Transcripts For BLOOMBERG Bloomberg Markets European Open 20

BLOOMBERG Bloomberg Markets European Open October 11, 2017

About that later in the program. They are both rising and watch the turkish data drop later on. The tape turkish stock market had a solid day bouncing back on the political concerns that we are watching at the moment. It is interesting to see the brazilian market bounce as strongly as it did. Lookmuch in play as we for the fed minutes. Catalonias president has said he will seek talks with the government and matured over the future of his region in spain. The announcement burress back from an immediately immediate declaration of independence. Is call for dialogue. Europe is afraid of the outcome if there is not ilog. The calls should be heeded. We need to open up a time to have dialogue with the state of spain. Donald said hent taxs to make changes to the form. He dismissed concerns that his public spat with senator bob corker would scuttle an overhaul. The framework they released last month has been criticized for adding to the budget deficit. Independent analysis suggests it would raise taxes for 30 of 50 making between 50,000 and 100,000 year. Be north korea appears to preparing to fire scout missiles. North korea is transferring about 30 skied missiles to a Maintenance Facility on the west coast. The movements are similar to an incident in march 2014 in which north korea fired 70 rockets. The occasion Prime Minister has stressed to president that the Iran Nuclear Deal is vitally important for regional security. They spoke on the phone yesterday with theresa may reaffirming britains strong commitment to the accord. This comes a few days ahead of the it announcement of whether trump will certify durants compliance. Theresa may has risked angering brexit supporters in an interview with nbc radio. She refused to say if she would in anotherve the Eu Referendum saying i voted remain for good reasons at the time but circumstances move on. What i did last time around was i looked at everything and came to a judgment and i would do the same thing this time around. Green tolddamien channel four news he believes the country is better off inside the eu. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Matt thank you for that. The chief executive of the Worlds Largest wealth manager has signaled his bank is resolving it capital issues at legacy costs. Speaking exclusively to bloomberg he said investors need seek cash flow coming but back through dividends or buybacks. We asked where he had concerns about complacency. Across lots of classes, to be honest. More remarkable is credit i would say across the board. Across corporate credits and the [inaudible] investment grade. A lot of see i see a lot of complacency. Enough to cause alarm . That seems to go for much longer. It is too early to say that if this is alarming or not. We have to Pay Attention to that. Are you hearing from clients, what are they asking you for . Guest we see a little bit more of willingness to deploy cash. Changed from the beginning of the year. Our indicator is cash balances. There going down to mid20s. It is good news. More willingness to deploy money and invest money in equities that in bonds or any other asset classes. Still looking for diversification, the conviction level is not very high. You said diversification and one of the things we did not get to talk about is cryptocurrencies. Is anyone asking for more bitcoin . Guest some people. I do not think there is any meaningful desire by High Net Worth individuals to take big bets on this kind of phenomenon. Are they curious and what is your view on cryptocurrencies . Guess we believe that existing currencies may move to become more of a cryptocurrency, something that will make it much easier for intermediaries, clients to Exchange Services and pay for services. Isnot really believe there much room for the creation of new currencies. Thee is no real backing for credible issuer. Billionaires want to speculate with bitcoin. It does not look like it. It is definitely premature. The other issue is Monetary Policy. Impactportant late the the fed will have on reaching seeing. How concerned are you about leadership change at the Federal Reserve . I do think there is a sense of last time we had a change there was a high degree of continuity. If therebelieve is is any change. If there is a change i am not so sure that anybody has an interest to do something that is destructive. The market is already pricing the probability. There are expectations that you point,. 75 of a point hike. Probably in equity markets are in line for potential likes. I do not expect the fed to do aggressive, move aggressively. They have a nice path of exiting [inaudible] theyre going to be able to contract the Balance Sheets smoothly. There is a president who is not shy about sharing his fears. Are you worried about the independence of this fed Going Forward . Thisually when you look at kind of political intervention not only in this country but generally in the world, they may contrary reaction of people trying to show that they are independent. I do not think it is a smart move for politicians to interfere in central banking Monetary Policy. When you look at the policy is there anything does the prospect of a change in sight you . We are not overly focused on those kinds of leadership changes. The angle that matters for us is not necessarily Monetary Policy. If there is any implication to the oversight of the potential or centralt the fed banks are doing to our industry. Be taken and ito do not expect major changes. Kia interesting interview. We have another one coming up. At 1 30 p. M. U. K. Time. The dollar declined, the greenback halted the threeday fall. And fed minutes under pressure. We will take a look at what we can expect from the minutes and what we do in the meantime. That is next. The market open 18 minutes away. This is bloomberg. Guy 15 minutes till the equity market open. The s p marches toward record highs again and again. We are talking very much about the relationship with u. S. Tax reform, are the two interacting . The stock market is a concern from four richard faler. He is the professor who won the nobel prize in economics and spoke to bloomberg yesterday. I do not know about you but i am nervous and it seems like when investors are nervous, they are prone to being spooked and nothing seems to spoke the market. As you said it just crawls up slowly but surely. Thaler, nobel prizewinning economist. We are waiting for the notes from the fed to be released. To be nervousing about, will they be overshadowed by the nomination of the next fed chair . What am i doing with my time as for the minutes, how should i be preparing . Mark there is one of the big issues for turkey, the external deficit balance. Tradinga. M. Has been incredibly strongly led by asia. Asian stocks have done well. Of thethe fed itself one big issues were looking at, we are not expecting major surprises because where there was a fed conference afterwards they are at a binary point. That means any small surprise could set the trend for the next few weeks. Matt i wonder about the catalonia issue, if we see a big gain in ibex futures. Is thisom this pop, full thing over, are investors going to go back to ignoring it like they were last week . Back tovestors may go ignore it. In the samee are situation we have been in the last couple of weeks. There is no conclusion but it is not going away, it is not resolved. Were looking at a deferred declaration of independence. There are major unless there are major concessions. They have not given any sign they want to give concessions. The situation will head to a big stir up. We are not that sure it will come to a head this week or even last week. I do not think the situation has changed that much. Maybe we can be more confident that it is not likely to come to a head next week or the next couple of weeks. Investors should not ignore it, they should keep on the radar but not trade just now. Guy i am looking at the tail risks surrounding this, how do i position for those . Out of money positions i could take on, what are details looking at, how should i play this one if i need to put insurance in place . Mark with the privacy oig not want to recommend specific traits, volatility is very cheap at the moment. The risk ofo get option. The base case is this will be fine. Spain cannot afford catalonia to separate and they cannot afford any major concessions because that might incentivize other people to try the same trick. There is too much at stake in this will be resolved. If there is separation or if is adoes stir up, this negative story for the euro, for european bonds and spanish bonds. Not the base case. Matt speaking of independence and volatility, cranfield writes on the mliv blog about the euro jumping abovey the threemonth header. The european consul will meet october 19 and 20 and they say brexit negotiations have not gone far enough for the u. K. Has not gone far enough to advance their cause. What do you think about the euro pound rate here . Storiese fundamental for the u. K. Is very negative from the macro fundamentals and the political story surrounding it domestically and with exit. Brexit negotiations do not seem to be going well. Sentiment is negative and expectations are low for brexit. It is easier to get a positive than a negative surprise. Expectations are rockbottom. In that regard regard, the base case for the sterling is negative. The larger surprise if there is a positive surprise and even though embrace hike is priced for november if the bank of england delivered it will be a boost for sterling. You how much attention are paying to the tech story and what is happening with senator corker . K it will be as simple absolutely massive for markets. There is a much priced in for it. If there is tax reform it will be a massive boost. I understand the market is skeptical. There does seem to be massive thesion not even between bipartisan divisions but in the Republican Party itself. At the moment it is looking unlikely we will get touched for a. There is a little bit of high price, the market started trading that story. There is a reaction function either way. If this has been killed completely that would be a negative for stocks and assets. You saw that dollar trade only because of this issue. The even bigger reaction will be if there is tax reform passed because that is not expected at the moment. Guy thank you very much indeed. Mark cudmore joining us from the mliv chief team. We are anticipating in 10 minutes time the market open and currentaccount data out of turkey. It is expected to bounce back. That is the survey line there. We are anticipating that will see that, what is interesting with the brand and the turkish lira. Both trading strongly this morning. We are minutes away from the market open. We will take a look at the movers we are expecting. Singer, the conversation is next. The open market open is minutes away. This is bloomberg. Matt the European Market six minutes away from the start of cash trading. Lets take a look at the stocks to watch. Ubs is one and maybe watched banks across the sector but ubs especially because of our exclusive interview with Sergio Ermotti in which he said the bank is where you want to be as far as the capital cushion and as far as legal costs are concerned. It is time to start paying shareholders back with about if they have more than 13 capital ratio they want to get 50 of their profits back to shareholders. That is their policy through buybacks or dividends. Watch ubs stock. Lets look at the anr for smith and matthew. What is interesting here is you can take a look, there is the price target. Price that has come up sharply over the last few months. The prices, as you can see, the little red bars here. There are more sales coming into the market. It will be interesting to see i get if they get reversed. Heres your fair value. Spain a softening but it is up by one point 4 at the get go of trade and i suspect it will be beat to the high trade. The market open is four minutes away. This is bloomberg. Guy a minute to go until cash opens. We are expecting an increasingly positive start. The spanish market trading strongly pure you can see the ibex up by 1. 5 . Keep a firm eye on what is happening with the banks. Thent to show you ecoscreen. Turkish current accounts data about to drop. It is a big number, one of the factors the lira trades around you look at the survey. Big gap there. Matt. Matt i am just looking quickly at the ubs chart i have got here, g btv 1162. It shows the share price in white compared with the Credit Suisse share price and purple and a basket of investment banks in blue. Thes normalized from beginning of the year. Keep that in mind. January firste, this year, ubs has underperformed Credit Suisse. Be the day that ubs gained some ground. Guy the equity market open. We should probably bring this up as well. I want to see this data dropped during flight problem with that. Let us show you what is happening with the monitors. Up. Us let that load the ftse 100 trading positively. The cac 40 is expected to open up. Let us wait for the ibex. 1. 6 . Good. The current account data is dropping as well. Let us see how you turkish lira is reacting. We will show you numbers in a moment. In the meantime, let us go to nejra for the details. Nejra i am starting with the gilt market open which is happening right now. Looking at the 10year gilt higher by some two basis point. 1. 38e at 8 . Really, that is where we are seeing most of the action. If you look at the stoxx 600, we are of by some not a huge amount of movement in the equity benchmark overall. A mixed picture looking into the Industry Groups as we dig into the imap. Financials outperforming. Following closely behind. On the downside, energy and industrials underperform. I have a focus with my next two charts. This is the biggest etf tracking spanish stock, msci. Yesterday on optimism that some sort of deal with madrid would be reached. Back fromwas coming the brink. The Trading Volume was at 700 of the 90 day average. We have been seeing outflows from this in the few days previous. ,ooking here at financial etf this is the msci europe financial etf assets and really catching up with the ishares, u. S. Financials. One interpretation of this is investors have been getting ingly positive. Guy, matt. Ejra. Thank you, n this data has come in better than anticipated at 1. 24 billion. The prior, 5. 12. Just revised title. The number certainly better than anticipated. Whats move on and show you the reaction is. There is not very much. The market clearly feels this is something that may be consumed by the political story. Let us talk about what is happening with individual stocks. Take a look at the Spanish Banks and other spanish stocks. Here are the banks. This trading up by 4 . Nephew trading up 3. 5 on the back of the elliott means. Santander is trading higher. Anticipated, a stock play on the ibex is driving this market on the upside. Matt miller come over to you. Matt i want to talk about what is going on over in spain. Catalan president has held off on the glaring immediate independence from spain this by saying he has a mandate to do so and saying he would yesterday. It follows warning crisis could morph into an economic crisis. We propose for the parliament to suspend the effects of the declaration of independence so in the coming weeks, we undertake a dialogue without which it is not possible to reach an agreed solution. The spanish Prime Minister rajoy willano address them imminently. Response yetny from the government . That is right. Yesterday night, the Spanish Government did come out and say that this is completely unacceptable. We do not care about the fact that he suspended the republic. Catalonia was independent for 10 seconds. This is a step too far. How tough will they go in catalonia . That is still in the cards. If the government wants negotiation, they are not going to get it. The bottom line shows how far will rajoy go now . Guy the ball is definitely in his court. Limbo,s of the state of region, province, whatever, currently finds itself in, what is the timeline and how will the people react . That is a great question. We have been talking about this for days. He was being pulled from all sides. Moderates saying do not do the lateral 48 hours. The market is reacting to that means. On the other side, we get radical saying you obviously did not deliver. I want to show you something. This catalan newspaper, it says Catalonian Independence now you see it, now you dont. You get people nothing and celebrating, and 10 seconds later, everyone is crying. A lot of people on the ground were incredibly frustrated. They got a republic for 10 seconds, and that was it. You very much indeed. Maria joining us out of barcelona. We see exactly how the day progresses. We are indicating the market trading higher on equities. Steen akerson joins us jakobsen joins us now. Steen it reminds me of the brexit. I think it is a constitution crisis. This is about the setup of the parliament in spain which is where the region is sitting. Madrid is fighting this. That is where the solution will be. Constitution changes difficult. Guy why do i worry about this . I have the ecb hoover during of everything it can. Up everything it cant hear you have seen a little bit of volatility but not a great deal of volatility. This is a huge half for spain. They are moving to percent, 3 three government bonds are moving a little bit. Steen one of the reasons we have seen the catalonian government step down is companies are now actually physically leaving catalonia and going to spain. That is what is going to be determining whether catalonia comes to the table. The blame is on both sides. Make no mistakes. Spain, madrid, famous for not wanting to confront this issue. He has not even been to catalonia. Both sides meeting to address it. It is a constitution crisis. Hence, for the market, it is not even that relevant. Ecb is at sure the least happy that the euro went back down from 120. They dont want to see it get much higher than that or at least not with any speed. Is this a dip to buy . Can we assume that catalonia does not secede from the federal Spanish Government and that the euro continues its climb higher . Steen i think the euro goes up independently of what happens in for whatever ri

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