tv Bloomberg Markets European Close Bloomberg July 28, 2017 11:00am-12:00pm EDT
and this is the european close on bloomberg markets. ♪ mark: big top stories we're covering from the bloomberg and around the world. european bank orderings, credit suisse feeling good, ubs shares getting pummeled. we will hear from the chief executives of both banks in this hour. tobacco shares are getting pounded on both sides of the atlantic on where the fda is trying to cut the amount of nicotine in cigarettes to nonaddictive levels. 2.6% in economy grows the second quarter, showing a tiny resilience but will washington's inability to get anything done eventually come back to heart the nation -- heart the nation -- haunt the na
tion? function,s your another leg lower on the tobacco news, driving down b.a.t. and imperial brands. look at the currencies, all rising against the dollar in the wake of the gdp data out of the united states with bonds, commodities, and stocks on track for their second weekly decline. the earnings season continues in earnest with shares in adidas jumping as much as 9%, the biggest gain since 2008, passing through three standard deviations. that is what this chart shows. record high for the shares of adidas, increasing revenue and profit forecasts helped by strong sportswear sales and the brand streamlining that includes the disposal of its ccm hockey business and benefiting from booming demand for retro shoes
and a steady stream of new models. the major bread a hot commodity in the united states, helping to regain ground, it had earlier loss to nike and capitalizing on a growing middle class in china which is adopting a more active lifestyle and strong demand for more fashionable sportswear. worn outside of gyms. in renault.ng they said price pressures are rising in some markets, the results are a record for the french carmaker. they may not benefit in the future from pricing increases in some countries as customers balk at paying for extra cost for cleaner emissions, potentially weighing on profits, according to their cfo. shares are lower today. france's economy expanding for
the fourth straight quarter, ending years of stock progress and giving emmanuel macron momentum as he tries to push through crucial economic reforms , piped gas .5% expansion matching the pace of the previous two quarters, driven by exports. net trade making the biggest contribution in more than seven years, economists warn that the long-delayed rebound will not last unless emmanuel macron successfully implements the economic reform agenda. he is promising to deliver the first age of the labor market revamp on september 21. four quarters of growth in a row, let's get to the u.s., 90 minutes into the session, how is it looking? julie: a downdraft but for the dow it is a small one, only all seven points but the s&p and nasdaq continue to fall because of what we have seen on the earnings front. gdp numbers also in the u.s.
this morning not serving to help matters. a pace of growth of 2.6% last quarter. if you look at the big push and pull in the market today point wise, amazon lower as we have been discussing after they forecast a potential loss in the coming quarter as it sells more stuff but spends more to acquire the customer's. exxon mobil, that companies production falling when analysts have been predicting a gain. that is the downside. on the upside, chevron and index point wise contributing the most with facebook bouncing back after it's posted earnings move. chevron shares moving up, that company boosting production by 10%. on thearnings movers downside, percentagewise, goodyear tire & rubber, their sales and earnings missing
estimates and it cut its operating income guidance or the year. it is seen higher volatile raw material costs and an increasingly challenging competitive environment. mattel coming out with its numbers. they have been trying to push more into technology, a technological based toys. still seeing a slowdown and brands like thomas the tank engine an american girl dolls. starbucks, they are comparable sales growth is lower than what analysts had anticipated, closing all 379 of its devonte stores. havearnings snapshot, we 287 of the 500 members of the s&p 500 who have reported sales growth running at 6%, earnings growth at 10.5%, the rate of sales surprises has gone down a bit over the past week. 73% of the sales reports are about analyst estimates and 78% is the rate for earnings.
mark: busy day for european banks earnings as credit suisse reporting a better than estimated 78% increase in second-quarter profit with shares of switzerland's second-biggest lender rallying on the news which comes halfway through their chief executives three-year restructuring program. we sat down with him and we asked where we have seen areas of growth for global markets and what makes him optimistic? >> europe is coming back strongly and emerging markets have held up. the u.s. as going at a reasonable level and that is positive. where we have been challenged is volatility. unprecedented.
more important, long-term trail wins. the growth in asia is continuing, it is incredibly strong and we do business there. 40% of the gdp. you thatneed to tell you have a lot of growth potential. middle east, brazil, mexico. africa. europe. at the first and second corner, good growth in the first quarter. staying close to clients and having services to offer them in
dealing in the asset side and the liability side, manage wealth and have people borrow from us and monetize wealth. this growth is excellent, everything is going up. net margins. flows. more to come. >> on global markets, you see any volatility picking up? >> not yet. we have not seen that. we have a diversified platform. equities have been under pressure. volatility, macro derivatives, we suffered and very market dependent. it goes back to our strategy. you have two types of activities , low burn, regular earnings we
get from what management and the more volatile market dependent which we have cut and we are growing the rest. it makes us less defended on volatility. -- dependent on volatility. ceo of credit suisse speaking to francine lacqua. >> senate republican leader mitch mcconnell has raised the white flag on obamacare repeal for now. he said that it is time to move on after a stripped-down repeal bill fell in the senate. john mccain joined to republican colleagues and all 48 democrats to defeat the measure and the president said lawmakers can let obamacare implode and make a deal. russia striking back at the u.s. for the new sanctions approved by congress, the u.s. has been ordered to reduce the number of diplomatic and other personnel in the country. a news agency says hundreds of
u.s. personnel would have to leave. an epic takedown, the white house communications chief anthony scaramucci launched a foulmouthed attack on two of his rivals to new york magazine company called the chief of staff a paranoid schizophrenic and said that white house strategist steve bannon seeks media attention at the president's expense. the fda has unveiled a comprehensive plan for regulating tobacco, they want to cut nicotine in cigarettes to nonaddictive levels with the goal to cut down on future smokers. a blow to the tobacco industry. global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am courtney donohoe. this is bloomberg. vonnie: thank you. tobacco shares are plummeting on that news. altria down almost 10% and philip moore is down 2% and british american tobacco down
more than 8% with the fda commissioner saying that unless --change course, 506 million 5.6 million young people will die later in life from tobacco use. coming up, challenging time for central banks, from inflation to likely a look at what is to drive policy with a legendary bond investor. this is bloomberg. ♪
hellbent on normalizing its balance sheet and may be continuing with rate increases this year. joining us is the legendary bond manager, dan foss. levels, weyou about are in a range and we saw ,assive block trades this week is this a market that has conviction or a non-directionless market -- a non--- a directionless market? dan: neither one. you can say it does not have direction but there is good volume, the range is tight, it is pretty much business as usual. unusually good volume for this time of year. money, a lot of foreign are you convinced we will go to 3% by the end of the year on the 10 year? dan: a little less convinced.
best guess is what happens now. there are a couple of reasons for this. the best guess is that it is content -- they talk about the balance sheet in some detail, how they will bring you down in september and then it is data dependent or i would say more political dependent. they bumped rates up a quarter in december. of fed is in a really sort stinky box. they are cornered, whatever you want to call it. not in a comfortable position. vonnie: no, and it is partially because of washington but the data is not backing up any kind of plan to continue strongly with normalization, is it? dan: it is certainly not. on the inflation side. and you can argue about the economic numbers. i think they are strong enough but the inflation side, the
numbers are not cooperating with their 2% target. they have indicated that, while maybe they should not wait around, my memory reminds me that inflation data oftentimes, particularly on the unit cost of labor lags. the reality. we will have to see. i do not think economics are their primary uncertainty. i think their primary uncertainty is geopolitical and domestic political. mark: a few weeks ago the suggestion was that the bank of england august meeting was a live one, then along came a weaker than expected plaintiff -- inflation reading, but 2%, and this week weakest gdp data. does that put in the notion that the bank of england will be
hiking rates anytime soon? that i best guess is think the bank of england will be reluctant to hike rates unless they have very strong data. here is the reason, they are in situations with brexit -- i will grant you, the banks, the savings institutions, they want to boost their deposits so they can make loans. that is true also in the u.s. that is the pressure to raise rates. to rely strictly on the normal set of economic numbers right now, realizing what they are staring ahead at with brexit. and the gradual weakening of their economy as people adjust their own operations, particularly noticeable in the city. the bank of england will need something solid to raise rates.
i think it will be a little bit more cautious than you would otherwise expect. mark: does the ecb have something solid to start the pathway to policies normalization. look at the spanish and french gdp data today, can they start that, even without inflation anywhere near their goal of just below 2%? dan: that is a tough one, mark. i think one of the best politicians in the world is mario draghi. long,u only can talk so eventually you do have to do something. oh, boy. i think they will try to sound maybe like they will do something. and you would say, they have to do something, if they want the
savings flow into the financial institutions again. that changes around the country and the rates are different around the union. so, again, it is one of these things where, in a perfect world, relying on only economic only, inand relying the case of the u.k. and the u.s., on your domestic mandate, you may start to raise rates. but there are things that are not covered in writing in your domestic mandate, and if you get a little bit outside of that mandate, it did we can you -- weaken your independence as a central bank. the only thing i can say here, mark, is, you know, if you are wishing people well, with the central bankers particularly well. they have a tough job. vonnie: a quick word, the huge announcement this week from the fca, will it be easy to transfer
benchmarking of $350 trillion of securities by 2021? dan: absolutely not. somebody said yesterday, if the relief act of all the attorneys in the world, they will have a lot to do. easier thanill be that, a consensus will be reached i think, what it should be, libor is a dollar-based rate. i do not think you can substitute another currency-based rate. should, in a normal environment, without a lot of nonfinancial input into it, i think it should be fairly easy to do in theory. in practice, it will take some they say, weer will keep libor alive for 6 -- better yet, seven years, then
you say, good, the problem is a lot smaller. it will be smaller in three years and that it is today. it will gradually shrank into oblivion. that may be the compromise. they may extend the date to make it easier to handle. i think it is doable. vonnie: fascinating to listen to you but we have to let you go. we must big to you soon, dan f uss. mark: still ahead, you'd be should -- ubs shares getting punished, what their chief executive told us next. this is bloomberg. ♪
earlier today, matt miller sat down with their cheese -- chief executive. strong for the first half of the year and usually in the u.s. we see some outflows. in the second quarter. our clients are paying taxes out of their assets and there is a big component of that. if i look across the board, strong momentum, growth in our international businesses of 6.6% on a very high base. reducing client advisor accounts and demonstrating we can grow with quality. we are not focusing on quantity, we are focusing on quality. we can perform in different markets. track for cuts are on 2017 with 1.8 billion francs of cost cuts or net cost savings
already. the 2.1 billion looks easily achievable, can you overshoot that? >> easily achievable is like a marathon, the last few miles are the most difficult. we are confident that we can achieve our target but it is not an easy journey, also because we are talking about a net cost savings target and we are absorbing a huge amount of headwinds of cost coming in from unexpected regulatory changes, technology investment that we need to keep up our competitive position. in order to offset that, we need to work hard on the actual cost-based. i am confident we can get there by the end of the year. matt: where do you see taking out that further 300 million? reductions? >> it is not a matter of account, it is across the board,
we focus on optimizing our front to back infrastructure. enhancing productivity. it is a mix of different initiatives. when you get down to the last 10%, it is about every single dollar counts and we are focusing on the best and we are also making a lot of investments , it is not just about cost-cutting, cost-cutting is not something you can do forever. you cut costs to create capacity to invest in the future. mark: matt miller speaking to the ubs chief executive. this is bloomberg. ♪
oil and gas and other industry groups declining. squeeze three into one chart today coul. ubs shares are down. the bank reported a decline. credit suisse reporting an increase in second-quarter profit decline. bnp paribas still showing it is possible to build and investment banking franchise here in europe. it is outshining deutsche bank and wall street for yet another quarter, posting a standout performance and equity derivatives to help drive that is unexpected earnings. bmp, credit suisse, and ubs in the last year in order.
the laggard up by 27%. the was another lender that reported earnings to spain's workingbank after its purchase last month. inular has seen a rebound profits since the takeover since santander. that upsets losses from bad assets . deposits rising by 5 billion euros since that purchase and july 20. little changed today, but spain's economy is on a bit of a roll. it's expanding on the fastest pace in two years and extending growthery that shows after expanding in the first quarter of the year.
friday's report did not break down the components. the growth probably benefited from consumption fueled by strong job production. -- there yourism go, spanish growth continuing to chug along. how's it looking there? vonnie: let's ask the person who knows when it comes to the winners and learners. let's bring in bloomberg markets live editor and she joins us from london. i am with this new function i have been learning about. it shows us just exactly what companies have reported any concerts indexes and so forth. 500,ppens to be on the s&p but it has been the same in europe as well, right? christine: it has been a bit of a mixed picture in europe. some figures from jpmorgan this morning show the disappointment
that we saw earlier yesterday and maybe a low more mixed today. we have over 6% of stoxx 600 companies reporting estimates beats for the second quarter. that is also below the 70% for the s&p 500. and its with the u.s. previous performance in the last quarter, european earnings dipped harder and maybe more t a mixed ba. mark: breakdown the banks as you refer to this wonderful chart that you provided. we've had deutsche bank, credit suisse, and ubs to that. everyone having a slightly different story. kristine: it speaks to which banks are focusing on. positiveave a lot of from credit suisse because of the wealth management improvement on their side. ubs not so much.
bank was particularly upbeat yesterday about the european economic momentum despite the fact that deutsche bank earnings were the weakest in three and a half years. part of the reason as he can see on the chart is because of deal curve steepening story in the euro area., which is positive for banks. it's continuing and becoming more correlated with deutsche bank shares specifically. that show support there as well. mark: the macro picture is fascinating. the economy is strong, but you have the euro, the elephant in the room, resting at it ties levels since january 2015. how will that play out going forward? kristine: that is something these companies will be watching for. we had a survey and bloomberg news earlier showing a pain threshold for most companies. we are about three cents or so off of that level.
it depends on the currency here and different factors like the ecb. mark: which the chart highlights. kristine: you can see the correlation is becoming more negative where a stronger euro would be hurting stocks. vonnie: what are we hearing in terms of m&a activity potentially in the next quarter and also buybacks from the earnings calls that have already happened? kristine: m&a continues to be a big driver of consolidation in the industry. we have seen big deals in the first half of the year. it depends on where valuation stands and investors perceive to be fair or overvalued. it depends on how well these companies generate organic growth and how they can manage to fend off maybe some interested buyers defending on where they stand at the moment. it really depends.
there is some value hunting to be found in markets currently and evaluations properly. mark: thank you, christina queener. -- kristine aquino. fallingtobacco stocks back after the fda announced it wants to cut nicotine to nonaddictive levels. joining us from princeton with more is bloomberg intelligence senior food and beverage analyst ken. were we expecting the fda to take this issue up? it seems a huge thing for the fda to suddenly announce. ken: the action really reflects the word nicotine. , mr.ugh the new fda chief gottlieb, is going after the new products coming to market, i
think a lot of investors did not appreciate that he would be looking at levels of nicotine in flavors and doing so. the producers of these products got a mixed bag of news today. they were extending the deadline up to four years now with a can modify the products in accordance with the new standards. at the same time, they will have to modify them to levels of nicotine and flavorings that are probably less favorable than i thought yesterday. vonnie: it's pretty stunning really. is this something that will go through given that big tobacco has probably unlimited funds for in anng and it's administration that might be a little more friendly to big tobacco than other administrations? ken: well yes. large tobacco companies have a lot of political clout and they will certainly voice their opposition to many elements of this. that being said, on the flip side of it, the big tobacco companies like reynolds
american, which is owned by british tobacco, could benefit. the fda's going after the new products and not really the existing products and the nicotine levels. the only flavor allowed today is mental. hol. to the extent that these companies are in these new products and a lot of the growth expectations of these companies are in the vapor and the burnt tobacco space, that is what is survey.ng investor mark: might today's reaction might be a bit of an exaggeration? they've clawed back some of their losses. still it has lost a billion pounds of market value today. might it be seen in the coming weeks as a bit of an overreaction? ken: it could be. i think there was a loomis understanding when the release
came out in terms of what products they were really targeting. just the newis products coming to market, the newly de-and products as they're called in the industry, it will only affect those companies to the extent that investors were looking at those products as the future growth engines of these companies. which could be material. as many of you know, austria and phil morris international have a market, which to could come to market as early as this year. if that is off the table or have to be modified, that could be a problem. shea thereen from a princeton europe, thank you. let's check on the first word news with courtney donohoe. courtney: north korea has fired another missile. there has been speculation that kym johnson's regime would test fire a missile to mark the 64th anniversary of the end of the
korean war. president trump is renewing his call for the senate to change its rules. the president tweeted today that senate republicans are going to pass great future legislation that they must immediately go to a 51 vote majority. president trump said that while some parts of the health care bill to the past with 51 votes, some did not need the senseless 60. jeff sessions tells the associated press that he wants to fight for the president agenda. president trump has criticized sessions for being weak and ineffective. he's also angry that sessions recused himself in the russian investigation. over tot trump heads new york's long island today to put the spotlight on the fight against illegal immigration and violent crimes. the president will speak not far from where the gang committed or summe gruesome murders.
consumer business spending in the u.s. is keeping the recovery on track. the economy grew at an annual rate of 2.6% in the second quarter, slightly less than estimates. exports grew faster than imports. dayal news 24 hours a powered by more than 2700 journalists and analysts in more than 120 countries, i'm courtney donohoe. this is bloomberg. mark: we will hear from barclays chief executive jes staley on the banks restructuring plan and what is next. this is bloomberg. ♪
vonnie: i'm vonnie quinn and this is the european close on "bloomberg markets." let's talk oil. the industry streak of upside surprises right by exxon mobil missing second-quarter estimates. joining us now for stock of the hour is bloomberg's abigail doolittle. were we to anticipate this from exxon? abigail: other major oil companies missed the street, but they did miss on the bottom line even the earnings to double. cash flow is a big concern. all this is tied to production for expectations may have been high, but if we take a look at g #btv 8129, this is the company's production over the last five years. the down bars represent production declining in the up farce to the upside. we have seen that 17 of the past 20 three quarters have been to the downside. that reflects the oil crash. they had more than 1200 drills on. now less than half of that as oil has really declined.
as you can imagine, the price of oil is a huge factor here. this gives us a chance to take a look at our favorite chart and the bloomberg. this is g #btv 299. this comes from mike mcglone, a bloomberg intelligence commodity strategist. look at this -- beta for colors and the moving band. der anded to be a tra it suggesting that we may not see oil rise above $50. if they did not get above it, they make money. below it, not so much. this suggest that there could be more pain ahead for exxon mobil. vonnie: and the biggest production for shale and the u.s. yet and then canada oil plans are coming back online too. abigail: that could certainly be a pressure on the price of oil and exxon mobil. all this could in fact be a negative drag on the dow. take a look at a great function within the bloomberg.
this is the age move function on the year. the dow is climbing on the year up about 10%. the individual movers are among storm green. exxon mobil is one of the few laggards, down 10% on the year. really declining in a big way and a drag on the dow. we have a lot of those winners helping to move the dow up here. vonnie: abigail doolittle there. mark: let's get back to the european bank earnings. it's been a busy day at week. barclays posting a net loss due to shares in its effort to unit and part of a scandal. we spoke to jes staley on the pain of protection and insurance scandals and how he feels the investment bank's performance. >> with the investment bank overall, we are quite pleased. with equity underwriting's and debt underwriting's, we had a great quarter. the first half of this year was
one of the best results that the bank has had as part of our business. credit-rating did quite well. in rates in currencies, we're still not happy with where we are. we are down in the second quarter. we have made some recent very important hires. we will get that corrected, but overall, i think investment thanking had a good quarter. >> are you still happy with the extent to which you backed the investment banking business at barclays? have you taken enough action to turn that performance around? >> we still have room for improvement. clearly very pleased with the strategy that we set out with the transatlantic investment bank. we have a very strong position in new york. we are the number one investment banking nikkei with a market and theer 10% -- bank
u.k. with a market share over 10%. we like the strategy of being a transatlantic and we will continue to invest in our investment. >> can you give us an update on the state of the investigation with the u.k. sfo looking into the markets and the u.s. doj looking into rmbs issues? what are these telling you about legal issues? are they proving to be a distraction when you're talking to investors about company? puto we definitely want to both the rmbs and the qatari issues behind us. clearly in discussions with the thatnd the doj, but the on , we really don't want to discuss the situations as they are open investigations. >> looking at your statement time you talked about another $700 million in charges for ppr. the deadline has been extended. could there be more?
endsr hope is that this the reserves for ppi/ . the bank is taking close to 9 billion pounds of these reserves related to ppi issues. the government has to put an end date to the ppi claims. 700o hope that this million pound reserves will bring this issue to a close. >> sticking with the consumer credit story and united kingdom, a different part of it, the bank of england has said that u.k. lenders are jousting with the fire of complacency. has that forced you to change any of your policies in regards to credit cards? >> we are definitely focused on it. we have been in discussions with the bank of england. what we have seen is a pretty sharp increase in consumer spending. that has been matched by an
increase in consumer credit. per capita consumer credit now is at a level roughly to where it was in 2008. that being said, unemployment stays very low. we are watching. we are adjusting our underwriting standards accordingly. we want to remain a bank with one of the highest quality consumer credit loan portfolios. we are focused on it. we are focused on unemployment, which continues to be quite low. i think everyone should be mindful of the levels of consumer credit both in the u.k. and in the u.s. as well. mark: barclays chief executive jes staley there speaking to anna edwards a little early. coming up, it's battle of the charts. everybody wants the bacon. pork bellies getting pricey. how high will climb? we have got the truck next.
vonnie: time now for our friday global battle of the charts where we take a look at some of the compelling charts of the day and what they mean for investors. you can access the charts on bloomberg by running the function at the bottom of your screen. kicking things off today is oliver renick. oliver: i do not think i was going to go first. this is my da vinci code looking chart and it's looking at the dollar. i tried to make this chart after our conversation this morning. if you looked at the past year or so, stock markets of m have not cared about the direction of the greenback. it's having it both ways. the s&p 500 rose 8.5% as the dollar went up up and away after trump. i think we all know what happened there. on the downside, since the
dollar has moved down, stocks continue to say we like a lower dollar story as well. s&p up 9% over that time. becauseit's interesting a lot of people watching this after the election that a stronger dollar meant a stronger economy. at least is going slowly. now we are saying a lower dollar is good to because it's good for earnings. i'm a little suspicious. mark: where can you find this chart? vonnie: he said it's like the da vinci code. mark: where can we find your chart? 25.er: g #btv 81 now we are going to look at emma. mark: emma chandra take it away. emma: it may be a day full of gdp we,ank earnings and but i think we have all buried the lead. prices are popping,
which means you may have to raid your piggy bank to get that same sandwich. this is g #btv 3631. the yellow line shows heart features for this. particular commodity. prices are up around 80% this year. frozen reserves are at a 60 year low. what does this all mean for that breakfast sandwich i was just talking about? let me at you to the bacon egg and cheese index. that exists. it is not quite as high yet as hard prices, but expect to see that white wine turn up very soon. the retail price of bacon tends to trail that of the wholesale price. what does this all mean for the u.s. economy? that is the question. the question is to the shortage of bacon finally provide that boost to inflation that janet yellen has been looking for? it is g #btv 3631. oliver: i don't stand a chance.
vonnie: you can't put a price on sizzling bacon, emma. [laughter] oliver: let me just say i don't stand a chance. i'm so team bacon. i forfeit today. [laughter] mark: i did hear that, so who won? vonnie: giving all over in wins this but emma time. still to come, catch our energy with omb director mick mulvaney. his reaction to the latest read on gdp and lots more going on in washington. that's at 1:30 p.m. new york time. this is bloomberg. ♪
jonathan: from new york city to our viewers worldwide, i'm jonathan ferro with 30 minutes dedicated to fixed income. this is "bloomberg real yield." ♪ jonathan: coming up, the u.s. economy rebounds, but inflation raises questions about the fed's next move. away with the biggest debt market deal of the year. the market wanted even more. billionaire investor howard marks of oaktree capital issues a warning about current valuations. we begin with a big issue -- fading inflation forces raising questions for the fed.