tv Bloomberg Markets Bloomberg February 3, 2016 11:00am-12:01pm EST
in the next hour. we are now three for three in losses in europe. european stocks dropping for a third consecutive day. anxiety about corporate earnings overshadowing this rebound in the oil price. the european close starts right now. ♪ betty: we will take you from new york to london in the next hour. tell us more about the declines in europe. mark: the only positive thing i can say is we were down as much as 2.5% half an hour ago. the stoxx 600 is 1.6% lower. declining for a third consecutive day. this is one of the rare days where the stoxx 600 and oil are actually moving in opposite directions. crude oil rebounding from it's
almost 11% today decline. every industry group is declining on the stoxx 600 today. credit risk is increasing. the cost of insuring european corporate debt is rising. the market i tracked europe's --ex -- on investment grade surpassed 100 basis points for the first time since october 2013. that is psychologically important. let's talk about some of the big individual movements. ins is the big m&a story the region. look at the syngenta intraday share price. the swiss pesticide maker was up 7%. now it is up 2.7%. kim china has tabled -- cam china has tabled
-- speaking to aaron kirtchfeld in about 20 minutes times. swatch. shares are down 1%. they were down 5% earlier. analysts questioning whether it can reach its sales goal for the year. we have bank of america and merrill lynch saying retailers have too many unsold watches in their inventory. demand is weak as well. they are being heard by a slowdown in china. china is the biggest market for luxury watches. so switzerland very much the center. betty: and the apple watch. which i have not gotten yet. mark: exactly. apple watches is encroaching on swatch's low-end territory.
betty: it is. we have some services data out. it was below expectations for us. mark: and was an unexpected increase. services, activity rose in january. not so good news when it comes to services. haveces company confidence fallen to the lowest level in three years. we have a litany of rest in the u.k. -- of risks in the u.k. financial market turbulence, higher u.s. interest rates, more austerity. services are very much the bedrock of the u.k. economy. that's why we are seeing strength in the u.k.. a composite of services and manufacturing unexpectedly rose
and it is consistent with quarterly economic growth of .6%. tomorrow, it's the big one. super thursday. bank of england rates. the bank of england quarterly inflation report. i'm loving -- rubbing my stomach in glee. betty: you will have to eat a big breakfast tomorrow. you have a big day ahead of you. here in the u.s., one thing i'm watching really shows you -- it's a great number. shows you how many people have been taken up by the decline in the market so far. 1941 stock funds so far this year have escaped the mayhem in the markets. it has been brutal for just about anyone -- just about everyone. only those who really played defensive have been the ones to win out.
let's continue with how the markets are trading right now. we are following europe along with a decline. we lost all of our gains. julie hyman has more. tough and continues to be for people trying to make money. we are lower, but we are well up off the initial plunge we saw for the market share. if you look at the s&p 500, we have seen a little bit of a bounce. financials are leading the decline followed by discretionary and technology shares. utilities and materials are doing well. utilities have been tracking higher. the yield curve is narrowing. that is not good news for banks. thanks continue to suffer. we have seen a lot of this recently. wells fargo, bank of america and jpmorgan, citigroup all showing relatively steep declines.
we saw the weekly inventory report. a pretty big jump. en reallyl has be resilient. now oil prices are taking a pretty dramatic leg up. trying to figure out exactly what's going on. we are seeing weakness in the dollar. that could be something that is contributing to the gains. versus the euro dollar. that could be helping oil prices. take a look at the 10-year note as well. movee now seeing yields lower once again. 1.83%. it just keeps going lower. and finally gold prices have been catching a bit -- bid. thank you, julie hyman at the markets desk.
let's check in with courtney donohoe. courtney: rand paul has called it quits. the kentucky republican is suspending his presidential campaign two days after getting 4.5% of the vote in the iowa caucuses. he is up for reelection in his senate seat this year. hillary clinton's move last year to lock in fundraising alliance is with 33 state democratic parties is paying off. a bloomberg analysis of regulatory filing shows that she already added nearly $27 million to the money that she has raised so far. meanwhile, senator bernie sanders has only signed one such deal for a total of $1000. president obama travels to a mosque near baltimore today. white house aides say it's a delivered rebuke to republican presidential candidates who have sown islamophobia. it's his first visit to a mosque on u.s. soil. the governor of michigan wants $30 million to help when
residents pay their water bill. governor rick snyder will offer details later on today. residents stuck with the contaminated water system. that's according to the associated press. the aid would cover the portion of the bills for the water used for drinking and bathing. a bill being unveiled in congress tomorrow would spin off the u.s. air traffic control system into a nonprofit corporation. it would also ban passengers from having in-flight conversations on their mobile phone. airlines would have to refund bag fees if luggage arrives too late. betty: much more ahead in the next half hour of our european close. european stocks falling for a third day. mark: we will discuss more pressure on draghi to act. what are you watching? betty: the s&p is now in the
this market when people were worried the euro would blow apart. everyone was concerned about greece leaving the eurozone. fast forward today, is this market more like 2011 or is it like 2008? shaoul us now is michael --he chairman and ceo of it reminds me of 2007. are entering ae down credit cycle. betty: was telling you that -- what is telling you that? >> credit markets themselves. it's no longer an energy storage. it used to be a high-yield
story. now the low end of investment grade is behaving as badly as high-yield was six months ago. the calls from asset managers telling you not to worry is precisely why you should start to get concerned. betty: bill said another thing i don't was interesting. for the market. he says, all of that on the ground information is telling you there's nothing wrong with the u.s. economy. what's telling you -- what is telling you is there is something wrong with stock prices. >> if it was just an equity market correction, they happen and you have to ignore them. but it's not. this is a credit correction along with an equity correction. generally credit cycles precede economic cycles. i don't have any concerns about employment right now. healthier?'t we
the financial system is healthier. >>. yes. i have no concerns of a general banking crisis in 2016. you have your money in bank of america stock, perhaps you don't sleep quite as well. ofeaningful deterioration corporate credit conditions and deterioration of corporate earnings. back and have a big impact on the value of your holdings. you don't have the same risk of a general banking crisis in the entire economic system falling apart. mark: i want to talk about china. it's planning to loosen rules determining when foreign investors can bring money in and out of the country. is this a big deal or not? >> no, i wouldn't consider this to be a really big deal. the amount of foreign money qfii the two fii system --
system -- this is part of china's deregulation of its financial system. to me, that's a little bit of noise often sideline. the have any meaningful impact. mark: talk to me about china. let's start with the yuan. august, it has fallen by 6%. we have heard all sorts of views on how much further china should allow it to decline. what's your view? some saying it should decline another double-digit amounts. over what sort of time period? how will do you think it is yuan right now? steady depreciation would be a mirror image of the steady appreciation that took place between 2005 and 2013. i think that is what they hoped
to start over the summer and they were somewhat horrified by the market response. i don't think the chinese want to be forced into doing something. you can make the argument that the yuan is overvalued. --n i look at china currency isg of the merely an aspect of that. have a chart of how much reserves have declined defending their currency. is that a better signal to you -- bear signal to you? the depletion of chinese reserves as a form of quantitive tightening. the disposal of those securities is no different to the federal deserve -- federal reserve -- balance sheet.
in retrospect, that's one markets started to get more difficult. for a period it was contained strictly and commodity related equities but it has really accelerated since then. i think you can look at verizon -- equitylatility and volatility and you can point a finger at chinese reserves and value reserves and emerging markets and say there is a connection. mark: if you implement strict capital control in china, you give china some breathing room to implement some sort of domestic reform. his capital control the answer here or not? >> china might not view this as a significant problem. china's perspective, their reserves have only gone back to where they were three years ago. there is no problem with the mystic liquidity. the depletion of reserves has not led to a collapse of domestic money supply. they may take the view that
weakness in u.s. credit markets is our problem and not there problem. i don't think you will see anything really troponin in the form of capital control. betty: is the strategy short china for now? the strategy is be very defensive in u.s. equity and credit positions and the same in europe. that's where the volatility is -- betty: where you defensive in january? >> we lost some money, but less than the market. it's what we are aiming for this time. betty: you were in utilities? >> we were not in utilities. there really were very few places to hide in january. the short side of our book really saved us. thank you so much, michael shaoul. mark: still ahead on bloomberg television, china snaps of syngenta. it's a massive deal.
betty: live from bloomberg's world headquarters in midtown, manhattan, you're watching the european close. i'm betty liu. kind of a warmer day today this winter. let's head to julie hyman. julie: i want to focus on the dow. we are seeing major averages bounce a little bit off the lows. the dow is little changed down not even .2%. you see the movers. really three stocks in particular accounting for the bulk of the declines. we have more movers in the green. on the downside, united health, goldman sachs, and home depot.
those three accounting index point wise for all of the losses we are seeing in the dow. for theseng catalysts to be going down necessarily. we did see some deals and home depot's industry. otherwise not a lot of news. 3m moving higher after that company came out with its numbers late yesterday. exxon mobil rebounding from yesterday's losses the dupont continuing its gains from yesterday. comcast coming out with a burst of cable subscribers. those shares of 3.4%. gm shares still declining. and merck's diabetes drugs missing their sales estimates. betty: thank you so much. it is official. chemchina is offering to buy the
swiss pesticide and sete maker syngenta for $43 billion. if the deal is completed, it would be the biggest acquisition ever by a chinese company. syngenta stock is higher. below chemchina's offering price. there are a lot of moving parts to this deal. 'srk: aaron kirtchfeld managing editor of bloomberg dales for bloomberg news. we have been here from the beginning. when sancho, chemchina. -- monsanto, chemchina. it is trading below the price. what does it tell us? completion risk. we are looking at a chinese state backed entity buying a european company which has operations in the u.s.. chinese dealse for companies that operate in the u.s. there's always the big question of what does the u.s. government do? mark: foreign investment. >> exactly.
it is very scary for chinese companies because they take a look and ask themselves, does this have an impact on our food supply in the u.s.? a lot of people are wondering, will the u.s. use this as a political to block the deal. mark: why did syngenta settle for chemchina and not monsanto? >> money talks. chemchina offered $43 billion in cash. offeranta -- monsanto's was cash and stock. there was no way they would get regulatory approval. whereas with chemchina there is much less overlap. maybe a few minor disposals, but they're not expecting a big headache when it comes to antitrust. betty: where does this leave months into -- monsanto? >> in a very tough position. they saw their biggest rivals
merge pending regulatory approval. they had wanted to buy syngenta. that's out of the picture. what does monsanto do next? they don't have a lot of options. betty: you mentioned to regulatory approval might be easier. are there goes the regulatory hiccups? >> that's the big question. that is why the stock is trading so low. regulatory wise there is less concern, but it's more a chinese state backed company getting control of the u.s. food supply. mark: this is part of a big china plan to be self-sufficient. china m&aof a big grab. chemchina has been highly acquisitive in the last decade. where is this taking this? >> to a whole new level. we saw this in the past and various industries. oil and gas. this is the biggest deal by far.
hearing about the chinese buyer and we remain skeptical, those days are over. chemchina shows they can do big deals and they have the financing to back it up. they had the strategic vision. this is the chinese government saying, we want to have the technology and know-how in critical industries. this time it is agriculture. this is just the beginning of more. kirtchfeld, covering m&a on bloomberg. few minutes just a away. stocks are lower for a third consecutive. we will talk fx next. stay with us. ♪
1.5%. -- will fall 1.5%. .he third day of decline february down, down, down after two weeks of gains at the end of january. we've seen the divergence between stocks and the price of crude. we know the correlation between the two is the closest since seen heard today, we've will arise after two days of losses. stocks are falling. .redit risk is rising it is rising here in europe. you have the cost of insuring european debt gaining today. surpassing 100 basis points for the first time since october 2013. that psychologically important -- this is also psychologically
important. the german to your yield fell below nine this 50 basis points -- fell below -50 basis points for the first time ever. i record low for the german to yield asd -- two-year markets decline and bonds rise. on japan's yield benchmark now at a record low for all g-7 nations. i want to show you the big m&a story. we talked to erin about it. --aaron about it. theshare price will below open price of 485 swiss francs a share. china agreeing to buy this swiss pesticides maker. it will be china's biggest ever
acquisition. you shares of the biggest maker of insulin. reported fourth-quarter earnings that missed estimates. product saw its growth checked by a rival of lilly.e by eli also weighing on earnings. 7.6% today.by seve --ty: there was a surprise you have super thursday in england. there was a surprise on the services side. mark: we saw an unexpected increase in the data on services. not so good news is within the services industry, confidence has fallen to a three-year -- a litany of worries and u.k. china slowdown, u.s. rates come
austerity in the u.k. one, the concern the u.k. could exit the e.u. we had the compendium of services, manufacturing, construction which unexpectedly rose as well. .6%.erly growth of which sets us up nicely for super thursday tomorrow. the latest rate decision minutes from the meeting. the big one, the quarterly inflation report. cannot wait. betty: where is the inflation? i'm keeping my eye on the services numbers that came out for us 90 minutes ago. different from what you saw in the u.k. exceedainly did not economist estimates, coming in
below expectations, the slowest growth we've had for two years. the services side of the economy is about 90% coming quitting utilities, health care, retail. even though services might be insulated from what's going on overseas, some of that sentiment may be changing as we see the stock markets decline. we are coming off our lows of the session. abigail doolittle has more. abigail: we do have a bit of a recovery here appeared the nasdaq had been down 2%, now down about 1.1%. still a selloff there. one of the worst percentage after missing fourth-quarter earnings estimates. some are calling this "messy." below the, the stock
50 day moving average. elez comese of mond in the past, they have recovered from this. the worst percentage performer in the nasdaq coming yahoo! shares plunging today after the company ironically beat fourth quarter estimates but did announce that expected 15% layoff and they are open to strategic alternatives. not positive -- shares are below last year's lows. withbreak of support buyers suggest the selling could just continue for yahoo! betty: thank you so much come abigail. mark? mark: today's big story in europe is will the bank of england move on interest rates? the conversation is shifting
from how long officials will sit tight or will we see the next move being a reduction rather than a rate hike? jean akers is head of ethics strategy --fx contracts below .5% until the second quarter of next year. if 25 basis point increase in the second quarter of 2018. is it even silly to be even mentioning the fact that the next move and interest rates could feasibly be a downward one rather than an upward one? is it worth even discussing it? >> i personally think it is a bit, given the evolution of economic fundamentals u.k. the market is getting spooked in so many ways, a lot of what is happening in china come
between the first fed rate hike and the boe rate hike, it is an extremely big gap. if you look at the economic cycle in the u.k., i don't think it's that bad. my bottom line out of this, tomorrow, we are going to get some risk to the central scenario by the bank of england, largely on the back of these ongoing declines in oil prices. at the same time some of the sterling on the trade weighted basis has gone down further a bit. oil prices recently seemed to have stabilized around the 30 year level. -- the 30 level. i don't think tomorrow will be a big story coming out of what is -- betty: let me bring it over here stateside to talk about the dollar because it's trading at a three-month low against the euro . the services numbers coming out
below economist estimates. do you think the economic data supports a lower dollar here? i would say two things in that respect. it has been something we have been highlighting for the past four or five months now. the dollar was significantly overvalued. even if one considers a relatively normal hiking cycle by the fed also to be accompanied by relatively stronger u.s. data. in that respect, the stoller was --ject to downside pressures in the dollar was subject to downside pressures. data seem to be turning lower now. the market seems to be positioning for a much less aggressive hiking cycle. tohink that compounds further dollar downside. i personally believe it's going to be a theme of the year that
we will see further dollar declines going forward. maybe if the economy continues to slow down and the possibility of a recession -- we talked to bill miller of legg mason about the possibility of a recession and he said to me yesterday, the u.s. economy remains strong with a low likelihood of recession unless stocks of also part that they cause a collapse in the wealth effect." that means we would fall into a recession. do you see any kind of that scenario playing out? >> i think that is absolutely right in the sense that u.s. equities are extremely important for the average u.s. household. so far come i don't think they are causing that big of an issue in wealth dimension. if this thing carries on and continues further, it will have an impact on u.s. consumption. mark: let's talk about the yen.
we saw a big downward move in the end. .- in the yen it has since recouped half those losses. with the boe magic number do with the last two surprises due 2014?4 -- did in 2013 and >> i cannot really explain the move that much in the sense that i think it is extremely marginal. most of these guys can aim to inceed, putting a flaw dollar-yen. we've had three moves by the bank of japan since 2015. first in april of 2013, then the second round and 2014. time they are doing something smaller than the previous style.
which tells me also they recognize the monetary policy has its limitations. respect and implications for the yen from don't see the big story in dollar yen. mark: where is the big story? >> i think the oil related currencies are going to be subject to upside risk largely because they are priced in so much -- mark: oil related currencies could be subject to upside risks because they priced in so much doom and gloom. let's check in on bloomberg first word does this hour. courtney donohoe has more from our news desk. courtney: the french government calling for a three-month extension of the state of emergency. it has been in effect since the deadly attacks in paris in november. the rules allow french security
forces to order searches and intense aspects without a judge's approval. isncellor angela merkel changing her tone on refugees as the elections approach. she is turning away from the rhetoric that critics say than one million people to arrive leslie picker cabinet approved a legislative package to restrict the flow of an explosion ripped a hole in the side of a commercial jetliner. the jet was able to make an emergency landing. there were reports that a passenger was sucked out of the plane but the airline says everyone on board with safe. so far, no evidence of a criminal act. donald trump is saying he was robbed. trump says ted cruz install the iowa republican presidential caucuses. republicane iowa presidential caucuses. cruz's went for
to be nullified. a scan conducted last week showed no signs of cancer. carter will go ahead with treatment next week. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. coming up in battle of the euros and how low are the area, g 10 and u.s. economic surprise indices trading at right now? stay with us. ♪
betty: it is time for our global battle of the charts where we take a look at the most telling charts of the day, what they mean for investors. can access these charts on the bloomberg by running the function featured at the bottom of your screen. we have two wheel out the big one. -- to wheel out the big one.
julie hyman. julie: that's a lot of pressure. what i'm taking a look at today come as we talk about the yields in germany on the 2-year note going more deeply into negative, i'm looking at the yield curve and thethe u.s. narrowing of that yield curve. typically, it widens when you see the difference between the tenure and the two-year -- 10 the white linear is the yield curve between the 10 and two. -- this goalne is line, their net interest margin narrows. the differential between the money they are borrowing and lending out, that is compressing. that is not good news for the bank when you see this yield curve narrow. there are different ways to measure the yield curve. i picked one of them.
we've seen banks really come under pressure. betty: drawbacks from the rate hike. all right, mark. mark: i'm obsessed with the world economic surprise indices. this chart shows citigroup's economic surprise in the seas for the d10 and the united states. the g 10se indices for , eurozone and the united states. all three are below zero. the united states and -54. not only that, u.s. data missing expectations for the best part of the last 12 months. -30.8.leases
let's finish with the eurozone. on january 28, the orange line -20 6.5, the lowest since november 2014. unlike the u.s., this index has been about zero for the best part of the last 12 months. when it begs is coming data keeps on missing expectations, not only could we be talking about rate hikes, will there need to be further rate cuts? a great chart. howe: does it also show poor u.s. economists are at predicting economic data? people have been way too optimistic. mark: the u.s. is by far the worst when it comes to predictions. we've been below zero except for this little period in november of leicester. --ve been below zero
november of last year. betty: did we just put a bunch of economists out of their jobs? is that what we are doing here? mark: of course we are. betty: i will have to hand it to market again. is this then julie: first time mark has beat me? betty: that is the reason why. i love both the charts, but we have to be fair. thank you, julie and mark. mark staying on the european we will head to japan. mark staying on the european close. we will be heading to japan. ♪
ultimate luxury in fine dining, caviar, a fascinating aquaculture experienced yielding kilogram upon kilogram of the stuff in southern japan. the sturgeon was imported from the soviet union and the prized eggs are being shipped overseas to compete with caviar from traditional exporters like russia and iran. paul allen has that story. >> say hello to the world's newest caviar supplier. these sturgeons women mountain spring water and the constant 17 degrees. they are the end product of a long experiment in aquaculture. >> the sturgeon was given by the soviet union in 1983. we got it from the government research institution and started studying sturgeon farming in miyazaki. >> completely new to the business, japan's caviar farmers admit they had little idea what they were doing.
so, they just stuck to what they knew best. we did not know how caviar was produced overseas. we started eliminating all impurities as we thought we should. that turned out to be a special procedure for us and japan. .> the hard work is paying off from a mere 15 kilograms and 2013 two now 300 kilograms each year. fishl ends badly for the predict the consequences of having the equivalent of black gold inside of the belly. a single 20 gram jar retails for more than $100. preparing it for sale is time-consuming and labor-intensive and plenty of political work has gone into japan's caviar project as well. japan needed to comply with the washington convention which prevents the overfishing of sturgeon so it can now join the elite club of caviar exporters. that was paul allen for
you can read more about luxury at bloomberg pursuits. time now for the bloomberg business flash. norway's biggest oil company will cut investments owed can maintain dividend payments. it sent shockwaves through the norwegian economy. watch and jewelry sales slumped in the fourth quarter, but earnings is still rose more than expected. that is the latest bloomberg business flash. a quick check on how u.s. stocks are trading here. we are back from our lows of the session. belowe now turned just after peaking -- oil prices and
still holding on, getting after the inventory buildup we saw. mark: one of those rare occasions when the stock market moved in the opposite direction of the oil price, here in the u k, here in europe as well. the stock market here in europe .eclined basic resource companies also rose today. you know the story. it was the third consecutive day of declines. we had two weeks of gains in january. we are back on the downward path once again. for bloomberg markets, the european close. we will see you tomorrow. ♪
good afternoon. i am scarlet fu. alix: i'm alix steel. new concerns about the u.s. economy weighing on stocks. markets paring their losses as oil prices rebound. scarlet: wells fargo settling a long-running dispute with the government. alix: the bank of england was not expected to raise interest rate but that was before the bank of japan went negative with theirs. so come all bets are off. first, we want to check in with julie hyman for a look at how the markets are doing on this wednesday morning. give us a sense of what the pressures are. julie: all bets are off with regard to direction. having a volatile session here. a lot of different elements.