Skip to main content

tv   Bloomberg Markets European Open  Bloomberg  July 4, 2018 2:30am-4:00am EDT

2:30 am
guy: good morning. happy fourth of july. welcome to "bloomberg markets." open." "the european cash trade less than 30 minutes away. china focus. chinese stocks continued to slide. macron aggression. china temporarily banning sales from the u.s. chipmaker. macron in the latest trade war escalation.
2:31 am
will they take a hit. passports expired. just 20 at a hundred banks have met the deadline to operate in the eu post-brexit. less than 30 minutes to go till the start of european trading. futures are lacking a little bit. particularly the chinese markets. at the moment, looks like we're been to see a negative day. the u.s. will be out later on. we have futures trading. that's going to be a factor as to work our way through today. that show you the gmm and give you an idea what happening here around the world. you can see it there. trading a little bit stronger. the yen is trading higher. a lot of things are trading up against the dollar. be aware of that.
2:32 am
in terms of the commodity story, let sure you it's going on. it's going to be interesting to see what will be the dominant factor this morning. copper a little bit weaker this morning. agricultural complex a little bit stronger. we will talk about where china sits in terms of the capacity story. copper continues to slide. the inverse relationship between copper and the yuan is really strong right now. that correlation is something worth paying attention to. let's get a first word news update from juliette saly. juliette: theresa may is said to be facing a fresh showdown with her cabinet over plans to keep the u.k. toast -- closely tied to eu you rules after exit. sources, her colleagues want her to explain more clearly our new proposal for the future customs regime will work. are pre-brexit ministers
2:33 am
concerned the plans could keep the country changed to the eu's tariff regime indefinitely. the former malaysian prime minister has pleaded not guilty to charges of corruption. that's in connection with a multibillion-dollar scandal surrounding city -- state funds. a. the country's high court, he was granted bail. could beguilty, he jailed for up to 20 years and find. he denies wrongdoing. rouhanipresident hassan is seeking closer ties with switzerland and is calling on europe to deliver on its promise to shore up the nuclear deal. the record inng jeopardy and iran says it will review its nuclear activities unless france, germany, the u.k. guarantee continued investment and trade. president trump will continue imposing sanctions on the islamic republic next month. >> the two countries agreed of
2:34 am
the nuclear deal is an important achievement on the political level. the fruit of long and difficult negotiations and it is in the interest of every country in the world that this agreement is preserved, maintained, in the interest of international peace and security. after going out of six major tournaments through penalty shootout, england finally progressed in a world cup through penalties for the first time ever. columbia and england were level on one goal apiece with european side finally winning a 4-3 in the shootout. they face sweden in the next match. it is july 4 so u.s. bond and stock markets are closed today for an independence day celebration that you can watch some of the fun tonight with our exclusive live coverage of the boston fireworks spectacular at 1:00 p.m. london time.
2:35 am
global news 24 hours a day on air and at tictoc on twitter. this is bloomberg. guy? guy: thank you very much, indeed. has indicated, u.s. markets are closed. asian stocks on the mixed side today. save you are looking for a trend, negative. the yuan has stabilized which is an interesting aspect to all of this. mark cudmore joins us now. mark, morning. once the story? supposedly, the whole yuan depreciation was the center of stress of asian stocks. two things to take away.
2:36 am
clearly, the yuan isn't working as a guide to lead us out of the misery and it's probably reflective of how negative the sentiment is that even we have --s positive could turn, positive turn, asian stocks can't rebound. , i thinkterm investors it provides an opportunity but it's hard to catch a falling knife. guy: what should we think about? how should we contextualize what we are seeing here? you wrote about this earlier. talking about 2015. this sentiment is now as dark as it was back in 2015. is that the right way of looking at what we have out of china? mark: that's what i've been hearing from people i'm talking to. there's a really extreme negative sentiment that i haven't seen for many years.
2:37 am
i can't remember what was the onshore sentiment because i was in london at the time but it's worse than it was a couple of years ago. it shows the locals don't believe that the government has control of the situation. china's economy is still doing exceptionally well. there has been some weak data points but also some strong ones. they are set to grow comfortably above 6%. doing well overall and i think, officials from several different corners have shown a change in policy shifts of the last couple of weeks. state and the pbc -- pboc advocatedouncil targeted easing. no longer with the deleveraging campaign be so intense. it has overshot fundamentals.
2:38 am
one possible narrative is that when tear's go into place, it's a cell the river, by the fat. maybe next week things do better. or people come back from independence day a little bit happier. you and i were chatting a little bit earlier on. saying investors should bear in mind. a lot of negativity surrounding india at the moment. people are worried about what is happening. still looking reasonably rosie. , and you're not a super short-term investor, maybe there is a positive narrative to latch onto. there's a complete disconnect at the moment between the broad market narrative and long-term fundamentals. it's important for people to be aware of the narrative.
2:39 am
most of the time, the narrative dominates fundamentals but investors want to be aware of when that kind of narrative gets this imbued. it's hard to know when it will shift but there may be an opportunity coming up soon. economies,d many were not seen a material impact. especially china. china and india are two of the three largest economies in asia. two key economies and they're both doing well. they're both above 6% this year. they are showing economies that are still continuing to expand. particularly in the services sector. overall, the fundamental story is exceptionally positive. that does not mean stocks are going to turn around and bounce but it probably means they will be a lot higher in a couple months time. some 30. tends when
2:40 am
sub 30. d you think that is more important than the payrolls? people keep asking them about it and they have to express their opinion but i think it's a bit of a mistake. i think the curve will continue to flatten. i think it's part of a natural cycle. think it will eventually inverse and only when it starts to steepen after an inversion that we start worrying about in session -- recession. i think it is more important than payrolls. the market has been slow to latch onto the story but it's clear from recent years that the feedthrough from low unemployment into rages is -- into wages is broken.
2:41 am
it's much less than people expected. we have this low headline unemployment rate. participation is still quite low. the real labor slack in the u.s. economy is probably larger than people think. that's why we're seeing it come through slower. butolls are still important it's a marginal story from what it used to be. great stuff. mark cudmore join us area you can find him and the rest of the team on mliv on your bloomberg. next, microtechnology banned from selling chips in china. you will take you to beijing next. this is bloomberg.
2:42 am
2:43 am
2:44 am
♪ 44 minutes past the hour. we have 15 minutes to go into the start of european trading. here's juliette saly. comparable retail 0.2%,rose by .2 -- by meeting the average analyst estimate. it was the slowest growth since the supermarket acquired a
2:45 am
competitor in 2016. reflects price reductions in key areas. the ceo of at the at airways has plans to scale back the global ambitions. and jets may be cut orders are in doubt after a whirlwind review. in an exclusive interview with they told manus amount to travel is higher than it's ever been. >> there be failures this year, there be failures next year. this is that on
2:46 am
there are more people traveling now than there have ever been. ryanair expecting pilot strikes in its irish home market in what may become the most significant confrontation between europe's biggest low-cost carrier and organized labor to date. the pilots produced a 94 21 vote in favor of action. that support -- that's according to the irish airline pilots association. it's the latest in a series of labor battles for ryanair. that is your bloomberg business flash. thank you very much, indeed. a chinese court has temporarily banned macron -- micron technology from doing business in china. it stems from a legal case. for now, we bring in tom
2:47 am
mackenzie. micron collateral damage? given the timing, it's hard to see that this isn't in some way links to the trade discretions -- discussions between beijing and washington. the chinese court is not independent and they are ultimately part of the chinese come his party and part of chinese government. this initial ruling blocks them from selling about 26 of their products in the chinese market. in 2016, they had about 50% of their revenues in the chinese market. it's a significant blow. you saw the investor reaction yesterday. , this cuts two ways. cut off from u.s.
2:48 am
semiconductors and feel the pinch and then the companies in the u.s. are cut off from the market. we are still waiting for the closure of this case. guy: it will be interesting to see how european stocks trade off that. let's talk about the telecom sector. winning a reprieve for now to resume operations. how clear is the road in front? tom: this is a brief positive for szte. chinesee second-largest telecom equipment maker. there is a view that after the date it will be in compliance with the u.s. regulations given that it has changed its board
2:49 am
completely and is close to starting to pay the fine imposed on it. it has been something of a switch up. the commerce department initially bad company. then trump came out and said he wanted to do a favor to she 2 -- to xi. it is back up and running. there are future hurdles that involve lawmakers in washington debating how much pressure should be put on the company given what they say our national security concerns. thank you very much, tom mackenzie. the latest on the trade story. we are minutes away from the start of european trading. tech stocks could be under pressure.
2:50 am
erickson could be a company that is benefiting. there's a major deal in italy. we will discuss all of the market moves as we approach the open area did -- the open. now 10 minutes away. ♪
2:51 am
2:52 am
guy: let's talk about the stocks
2:53 am
that are going to be in focus this morning. we talked to our european editors. taking a look at what's happening. us toa pence you join talk a little bit about erickson. let's start with you and talk a little bit about this timeless story. their numbers dropped early sharply. was that a trade story or something more idiosyncratic when it comes to what is happening with daimler. daimler really stood out yesterday we got the numbers. down nearly 10%. there was a fire at a supplier plant in the u.s. where they make a lot of suvs. that had nothing to do with trade. trade is the big focus. friday, chinese tariffs are due to come in which will
2:54 am
daimler exports from the u.s. to china. guy: we will keep an eye on that. sainsbury's numbers, first-quarter numbers this morning, are pretty much in line with expectations. there's some big news and some rather bad news. the big news is the general merchandise division. it follows three quarters of decline. it shows the progress they are making following their acquisitions of 2016. the bad news is the grocery numbers. mores the weakest gross in than a year and shows a struggle that they are having up against the discounters and revival of the other main brands.
2:55 am
they're doing the merger they're proposing. reflecting maybe some consumer weakness. thank you very much. we are talking to tom mackenzie out in beijing. a nice little story about what happening with erickson. >> a nice win for erickson. a 600 million contract to provide equipment for the largest mobile network in italy. ck is buying it out. this is erickson benefiting from problems in the u.s.. with trump's ban on equipment supply. there was some speculation a couple months ago wondering whether cte would be able to have complete major contract in europe. now we are seeing that it cannot. guy: thank you, everybody.
2:56 am
first go on your bloomberg. all the details on what happening with the stocks news. fair values. points to a negative start in europe. ♪ retail.
2:57 am
2:58 am
under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver.
2:59 am
start of cash trading in europe. europe is bouncing a little bit this morning with the dollar on the cash -- back foot. nikkei closing down .3%. it gives us a negative bleed off into the european session. oil is trading at 77/78. the s&p, half day yesterday and closed today. let's talk about the futures in europe and what they are pointing to. think it's going to be a negative start but not by much. you may see the morning being more exciting than the afternoon.
3:00 am
u.s. will be out this afternoon is going to remove a significant chunk of the volume story. i think the afternoon could be fairly quiet. at .2% on the negative side. let's show the actual numbers. cash opening here. the ibex is down. london is flat. the cac's opening up down. it's a struggle to see the drivers for the european equity market. stabilizationome in the story surrounding what is going on with the yuan. the fact that equities are still going down with the yuan stabilized maybe slightly negates the story. dax, how long will it take
3:01 am
to open up this morning? keep in mind dialer -- daimler. london down by .3%. let's set our attention to where the heat is. this is the story around europe. your heat map. in terms of where we sit in the sector breakdown, oil and gas and auto parts or the two main gainers here in europe. the sectors that had fortunes of late bouncing back. technology is trading down and i think that is the micron story. the cte story rippling. banks, we continue to watch what is going on there.
3:02 am
the dax still not open. let's look at the individual names here in europe. in terms of the percentage change, glencore is down again. a massive move yesterday. some of the nordic banks are under pressure which is why maybe the banking sector is losing a little bit of ground. the positive side, i've got anglo trading a little higher. points, andindex glows biggest upside moves, total and royal dutch shell trading up as well. we're still waiting for the dax to open up. now steen jakobsen.
3:03 am
glass half-full or glass cap empty -- glass half-empty? steen: inti. now, it's all about the trade wars and if you think about the political timeline, we have the midterm election in november and it's unlikely we'll see trump changes rhetoric ahead of that because he needs it or is domestic audience. overall, we see the bleeding. we see the policy of the federal reserve remains very tight. is having azation lot of pressure around the world including china. i think the bond markets are responding well the -- but what really concerns me, we moved 25 or 35 basis points in the market is very nervous. volatility is picking up. we are seeing cracks in the armor.
3:04 am
valuation, take out, what you have for me? guy: oil and gas. steen: yes, commodities driven by the energy sector and it's a perfect storm in terms of the price. libya, thenezuela, policy changing. i think we are in for a time where we will have that eventual slowdown in growth. the pce was very negative. is that trumpe won't let go of the story until the midterms. we have until later on in this year to deal with the story. what happens after that? is now a good entry point into emerging markets are is there a better entry point? you have to buy it now.
3:05 am
it's a value and you have to pick up the pieces. we are seeing some more high-quality emerging markets. using india stabilize. the currency impact is still there. we have this economy globally that is linked to the dollar. at the same time, you have the chinese authorities and government saying we want to be a competing currency. i think there is a tug-of-war. guy: does trump want a weak dollar? no because his federal reserve's policy is strengthening. it reminds us of nixon. the first time we seeing a u.s. administration saying maybe we should be more conservative about the incoming hikes. the pressure is starting and i think that's what the dollar is
3:06 am
reacting to. guy: we will talk about the fed a little bit more in a few moments. let's look at the china narrative for a moment. onshore sentiment is as bad and as bleak as it was in 2015. are the chinese authorities in control? it's a control economy and theoretically it should be. steen: i think what is really it was too hard. toy tied the monetary policy 20 percentage points. they are still try to a lot of things at the same time.
3:07 am
the current economics and strategy is that you can only do one thing at a time well. to do multipleg structures, you're trying to deleverage the economy, increased practic -- productivity, all these things of the same time, you're going to fail on some of them and what they failed was to realize that the economy is significantly slower than the headline numbers on pmi and the likes. when we see the biggest focus coming? chinese authorities seem to be backing off on deleveraging. steen: absolutely. be, even mores to than the other stuff, where we see the biggest bang for the buck. the u.s. are to start fiscal expansion i think china is close to doing the same. why are they decreasing the
3:08 am
amount of leveraging? it's because the traditional supersedes the off-balance financing. they will become more and more a front-page policy. allowing this economy to go to the state-owned banks, not through non-balance sheet companies. i think were going to see a very aggressive china. it's also a we saw in 2007 and 2008. andlso what we saw in 2007 2008. they were carrying the world through the crisis. more to come from steen jakobsen throughout the program. up next, talking about some of the stocks we are watching this
3:09 am
morning. micron ruling in china. it's feeding into the european narrative this morning. trading down by 1.58%. we will have more. ♪
3:10 am
3:11 am
3:12 am
guy: welcome back. we are 11 minutes into trading. let's talk about the individual movers. to watchu might want chipmakers in europe in general. their chips have been temporarily banned from sale in china. it's down 1.6%. chip makers have been already hit by the trade tensions. well is anure as estonian operation used to launder as much as $3 billion. this figure is more than previously estimated. they had been doing an internal investigation and can't comment until the results of that pro --
3:13 am
that probe are ready. thyssenkrupp doing better. steel prices are rising. a couple of things perhaps feeding into that stock move. let's talk about steen jakobsen's q3 outlook. nobody wins. trade tensions between the u.s. and china escalate. we are in a trade war, apparently. is still with us. this could in very badly. but badly is a relative term. nobody is going to win but some will lose less than others. very: the biggest loser is
3:14 am
easy to identify so that's the germany's, denmark's, and sweden's. who is the relative winner? trump is trying to rebuild the story. he's trying to make it about trade and undoing some of the ills of the past. maybe he is willing to take some pain on that front. the rebalancing process more important than the winning process? steen: it's going to increase the level of prices which will be a tax on the consumers. if you want to select a winner from this, nationalism, america first, china first, germany first. this will play into the narrative of the political -- the political narrative which is
3:15 am
you have to look after yourself. you have to be more contained in more controlled. political backlash will be into the midterm, we are going to see a swing to the far left. the idea is that bernie sanders should have one. won because he was appealing to the youth and women. the winner is the political narrative that we need to be looking after yourself. there is no economic win. he was see 1%ase, or 2% of global gdp one year from now. if the americans heard europe, it will be via the auto story. steen: that will be the one
3:16 am
thing we need to watch. it seems in many ways it is the next logical step. it's a lot of jobs in the u.s.. it named the amount of jobs involved here. happen, you know it's not going to change before the midterm election. it's the show you will have. he can win with that. but if he does do its, his intent will be to continue to make this is number one topic into the reelection cycle. badly would it affect europe and what would be the implications of the pain? steen: the german car industry is more than just a car they sell. there's components and other things and it's really bad. all of the country seeing --
3:17 am
--prising germany, surrounding germany, it will have an impact. that's why this import tax is the most important one. europe will have a hard time to struggle and have a solution that will appease the u.s.. think about it. he doesn't want unilateral deals. they want multilateral. in a wayresponding where they don't want these deals. they just want americans to do better. guy: how does merkel respond to that? she can't. she's in between a rock and a hard place in the sense that she has the immigration issue and she has a hard time because she has a lot of political capital to use. she's going to go back to the
3:18 am
rest of europe and fight for german car industry? it's going to be a tough sell. she's only got so much currency she can spend and she spent a lot of it already. steen jakobsen sticking with us. this is the picture in europe. i'm not sure there's a clear narrative coming out of europe. story. the danske bank that's affecting the market. a lot of gray around europe this morning. not a lot in terms of the market story. it is the fourth of july and we are going to see a chunk of volume taken out. i suspect were already seen it. this is bloomberg. ♪
3:19 am
3:20 am
3:21 am
guy: 21 minutes into the session and not a lot happening. the fourth of july and volume is being taken out of the markets. let's talk about another aspect to what we are seeing. on off-again seems to be the mantra. there are signs that the most recent flight to safety may endure beyond the latest week. volatility into the markets where it out -- actually matters.
3:22 am
let's get some details. i am looking at global correlations which are on the rise. the dominoes might be lining up to fall. see how they really took a nosedive in 2016. think about the global synchronized growth story. allowing investors to focus on individual company risks. look what has happened. it's the highest since 2016. a slow move up. think about the macro risks, driving everything. we have trade tensions, central bank policies. these are not short-term risks. should this correlation into you to move higher, any uptick in volatility is likely to be sustained. i cannot talk about volatility without addressing the elephant in the room. --t is this stubbornly level
3:23 am
stubbornly low level around this five-year average. i said it before and i will say it again. the trends that have emerged. i have accept -- fx of volatility which has been rising. this directly influences the terms of trade. we're going to see it in fx volatility. one last thing which is really important, volatility tends to be the leader of the pack. that's the title of this chart. you can see in january, it's the first to move. if you want to know where markets are going next, this is a really important chart. great stuff.
3:24 am
is still with us. i have you on copper here the highest correlations since 2012. everything seems to be very correlated at the moment. things's the case and are tough, where do i hide? high: the reason we have correlation is that the source is the same. it's the tight monetary policy of the u.s.. where you go, i think the tactic right now is the u.s. treasury. the 10 and 30 years. right now we are at 2.82. if you break 2.8, there's a great signal. i'm going back to exposure to the fixed income market. i think what you alluded to earlier, their selective risks
3:25 am
in emerging markets but has to be in averaging in process of the next six months beyond the midterm election. let's talk about what happening with the u.s. treasury markets. the tens subsaw 30. we saw couple of touches below the 30 basis point mark. the fed has spent a lot of time talking about the flat curve. are we making too much of it? is it significant? how important is this as a leading indicator for what is what happened next? tools it's one of the few in the toolbox that actually works in terms of predicting. showing that we
3:26 am
have a suppression industry despite the short-term rhetoric of the federal reserve. i think there's also a huge amount of financial suppression going on here. we are in a situation where the u.s. is massively expanding the fiscal deficit. why is the number not heading north? people still think we are in a deflationary environment. it taking off the deflation bid. it was a story that was dominant three months ago and it's disappeared almost. you have the credit impulse very negative. all this place the fact that the market is repricing its tough right now. the first reaction will be the foreign exchange market. you see the dollar start the weekend.
3:27 am
you have confirmation of this is where you want to be. guy: angela merkel is speaking right now. she's addressing the issu migration. ♪
3:28 am
3:29 am
3:30 am
guy: 30 minutes into the trading day, let's talk about stocks. asia finished mostly in the red. the dollar weekend after the yuan rose after the second day. a u.s.emporarily bans chipmaker in the latest trade war escalation. passport expired, just 20 out of missed theks have deadline in the post brexit environment. we are going to continue to watch that story. european banks and a little bit of pressure this morning. .2% for theive,
3:31 am
stoxx 600. a farmer out of switzerland getting an update this morning. pharma out of switzerland getting an update this morning. let's show you the bottom end of the markets. this is the picture we find ourselves with. we would talk about danske bank in a little while, under pressure from investigations. the breaking news we have right now, hna says chairman has died in an accident in france. we will come back to that because this is going to be something that the markets in asia will be paying attention to. sebastian: theresa may is said to be facing a fresh showdown
3:32 am
over keeping the u.k. closely tied to eu rules after brexit. pre-brexit colleagues want her to explain more clearly how a new proposal will work. are progress at ministers concerned the plan could keep the country changed to the eu tariff regime and definitely. the malaysian prime minister has pleaded not guilty to charges of corruption and criminal breach of trust in connection with a multibillion-dollar scandal surrounding safe funds. at onegranted bail million, if found guilty, he could be in jail 20 years. is seeking president closer ties with switzerland and is calling on europe to deliver on its promise to shore up the nuclear deal. iran says it will resume its nuclear activity and must france, germany and the u.k.
3:33 am
guarantee continued investments in trade. president trump will begin reissuing sanctions on the islamic republic next month. the two countries agreed that the nuclear deal is an important achievement on the political level. the fruit of long and difficult negotiations. it is in the interest of every country in the world that this agreement is preserved, maintained in the interest of international peace and security. going after six major tournaments, england has finally progressed. after nailbiting two hours of finallye european side walked away with a 4-3 score in the shootout. they now face sweden in the quarterfinals. you can watch as some of the fun tonight with our exclusive live coverage of the boston pops fireworks spectacular. that is at 1:00 a.m. london time
3:34 am
here on bloomberg tv and at tv on your bloomberg terminal. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. guy: thank you very much. we have had this breaking news with the lost fee minutes -- within the last few minutes. hna saying its chairman has died in an accident in france. this is the company that has been financially stressed, has a shareholding in deutsche bank. the accident apparently taking place in france. that is breaking within the last few minutes. let's turn to china from a different angle. they will have the jump on the united states and the brewing trade war. headstart because of the time difference. retaliatory tariffs are set to take place on friday.
3:35 am
we were discussing this earlier on. the chinese market this morning have continued to fall. a few days ago, people were an,ing destabilize the yu you will have stabilization in the market. miranda: you still have concerns about the impact of the traded tariffs as they come in. people are a little bit surprised that there has been any movement, and a shift, and the announcement so far ahead of friday. the tariffs are going to go ahead, which means we are going to have to watch for it. watch for a period to see what negotiations come out. we are getting to the stage where it is pretty definite friday they will be
3:36 am
implement it. -- implement it -- implemented. shanghai comp was 20 times. this was basically margin trading. itre was nothing to support apart from government intervention. this time, we think it is more like 2015 we have economic problems in china, you have the seasonal financial squeeze, which is still affecting markets, a have this added trump factor. markets are week and will probably remain so while the trade war is happening. thing, the one key pbc has shifted to a slight stance.
3:37 am
they will still do deleveraging, but not too much. they are dialing back on some. i think we're moving to a stage where they are getting into a slight stabilized market and it is a bit more like 2013. >> do you think this reaction is because the chinese honors how deeply this fits with trump? think they hoped originally that if they gave $70 billion to the u.s. farmers and gave, opened up markets to the financial markets in china, then that would please the trump constituency and they could get away without a full-scale trade war. i think they underestimated the depth of focus. guy: given the underestimation of how far trump will be prepared to go, the chinese
3:38 am
don't appear to have an interest in a trade war. how do they deal with -- we discussed this already on the program, how do they deal with the run-up to the midterms, in which trump seems likely to get more aggressive? not engagedna has in tit-for-tat. you are not going to get this escalation like that. they have actually done some things, the have opened up markets and taking on the 48 inve lists from 64 to terms of opening sectors. they have also liberalized some of the other markets. if they are taking measures into address some u.s. concerns, that is more likely to lead to negotiations after the $34 billion is of limited on friday. quickly theyds how
3:39 am
come to the forum. >> isn't the story for china that they tighten too much? so they are trying to develop a lot of things the same. their trying to recalibrate the economy. the deleveraging is clearly not working, it is still the central piece. in the stock market, there is still talk about too much leverage. ke even have this thing takni out. are they chided too much at the same time even for a central planned economy right now? miranda: in terms of having to deal with the mystic issues, it is quite a lot to deal with. with the deleveraging campaign, it's wanting to shift from the rouded banking. you're trying to make that shift. >> clearly when we do that,
3:40 am
there will be a transition period build to be significantly lower growth. i think they are trying to do the right thing from a macroeconomic perspective, but they seem to be thinking they can do without actually seeing slower growth and falling stock markets and falling currency. very unlike the chinese and slightly naive. to 2013, shadow banking, they tightened up that. when you saw the first stage of the chinese economy beginning to fall. the report we put out yesterday shows that most companies and sectors of deleveraging supply-sidey use a that price rises the
3:41 am
bankruptcies. you have actually got the particularlynies, the larger ones are in a much better financial state then they were five years ago. this means you can be a bit more aggressive and the whole thing is not going to collapse. guy: we will leave it there. thank you very much for coming to see us. i want to highlight a move we are seeing in the turkish lira which once again is taking another like lower right now. -- leg lower right now. leglira took a significant lower yesterday. this is the second of big moves we are seeing over the last 24-48 hours. when you talk about the stock to be watching carefully, that is
3:42 am
dancska. i want to get more detail on what is happening here. as you can see, that is trading down by 3.3%. let's find out why bloomberg's managing editor joins us now. what are the details unwise the stock getting hit? what is the money-laundering case we are so worried about? this case has been chugging along for quite a while. last night, one of the main revealed thate, the size of the laundering that skek place through danc was way bigger than we thought. roughly $8.3 billion. that is a huge amount,
3:43 am
especially for a small country like denmark. it has just changed the whole tone of the perception around danske bank, the country's biggest bank here. guy: in terms of what this'll mean for the bank and its management, what kind of penalties could be talking about? thatrt of the problem is you laundering legislation is quite touchy. the laundering allegedly took place by the branch and estonia. quite aly this was common root into western europe to make. the question at the moment is who had the jurisdiction of the time. denmark, they tended to focus on the governance side of things. the minister in charge has said that this case shows us that we need much tougher rules and laws.
3:44 am
the problem is that even though they are tightening the loss of the moment, that will not be retroactive. there is a sense of huge public indignation in denmark. they are sort of looking for some kind of legal path to addressing that indignation. guy: in terms of the share price reaction, i'm looking at a share , in somection today ways, it is not that substantial. walk us through why the market has priced all of this and calibrate the market reaction in light of what we have learned in terms of the story. part, danskest shares have been in line with the bloomberg index and european stocks. they have not been any real signs that investors are worried about this.
3:45 am
people have been looking away from this scandal. today, that mood seems to have changed. so many politicians coming out and saying this is enough, we have to do something. we seemed to have reached some sort of tipping point and we can to that today in the share reaction. guy: thank you very much. let's talk about some of the other moves we are seeing in the markets this morning. here are the mid-caps. patrick draghi is not ssn.ing to sell we are seeing a little bit of underperformance in media stocks in general.on the upside, i am looking at sainsbury's first quarter. were calling the
3:46 am
stock lower ahead of the open. it is higher by 1%. finally, i am looking at cucinelli. tw -- the shares have reached full valuation. that is the reason for their decision in the shares are moving lower today. very much.you let's get back to the banking story and talk about it in a little more detail. the real stock story was the damage done when it comes to deutsche bank. theworst-performing bank in fx 70 sector here in europe. let's talk about the first half of the year and put everything in context. the first half of the year saw deutsche's share price. by 40%.
3:47 am
is the share price performance commensurate with the problems of deutsche bank faces right now? >> actually, it is strongly related to the problems that deutsche bank faces. their business model is not working yet, so the bank has to approve that they can improve profitability, can bring down costs, and bring up the share price. it is a show me story, currently. guy: it is. what i'm waiting to find out is what deutsche bank will become. i still don't have my arms around an understanding of what deutsche bank is going to become under this new management seen. -- team.. >> the management team has to focus to cut costs, alter strategy and think about the positioning in the u.s. because domestic in the u.s. is
3:48 am
obviously the biggest problem. find theirey have to place in the world of investment banking. among the strong u.s. guy: is there a place for deutsche bank in investment banking? bank my opinion, deutsche has to stay in investment banking, but in a different way. they have to focused on certain niche and markets where they have high growth where they can generate a high returns, they have to scale back other activities. the big issue for them is if you scale back of activities, it interrelates with your core business. have to make wise decisions that you shrink the business in a carefully. primarily, and my understanding, they have to reduce the u.s. and a have to focus on europe, partially in asia where they are
3:49 am
pretty strong. faithoes the market has a in christian? is there a place that he can do what is necessary at deutsche bank? at the moment, my sense talking to investors that that fate is not that well-founded. what are the milestones he needs to achieve to generate that faith? >> execution, execution execution. to keep it simple. he has to show that he can cut costs and has cut costs in this efficient way. second step is you have to think about the businesses in investment banking and we want to be and what you haven't been in the past. the third one would be to fix internal systems and procedures. at least for the u.s. banking
3:50 am
division, it is still not in a good shape. .his is worrisome the situation over there is quite negative, if you imagine what they have done and assume that is sufficient. bankthe low for deutsche 052.ne spot we're trading north of that at the moment. is this a decent entry point into deutsche's stock? singd you be advi people to get into it now or would there be a better entry point down the road? >> first of all, they have to show that they are turning the business around. it is a show me stock.
3:51 am
we should see positive data pointing to this regard. nevertheless, you have to keep in mind the policies for these banks. we have to manage the bank, you have to focus on the fixed income part and he have to focus on the writing agencies to be buoyant in the business and to bring up in the second set the share price, finally and hopefully. guy: thanks very much, indeed. the biggest share price underperformer in the banking sector here in europe over the first half of the year. bloomberg users can interact with all of the charts we use here on tv. you'll find them all laid out in a beautiful format. you can find that on your bloomberg gtb dots . it is the fourth of july.
3:52 am
the united states is holiday.the you can watch some of the funds running the fourth of july with exclusive coverage of the boston pops fireworks spectacular. that starts at 1:00 a.m. eastern time. this is bloomberg. ♪
3:53 am
3:54 am
welcome back. it we are 54 minutes into the session.
3:55 am
waiting for it, the time format with the charts charts.with the ine: you told us it was fourth of july and we are looking with envy. it might be better off going to germany for their beer supply. i looked at beer inflation in the u.s. versus germany and found that beer prices in the u.s. over the last five years have risen almost 10% versus a more modest 6% increase in germany. plus, they have a currency advantage. look at the euro dollar exchange rate. it is nearly 144 five years ago versus nearly 115 at the moment. that is a big currency advantage for any american buyers going to germany for their beer. may be something they might consider as they celebrate fourth of july today. i am looking at the
3:56 am
potential impact of trade tensions across the commodity spectrum, specifically on precious metals. the platinum and gold ratio hitting a record low. it reflects what is happening today as gold is outperforming platinum. both precious metals have been hit with the prospect of higher rates from the u.s. and also a stronger dollar. platinum is down about 9%. the fact that this ratio has hit such a record low could say something about where you want to look if you're looking at precious metals. do lookups on them just because the valuation has dropped so low altitude gold, or do stay away from both? which i really look at it, it is an interesting ratio to keep an eye on. the reason that form has been underperforming is because of the concerns demand for it could be sacked on the potential auto tariffs with platinum being quite instrumental. guy: i am under consider
3:57 am
pressure from the rest of the team to go one way or the other. i'm going to give it to nejra. who cares about beer inflation in the u.s. are germany? neither of them are in the world cup anymore. . prices, who cares? what's a gig of data?
3:58 am
3:59 am
well, it's a whole day's worth of love songs. 300 minutes of baby videos. or, it's a million chat messages. a gig goes a long way. that's why xfinity mobile lets you pay for data one gig at a time. and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. francine: trade disputes in
4:00 am
china. is this the latest move in the trade war? b yuan extends gains after the comments on the currency, a different story for stocks which continued to slide. -- movers middle east merger ubers merger. re-resolvedled the -- the result -- the rivalry be resolved?

35 Views

info Stream Only

Uploaded by TV Archive on