tv Bloomberg Markets Americas Bloomberg July 29, 2019 10:00am-11:00am EDT
minutes into the trading session in the united states. welcome to "bloomberg markets." vonnie: a big week for markets with the fed decision, jobs data including thed u.s. restarting talks with china impacting some stocks. earnings above 3000. one major deal and less major deals. combiningd pfizer parts into a public traded company. pfizer down 2.7% in line with what would be an acquirer type position. we have paypal holding, down more than 3% on a downgrade which calls their outlook which was decreased a wake-up call. guy will get into that. guy: let's talk about what's
happening. i will focus on the u.k.. the real story coming in, the markets along with boris johnson starting to look at may be no deal brexit. as a result we have the fish found against the u.s. dollar, we will -- we have the british pound against the u.s. dollar. a big move there. that is one of the factors outting the ftse 100, it is forming the rest of europe but it is -- but there are other factors. m&a is one of them. deal buying a business sold to blackstone and now being bought by the london stock exchange. that will put a whole different class when it comes to financial assets. it's trading up there are other
deals as well. a big week for the global economy with rates decisions from the boj, federal reserve and bank of england as well as economic data from the u.s., germany and china. let's get to someone who can help us size up investor sentiment. he comes to us from boston. let's begin with the federal reserve, do we see basis points decrease and is it warranted? >> it is the wood versus the should and will. the fed has to 25 basis points because they finally had a test -- twowe are going to 25 do 25. should they? if they could travel back in time they would have gotten there stories straighter -- andr stories straighter
keep policy unchanged. to risks they were pointing in june haven't materialized. but the fact is market participants have considerable easing priced in over the course of the year. what i think they should do is cut, say this balances the risk, let's just get on with our lives. vonnie: is the economy in so much danger that we need a 50 basis point cut, would that make the president correct? he will be unsatisfied with the extent of ease. i'm not sure the economy needs 50 basis points but i do know when market participants are pricing in 75 to 100 basis points of ease that if you drip
feed a 25 here or there, they will extrapolate and it will get overdone. participants sound like they want to do 50 this year, we are close to the majority in june and some of them have shifted. if you have to do 50, why don't you get it over with? if you do 25 and another 25, you're giving them two points to extrapolate that line and they will get over their skis with how much easing they expect. guy: vince, good morning. forcing investors to buy overly expensive assets? vincent: i think central banks in general are forcing investors to buy overly priced assets. 13 trillion dollars worth of sovereign debt or so have negative yields.
in some sense i think it is the bank of japan and ecb that is forcing the fed to be more accommodative than the u.s. economy would warrant. right now, u.s. treasuries and federal funds rate are the two nails sticking out and the fed theyhammer them down so are not into much variance with their colleagues. guy: where do you see the biggest opportunity for mispricing lie? high-yield, money is pouring in. that market looks really stretched right now. but money keeps pouring into it. the s&p trading around 3000. you look at the valuations there. do you see the biggest outliers right now? where you see the biggest
opportunities? if you look at cash balances, people are waiting to put money to work. vincent: i think you are right. the way i would frame it is there is something wrong. either the december fed contract that has recession fighting style easing by the federal reserve with nearly 100 basis point cut in under six months is right and they are pricing the -- and the pricing of risk assets is wrong. the equity prices are too high a high-yield spreads are too narrow and there is going to be a pullback, or market participants in the fed fund futures are wrong and it's just not going to deliver nearly as much easing as currently built in. i think it is the latter. i think the fed will disappoint and when the fed disappoints in the data youuse of
will see volatility, up and a up and-- volatility come a backup in yields. vonnie: we were tightening last thing we need to loosen substantially even though one point 5%saw year-over-year and it doesn't seem like wages are feeling any kind of inflationary pressure. vincent: you are right. six or seven months ago, jay powell was saying in order to sustain economic expansion, we will have to raise rates a few more times and just a couple weeks ago he said in order to sustain economic expansion, we will have to cut rates. vonnie: we are going to hold on for a little bit. us, lotscking with more to get to. in the meantime, we want to check in on other news. police in northern california
say they are not sure why a gunman opened fire at a popular garlic festival sunday. he went with the intention to kill. police say he was armed with a rifle and cut through a fence to avoid security. three were killed and at least 15 were wounded before police shot and killed the assailant. sunday was the last day of the two day festival that attracts 100,000 people to gilroy. china continues to back to hong kong chief administer while condemning violence in the city. part of a rare news conference on the beijing office. they crossed the redline of the principle of one country, -- systems and must any civilized society under the law would never allow this violence. followsdeclaration fresh demonstrations this weekend. police fired tear gas and rubber bullets.
prime minister boris johnson holds its first meeting -- holds his first cabinet meeting today. michael will lead the session. 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. leinz, this is bloomberg. you very much. the ongoing saga around the troubled south african utility continues. will be thed -- company ceo. a huge task. what canman who has only be described as a massive number of hats. hat is's got under the under the question. he has to figure out how this utility is putback on a sustainable path and how that is
done without putting the situation in south africa into a much more precarious position. this story becomes more difficult, that will put the whole system in a really difficult situation. mabuza, what does he have under his hat? president trump is participating in a signing ceremony foreign act to only authorize the september 11 victims compensation fund. the president making some remarks signing the 9/11 victims compensation fund bill which will authorize it permanently in place. bloomberg subscribers can continue watching on live go. this is bloomberg. ♪
♪ guy: from london, i'm guy johnson. vonnie: this is "bloomberg markets." let's check the markets. mixedare looking at a picture for u.s. equities opening in the last 45 minutes or so. the s&p 500 and the red down around 3/10 of 1%. , a cut all but assured when they come out with their decision on wednesday.
a much greener picture when you come over to europe. the stoxx 600 still in the green. the big story, the ftse 100 rising 1.8% heading for its biggest daily gain since february of this year. surging after the stock exchange group made that bid. a very different story when we get to the pound, take a look at this, we are looking at three-month pound implied volatility. we've seen it around 1% that hits a two-year low. volatility spiking again. at quite as much as before the last brexit deadline. boris johnson, the new prime minister, his team really talking of the possibilities of a no deal over the weekend. we are seeing something of a mega m&a monday.
you can see a number of those deals. i mentioned on the stock exchange spiking on that $27 billion bid, rising around -- this having its best day after the dutch company said it wants to buy. an rising as pfizer wants to create a generic giant with them. one quick final chart i wanted to show you. , over look at u.s. m&a the past year, it is lagging the s&p 500, that tracks all the companies going through a deal. guy: protests continue in hong kong over the weekend. violencecondemning the , a spokesman for the hong kong affairs office saying it has gone far beyond the scope of peaceful march and demonstration , undermining hong kong's price
parity and touched on the bottom line of the principle of one country, two systems. no civilized society under the rule of law would ever allow acts of violence to take place. we are still with vincent. storyput this hong kong next to the trade story and i'm just wondering if these are overlapping. i'm wondering how much attention investors are paying to both the hong kong represents a huge source of access to the wider world for china, one that is slowly fading but still hugely important vincent: i think you have to connect the dots, no question about that in a couple of ways. number one is hong kong is the exit point for capital from mainland china. it is less important than a decade ago, and that is warranted, but it is still an important conduit to the wider world.
about theis is also status and prestige of president xi. if he has a in calculus president trump has. if you are in battle on other fronts, it would be a good time to have a victory and what you could declare victory on his trade between the u.s. and china. guy: how much attention are you paying to what's happening in the u.k. at the moment? it went off the radar for global markets a little while ago but the pound is really aggressive today. is it back on your radar? vincent: it hasn't fallen off the radar, but in any time an isortant relative rate consequential for fixed income investors. is bottom line though is it
not a global economic story because the u.k. represents less globally. gdp it is however an important market event because boris johnson seems to be barreling towards a hard brexit on october 31 and when that happens, that will be concerts what -- consequential for some important relative prices. 1.2267 so weng at got a bit of a substantial move off of this change in posture. how much is this? how much is it good for europe to see that there is a slight sliver of a chance there will be a no deal brexit? it's still not good for either side if there is a no deal. vincent: it's more than a sliver of a chance for no deal, at least when you listen to boris johnson cabinet over the weekend
who were uniformly raising those probabilities. i think it is tough in terms of game theory aspect of it, boris johnson bargaining with the eu wanted to make the strongest case possible that he is prepared, nonchalantly almost, to leave without a deal. is it isthe problem opening -- in his opening address to parliament, he talked about the backstop as being undemocratic. it's hard to figure out how you can compromise on the backstop them -- then if the mere existence would be undemocratic and to give up on the backstop from the eu perspective means throwing a well behaving member of the eu under the bus. the eu has along, said it's not prepared to do
that. the thing about game theory is it doesn't work unless you -- if you don't put up a strong front that europe won't believe it's a possibility. feel severen not economic pain if there were to be a hard exit? the reality is the estimates of the cost of brexit have been all over the map and in some sense i think boris johnson is having an easier case convincing the public of no deal brexit because so many scary stories were told early on. i think there are two alternative views. in trade theory, it is location that matters. if they won't move the u.k., they are still going to be trading partners, there will be
price affects. british goods will have to get cheaper from the selling point in order to deal with all the extra costs they will pile on as a result of not being on the eu. costuch more substantial will be the severe disruptions of global supply chains and that probably is going to be a hard hitter early on, but over the medium and longer-term, we should get past it. guy: final quick question. if the u.k. looks to have a rate cut and fiscal push at the same time, how significant an effect would that have an for what extent would it compensate? iscent: the important part clarity under trading positions. if you are accompanying with stimulus, that is going to probably augment the weakness in , anpound and by the way
important pivot would be tried to get a deal with the u.s. on trade. find some friend somewhere to for thee is a vision u.k. integrated in the global trading system but not appointed as much to the east and the continent and more to the west. vonnie: wonderful speaking with you this morning. our thanks to vincent reinhart. this is bloomberg. ♪ ♪
i'll try to correct it. there are more nations than just russia who are attempting to undermine western democracy, that has been true since the founders created this great nation. we have to be ever vigilant. guy: that was the secretary of state mike pompeo speaking to david rubenstein. show oncatch david's bloomberg tv on wednesday at 9:00 p.m. eastern. vonnie: it is time for the latest bloomberg business flash. china has purchased a record volume of crude oil from saudi arabia. 64%.urchases increased russia and venezuela also increased. it comes as the world's biggest exporter plugs a shortage from sanctions hitting iran.
elon musk announced drivers will soon be able to stream netflix and youtube woman in car display. an in car from display. it only works when it is not in motion. that is your latest loom or business flash. guy: a bit of news, this is coming in from the administrator of the woodford fund. the administrator is saying it will remain closed and is likely to be locked until early december. much to the annoyance of the investors in that fund. liquidity issues once again. this is bloomberg. ♪
first word news. suingrench activist is officials saying they should have done more to protect people after the notre dame -- week, city officials ordered a deep cleaning and health authorities recommended blood tests for people who lived nearby. france is sticking to its plan in defiance of u.s. president trump suggestion he may propose retaliatory tariffs on french wine. the finance minister says the two are completely different issues and should not be lumped together. the u.k. has deployed a warship to the strait of hormuz. this after weeks of recent threats to oil tankers in the region. officials are working with officials in tehran to ensure the freedom of navigation. 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. i'm kailey leinz, this is
bloomberg. we are seeing the mexican peso weaken right about now. the u.s. dollar is weaker i about one third of 1%. about one third of 1%. is calling on unions and businessmen, he is going to propose a dialogue table for mining unions and businessmen. these are the first of some today, thend later bloomberg editor-in-chief is sitting down with the mexican president for a wide-ranging yourview in mexico city and can see it on bloomberg tv. it is merger monday. one of the deals on the table, pfizer combining its business line such as lipitor with generic drug maker mylan.
it is unusual type of deal, but as of now the market is treating pfizer like the acquirer. >> pfizer is spinning off and then combining its off patent thatwith mylan in a deal mylan shareholders will get 43% of the new entity and pfizer will get the rest. guy: why is bigger better here? >> it depends on which drug maker you're are asking about. challenges isd the u.s. generic market has flailed over the last decade. the company lost three quarters of its value since 2015. they are dealing with legal liabilities as well as price erosion and so about a year ago today they launched a strategic review to find relief to that pressure. pfizer has seen loss of exclusivity and are looking for
new ways to leverage growth. china and emerging markets throughout asia represent a viable opportunity for growth. vonnie: what does old pfizer do once it has spun off this part of its business? obviously it will focus on the higher-margin type of innovative business, but does it have drugs in the pipeline that will keep it going? >> absolutely. the ceo has outlined a new strategy with company focuses on the higher-margin drugs, cancer therapies, vaccines. they are looking to move off panted -- off patent drugs off the balance sheet and onto those newer high market therapies. guy: is this something that could be replicated elsewhere? riley: i don't know if i have the answer to that question as of now. mylan and pfizer have unique challenges. vonnie: the generic drug makers
are facing the silly we may they deals. did they come up with this transaction? how long have both companies been thinking about this? riley: we are working to find those out. it sounds like closer to today the deal has come together. is theone thing to note mylan chairman will be acting as executive chairman and he said on the call that he will be keeping a tight grip on the new entity that he will be leading future m&a and other strategies, so there is a lot to watch in terms of how management shakes out. vonnie: we are waiting on a new name for the company. by 2020 -- our thanks to riley griffin. guy: let's talk about another deal. $27 billion worth. the london stock exchange group
shares soaring on the back of the takeover of the multimedia new -- news agency. joining us now to talk us through it. the market loves the deal. trading up, why? this feels a get plan b deal to me. they are doing this deal, why is it a great one? they have been upbeat on these transactions. 27 billion and this will really transform the global data provider. excited about this actually transforming itself in becoming a more global data company. vonnie: what are the main benefits here? benefits --main
diversification of trading business and also the fixed income and an extension of the ,lobal footprint of lse especially to the americas. this comes together in terms of geography and products offered. numbers are quite amazing. reuters sells this to blackstone, that looks like a good transaction. blackstone flips it and sells it onto the lse. overpaying and i don't believe it is, or did blackstone just get an incredible deal when it bought it?
>> we don't know the financial details with the deal yet because we don't have the obviously with all the -- blackstone tried to buy, so they are not very interested in the business. seems like a lse long-term partnership, transforming something different. in terms of value we will have to wait for the financial details that can be published. we should note bloomberg competes with refinitiv to provide financial information. talk to us about market share here and in europe. with this transaction, lse
will be one of the biggest global data providers. in a market where there is not much competition. there are not much details known yet and they will come during this week, we will see what was really the market. guy: thank you very much indeed. joining us on the lse deal. brexit uncertainty is having an impact on the aviation sector .nd an impact the cfo told bloomberg the airline had been forced to cut contributed to a 21% drop in earnings. has been -- in the
last quarter. there is a lot of capacity in the german and austrian market. due to the uncertainty around what may happen with brexit. we are continuing to grow strongly, a very good cost base for the rest of the markets. the structural cost advantage of everybody else which is enabling , but i think longer-term and the strength of our balance sheet means we are in a very strong position to participate, particularly as we look into the winter with this low environment
i think there will be a number of consolidations. in the opportunity they will reside -- rise as the result of that. >> in terms of that consolidation i guess that's how , that us bankruptcy takes out the over consolidation. what role will ryanair play? >> we will continue to offer the lowest fares and costs and our objective is to grow to 200 million customers by march of 2024. that will give us a market share of about 21% in europe. clearly the standout low cost operator in our market covering all the point to point operations in europe. ryanair cfo speaking
with bloomberg's matt miller. checking the u.s. markets, we are just more than an hour into the first trading day of the week and the s&p 500 is down 3/10 of 1% but still well above the 3000 mark. the dow industrial holding onto a gain of a 10th of 1%. 1%.nasdaq is down 8/10 of slightly elevated though. this is bloomberg. ♪
business stories right now. , fighting ahnson lawsuit asking for a warning to be put on its baby powder products. the company is pushing back on a texas law firm. the law firm calling for it now wants to dismiss the case. the new jersey-based health care conglomerate faces more than 40,000 lawsuits accused the company of hiding the health risk of baby powder. down a group is winding credit business -- and energy credit business. bloomberg has learned the will manage out the rest of the portfolio. investing inostly energy and power companies. -- is in talks to acquire genomic health heard --.
the exact sciences focuses on early detection of cancer, genomic health business is in commercializing clinical oncology tests. that is your bloomberg business flash. vonnie: time for another highlight from a conversation with mike pompeo. he spoke with david rubenstein today at the economic club of d.c. they talked about issues of the border with mexico. and theynot enough still have the high side of 2000 every day and it is unacceptable. congress needs to change the rules, we have to create a deterrence, it has to be the case that those who want to come here legally, can and those who want to come by some other mechanism choose not to because they understand they will not find a way. vonnie: rubenstein spoke to the
secretary of state about the price it debt crisis in venezuela. secretary ofent -- state about the poor -- crisis in venezuela. >> we are closer today than we were several months ago. in the end we will do our part and we built out a great with 58n from members other countries joining us saying maduro is not the duly elected president. progress every day. vonnie: pompeo weighed in on russian meddling in u.s. elections. >> it ain't just russia. that's bad english, i will try to corrected. there are more nations than just russia attempting to undermine western democracy, that has been true since the founders created this great nation. so we have to be ever vigilant. u.s. secretary of state mike pompeo speaking to david
♪ vonnie: live from new york, i'm vonnie quinn. guy: i'm guy johnson, this is bloomberg markets. vonnie: time for the stock of the hour. guy: heineken's or stock of the hour. emma chandra is here. >> it is falling today, headed for its worst day after the earnings that came out which showed profit was a lot worse than expected. came in at .3% way below analyst estimates. rival, ab its biggest
inbev. heineken stockhe retreat from a record high on friday and wide in performance. the really big cost was input .osts, particularly aluminum you don't have to say aluminum anymore. up thecally they set rise of the cost of alum any him -- aluminum. the fall of aluminum prices we see, this is something the cfo talked about on bloomberg earlier today. >> the import cost, that is something -- the input cost, that is something you largely see coming. if you are talking about
aluminum, which is the most important raw material in terms of amount. >> hedging was a problem there when it came to aluminum cost. but they see things improving. structure -- structural problems for heineken. the proliferation of breweries around the world and changing habits. >> that is true and they did see a bit of a pullback in the u.s.. craft beers have been doing a lot better. nevertheless the company maintained its guidance so a number of analysts and investors saying they would have to perform extremely well in the second half of the year, not to make any mistakes if they are to meet that guidance. -- if consensus growth is to be met they need to grow about 10% in the second half of the
year and see some comparisons in the second half of the year. benefitany expecting to from the currency shift. stock, thes the start of the year in a low back in january of 75 now trading north of 100. we are talking abut a very big drop but it has been on an these foodrun, all and beverage companies which have a big yield have done well. >> it has done extremely well through the year. whyas such a big miss today we are seeing such a big drop when you compared with its rival , this has more of a concern creeping into investor sentiment. ,uy: after such a strong run maybe a little bit inevitable. emma chandra, thank you. vonnie: time for futures in focus, joining us from the cme
is partner at the carlyle group. scott, we have the 10 year yield , does that experience any volatility before wednesday and the fed decision or are we set for the week? >> i don't think we will have to much volatility. the 10 year yield i think will be a slow grind lower. you can't fight the fact that there is 13 trillion or $14 trillion weighing on our longer and. i think that is what the fed will try to fix by cutting rates but i'm not sure i'm on the rate cut group because i'm not sure the economy is doing poorly. i would be judicious with the rate cut, i would throw them around like manhole color -- manhole covers rather than dimes. we don't have a lot in our quiver to stave off any sort of big selloff or downturn. i think they have to be very careful. other: then there is the
set of thinking, saying if you are going to do 50 or more, why not do the bulk of it now because the market is looking for it. scott, if you are all in the economy doesn't need a cut but we are getting one anyway, is there a way to play that? is there a trade? >> because the fed has said what they will do, it is largely priced in. i think what i would be doing is let's be careful what we wish for. we have now forecast what the fed will do, some folks are banging on about a half. i would say ultimately what happens -- what if the stock market starts to selloff? that is the scary perspective. i don't think anybody is thinking the stock market will stream higher. i would be looking for defensive plays against negative action
because once we have it priced in and they say what they will do anyway, there is nothing new that will hit the market. we could have some negative ramifications and once you've used once or -- one of your rate cut cards, will you use another to stave off a downturn? defensive taking some asset price production now. vonnie: on oil we are not seeing much snow and -- much movement at the start of the week. out there,ssues are what are you looking for oil to do in the next five days? >> i'm looking for it to lay there. it is been difficult to get it going. we have had some geopolitical issues but it's not getting out of bed like we thought. we have seen that with some other commodities. i would say because of the efficiencies in the fracking business. back in 2008 when we were
looking for help from china to get our economy going, 25% of the jobs created were due to be part of the oil industry we have in the states. it's big and if it's efficient, it will move these things when they said 15 or 20 years ago it was a big deal. vonnie: thank you for all of that. guy: we will carry on the conversation next. the european closes coming up and morgan stanley's chief strategist will join us. this is bloomberg. ♪ ♪
i am guy johnson. vonnie: this is the european close on bloomberg markets. happening inhat is the u.k., boris johnson is tweeting a no deal brexit is his default option. we went through 123 earlier. we are approaching 122. the acceleration is absolutely brutal today. we are down by 1.23%. that is having an impact. they trade antagonistic lee. there is also a lot in the ftse 100. it is trending up by 15.23%. the market treating pfizer as a spinoff and a creation of a new public company. 2.2% of the jobs for pfizer there.
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