last few months, it was a bit too optimistic, pointing to growth that was a little bit better than what the hard data was showing. that pmi data has rolled over some of the survey data, but probably more in line with what the european economy can achieve. the 2.5% growth. we are very constructive on europe as a whole.
we see growth positive this year. what would be more of a concern is if you saw a greater rollover or continuation of that survey data rolling down. hopefully, it stabilizes here. over,he data are rolling particularly the survey data, because of the facts. capacity constraints are starting to impact companies. as a result of which, they are not able to drive higher from here. that would seem to me to be a positive thing. the output gap probably closed a while ago in germany. it has not closed elsewhere. read the data differently across europe. in parts of the periphery, the gap has a long way to go to close. the pmi theoretically should be staying relatively elevated. in germany, i understand what's happening because of the capacity constraints. do i need to get more granular than talking about europe? iain: i think you do.
there is a lot of slack in parts of the periphery. a lot of opportunity there. you see growth coming through in those regions and drive the european recovery. the first leg from the north and than the south can kick and now. i think that is what is happening. matt: all right. you are going to stick with us. morgan asset j.p. management. he will stay with us because we have a lot more to talk about. we have got the spanish march composite and services pmi. the composite pmi falling to 55.8. the forecast was 56. you can see that is rolling over a little bit as well. the euro-dollar trading at 122.53. we will speak with the fed president after 4:00 p.m. london time. don't miss facebook coo sheryl sandberg. she joins us for her first interview of the day at 8:00 p.m. tidjane thiam. this is bloomberg. ♪
5.3%. the tariffs could have an impact as well on key u.s. states. this is a map of where u.s. grain elevators are. if you were to overlay where trump voters tended to find themselves, you may find a significant correlation between those two things. i think that probably tells the story about why the chinese did exactly what the chinese -- why they did what they did yesterday. still with us, it iain stealey at jpmorgan asset management. tariffs in some ways yesterday were surprising. in other ways, not. kind of walk us through what effect they are going to have and is this the effect the chinese are looking for? sebastian: at this stage -- >> at this stage, it's a question as to whether it will actually
happen. is this the opening salvo?is this the start of trade negotiations ? will they deal the come to some solution? buy theses to soybeans, so if they are putting this import tax on them, they will end up paying higher prices. that is not good for their producers, and that could make higher pork prices. the u.s. needs to sell them, so it's not great for either side of them. co.t: i look at gl i see soybeans up just .1% right and but the volume is big, it is not just that much of a rebound in a heavily traded market. what kind of reaction are you seeing after the selloff we saw in so many stock commodities yesterday? lynn: i think the market moved today and it reflects what we are talking about, that things are calming down. i don't think anybody expected
them to do this, to actually take that step. you know,you saw, some people from the trump administration say we are in negotiations and we want to work through this, i think the market is calming down and waiting to see where will actually go. guy: global breakevens are pushing higher. walk me through the inflationary impact. prices are down. soybeans, but if you take a step back and look at what happens if we were to see a trade story develop, potentially, that should be in the near term inflationary. how does the market price more near-term inflation?how does it figure out what the impact is for further down the road? walk me to the impact this will have. iain: when you get tariffs on goods in both directions, the prices are going up. that will be inflationary. raw materials coming into the u.s.. u.s. producers have to put prices to combat that for the
u.s. purchaser. that probably leads to near-term inflation, expectations of that in the front end. down the line, what we might wealthy is negative for the economy. guy: a flatter curve. iain: higher prices near term and it creates job disruption further down the line. closer somebrings kind of global slowdown, and that is what i think most people don't want a seat, and why we late yesterdaylk saying none of this is in place, just the start of negotiations. can to see american farmers as trump space, and of course, those states voted for him, but i don't think it is fair to make a generalization. just because someone is a farmer they support the president. how are they reacting though? what have you heard from the actual producers of these commodities after the big drops and the big surprise, really,
from yesterday? the story broke, we talked to a lot of farmers in the midwest. with interesting is we are in the middle of planting season, so a lot of the farmers, they want to make a choice between corn or soybeans, they still have time to do it, but they have to move fast. a lot of farmers out there are trying to decide whether i will make more money selling corn or soybeans. ori want to wait this out try to take a crop that is not impacted by these tariffs? guy: can i ask you a quick question? if this were to become a reality -- the u.s. administration is keen to walk back a number of markets on the precipice. one of the interesting stories overnight is what is happening in brazil. story has got a political that's developing. it could become one of the beneficiaries if this were to happen and hit the united states. -- is there aeas
compensating factor elsewhere in the world that could benefit if we were to see this happening? lynn: there is really not. in terms of big soybean producers, really, the only people in the game is the u.s., brazil, and argentina. even if brazil and argentina beted to make up what could lost from the u.s., they could not because there is not enough. china will have to buy from the u.s., so essentially, if the tariffs go through, they will have higher prices. guy: i know matt wants to jump in. what happens if you cancel soybeans? what do you do with it? [laughter] lynn: you can store it. you can put it in a silo until you could. i'm sure you would be able to sell them. china would have to buy. they are pigs. they need the soybeans. something like 400 million pigs in china. they need soybeans to eat. also, if you can't sell the soybeans, i'm sure your congressman will push for a law
that would make soybeans into gasoline that destroys your engine. let's talk a little bit about how much you see these things spread out. theou see the pain in commodities sector, how long does that take that to hit high-yield in middle america? iain: i think you actually do need to see it play out. at the moment, the market is taking it -- the fixed income market especially is taking it to have a better look and understanding of it before we oversee some of those additional reactions. the equity market seems to be taking the full brunt of it. the credit markets, they have been a little bit weaker. other reasons other than focusing on the tariffs side. we'll see how it plays out. are we actually going to have these tariffs in place, get a trade war before the reaction that feeds into the bond market? matt: thanks very much. let me thank lynn for joining us today.
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matt: 30 minutes into the trading day, and we are looking at massive rallies across the screen. here are your headlines from the bloomberg. larry kudlow says there is still time to negotiate, and the market listens. stocks rebound sharply in the u.s. purity even more across asia, and now, we are seeing big gains across this continent and on that island. barclays credit rating cut to one level above junk. green fencing rules become a reality. are capital market divisions going to see more earnings volatility? facebook says most of its users vulnerable.
mark zuckerberg will testify in washington next week. sheryl sandberg joins us today on bloomberg television at 8:00 p.m. u.k. time. welcome to bloomberg markets the european open. i am at miller in berlin alongside guy johnson. guy: every single sector, matt miller, in positive territory today. around 4%.00 up by a little bit more than 1.4% this morning. kind of stocks that are rallying. the heavyweights are on the move this morning. decent gains in the financial sector, in some of the mining stocks. decent gains across the board's morning. let's take a look at what is happening on the downside. the reason i am going to talk about this is a lot of these stocks are ex-dividend today. a lot of stocks ex-dividend on thursday, particularly the u.k. focus. you are seeing a bunch of stocks go ex-dividend today.
aresome of the stocks lower, there is ex-dividend. the overarching theme this morning is picking up on what we saw yesterday on the backend of the s&p session, we are seeing a very strong rally in europe. here is sebastian salek. sebastian: the u.s. and china have indicated they are willing to negotiate on escalating hoping to ease fears that a trade dispute could derail the strongest global expansion in years. there he cut low spent much of yesterday trying to calm the market after the two companies announced tariffs. china's advance at her -- ambassador to the u.s. will confront washington over trade. donald trump sending national u.s. forces along the mexico border. according to a presidential memorandum, the move was due to american security being under threat to too drastic legal activity including drug smuggling.
the memorandum did not say how many national guards would be sent to the border or for how long. the white house signaled the u.s. is committed to keeping troops. it comes a day after donald trump said he wants to get out of a seven-year civil war very soon and bring the troops back home. the white house spokesperson says america remains committed to -- rejectedsupreme court the former president's plea to remain at liberty while appealing a 12 year prison sentence. they paved the way to the imprisonment of the front run it. you must now decide whether to authorize it. standard procedure suggests a two week delay. likely tof japan is raise its yield target within a year according to the former
chief economist who says inflation is accelerating faster than expected. said it will adjust its target for 10 year government bond yields. now core inflation gauge is .5%. the saudi crown prince is starting to pay dividends. the general entertainment authority announced a deal to bring shows such as cirque du to theand disney on ice kingdom. it is planning up to 100 and theaters. the marble experience will open in riyadh. news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. matt: thanks very much. to ones debt ratings cut level above junk by moody's investors service yesterday. that is after the u.k. bank separated its investment banking activities from retail
operations to comply with new rules. stephan morse joins us now. still with us, iain stealey at jpmorgan asset management. talk first about what's going on at barclays, and then kind of get into the broader european banking picture, because morgan stanley also had an interesting note out yesterday, and deutsche bank has its issues here. what is the story with the company, specifically barclays actions? >> the overall credit rating has been downgraded one notch to one above junk, which means that moody's has seen some problems in the future with earnings in addition to some structuring issues around the bank separating its trading activities from its retail bankers required by u.k. law for next year. what this means for barclays is they will likely have to pay higher rates to refinance some of the debt coming due, which they were relying on to boost their earnings.
means --s downgrain downgrade means they are one step lower. guy: is this a surprise? >> i think it was already priced in the market. if you look at the bond trading they and the share price, shares have actually increased. the bonds have not moved that much. it looks like investors in barclays were expecting this. there are two other rating agencies. both of them rate barclays slightly higher. we will have to see if there is more momentum and movement from others. this could develop into a bigger problem for the bank. matt: what is the issue? just don't have the scale, i guess, it is, to grow as quickly as u.s. banks. they clearly did not recover as quickly post crisis. what slowed them down, just the size, the reach? >> you're right. european banks were slow to recognize and slower to deal
with their problems, and they are still feeling this a decade on from the crisis. we had another note from other analysts saying deutsche bank needs to look at its u.s. business and think about taking capital investment out of new york and bringing it back to europe. it really just confirms this. less two big global investment banks out of europe are deutsche's and barclays, and both of them are really struggling to compete with wall street. they have plans to invest more, plans to grow, gain market share, earn more money. whether they can actually do this and what investors will give them time and space to do this is another question entirely. guy: were the credit markets given time? iain: they liberty good to us toause they have been forced become very well capitalized, which is actually probably detrimental to how quickly they can grow, sitting on a lot of capital. from a bond market them point, they look really healthy to us. tier one ratio's, you want your money back.
those banks will be a will to do that for us. as i said, it was in the price of barclays. guy: the bonds have not really moved. is there individual names? onyou look at what happened the credit rating front and the business models as they develop, as you look at what happens with individual names such as barclays and deutsche bank, are you heading to be more selective and specific when going to the numbers? iain: definitely. there's always going to be individual stories out there, especially when we get to later stages of the cycle. it is a time when the analysts really earn their keep in making sure you are in the correct bank at the right time. a broadbrush statement, the european sector looks very healthy at the moment. can you find areas where you are getting more return here in banks than you can in the u.s.? iain: when we look at the overall banking system in europe, the area we like is the
subordinated bank capital. you are still getting a spread comparable to global high-yield for what we think is a better quality asset. obviously, there is a bit less liquidity in the market. as wellrket is not developed, large, does not form part of bond indices. you are paid to take that risk. if you can get comfortable with the banks, go down the capital structure, there is value to be had in that part of the market. guy: barclays has a new activist investor. you have some fantastic pieces. do we know what this activist investment wants? it coincidesether with what is coming out of the rating agencies as well? iain: this is a big mystery. am sure jes staley would love to know whatever bramson's plans are. it would not be a quiet, passive a -- passive investor. other investor was looking
specifically at debt refinancing. barclays had to issue a lot of the very expensive that in 2000 -- debt in 2008. it was planning on saving lots of money in interest costs which would remove a structural impediment on the bank. this downgrade could affect that, but certainly, with the byre price being dragged up the market, this is not a disaster for any of the major shareholders today. we are going to get first-quarter results from barclays sam querrey the real thing will be if they managed to gain market share back from wall street. matt: i want to get back to -- the difference between your point of view or the credit markets point of view banks and the equity markets point of view of banks, we had german regulators out discouraging big mergers here, although some of marked ashave been possibly targets in a broader m&a action in europe. do you think that european banks need to get together?
is consolidation necessary right now? iain: as we mentioned earlier, they might will struggle to compete with the larger wall street banks, but from my standpoint as a bondholder, i am comfortable with what's going on in the banking system in europe, and we are comfortable that the capitalization they have allows us to get our money back on it. at the moment, from a bondholder standpoint, we are very happy. guy: gentlemen, thank you very much indeed. stephen morris enjoyed thank you to iain stealey, fixed income portfolio manager at jpmorgan asset management. he is not quite done yet. he will be joining us on bloomberg radio, london dab digital. we will be carrying on the conversation as match and i will be carrying on -- matt and i will be carrying on the conversation. a group anticipates full-year billings. the early call i saw miss was plus 10%. we are plus 18% on this stock
today, a very different picture. this is your weather report. we are talking a little bit about what's going on in the markets. let's find out the details. here's nejra cehic. nejra: let's start on the upside. intraday gain on record. billingsning after growth towards the top end of its previously guided range, up 18% right now, but earlier, up by as much as 20%. on the downside, btg, the global health care company dropping the most since november of last year. full-year revenue came in line, but it said the coils market is taking longer to develop than expected. that's one of the worst performers on the stoxx 600, and so is just eat, hitting its lowest since october, downgraded to underweight at jpmorgan. guy: thank you very much indeed. what can we expect from the chinese in the ongoing trade
tensions with the united states? the ambassador says china will always stand for negotiation. he does warn, if others do things in the wrong direction, "we will have to respond." joining us now, the head of chinese research. good morning. be changing tactics from the chinese. they came back harder and faster than they have done in the previous responses to the trump administration. about thethat tell us evolving strategies we are seeing from the chinese and the lessons that have been learned? >> china knows it can afford to play highball on this. it has a lot of its reliance on exports or for technology which is lessening. it can afford to stand up to any sort of u.s. aggression as it sees. administration, china is a lot more confident in its global stand, so it things
it can stand up to the u.s., and also, it learns wha lessons from japan in the 1980's. demands,lated in u.s. and suffered as a result. china does not want to end up with the same fate. matt: i wonder why, miranda, china is not being even more aggressive. i mean, they continually match president trump with tit-for-tat terror threats, but they -- tar go threats, but they don't above and beyond. why don't they double down on there' strengths -- their strengths? miranda: to be honest, they are fighting two different battles here. the u.s. is trying to stop high-tech groups from coming into china. what the chinese tariffs were is more about hitting the trump
voters earlier and making it more of an election threat. to be honest, tariffs don't help china. they need soybeans and aircraft. unless they are manufacturing domestically, they had to import because they don't have it themselves. tariffs do not help china, but they need to stand up to u.s. ion to get to the negotiating table. clearhere seems to be a walking back from the precipice on both sides of the fence. the u.s. authorities were certainly doing this. messagey, that was the we got through from beijing as well. do the chinese want to end up here? is there an acceptance of the fact they will have to cede some ground? is the objective to get back to stable footing? what is the tactic and what is the objective?
miranda: tariffs don't help china in any way. it wants to open up its markets and sell more to global markets. this is not helpful for china's development. what the u.s. wants is opening up of the chinese domestic market. it doesn't want to be threatened by chinese manufacturers selling chinese owned goods into the u.s. market, but it also wants opening up into the tech market, financial services market, being able to have 100% ownership of companies in china in the same way chinese companies can't own in the u.s.. the thing is that china can open and under negotiations, it can open up financial services, the auto market. we are now in a free economy. why the negotiations are equal. china can always stop u.s. companies operating in china directly without any tariffs or
without any sanctions, just because of the state control of the market, so that makes it very different as a negotiating tactic. will we see the chinese now allow 100% ownership? now allow companies from the u.s. and from europe go in? sortseem to have already of allowed that they will go in that direction when they are discussing the fact that they won't be requiring intellectual property in order to go into partnerships. miranda: they can do that, but the reason why they are playing hardball now is instead of capitulating immediately and opening the market, they can impose tariffs and climb down from that, and so the u.s. can say we have got a win here ahead of trump's midterm election, and the chinese can say we have not seen this too much. this is part of the negotiations. the idea that china will open up
, it's not necessarily going to open up as fully as people hoped. guy: can i ask you a bit about the currency? i am wondering what china now has next if we were to see another leg of escalation. what would be part of the escalation, and would it be the currency? we have a chart report later this month -- treasury report coming out later this month. do we wait until we put the currency story into play? where does it fit into the overall narrative? miranda: china, in terms of the long-term, is trying to get away from the dominance on the u.s., and it put up a lot of isolating the renminbi from a lot of these moves, and the interesting thing is it has not used the forex reserves or any sort of threat there, because to be honest, it's not really interesting in the negotiations. if they start selling down forex reserves, it hurts the value of their reserve.
obviously, it is still there for the threat, but in terms of it actually coming to pass, they are already selling down forex reserves because it's lower. they are not buying -- you look at the chart over the last few years, and forex reserves are pretty much flat. they are not buying anymore anyway. with a sell down? -- will they sell down? probably not in reality? matt: thanks very much. miranda carr, head of research. we could obviously talk about china forever, and hopefully, we can have you back on and do some more of that. bloomberg users can interact with all of the charts that we show now by typing gtv . we simplified this to allow you access all the charts we bring up in order, so you can see, going back, you can see them in the context. get the clip.ly
matt: welcome back to the european open. i am matt miller in berlin. strong gains across the board for the equity markets, but big misses for a german data coming across. we had factory orders out earlier with a huge mess and drop in the previous reading. on germaning a mess services pmi as well at 54.2 -- sorry, 54.2. the reading was 53.9. misses for pmi. the question is how much is the economy slowing? company. is a tech the buildings numbers look much better than the market was anticipating. the stock had its biggest jump ever in its history this morning, currently trading up by 18.7% on huge volume, over 600% of the normal volume we see going through honest stocks, so seeing very big gains. up over 100% last year. interesting numbers to take away as well. so far this year, it has fallen
♪ >> talking to down trade tensions. this china willing to negotiate? investors breathe a huge sigh of relief. land of the rising rates. before the boj chief economist says that a hike is likely within a year as inflation accelerates higher-than-expected. admits that the data of most of its to begin users could have been accessed, but mark zuckerberg insists he is still the best person to run the company. ♪