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tv   Bloomberg Markets European Close  Bloomberg  December 7, 2018 11:00am-12:01pm EST

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merkel will be replaced as the leader of the cdu. she will remain in place as chancellor. she is very much of the same mold. she comes from a more centrist tradition of the cdu. she is not at the more right end of the party which is significant. she will be able to work more easily. that is the latest out of germany. will have more details on that we'll go to matt miller in just a moment. manus.o to much.nk you very welcome. good to see you again.
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the deal is 1.2 million barrels from the october level that is the cut. can you confirm that? is there an understanding? countries,t of november was a slight. hopefully, in november it should be much. the sign of deadline is october. cut.u now have a how much are you taking in nigeria? >> 2.5 percent for opec members and 2% for non-opec members. >> we have been blogging all day that this is a fudge and not a
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real cut. can you clarify that? it will be from natural production. is this a real cut or from natural reduction? >> these are real cuts. arising natural factors . the gmc has a bit more work to looking aterms of it. we are seeing factors from some countries will make continuing barrels. it is a lateral cut. >> has iran been given an explicit exemption? has that been used? >> we have used the word concentration. what is important is the barrels for opec. who contribute some of that is
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fairly significant for us. there is a bit of flexibility. lookan, if they do, will for ways price it out. >> do you think president trump will be pleased by this? >> i hope you will be excited about it. >> why would he be happy? >> because we are cutting. it may be positive or negative. >> does this action today by opec/non-opec bring a floor to
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us? >> you take the branch from canada that there production -- that should wipe out the flaws and get us to where we are today . barrel and a5 a minimum. weeku have a budget next in nigeria. how important is it for you to go home with a rising oil price for nigeria? >> it is important and we are very dependent on oil. it is good to have the money, and it is good to have book comes from the lack of money. if we make the numbers it is iger -- easier to finance the budget. decided to move barrel.$55 a
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there will be enough room after we make the adjustments. if it goes up to 65, we will see. is this and how fractious was the meeting? >> i think it was very collegiate. people have different concentrations and different points. we have arguments. we will have the swing individual and we bring parties together. d.was very debate based >> who was the most process for --or
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>> he was the most silent. he brings them together. i enjoy the debate and discord. we work our way and they get back on and don't comply. >> you came straight out of the ring and. do you think that will be any other partners from opec question mark >? >> nobody wants to leave. >> the usa is becoming net exporter of crude a for the first time in a 75 years. is this one of the biggest risks for opec? >> it is definitely a risk. but what this is doing for opec member is looking for a different model for crude.
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for crude and the raw and, you have to refine power the industrial base. we are headed to europe and north america. where looking into the regional market and domestic market. >> i can tell you this, i am geared to come to nigeria if they make it happen. thank you for being brave. the gun and under made it to the room and now he leaves. part in shoring up opec. in shoring up opec. guy: thank you very much indeed. he was talking to the nigerian oil minister. we also had comments coming through from alexander novak,
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the russian oil minister, just highlighting. the opec communique makes no reference to exemptions for countries. he does say the oil market is challenging and he says the decision today has been timely rational and democratic. opec can alter in both directions which will help the oil market rebalance faster. , keviner breaking news bauer, has been elected as the new leader of the cdu party in germany. let's go to hamburg and talked to matt, who joins us from their. she is a close ally of angela , how will this change german politics?
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matt: she has been called a mini miracle and carbon copy gary chi said in her acceptance speech and she wants to maintain it as a large people's party in the middle. that has been the strategy and that is how she has one for the last 13 years. anding the center collecting votes for the left. the problem is they have lost a lot of votes to the right and now that opportunity is present in every one of the 16 states this is something that they were hoping to change and now it is akk while caring on the policies. vonnie: well she
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seceded angela merkel as chancellor eventually? matt: that is a very good question. they often say the leader of the cdu becomes chancellor and that we do see it but not always. merkel's government has been fairly unpopular proposition has plummeted in the polls in recent votes. in germany, other parties, including the green party have taken a lot of power in each of these local and national elections. angela merkel were remain chancellor until there is a new vote. plan but ifnew vote new are called, anna kramp-karrenbauer will be the candidate. vonnie: thank you for that great reporting from the cdu elections.
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the u.s. adding 155,000 jobs in november, that date out this morning. joining us is ethan harris from bank of america merrill lynch. today,erything going on what is mainly on your mind as we head toward the u.s. sessions? ethan: the u.s. economy is doing fine. we have seen job reports as good. manufacturing and nonmanufacturing are strong. consumer confidence is strong. economy isthe shrugging off the policy uncertainty and volatility. looking forward, that is the kind of environment that keeps , obviously with concern and hesitation. things are still on track with the economy. do?ie: what will the fed
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we are hearing more and more people suggesting there will be a pause next year, if not december but next year, and market expectations for increases have gone way down. what will happen next year? --an: i think the market is has overreacted a bit. it is priced in one hike for next year. they are misinterpreting the fed to some degree. the fed has dropped the foreign -- forward guidance and are no longer hinting at how far they will go and they are talking about data dependence. that is different than capitulation. if the data coming healthy as they are now and likely continues, i think we will very likely get more than one hike next year. we still think there is a good chance they hike every quarter next year. there has been a little
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overreaction in the markets. the markets remain volatile and remain affecting the economy, then you do want to see if you are on the fed and early pause the comes more likely. the evidence for that does not exist at this point. guy: that would take us up to the top end of the neutral zone, let's call it 2.5 to 3.5. do we get to the top of that? ethan: i think that people forget that the fed doesn't normally and tightening cycle at neutral. they normally overshoot a little bit because by late in the cycle, you get a little inflation. your overshooting inflation targets and your unemployment target. some small, gentle overshooting -- and by the way, this is a very slow motion tightening cycle by the fed. for them to hike once a quarter is less than half the normal speed.
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-- the argument that the overshoot slightly makes some sense. we are all staring at our computer screens and seeing the red light flashing. it sounds wild to say the fed what hike every quarter next year. it will be a data call, and it may feel like it is a meeting by meeting kind of thing next year. there is still a good chance we get four hikes next year. guy: are we focusing on the wrong thing when we spend our time talking about the number of rate hikes the fed is going to be delivering next year? do you think they could be more dynamic with the balance sheet rolloff to manage the situation and a more of a nuanced way? ethan: i am surprised that the fed decided to set aside the balance sheet and put it on a predetermined path, and only rely on the fund rate for policy
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changes. that is the commitment they have made. i don't think they are going to change that, and i don't think we should be thinking one is better than the other. if you are rolling off your balance sheet and hiking rates and put constraint on financial condition, i don't think there is anything particularly different than using a balance sheet versus rate hikes. i wouldn't expect them to change that policy. vonnie: ethan, you are sticking with us. we will get his insight on the opec deal and the global economy as well. output is output is to be 10.7 million barrels a day in december, 10.7 million barrels a day and 10.2 million barrels a day in january. saudi arabia already making a move to implement those output
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cuts. some saudi oil has gone into inventory according to the oil minister. more next. this is bloomberg. ♪
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administerudi oil indicating the cut we will see out of saudi arabia. outfit december 10 .7 million barrels a day drop to 10.2 million barrels and they say some will be generated by weaker demand. we have seen comments coming through from alexander novak, the russian oil minister. these two critical in determining the size of the deal that was done. arabia wille saudi
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take half of that -- a little half -- less than half of that. that is the indication we are getting from the saudi's at the moment. domestichat will be a drop in demand. indication from the saudi's that some crude has been flowing into storage. let's bring back into the conversation, it ethan harris, head of global -- conversation, ethan harris. are we seeing some of this generated by the opec group? ethan: this is what we were expecting. the opec nations cannot afford to have a collapse. they need the revenue for the budget. it is not a surprise there is an agreement. from a global economy, this is fine. markets were setting up for strict sanctions on iran were oil was almost completely cut off and that did not happen. supply,et had too much
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and this was creating a significant downside risk to prices. from anthis makes sense opec perspective and it is fine from the perspective of the global economy. seen break down sharply and generated by the move from $150 a barrel on the crude price. is that creating a market had inflationary point of view? putting that side-by-side to the american economy with good jobs numbers and good wage numbers and is now, is that a had fake when it comes to the inflation story? i think so. oil prices will fluctuate and we do not want to get too excited about short-term markets. the fundamental backdrop for the u.s. is a slow, steady, strong
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job market. you have an absolutely red-hot job market. everything you look in the job market suggests this shortage of workers and companies under tremendous pressure to start wheezing rages. job opening -- the number of jobs available are easily at record levels, much higher than the level of actual unemployed people out there. there is a lot of labor market pressure, and it is still building. we are on a trend increase in inflation. i don't think it will become a big problem, we should be expecting higher inflation and breakevens going forward. vonnie: the job data -- the good job data is now moving in. why now? last month was also lower. data have turned . if you look at almost any measure of wages, we are running about one half to a percentage
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point faster than a year ago. there is a slow acceleration in wages, but i don't think workers have caught up yet to the improved negotiating edition, to tell you the truth. there are low expectations for unemployment. they are reacting to the labor shortage by leaving jobs open rather than waiting -- raising wages. this will be a slow, incremental process. my guess is that by the end of the year wage growth will be up by 3.5%. perhaps in the cycle we will get as high as 4%. it is a slow process but we are moving in that direction. at the margin, how much is donald trump affecting things when it comes to opec and saudi arabia and the federal reserve? in terms of policy, we have to wait until something happens but in terms of these comments and
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tweets? think the markets are being very heavily affected not just by the uncertainty around the trump administration policy but broadly by policy uncertainty. why was the equity market down in the last two months? overwhelmedas been by policy uncertainty. you have the trade war, brexit, the italian crisis, oil sanctions, and on top of that, the fed sounding hawkish. the markets can handle one or two of the shocks, but to show five or six shocks in the market at the same time is quite a problem. the problem right now for the markets is that we are not going to get through these things quickly. will have to deal with the uncertainties for a while longer. vonnie: ethan harris, it is good we have you to navigate through them. market selling off now. altered beauty is down 10% --
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alta beauty is down 10%. this is bloomberg. ♪
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four minutes to go into the end of the regular session in europe. a positive note. ftse up by 1.3%. dax is the underperformer. one stock stands out. it is hammering right now. europe does not have much tech, and you can feel that today. the end of the regular session is coming up next. this is bloomberg. ♪
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guy: 30 seconds to go until the end of regular trading in europe. markets finishing largely in the green. a decent session from the get-go
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today. london doing really well. the german market is the standout. i will come back twice germany is having such a tough day in just a moment. i want to show you the ftse 100, up to 1.3% trading on decent volume. decent by out of europe today and tech up .9%. let's talk about the dax. the german dax up .1%. there is one stock trashing the market and that is fresenius. it is really suffering today. 17.35% as we come through into the auction process in europe. it is trashed today. tullow is doing well and turning up by 7.54%. is a whole range of
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sporting equipment and around the world. it is being taken over by a chinese group and taking out that business whiskey boots, baseball glove -- business. we have ski boots, baseball gloves. 9%.stock trading up over the real story is for sending us and the damage -- fresenius and the damage it has done. europe has been backed up by decent volume. europe does not have the tech story hitting the u.s. markets right now. dayse is above the last 30 ' average. a decent move to the upside and backed i decent volume. that is a look at the european close. vonnie: markets in distress. that is what they are calling this episode.
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market decline after the . it is down 1.7%. ulta is the worst performer, down 10%. an idea of these fluctuations, hewlett-packard is down 8%. it was up at the close yesterday. a lot going on beneath the surface of these markets. there was a 2.8% swing to the s&p 500 yesterday, an indication of the stress an. other asset classes, not huge amount of movement for the u.s. dollar but we see it in the vix index and in yields this week. the 10 year at 2.88%, up even after the agreement from opec. you can see crude oil is only up .4%. there was one move on that announcement.
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53.74 is where we are at. guy: let's talk about one of the other aspects of the tech story that we have talked about. overhaul overg to growing fears that they -- their equipment is vulnerable to hacking. jonathan ferro spoke to the economic council leader larry kudlow about that arrest. >> i don't want to get in that yet. we are talking about roadmaps and timetables and i am sure there will be a lot of interaction at the presidential and staff level. i just don't want to make any predictions jet because it has not been sorted out. the chinese were -- to get to beijing is a long haul. we came from washington and they had to come from beijing and back from argentina.
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starting tuesday, wednesday, and thursday they released very positive statements with respect to the meeting between the two presidents, and a strong likelihood that immediately -- used,at is a keyword immediately actions will be taken on various commodities, agriculture, energy, industry. discussions on what i believe are the key issues on technology transfers and ip theft and cyber hacking. those discussions will come immediately. they are much more common than anything i have seen in the nine months i have been here. .rospects are good and it a while though
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was said that we must enforce this stuff and make the timetables good. an were gathered around the table in buenos aires . beingada the huawei was arrested. did you know about that when you are in the room but the chinese? >> i did not know. jonathan: do they bring it up at all? larry: not at the dinner. john has when do they bring it up? larry: i didn't hear it. jonathan: did everyone know? requesthis is not a new , if i have the story right. companies haver
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been in violation of our sanctions policy with respect to iran, and they have been warned. i think our canadian brothers and allies for helping us on this matter. they should abide by our rules. out.ll see how that shakes no, we didn't know -- i didn't know. jonathan: the optics will look iseresting that the huawei in brooklyn as you are trying to lead trade negotiations. you see the two things complicating one another? larry: some people will make that conclusion, i am not sure i want to make it. one is a trade reform track and the other, as you said, is a law enforcement track. they were warned.
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-- i don't know if i have a clear crystal ball in any of this, i see them on different tracks. the trade negotiations which , they lot of momentum will continue. i do not believe they will be interrupted by the huawei enforcement actions. vonnie: jonathan ferro speaking kudlow.ry kudlow > >> opec agrees to a cut. they will move 1.2 million barrels from the market. opec will account for two thirds of that. one of the winners in the negotiations, iran, which says it got an exemption because it is hurting from u.s. sanctions. whenever special counsel robert mueller comes out with a report, president trump will have a written response. the president tweeted that it is fake news that his lawyer, rudy
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giuliani, one that counter the report. he said in response is 87 pages long, but it won't be complete until he sees final witchhunt report. james comey is on capitol hill today. house republicans questioning him time close doors. -- closed doors. they're looking at the decision not to prosecute hillary clinton for using a private email server. a transcript will be made public within 24 hours. global news 24 hours a day, online 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: checking u.s. markets now. using a little. s&p down 1.4%. the industrial average is down 1.5%. one ands down
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three quarters percent. oil is higher after the opec agreement. tradingp about 4.5%, just below $63 a barrel. and interview comingand interviu don't want to miss. this is bloomberg. ♪ this is bloomberg. ♪
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guy: european markets through the auction process, settling. up 1.28%. oil stocks driving the london markets today. the dax trading lower, down .2%. fresenius is the new issue behind that.
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that fed through to the german market. over the last week, over the last five days, not a single inopean stock has finished positive territory. every single sector in europe is in negative territory. vonnie: more on the stoxx. the volatility overall. a topg us is david hunt, 10 asset manager globally. david: thank you for having me. vonnie: you are really all over the world. this volatility must be disconcerting. what is at its core? why are they so market -- a volatile these days? david: so many associate volatility with risk. they are not the same thing at all. most of our clients, who are the most sophisticated pension funds
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around the world welcome the volatility. the biggest risk we face as long-term managers is actually how to put money to work in an environment where prices are high when we think about the returns over the next 10 years. are of our clients welcoming of the volatility and if you would ask them would they be happy to have a little bit of repricing, they would say yes? vonnie: some volatility is good and have been none, so a little welcome relief. surely you cannot suggest this is a market not in distress. s&p 500 down 1.6%. no question, markets are repricing in three big pieces of news. one is that many people now believe the u.s. has crested in terms of growth. they looknk as
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forward see things coming down in the 19 and 20's. wonderful growth we have had around the world now seems to be slowing. slowed, china has slowed. the narrative around growth has changed globally. of easy fiscalra policy is going to end. we can talk about the exact timing, no question conditions are tightening. all three of those things are being factored in, and we see clients making changes to the portfolio as a result. vonnie: is this pricing orderly? it feels disorderly. if there was consensus, surely it would be more ordered. david: surely there is not consensus. long-term investors, such as ourselves and clients, are taking the other side of the volatility. if you worry about what your return will be this quarter,
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then you are very worried about some of the changes, and you are forced to sell much more quickly. that is only reinforced by the structure of the markets, particularly the equity markets. vonnie: what are your plans to weatherproof the portfolio? david: our clients are doing two things. one is that they are moving money into private structures and out of public structures. many of them believe we are toward the end of this particular cycle and while nobody sees a recession in the near term, they do think we are toward the late cycle, and they do believe that private equity, private credit, real estate are more able to whether the end of the cycle than the public markets. so we see quite a change in that. the second thing is we see clients taking down risk within each of their asset classes, fixed income, they are taking duration off. we see people moving in with
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credit and we see quite a bit in real estate, people moving toward core and gateway markets and out of value. risking --de- risking. lending,oward private it seems that there have been more warnings about those areas you mentioned that they are looking bullish if you like. is that a concern? david: the one area we do worry a lot about is the private credit area. us.s a big business for we have been doing it for many years. we play the investment grade side of that. in the last years, there are been a lot of capital flowing into the noninvestment grade portion of it. a lot don't have the track market with underwriting. if you were to look for a place where there will be money lost in the next couple of years, some of the noninvestment private credit is a good place.
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is it contained or is it now showing signs of popping up in other parts of the markets, and not just u.s.. it is not just the u.s. some of the fastest growth has been in europe. allke previous cycles, were of the loans would have been on whenalance sheet of banks, they begin to go bad it ripples through the economy and the banks need to write that off credit against it. this whole cycle, the losses will be on the balance sheet of lps. that won't have any ripple affect across the economy and there will be no bailouts for the lps, and that is a healthier state of the economy and having bank's the balance sheets. vonnie: how worried are you about trade tensions and a slowing cycle? -- take the did
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trade tensions, the nafta agreement was a classic trade situation where we beached an agreement -- we reached an agreement. don'tis different and i understand why they are casting the whole situation with china as a trade issue. the reason investors are worried about china is they are worried about the divide that is occurring between the two largest economies of the world. it is not just trade. many american companies make business in china and vice versa . imagine if we have a rift in the relationship between these two countries. we could have a really cold war economically speaking, which would be very, very damaging to many companies. that is why you see so much focus and attention on this issue. vonnie: talking about changes in the asset management, the trends you are seeing? david: the most interesting thing over the last year has
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been the private market side of the business and the alternative side has come together with the traditional long only business. for many years, these two have been operating very independently and covered by different media reporters and analysts. yet over the last couple of years, many of the alternative folks have gotten into the long only folks and many of the long only folks have gotten into private businesses. im, we aree like pg balanced in both to where the third largest alternative a manager in the world. we see it coming back to liking that very balanced set of businesses between the private and public arenas. pimco and have seen other asset managers selling some acquisitions. what is next for pgim on that?
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david: the most important is investment performance. we are one of the world's largest active managers, and we have had 15 years of consecutive institutional inflows. there is a simple reason for that, and that is investment performance. vonnie: will we get that part? david: if we focus on that come other good things will happen. we need to stay focused on investment. vonnie: you are not looking for opportunities? david: we are looking for capabilities our clients need, and we do see in the market quite a number of firms that have really excellent investment capabilities, but they haven't figure out how to gain the scale you need. scale is one of the most important elements in the industry going forward. we are actually able to take a firm like that into our family.
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we can leave them to operate as they are but help them grow themselves. of pgim,avid hunt, ceo thank you for joining us. guy: tune in to bloomberg radio. at the top of the hour, jonathan ferro and me talk you through the action we are seeing on both sides of the atlantic and the selloff in markets. we will get more of jonathan's interview with larry kudlow. >this is bloomberg. ♪
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guy: time now for the stop of the hour -- stop and the hour. we're looking at broadcom. the chipmaker is going against the recent trend for apple supplies and rallying after earnings below data to get the credit for the rally. let's find out more details.
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here is taylor riggs. broadcom is a key apple supplier. we have heard bad things recently from all of those apple suppliers giving the slowdown in sales. broadcom differentiating themselves and a really upbeat sales forecast for 2019. continue to grow year-over-year on the topline line revenue growth. they are forecasting .4 $.5 $4.5on in be analyst -- billion and beat analysts forecasts we have a quote saying they expect moderation of the iphone sales but continued robust demand from cloud providers. it is the cloud providers and data centers from google and amazon that are the future of their growth. guy: taylor, other chipmakers have not had such a good run and have been struggling and the iphone sales story is part and parcel of that. different reactions going on as
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you have pointed out. taylor: very different. come into my terminal. othern see all of the ones all getting hit. --wei and thehuawei and the huawei giving into that. vonnie: thank you, taylor. markets and selloff mode once again. we are early in the session, given that we saw a swing of 2.8% for the s&p. is the worst performer, down 10.5%. this is bloomberg. ♪ ♪ there's no place like home ♪
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headquarters, i'm jason kelly in for david westin. welcome to balance of power, where the world of politics meets business. -- we havereally and kevin on personnel changes, and matt miller on the election of the new leader for germany. kevin, we are going to go to you down in washington. what is going on. it's quite a day -- going on? it's quite a day. a lot of personnel changes at the white house. >> the musical chairs has begun here in washington with the trump administration. to ber new art is going named the u.n. ambassador, hasacing nikki haley who announced that she is departing in the administrn


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