tv Bloomberg Markets European Close Bloomberg October 2, 2018 11:00am-12:00pm EDT
bloomberg markets. guy: here at the top stories we are covering from the bloomberg and around the world. blinks. amazon bows to political pressure and delivers a prime pay rise to workers in the united states and the u.k.. italian markets have another turbulent day but stocks bounce off their intraday lows and push up towards the end of the session. have they found a short-term base? and boris backes may. the former u.k. foreign secretary says he supports the prime minister but not crucially her plan for brexit. let's talk about the european markets and 30 minutes to go until the close of european trade. the 10 yeards at
level are rising. that means prices are falling. we have seen a bigger move at the front end of curve. the ftse has actually bounced off its earlier lows. one of the better performing european markets. the banks remain absolutely in focus when it comes to italy. ends -- is down. boris is basically saying i will back the prime minister but not her plan. 8478 isre discussing the price on brent. down a little bit. earlier on today we did see 85. be interesting to see how much more momentum there is behind the brand price. -- brent price. vonnie: we have a little bit of a bounce in the s&p 500.
abigail: next averages for the major markets at this point. the dow is higher up .3%. the s&p 500 and the nasdaq flipping between very small gains and losses after the trade .nduced gains yesterday investors looking for more conviction for bigger directional moves. russell 2000 is down .6% on top of yesterday's decline. ironically the worst today decline since the end of july. let's take a look at a very interesting chart. in the beginning of the year and the s&p 500 was beating the russell 2000. from there out we had the russell 2000 where at one point it was testing the s&p 500 7% than 5%. now the s&p 500 is beating the small-cap index and it's really
pretty interesting and it has a bit of a risk on tone because this is a haven play in the trade war. investors might be feeling a little bit easier there. it is also slicing through some of its moving averages. apple, caterpillar and going higher. caterpillar and going are proxies for the trade war. the fact that these chairs are higher some relief of the that -- relief over that nafta 2.0. of the haven bit play here. we have the dollar trading higher and we have the yen trading higher against the dollar so there is a small flight to a 50 here. gold of 1.6%. it's best day since the end of august. we see over the last year that
gold has been sideways and then down. below the resistance that we see in yellow digesting that the sellers are still in charge of gold and with the dollar strength that we are seeing that could be an interesting pressure going forward. thank you. we were mentioning in the headlines. let's talk more about what's happening with the u.k. economy. the pound under a lot of pressure today. this says uncertainty continues to surround the brexit deal. deepd an interview with a the leader who told bloomberg's anna edwards that she won't as at a regulatory check means of breaking the brexit deadlock. we've been very clear all line. we cannot have either a customs
border or a regulator reported because that would make us separate from the rest of the united kingdom and that doesn't work from constitutional or economic perspective. arlene foster speaking to anna edwards. says he supports herprime minister but not plan for brexit. anna edwards is still at the conservative party conference taking place in birmingham. >> good afternoon from birmingham. guestget straight to my can help make sense of all the things he's been outlined. carolyn fairbairn joints me here. we just heard some words of arlene foster. of theng to some reporting we've been doing over the last 24 hours that suggested maybe a new offer would be made by the u.k. government that would involve more checks across
the irish sea. can you see any way out of this seemingly difficult puzzle that is the northern ireland border? an incredibly difficult issue but it does have to be solved because it's the only way we will unlock the withdrawal agreement and the 21 month transition period. both the north the south border in ireland and the east-west corridor between northern ireland and great britain really matter to business. very integrated supply chains. very connected across the whole island of ireland. three or four times more trade going from northern ireland to gb. this really matters. it's on the countdown path to getting a deal. very big very difficult issue. perspectivesiness you want to avoid friction. businesses don't like the added cost or time delays any extra
process would take. with that in mind there are other solutions inc. talked about fear other than the checkered plan. do any of those and a chance from a business or do they all just and friction? >> no friction really matters. this is about the days that contribute to the profit of the cup 30 -- of the company. affectedngs really do business profitability. are there other solutions to preventing friction, technology is often talked about. in the long-term we're optimists about that. there is a lot of innovation happening in the world of custom and -- customs. if you stand on the u.s. canada border and there are delays, there is hold up your there is friction. realistic about that. one of the things we have said
is there should be a customs union solution until there are technology solutions or other ways of doing it. we still think that is a good idea. the former foreign secretary boris johnson didn't make a play for the leadership of the party what he called on the party to check checkers. this was trending on twitter. it got the biggest round of applause listening to him speak today when he called on the party to do that. if there are people that are dithering if they should back checkers or not back checkers what would your message be? >> if you look at the kinds of things that business wanted. what do we need for jobs, growth, prosperity. frictionless trade. i go back to that again and again. checkers proposals are not perfect but they do deliver that. entertaining but
it's a huge distraction to what we really need to do which is to take where we've got which is a set of proposals along the checkers line and work with the european union who said there are parts of the deal that they like and parts they don't like. the countdown is on. time is running out. this is a distraction. we need to be focusing on the deal. we are hearing it from all businesses. >> someone suggest that cbi doesn't speak for all his misses. maybe it just speaks for big business are entrenched interests of businesses. >> it is not true. we speak for 190,000 businesses. last time i looked there were only 100 in the foot a hundred. all parts of the country. one third of the private sector workforce. we are the biggest representative organization in the country. when you have attacks like that businesses to hear them as an
attack on business overall where is actually what are we going to need for really successful post-brexit written -- britain? businesses firing on all cylinders. proposals do show listening to businesses. we've got to build on where we've got to. really important. >> carolyn fairbairn, director general of the cbi. edwardsnk you, anna joining us from the conference taking place in birmingham. vonnie: frictionless trade. nobody really knows how to get there. let's check in on the first word news with courtney donohoe. larry kudlow says a new trade deal with canada and mexico sends a message to china, we are acting as one. he says deal was negotiated in consultation with democratic lawmakers president trump says it's too early to resume trade
talks with china because beijing isn't ready yet. in indonesia the death toll from the earthquake and nominee has risen above 1200 and survivors are growing desperate for food and fuel. outlying areas have received little assistance because the roads are impassable. investors are dealing with doubts that opec can replace falling oil x words from iran. that has the price of crude hovering around a four-year high. oil has rallied about 16% since august. iranian experts have fallen to two and a half year low and opec and its allies have shown little enthusiasm for boosting output. the nobel prize for physics has in awarded to scientists for their inventions in the field of laser physics. american is 96 years old. he's the oldest ever nobel laureate. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries.
potential senate vote on brett kavanaugh's nomination to the supreme court and let me update you with the latest on that. the fbi interview with kavanaugh's friend mark judge has now been completed according to the associated press. a major step in the fbi investigation. cirilli whoin kevin is live from the white house. john cornyn has said he will not vote on this until the fbi investigation is complete in spite of mitch mcconnell weighing there will be about this week. where do we stand? boththink it could happen ways. there could be a vote this week and the investigation could be completed. senator jeff flake and chris way areo by the appearing together multiple public forums including one today across town in washington have said that they had agreed withone-week commitment each other to have the fbi
investigated. the fbi will when the investigation. democrats are raising the issue that this might take longer than one week. are saying this has to be limited in scope. we saw that at the white house from president trump and self. the bottom line, we are in a holding period. senate majority leader has consistently said that likely as soon as the fbi investigation is completed there's going to be a vote. vonnie: is anybody in d.c. talking about potential substitute names? >> president trump has said he doesn't want to discuss the potential backups. democrats are skeptical there would be a less conservative pick to the supreme should judge brett kavanaugh ultimately not be the nominee. the name that comes quickest to mind is judge amy coney barrett and she is largely perceived as
being much more conservative than judge kavanaugh on the issues of marriage equality and women's health. this would get very interesting very quickly should judge kavanaugh not be nominated. whether or not they can have a quick nomination process in the have before the midterm elections is highly unlikely. that mcconnell has doubled down on the idea that there is going to be a vote this week, does that speak to a wider political story than is happening just a has he got -- happening? has he got one eye on the midterms? why is it being -- he being so fervent? >> first the white house. the white house has completely deferred all the power to the senate. this i can is the midterm elections. this is definitely galvanized democrats and the republican base.
many evangelicals voted for this white house and this republican congress. made some personal choices with regards to the rhetoric coming from candidate trump based upon his policies they felt were more in line with him on the issue of theeme court justices in midterm elections definitely weighing on the minds of the senate majority leader. thirdly from the matter of policy. especially if you would have to get through a new nomination process in the lame-duck session. about: i do want to ask trade. there was a win yesterday for the white house. usn ca. now the pivot to china starts. will there be any kind of advancement for the midterms with the china negotiations? >> i think that's anyone's guess. not being talks between the u.s. and china has captured the attention of negotiating of the shoals.
are a bit perplexed as to why there hasn't been a clearly articulated and point with regard to u.s. china relations. leader chuckty schumer putting out a praiseworthy statement about the negotiations with nafta suggest there won't be too much ultitical turmoil or tumb when they try to ratify this and next coming weeks. vonnie: our thanks to kevin cirilli keeping an eye on everything happening in washington, d.c. we have breaking news as well. the dow jones industrial average has hit a record. .4% and the best performer is intel. 4.4% followed by caterpillar which is up more than 1.3%. intel the highest in the month ending the dow to a record. this is bloomberg.
guy: eight minutes to the market close here in europe. not budgingntly when it comes to its budget. beijingof words between and brussels is escalating. attacking before even reading the plan is market manipulation, not creating tension in the markets. they should just say that this is the goal. the goal is creating tension in the markets because they don't want italy to raise its head. but we will raise our heads.
guy: dan liefgreen joins us now out of milan. it's making the running here. the political leaders that are having their voices heard. wears contact, where his trio. where's the market voice of reason around the italy story because at the moment the markets are getting nervous because the people we are hearing from are the more firebrand populist politicians. >> that's exactly the point. the cabinet met a week ago thursday. they released one number. the key budget deficit figure. now was it. there was no press conference. demaio appeared on the balcony of the prime minister's office and we are still waiting for the official document outlining the target. trio did not speak publicly. he went to the gulf and meeting
yesterday. he came back early after a fairly unwelcome reception from the ministers there and is back at work putting together this document that might be coming out tomorrow in rome. vonnie: jean-claude juncker said we have to avoid a new greece like crisis in italy. well europe allow even a 2.4% deficit? >> let's take a step back. i think the way the italian government has handled this presentation of their plan just hasn't been the greatest in marketing and communication. could be said that juncker and some of the other top eu officials probably one could question whether it was worth it to escalate the rhetoric because you have to is stillthat this is very popular.
the opinion polls show that both the five star in the league are extremely popular and they are not losing ground. a very sharp upscale and rhetoric on the part of brussels in a way plays into their hands. and thus markets remain extremely scary about the andpect of this long battle war of words just continues month-to-month. guy: we can throw up a chart of the btp bund spreads. it has certainly been blowing out of late. are people in italy, rome, the lawn -- milan talking about this? aside from the politicians is the rest of italy paying attention to this? >> yes. i think they are. certainly investors are taking a look at the equities market decline. bond market decline. it's not going to have an
instant impact obviously. it just adds to the perception that there could be a market meltdown at some point. realizeonce investors that even small investors who are sympathetic and perhaps voted for the five-star league there's a very good chance that this could explode. it will have an effect on family incomes. liefgreen you, dan joining us out of italy. we have three minutes to go until the european market close this afternoon. this is how the majors are trading. a negative session for most european markets today. this is bloomberg. ♪
the ibex trading down. italy has actually recovered. is lee in gray, the italian market rallying into the close. let's talk about were btb spreads are. that is the situation. we see this pickup in the bones btb spreads -- the months -- the bunds btb spreads. let's show you where the main at,ets are and look exactly what is happening at the stocks we are focusing on as well. we were talking to anna bolton earlier. she was talking with francine lacqua. siemens down 2.85%. about the main
markets finish. thell be able to show you ftse and the banks. it was the cat that came under the most pressure today. it has lately been outperform them because the luxury sector has been doing reasonably well. and terms of the other functionalities worth paying attention to, we have seen outsized moves in terms of the volume generated. what we have seen his volume trading -- we get benchmarking coming through. we will show you that tomorrow. let's look at the european markets in more detail. cacftse, the dax, and the closing down by .7%.
that is a look at the european markets. : we have they doubt up .4%. intel is at its highest in my than a month. we have other stocks up my than 1% as well. the nasdaq has been strong for a few days. 95.43 is decent. the 10-year yield is down to 3.05. that is money coming into treasuries from abroad. and crude oil futures, 75.29 is not a bad price for a barrel of wti. let's see currencies impacted by the real trade. is a currency that is not performing that badly today. it is getting a bit of a bounce.
iah has gone through 15,000 for the first time since 1958. the south korean won potentially on a unit from the u.s. to asia trade deals now that we are on canada and mexico. guy: italian bonds under pressure right now. 10-year yield touching the highest level since 2014. let's talk more about what is happening. we are seeing the two fees -- btb's under pressure. how worried are you?
how worried are your clients about what is happening in italy right now? >> hello from frankfurt. clients are certainly looking carefully at what is happening in europe, in particular in italy. we are not not worried at the moment. the italians are effectively testing the eu commission, coming up with 2.4% a surprise. the market is not buying into the tips at the moment. we still have a positive outlook for the next three months. markets will calm down, and eventually we will find a solution via italy. guy: where do i need to be positioned? early to start thinking about averaging in on it on banks? they are incredibly cheap. the values are incredibly cheap.
looks cheap.ctor how do i position myself around this story. how do i tiptoe into the european story right now? right.are absolutely it is very tempting to get in there. . ,f you look at the value sector banks have been underperforming. i don't see an immediate need to go into that sector. into the year ended growth, stocks rather than value stocks will start to outperform, particularly in the u.s., you know, tech and health care and so forth. we do need to be the first one into the market and sees the opportunity because there will still be volatility and increase volatility in the next months, in particular in europe. vonnie: + way talked with you,
you are trying to protect your -- the last time we talked to you, you were trying to protect your portfolio. what is your net effective duration? >> duration is an interesting thing. if you look at how markets trade, it is two status. ndsst of all, bu selloff. the market is fearing risk of inflation. equity selloff at the same quentin time. period in time. we saw earlier in the year when we had the volatility accident, so to say. you have a larger selloff. then duration versification works.
u.s., given where rights are, they are quite effective duration.o add in europe, we are in a shorter duration. the ecb is obviously still moving ahead, even though that might only come in 2019 are toward the end of 2019. nevertheless, the risk of being wrong on the duration side in europe is much higher than in the u.s. diversifier on the positions we have an emerging market. vonnie: speaking of the ecb, there is chatter on what it might do in terms of any additional investments do you anticipate any can have true separation, via geography or duration? >> i would not be worried about the ecb at the moment. we looking into the situation in italy. we're looking at the midterm election. we are not concerned, but
watching closely the situation in the emerging markets. at this stage, and the ecb is him a secondary in terms of , it is impact or driver much more important what will happen in italy and emerging markets. emerging markets at the moment is very attractive, especially on the fixed-income side. equity, we can discuss when he the right time to play the rebound. it is probably too early. but at the end of the arab the beginning of next year, there is yen tradeor a longer in equities. guy: one of the more crowded trades is to be long u.s. startingring if we are to see a bit of extortion coming into some of those positions. i throw up this chart. this is the russell versus the s&p. the s&p continues to climb, by
small caps are beginning to roll over at the moment. is that a canary in the coal mine that you are paying attention to? andsmall caps are going off the s&p is still strong? could the s&p be primed for a move lower? >> we don't think so yet at the moment. i think there is a risk of volatility into the year-end. we believe the u.s. will be the stress market and to the year-end. to forget we are in an environment where -- and don't forget we are in an environment were gdp growth is going down. there are still at attractive levels. but we are in the legs echo -- that we are in the late cycle. the demand for growth, in particular growth stocks, where it potentially even accelerate. the laterng into
stages. the demand for growth will still be there. which does not mean that it does not come with large volatility. you'll see the dispersion opening up. i think it would be too early to get out of that chair, a particular toward the end of the year. vonnie: you mention emerging-market risks. i wonder what you consider attractive or slightly offkilter when it comes to the risk-reward scenario. side, it fixed-income is extremely attractive at the moment. we would probably not go into local currency. but hard currency image of market debt return is very
attractive at the moment. we already have one and we are looking to add. when it comes to the equities side, it is similar to how we see currencies. it would be too early to go into local currency and too early to go into emerging-market equities. from a valuation perspective, it is so attractive, in particular toward the end of the year and into the beginning of the year. we see a potential rotation out of u.s. into emerging markets. that could be -- if you don't want to add up a quite strong value trade. guy: thank you for spending time with us here on bloomberg. vonnie: let's check in now on the first word news. courtney: boris johnson has
called on his conservative party to back. prime minister theresa may but there is a catch. theresack trimester may. but there's a catch. byto back theresa may sensibly supporting her original plan and showed confidence in conservatism and confidence in our country. tortney: johnson wants may return to the original brexit plan. that calls for leaving the eu without ambiguity. in the last few weeks, trump has struck a last-minute trade deal with mexico and canada, south korea, and convinced japan to open one-on-one talks. larry kudlow says they north american deal sends a message to china.
harbor loss willis says brett kavanaugh will not return to harvard lawuary -- school says brett kavanaugh will not return to teach in january. teach "theduled to supreme court since 2005 melania trump is in ghana. she arrived today to begin her first extended solo international trip. this is trump is on a five-day tour. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm courtney donohoe. this is bloomberg. ♪ guy: coming up, let the battle commence. battle of the charts is coming up next.
white, we see the inflows and outflows over the last couple of years. we have seen five straight quarterly outflows, the longest streak of withdrawals on record since the inception of it in 2006. take a look at how wti performed during that time. it rallied more than 60%. uso shares also up 60% as well. this is a rare etf in that flows and performance tentative flow in op. cit. directions. invest -- in opposite directions. in, by investors come their dips, sell the short-term rallies, collected the office, and not hold onto it for a very long time. this is what we are seeing over here. there are risks associated with holding it too long. the kudose fact that contracts.
-- crude oil contracts. the costs erode those returns. traded, moreeavily than $200 million a day. investors who play uso, they love it for its volatility. guy: an interesting trade. let's turn to vonnie quinn. vonnie: i'm also doing an oil chart. jessica happens to be an oil reporter. i'm walking into the mouth of the dragon come if you like. it is a very simple chart. shows brent and crude. what it shows over here is that positioning is much stronger in brent than in wti. is partly because it is the global benchmark but that spread potentially investors are anticipating some
impact on brent prices than crude in november. you see it pretty widespread in terms of positioning. blue is brent and white is wti. guy: iem going to get in serious trouble -- i am going to get in serious trouble if i don't go with maker. my coanchor. positioned in are the short-term volatility trades is absolutely fascinating. jessica, you will win today. vonnie: no doubt, guy. [laughter] gtv is where you can
♪ been speaking with sunk under chair and about in. -- has huge faith in brazil anna bolton. she has huge faith in brazil. >> we had a conversation a few years about brazil. we delivered 14% while in recession. i am very proud of my team. reach 20% areill we. we have an election coming up. we need to remember that the election on sunday, is not the end of the beginning for
rebuild. i see it as a normalization of politics. i have huge faith in the country that i have known for 40 years really well. i'm going for three reasons. one, institutions are working. second, you have a strong private sector. three, you have a huge internal market. my thoughts on latin america, there is maybe one exception, venezuela, but the lows are always higher. elections, yes, will be important. they will develop -- they will determine the pace of development, not direction. francine: investors misunderstand -- i was going to ask you if investors misunderstand because this election is indecisive. >> and it will not change the direction. it might change the pace and this is the key issue.
francine: are there countries around the world where you can exit? >> not at the moment. markets, not 50. when investors look at center and there, they may now be understanding the amazing appetite for growth. live me give you two numbers. brazil and mexico as of june were 33% of the group net profits. and your areal, countries, 33% of group profits. the total lending in mexico and brazil was $100 million. -- $100l lending in billion. the total lending in the euro area was $360 billion. appleton --s an
anna bolton -- ana bolton speaking to francine lacqua. tensions were headwinds. taylor: we have the total number of cars they produced, more than 80,000 deliveries. the model 3 is the number we watch. they produced more than 53,000. that was right in line with estimates. deliveries jumped to 55,000. the headline numbers look really good. some analysts were concerned they did not talk about profitability. some of the trade tensions with china, they are working on building their factory in shanghai. all of that weighing in on investors.
we can't talk about tesla without talking about free cash flow. freescore, only a negative cash flow 740 million. that is an improvement. in elon musk says they want to turn that into a positive and turned a profit this quarter. that will be a key thing that investors are looking at. vonnie: that is our stock of the hour. jerome powell's beaks in just a noun -- jerome powell speaks in just under an hour. we will bring you his remarks life. -- live.
david: welcome to balance of power, where the world of politics meets the world of business. let's get started with an edwards in birmingham. there was drama today. anna: there was some drama coming into the conference today. word boris johnson decide -- would boris johnson decide to launch a in tilley the conservative party? launch a bid to lead the conservative party? no.