tv Bloomberg Markets European Close Bloomberg September 10, 2018 11:00am-12:00pm EDT
bloomberg markets. vonnie: here are the top stories we are covering. stocks in the u.s. rise. trade concerns not so front and center for the moment. the british pound is jumping as eu negotiators say a brexit deal is realistic. les moonves is out of cbs after being accused of sexual harassment. fresh accusations coming yesterday. we look at what is next for the company. elon musk scores a much-needed win with a successful spacex launch. his efforts to end the drama at tesla by appointing new automotive presidents. 90 minutes into the u.s. trading
session. let's get to abigail doolittle. abigail: small gains for the major averages. earlier we did have the dow, the s&p and the nasdaq all up .5%. not a lot of conviction on the part of investors following recent trading activity. the s&p 500 and the nasdaq right now. 500 its second update in seven. some bearish tones around trade and tech fears. take a look at the tech heavy nasdaq. see one concern for investors. you can view this chart of the s&p 500 using the gtb function. -- gtv function. lots of macro issues for investors to deal with.
the rsi above 70. when it heads down sometimes it could signal more of a pullback. that was certainly true back in january when the market was truly overbroad. overbought. the tech heavy nasdaq flipping between gains and losses. overbought. apple down about 1.8% on the day. we soon as big decline on the day as president trump is encouraging apple to manufacture its products in the u.s. some are saying that could raise the price of the iphone by 20%. if weakness continues here it could suggest that though small gains will evaporate. up once again.er
wells fargo is ola seamus -- is bullish on the shares. tesla up 4.4% after elon musk named a new automotive president. he fixed the model three issue. up 4.9 percent. they bought a competitor for $2.1 billion. finally foot locker up 5%. vonnie: the british pound suddenly rallied a little while ago. stronger. .75% following comments from the chief brexit negotiator, michel finally foot locker up 5%. barnier. stickee that if we really , we are able to reach an agreement on the first stage of this negotiation.
in six or eight weeks. vonnie: let's bring in marcus ashworth in our london studio. why is this time different? why did suddenly the market decide we are going to get a deal in the next few weeks? >> i can barely keep my face straight. i love mr. barnier. things are possible all of a sudden. a little bit of pressure on the british prime minister. i think we have a bit of realization coming. intransigence on the european side needs to be removed. perhaps more practicality on the british side. put them together and almost certainly a deal can be done. for both sides it would be a disaster. markets are realizing the more positive talk, 85% done. last week barnier making
positive noises. problem isorder nowhere near as big as it was made out to be and that was the big sticking point. the market is starting to realize that it isn't going to be sunshine but it's quite likely that there's going to be a reasonable period of sorting things out. period, aet a nice year or two to be able to sort things out. vonnie: what solutions came out of the woodwork? it seems binaries mean you either agree on one thing or another. how you can have a 5% agreement on something that is pretty black and white is a little bit of a mystery to me. >> 85% on the entire deal. all sorts of things. that 15% could largely be put down to a big chunk of it is the irish border problem. that's what they are working to agree to sort the situation out
over a two or three year period rather than two or three months. taylor: we just wrapped up the swedish elections. stocks had rallied a little bit. ,e just heard in the last hour short-term really is not going to have a big impact. there's any see if long-term structural reform changes. what do you see coming out of the swedish elections? one, they haven't resolved anything. we've got a complete dead heat and therefore the problems of the swedish democrats have been will not go away and therefore resolution or perhaps the center ground response to that. equally this means nothing for monetary policy anyway. the riksbank has been deliberately vague on the swedish currency weakness and
has been pushing out its potential for when they will ever raise rates. thinkolitical front i there is one big positive that because the showing of the sweden democrats was below what it could have been and they were t, itting a potential swexi looks like they will no longer be the biggest party. i don't think it's going to go very far because the actual underlying problems are still very much there for sweden. finally getting a little bit of dollar weakness today. any signs of emerging market crisis moderating a little bit? >> i'm trying to look at what happens if dollar strengthens. you could logically think it is very much a risk.
you can't see the fed backing away. they're going to keep taking liquidity out. that should make the dollar stronger. that is going to really focus on the week emerging markets with large current account deficits. argentina, south africa. there is a real risk that dollar strength comes. any dollar weakness just takes the pressure off and reduces that contagion. we have the central bank of turkey and russia with rate decisions. you can expect a big hike from turkey. rates or atike least go to a hawkish bias. it's an interesting week for both turkey and russia. weaker 5.5%ruble
than the u.s. dollar -- by .5% in the u.s. dollar. here's courtney donohoe. the european union's chief brexit negotiator is sounding optimistic. michel barnier says it is realistic and possible to get a brexit deal with the u.k. by the start of november. he said several issues have to be resolved among them the irish border and protection of the names of food and agriculture products. negotiations continue this week. the british economy grew at the fastest pace in almost a year between may and july. .6%.dp rose retail and services get the credit. those figures vindicate the bank of england's decision to raise interest rates last month. president trump is boasting that the u.s. economy is perhaps the best in the country's history. that's the reason democrats are "flailing and line crazyrazy." -- lying like
." florence picking up intensity as it moves closer to the u.s. atlantic coast. the storm could hit areas from south carolina to virginia by thursday. it's now a category three hurricane with winds of up to 115 miles an hour. by midweek it could be a great to a category 4. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. i'm courtney donohoe. this is bloomberg. vonnie: les moonves steps down from cbs, leaving the business he's been at for more than 20 years. we look at what's next for cbs and for national amusements. this is bloomberg. ♪
vonnie: from new york, i'm vonnie quinn. taylor: i'm taylor riggs. this is the european close on bloomberg markets. vonnie: les moonves has stepped down after more allegations of sexual harassment. saddened tos deeply be leaving the company after two decades. joining us on the phone is brian wieser. he has a hold rating on cbs with a price target of $53 a share. it's hard to imagine this is how it all came crumbling down after all of this time. if this was going to happen what didn't you just leave? -- he just leave? >> he needed to leave. the position was untenable to say the least. he will inevitably be gone. vonnie: why did he opposed the merger so much?
he could have left without this shadow hanging over him and this investigation going if he had just agreed to the merger in the first place. >> i think that is part of a broader range of concerns that investors had. most investors were not necessarily bothered by the allegations as problematic as they were. moonvesas the fact that allowed cbs to be put in the position it was in because he knew these allegations were going to come out. and more importantly the board would have known. and the fact that they didn't do something to position the company ahead of that put cbs shareholders in a very -- position. surely from a financial start respect to they should have done more to position the company better for what is still an inevitable merger with viacom.
taylor: as a standalone company now that that might be off the table, how are the valuations of shares? we spoke to an analyst that says to him the shares still look like they are trading at premium . where do you see the correct valuation of cbs as a standalone company? viacom and cbs as reasonably fairly valued. the hard thing to know is what are the terms of a combination with viacom going to be. who will benefit from the synergies which are very real. of a wildfor a bit card valuation. you may have a situation where investors think it's actually possible that someone other than viacom could be a bidder. that seems very unlikely. both viacom and cbs are fairly valued. taylor: what about future mergers?
where does cbs go next? we heard rumors about verizon. vertical integration is back in vogue. who do you see as an acquirer of cbs? >> if ultimately national amusements will have more than a bit of a say in what happens it's hard to say that anyone would seriously pursue a bid. it's not that cbs doesn't have desirable elements. because of the controlling shareholder controlling cbs who also controls viacom, i wouldn't count on it. i guess you can't rule it out but i wouldn't count on it. vonnie: the new board members include everything from bankers to people who have worked at the very high echelons of media companies before. what is the strategy here? might lose some
of the advantages that les moonves conferred upon it? >> i haven't looked in depth at the new board structure. clearly there were cultural problems that were afoot. reportingade plain by in the washington post as well as the new yorker. that should be something of an overhang still. the chief operations officer is now the interim ceo. tell the i can problems that they have at cbs news are operational. that is still something yet to play out here. is the interim ceo in fact a ceo for very long? attract athey even ceo who wants to be able to set their own strategy to have the flexibility to merge with anyone they want? level i have to
assume they are considering the cultural elements and the fact that they have this unusual situation of stewardship of the anpany until what seems like inevitable combination for viacom. vonnie: nai says it will not pursue a merger for two years. what is the reasoning behind that? why the delay and why would it agree to it even if cbs had asked for that? >> i don't know. this is a situation where you need to be a lawyer and also a psychoanalyst i guess to understand the thinking behind this. my guess is there is something around protecting national amusements against accusations of the unfairly involved in whatever process might happen. but again, if you are cbs, it that your only option for scale will be viacom.
i'm vonnie quinn. taylor: i'm taylor riggs. this is the european close on bloomberg markets. vonnie: tesla gets a recharge. interview putial pressure on stocks and bonds. shares hit a five-month low. elon musk says just ignore it. in an email to employees he wrote, we are about to have the most amazing quarter in our his three. building more than twice as many cars as we did last. dorsheimer.s jed believe the long,
that's great news. >> if you were to believe him, you would believe that they were going private at $420 per share as well. pointk we have to at this take a little bit of there's been a history of promotional promotions from elon and take them with a grain of salt. is it going beyond the 276 now taylor? you think that's the direction we are headed. >> i think friday was a pretty bad day. himad a viral video of smoking marijuana circulate. more importantly other than those antics were really the key figure inone
another senior executive. you probably had a bit of an overreaction and you sought elon -- saw elon put some water on this fire. taylor: i want to talk about going forward because on the last earnings call a lot of the whole reason he said that he was public and wanted to stay public is that the profitability and cash flow is going to turn positive by the end of the year. terminalis chart in my that talks about the cash flow. where do you see them going forward? can they be profitable and cash flow positive by the end of the year? are they meeting those targets? >> turning cash flow positive is really a function all else equal and assuming the model has a relatively consistent in terms of those trends which have been for quite some time then it
really comes down to the model three production. that's where you need to have assuming a 30% margin. we are in the midteens right now for the model three. you need to have 5000 units per week. that's why everybody is focused and the financial community around that 5000 which would be about 60,000 for the quarter. have trimmed to those estimates. we actually are a little bit below us at 48,000. taylor: and give us an update on how the investigation is going? some analysts said it was just going to be a fine. how much can you price the risk into your thesis when you take a look at the sec and potential investigations. >> i wish i could. i don't have any insight into the sec investigation. what i could tell you in this is a point that kept us from becoming more positive on the
name is all of these things that are surrounding tesla. all of the antics, all of the self-inflicted wounds. we think of raising the cost of capital. as they come in to some debt that needs to be refinanced the cost of capital is going to start to become a much more important role. is this likeensive an automotive manufacturer that can really make the difference in terms of how successful you can be and that's where our greatest concern lies right now. thate: we have just shown chart. the yield on the 5.3% bond rising now. i wanted to ask you about the spacex launch. that was successful. does that have any halo effect on the rest of the company? on the tesla part of elon musk's company? or is it its own separate thing?
>> it's a separate company. a cachet ofely has followers that are going to be supportive to the end. and will continue to invest. i think from that perspective it is maybe a slight net positive. i think it is separating the wheat from the chaff. there are some key issues they still need to address. for us it is model three reduction. -- production. dorsheimernks to jed . tesla up more than 5% now. we are heading to the european close. ♪
we are seeing particularly good greens -- games in greece. minister unveiled the ref of tax relief measures on sunday. the market taking that ministery well. we are also seeing a rally in stockholm after an inconclusive election for sweden democrats. the right-wing populist party not performing as well as some has expected. green across the board here. packaging maker listed here in london. this is the best day ever for this stock on the market. it follows a bloomberg story that reported that initially the company had arrested strategies going ahead.
this concerns the company it co-owns with their friends. it was originally going to sell tehran. it can't now because of sanctions. not looking so good for ryanair. down by 2.4%. this is the longest losing streak since back in 2014. let's have a look at currencies and bonds. the euro is rising today. french business confidence came in at a five-month high. seeing a boost after comments from michel barnier that of beforedeal is achievable november. this really is a thing that drives sterling. this is what investors care about. yields are coming down as we see relief in these markets as well. the finance minister speaking about lowering the debt levels. this is something the markets
have been extremely concerned about because there were some fears they could violate eu rules with their upcoming budget. that's a look at the european markets. before november. the dollar index a little weaker precisely because of some of the stories that you mentioned including the comment from michel barnier that we are 85% of the way there. markets are certainly believing him. that has both of the euro and the sterling currencies stronger today. what isn't stronger is the stock. we can see it has been depreciating over the last year and then we had an election today. it really hasn't produced any definitive outcome. just a little bit messy if not perhaps as negative for the market as it might have been. we are seeing a .2% decline.
2.94%. most of the big move came last week. still headed in that direction. crude decline. 2.94%. not moving oil too much. there was a show of strength earlier on today. let's look at global macro movers. the top movers include some of the countries that you mentioned including sweden's omx which is only .4% higher. for the ruble and the brazilian rail it looks like we are continuing that's our story about em. thing fory the same sovereign bonds. brazil and russia getting hit hardest. taylor: let's get back to sweden. the election has left the country with no clear government. by inlachlan is standing stockholm.
like political deadlock here. the right and the left haven't been able to form a majority. who is the clear winner in your mind? you did see a little bit of verizon the anti-immigrant party as well. -- a rise in the anti-immigrant party as well. a on resulted in parliament with the current government notching up just about 40% and their main opposition candidates together gathering about the same. the sweden democrats, the nationalist party didn't do quite as well as some people had expected. wound up at about 17 and a half percent. taylor: what happens next? how long does the process takes to form a coalition government? how long are we in this standstill? >> usually this is over the very day after the election. now because the election is so tight between the two blocks some of the votes that have not
yet been tallied essentially votes that replaced by swedes living abroad and that were placed on the saturday just before sunday's election haven't been counted yet. about 200,000 usually. so the party leaders of the main are meeting in their party headquarters and everyone is waiting for wednesday when the final tally will be made. vonnie: we do have the overall ballot now. we know that less than 20% is going to the far right. from the markets point of view it really matter what the end result looks like now in terms of the makeup of it really matter what the end result looks like now in terms of the makeup of government? what policies will those factions be fighting over for example? >> i think you are right.
i think it doesn't really matter as far as the markets are concerned. both the current government which is a social democratic led lock and the main opposition parties are quite close to each other. the social democratic lock wants to raise taxes by a little bit and wants to spend more on swedish welfare system which is under a little bit of pressure and has been for a number of years. woulds opposing blocks prefer to cut taxes and get people working and tackle the welfare problems that way. that's why i think the market reactions have been quite muted today. vonnie: gdp is doing pretty well. 6.2% forecast for this year. that is low when it comes to european countries. is there anything to complain about? is there anything that needs to get done fiscally or even monetary policy wise? >> i think that is sort of the big conflict in the election. what to do with some of this money.
public budget surplus and has been for a number of years. that doesn't stop a lot of regular swedes from feeling that the welfare system that perhaps they grew up with has been hollowed out a little bit. was the twothat questions the opposing blocks were fighting over. vonnie: this week marks the 10th anniversary of the lehman brothers collapsed the triggered the worst financial crisis in almost a century. in thathe first step actual crisis playing out. earlier today we talked about the lessons learned with a deputy governor of the bank of england. >> i think when bear stearns failed and was rescued i recall a meeting at the bank of england where i said that had it not been rescued there would have been mayhem. and a month later one of the directors came back to me and said that was quite a thing to say. defend it.
and so i did. i don't think anyone has said anything intelligent about this. the tragedy is that the wasted six months between bear stearns and lehman. why on both sides of the the big banks't forced to deleverage in the wholesale market commitments in a controlled way rather than lending to the real economy? lehman is reported to have been debating and equity injection from korea. why didn't that happen? why didn't the u.s. authorities push them to do it. there's too much discussion about all of the liquidity measures that were taken, some of which i devised. and not enough discussion about missed opportunities by supervisors and regulators. >> but why? because they didn't understand the interconnectedness or they didn't want to see it? >> i don't know why. it's implausible to say people didn't understand the interconnectedness.
i don't think we learned a great deal. if you go back and look at vis, the the fed, the bank of england said in the years before the crisis, people knew the system was so horribly interconnected that they wouldn't be able to understand how it would unravel. mysteryery, and it is a , is why people -- if you provide liquidity, you don't solve the ultimate problem but you buy time. how is the time used by regulators and supervisors? i still don't think we have a good answer to that question on either side of the atlantic. wonderful voice that we heard before you came on, we had loretta mester of the cleveland fed who is truly one of our best mathematicians on all this. i go to a chapter in your book, the limits of design. are we asking too much of central banking? , is theystem locks up
correlations become so tight, is there a limit to the design? yes is the simple answer. if you expect central banks and agencies like central banks to make the world perfect yes plac, this is doomed to fail. if you ask them to deliver stable and low inflation over time, ensure that the core of the banking system is resilient, they can do that. they can't manage the credit cycle. they can't manage asset prices. in the years during the crisis and since, a lot of countries have fallen into the trap of expecting the central banks too much. --t's because politicians it's convenient for politicians to vacate the space and leave the central banks to the u.s. cavalry. it's very tempting for central banks to occupy that. it's terribly difficult for them not to try and do something when
the politicians don't step up to the plate. in the united states this centers around the difficulty of fiscal policy of any kind. vonnie: paul tucker, former deputy governor at the bank of england. we have a full slate of interviews coming up for the 10th anniversary of the financial crisis including the former ceos of deutsche bank and barclays as well as former u.s. treasury secretary larry summers. that's all this week on bloomberg. let's check in on the first word news. here's courtney donohoe. >> the pound is surging after the european union's chief brexit negotiator said a deal with of the u.k. is realistic within eight weeks. michel barnier says there are several issues to be dealt with. negotiations continue this week in brussels. president trump resumed his campaign against journalist rob woodward's new book. the president called the book a joke that uses is proven unnamed sources. he says he will write the real
book about his administration. woodward's book describes a chaotic white house in which some former staffers actively deceived the president and undermine his orders. alleged russian agent maria butina have blasted the u.s. in a late-night courts filing. they said prosecutors included false statements to keep their client in jail prior to the trial. there is a pretrial hearing in court today. spent twoe jack ma's decades turning alibaba into the largest e-commerce company. the executive chairman plans to to the seohat title year from now. he has presided over the company's ambitious expansion. moss plans to focus on philanthropy and education. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries.
vonnie: time for our global battle of the charts. you can see these charts on bloomberg. kicking things off today, he's doing double duty as my coanchor. taylor riggs. taylor: we thought the faang selloff was bad. nothing relative to the chinese tech selloff we have had recently. i have normalized the faang going back a year.
cap whilen in market the chinese tech stocks have lost about $7 million in market cap. aboutp hearing so much u.s. versus rest of the world and how the u.s. keeps doing so well and leaving everyone else behind. no better way to show this than here with the faang relative to the chinese tech stocks. you can find all of this on my terminal. vonnie: i really like that chart. cinderella, beat that. againstd time in a row the cohost. the odds are definitely stacked against me. this is a chart of china trade balance with the u.s. and china's export growth year over year. we wills points to, flip this into a currency story, is continued weakness for the offshore yuan. as china's trade balance
continues to build against the united states we are more than likely to see a very aggressive trade response from the president. at the same time year-over-year exports are declining which also spells depreciation for the currency as their growth story weakness. two things working together at the same time to put pressure on the current the. likely push it toward 700 and create more of a problem with the united states and eventually the rest of the world. that is wonderful. i am assessing penalties on both of you for trying to influence the judge. you can take it up with the officials afterwards. award at i'm going to draw. charts are both wonderful. control room, you don't have any veto power or deciding power. it is a draw and that is final.
vonnie: live from new york, i'm vonnie quinn. taylor: i'm taylor riggs. this is the european close. for our stock of the hour. shares of wynn resorts are having their best day in more than a month. getting some 3% higher after analyst said a recent selloff because of fears about macau poses a buying opportunity. kailey leinz is here with more. is that really a buying opportunity? >> it is. the story has been a pretty bad one this year. you had the founder ousted because of sexual harassment in february. also declining revenue growth. consistently the past four quarters a drop in revenue in large part because of their exposure to macau. it represents about 70% of the company's revenue. it's because of gaming revenue.
vegas forno in las example, it's all about hotel rooms. people go there for kind of like a vacation. the not just about gambling. in macau it is. huge fears about a decline in gambling because of fears of china tariffs for example. consumers pulling back on that kind of activity. also concerns about the pboc and the cowher -- macau having shared information. analysts saying this is really a buying opportunity. the selloff is overdone. macau is still seeing the strongest growth out of any of these regions in the sector. they are saying get in now. they see 20% to 30% upside vip theye happy -- think are going to start to grow in the coming months. potentialat other downsides to analysts talk about? >> the chinese economy.
any kind of material move downward in the chinese economy could cause consumers to pull back on the gambling. trade tensions we have seen play out over the past in large part an attempt to slow down the chinese economy. we have seen estimates from analysts across the board seeing it could knock some 3% to 4% if we get the under 67 billion additionally from president to a that could lead slowdown in the economy. they are saying that's the most pressing risk. right now what they are seeing in macau's growth. thanks for that stock of the hour. wynn resorts. that's kailey leinz. apple setting up for a potentially strong holiday quarter. joining us now from l.a. is bloomberg technology reporter mark gurman. from youe scoop i need today. three new phones that we're looking at this week. how much is this going to set me
back? are they going for $1000 still? >> that's a good question. there's going to be a new high-end model. i expect depending on the capacities and the screen sizes that phone will range from about $900 to probably around $1200. depending on how much storage you want will impact how much you are going to pay. taylor: are the updates worth the price? >> no. if you have an iphone x right now you are not going to want to read to the iphone x next. it's going to be a fairly minor upgrade. if you want the bigger screen you might he enticed to upgrade to the iphone x in a much larger form factor. vonnie: probably not going to stop you from buying them. what kind of corridor is apple anticipating? it is going to be a massive
quarter for apple. the q1, the holiday quarter in addition to the other quarters of course. about $90king at billion corridor which would be a record for the company. vonnie: about the watch was a surprising success. what is happening in this iteration? to be the first time were apple is going to change the design and the formfactor of the app watch. the screens will be larger. they will go edge to edge for the first time like the iphone x. the able to show more content. faces will be the same size. you are getting more screen size in the same amount of space. taylor: as we talk about the upgrade cycle and how quickly customers are replacing the phones, so often you have volumes are slowing.
people aren't replacing their devices but the prices are going up. where are we in that phone replacement cycle? phone replacement cycle we will see a lot of upgrades from people who bought iphones in 2016 and earlier. this is the year that a lot of people are going to upgrade. if you have an iphone seven or seven plus or anything older than that we will see a lot of people upgrade from that phone it'sis new lower end model going to replace the iphone 8. it's essentially going to be in iphone x in a little bit of a cheaper casing to keep the cost down. that's really what's going to spur the upgrades. taylor: just want to talk about the tariffs. apple had issued a letter to the trade office saying those additional tariffs really would hurt consumers and raise costs for consumers in the u.s. any update on how the tariffs
would hurt apple? report fromanalyst gene munster who is predicting at the worst between one and a couple percentage points impact on the overall revenue. these tariffs are only getting a few products that don't make up the majority of apple sales. mark bermank you, -- gurman. another great scoop. here's the stoxx 600 after the close. it closed up about .5%. u.s. the best performer in the s&p is united rental which is expanding. stocks are positive. this is bloomberg. ♪
in new york. i am david westin good welcome to that david westin. welcome to "bloomberg markets: balance of power." kevin cirilli on what a democratic house could mean. and the ross thomas from london on brexit hopes. let's start with kevin cirilli. maybe the democrats taking over the house. what would that mean for president trump? president trump is aggressively hitting the campaign trail as he tries to reactivate his conservative base. this is as polls tighten with the democratic base fired up for the midterm elections. consultants and lobbyists are busy gaming what it means should the democrats take control of the house. congresswoman maxine waters, a