tv Bloomberg Markets European Close Bloomberg February 24, 2016 11:00am-12:01pm EST
mark: this is the european close. vonnie: we take you from new york to london to johannesburg in the next hour. the possibility of a brexit. 's choices at the upcoming ecb meeting. mark: the challenges facing the nation's economy. vonnie: airbus earnings missed estimates. cfo.ar from the company's on in today's market session? mark: the second-biggest drop
all 19 stoxx 600 come falling today. full-year profit missing estimates. it shares down by 1.4%. profit at less than estimated. figures were held back by higher development spending in the fourth quarter. the french carmaker, shares up by 2% today. it will set new profit goals after cost-cutting and recovering demand in europe help it be targets set two years ago. it will start paying dividends in line with industry from this year's earnings as well. the dividend has to be a sign the company believes it can sustain a turnaround amidst this
slowdown in the chinese economy. we have the diesel emissions scandal affecting volkswagen. they have tonight any cheating. rely on then cells same type of engine. shares up by 2%. vonnie: the decline continues unabated. how low is the pound trading against the dollar now? below 140ling falling earlier for the first time since 2009. 139 .34. continued uncertainty over the brexit is what is driving sterling lower. -- 1.3934. sayut of 34 economists sterling will sink below 1.35 or below within a week. 23 say that sterling will not recover from that rate than
three months. seven c the pound falling below see thear 20 -- seven pound falling below $1.20. we seem to be heading swiftly ahead of the vote on june 23. it has been a battering for sterling this week. $1.34. the 10 year at we are 90 minutes into the trading day. julie hyman has the latest. julie: we are seeing stocks continue their decline. oil has a lot to do with what we are seeing in today's session. stocks bouncing up a little bit off the lows of the session. 30 minutes ago, we got that oil inventories report which showed a building inventories to an 86 year high. we saw a drop in fuel
stockpiles. if you see that drop, that will eventually feed through to crude oil as well. we saw movement upwards, paring ier declines. crude oil in yellow versus stocks in white. it is still down on the day. rorsaw the s&p 500 mir the movement there. stocks remain deeply in the red. if you take a look at the heat map that looks at the monthly performance come at once again in the red for the month of february. that means we will have the first down february going back to 2009. it also means if you go back to last december we were down, we were down in january, down in february.
looks like it will be the third straight monthly decline. we have not had a streak like that since 2011 when we had five months in a row that were down. it is relatively unusual that you get this stretch in recent years. vonnie: where's the most pain being felt? julie: look at commodities on a percentage basis and a mixed bag of commodities. transocean had a contract canceled for one of its drilling projects. it was supposed to conclude next june. transocean down 8%. down.rt copper and gold some familiar names here as well. electric down 2.5%. techn representing big cap
and wells fargo representing big cap banks. vonnie: nothing but dragged today. let's check in with the first let'ss paid courtney: start with the election come on to super tuesday for donald trump and the rest of the republican presidential candidates. trump had a big night winning .he nevada caucuses he took 45% of the vote with marco rubio and ted cruz more than 20 points behind. ted cruz has been endorsed by his home state governor. texas is the largest of the super tuesday states voting next week. democratic front runner hillary clinton hopes to run up the score on bernie sanders this weekend. clinton leads sanders by 20 points heading into the south carolina primary. a big loss for sanders may make it hard for him to recover. president obama says he will fulfill his duty to nominate the
supreme court justice to replace justice antonin scalia in the weeks ahead. mr. obama made the comments after republicans on the senate judiciary committee said they will refuse to hold hearings even if the president nominates someone. they want the nomination to come from the next president. the obama administration has about fighting the gao says the administration has struggled to resolve eligibility questions. the top u.s. commander in the pacific says a new anti-ship missile needs to be deployed soon. counterile is needed to chinese and russian naval threats. the navy plans on buying 500 of the missiles from lockheed martin in the next five years.
signings in the west held by the most in 5.5 years. shares of lows falling today. depot.ults trailed home they are not benefiting as much from the home-improvement boom. dunkin' donuts faces the cladding sales and tougher competition from mcdonald's. it is revamping its menu boards. overhaulingts is drive-through windows. european central bank president mario draghi has two weeks left to decide how to ramp up stimulus in a way that does not upset his colleagues or investors. hans nichols spoke with one of those colleagues today who gave his take on ecb policy.
>> what matters for france's that we do not produce counter -- theive policies , it would notanks we have to design our measures in a way to make sure they are powerful and effective. >> you are open to the idea of having a multitier system. thism suggesting we have debate in the governing council. >> we will try to bring a little out of the public. what is the lesser of two evils? attend basis point rate cut or a further rate cut with some mitigating effects for the banks?
-- a-10 basis point rate cut. >> we have to discuss the instruments, hypothetically. firstd to analyze this and then with a necessity to act, do this. andou board about the risks the low interest-rate environment, negative interest rate environment. it big topic of conversation. we saw deutsche bank hit pretty hard by expectations that there might not be earnings potential in the future. do you feel than the kid that your low interest rate warnings are finally being listened to? >> this is a broader issue. this survey we conducted with smaller banks found out of course the low interest rate environment reflects negatively on their profitability going forward. course, wese, of
have to watch that, as a through thend banking system. >> the challenges are not due to a low industry environment -- interest rate in miami? -- interest rate environment? you are their supervisor. >> it is not smart for a supervisor to discuss individually supervised entities with the public. we go to the supervised entities and discuss it with them. one of the outcomes with our survey, there are some candidates that are more fragile . we will intensify our contact with them, intensify our supervisory role there and increase the frequency --
>> does that include big banks? as well as small and medium-sized banks? >> the supervisory landscape in europe is a bit more intricate. systemic institutions are supervised by the ecb whereas the national authorities supervised the medium-sized entities. >> there are a lot of potential risks. name the biggest risks you see to europe? >> there's a multitude of factors. there are country specific reforms that have to be undertaken. with respect to structural reform with the enthusiasm has somehow vanished.
our challenges are perhaps more longer-term, more related to demographics. they are also there, so we have to act. level, there are a multitude of decisions that can influence positively the long-term growth rate. the products and the capital markets -- most importantly, the framework, consistent framework for our union which consists of one monetary policy combined with 19 independent fiscal policies. this creates a specific challenges of aligning possibly this policy control. >> earlier, he spoke a bit about the risk of a brexit.
what's what risks does it posed growth and banking harmony? -- what sort of risks does it post 2 banking harmony -- pose growth and banking harmony? --i'm doing this integration the complete repercussions of a potential brexit depends on the relations that are negotiated once a position is taken. you do not see a risk of brexit affecting the markets right now? >> it certainly plays a role in the sense that political -- with respect to the composition of the european this has good to be did to
earlier. >> we have a lot on the plate, but 2015, we are executing. 14 aircraft delivered. have a target for 2016 to a lot on the play, but we are getting there and translating that into improvement in the bottom line. when he 15 was another europe operational improvements. a 380 reached the breakeven. year ofwas another operational improvements. >> what is happening with the concerned about the fact that we still have ongoing engine problems. they say that will be fixed by june. is there a plan b? what is happening with compensation? whose balance sheet will this fall upon? >> number one, the a320 is a
wonderful performing aircraft. it does what it is committed to do in terms of fuel burn and the noise and all the criteria. we have a plan. the customerst to -- in order to execute that plan , we shifted the ramp up to the second half thanks to the engines.of the that means we can execute in 2016. -- if iew engine option am a customer and i have a neo-an expert it to be delivered youe come in my coming to and i'm have a neo expecting it to be delivered to
me, am i talking to? you're smiling tells me it may not be you or balance sheet. we are concerned about the 350 and the issue of the supply chain. about that.rned you are the cfo looking at the supply chain, these guys are causing you all kinds of problems. when are you going to buy them? >> i don't think vertical integration is the right thing. we are watching carefully what they are doing and also helping what they're doing. together.nstructively it remains difficult, kevin is the evidence for the pacing ramp up. to extend our own -- he is the man in charge ly.rational
i'm concerned in the sense of getting the right things done in time. we have already more than 30 aircraft in the final assembly line for delivery. things need to happen quickly. we have a plan on how to execute that. mark: guy johnson speaking with the airbus cfo. joining us now to dive deeper into the aircraft story. he's the european aviation editor. can it handle the ramp-up in production? >> they say they can. it will be a tough task. they have so many plates spinning now. , the350 is the new body competitive model to boeing's 787. at the same time, they are reengineering the a320 as the neo could already have some
problems with the engines on that model. they say they will deliver all the plans they promised to by the end of the year. they're releasing more a 330's when we thought production would dip. they're pushing that again. mark: as boeing is cutting output. >> there is a real contrast there. boeing shares tumbled the most since 2001 last month after they came out with their full-year delivery figure that was pointing to a decline in the number of planes to be built when analysts had expected an increase. thinking awe are 2.5% addition in deliveries. boeing is still ahead on delivery or will be by the end of the year. airbus is narrowing that gap.
mark: a big interview today with the cfo. a quick peek at the european equities. we are five minutes away from the close today. have a look at the equity primary. we are down for a second consecutive day today. concerns about oil, china, the u.s. presidential election and brexit fears continuing to weigh on sterling. thec resources come energy big industry decliners today. fac is the big gainer today. the close is seconds away. ♪
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close, live from london and new york. let's take you through all the market action today. the biggest drop for the stoxx 600 in two weeks. groups falling today. energy groups tracking the decline in oil. take a look at hugo boss. day they've had. this is 4:00 p.m. yesterday. yesterday, and falling 26%. the clothing retailer said their profit will drop by 10% this year because of weaker than expected sales in the u.s. and china. it will not reach its goal of an adjusted operating margin of 25%. the 12 month target is funny five euros. -- 25 euros.
the average estimate is 82 euros. one of the big gainers in europe today. sure is up by 4.4% today. up by 4.4% today. they cut net debt. the company's weathering this route prices. it is a big presence in the middle east. we have national oil companies continuing to pump as other producers cut spending and reduce projects. trendre bucking the measures up by 4.4%. forie: how bearish are they gdp? mark: i love this survey. seeut of 34 economists sterling thinking to 1.35 or
below within a week if britain votes to exit the euro area. that would be an era not seen since 1985. 23 say sterling would not recover from that level for three months after the june referendum. belowsee sterling falling one dollar 20 immediately after --t $1.20 mealy after falling below $1.20 immediately after. sterling'syou performance against nine of its major developed peers. you can see the trend very much in the last few days has been a downward one. the three-day drop for the pound against the dollar over 3.5%. the worst three days since 2009.
we cannot stop talking about the pound. vonnie: i think it will last a wild. -- a while. the head of the world's largest --company >> it is a black hole we are jumping into. there is no clear agenda about how it we did come out, we would manage this free-trade agreements that people think would be instantly renegotiated. vonnie: that was martin sorrell of wpp. other ceos weighed in as well. i would next guest says the risk is overstated entirely. patrick armstrong's chief investment officer of -- what is your base case? >> we think england stays in.
the media is talking about the risks of brexit. you have 25 percent of the population who wants to lead, 25% who wants to stay in the middle ground is where the battle will be fought. you do not have a clear voice yet. vonnie: you don't consider boris johnson to be a clear voice on the opposite side of david cameron? >> david cameron has had his hands behind his back he goes he has not been able to say these are the benefits because he has to negotiate with the rest of europe. now that he's got that come i think we will get something much more articulate and clear. in europe.l stay sayinge have seven
$1.20. if the vote goes the way of the leave campaign, how much further could the pound fall against the dollar? with thed not disagree consensus. you will see a significant selloff. at $1.55.e things you are creating jobs, you see a much stronger sterling if it wasn't for the brexit risk. you pose the question with brexit. mark: you will close out the rest. we have seen the declines. >> you do have clear risks with the brexit. it will be a minutia every day for the next few months. using most of this already happened. -- you have seen most of this already happening. does it change the
equation for the bank of england? argument for an interest rate increase different? >> it is very difficult to be hiking interest rates right now t of brexit. if the fed is on hold and the ecb will be cutting again on march 10, i don't think u.k. will be rushing to hike interest rates regard this. -- regardless. it is really interrupting markets at the moment. we are seeing that particularly in yields. -- 10 year german yield there is not much to be had here in the u.s., either. where are you headed for safer returns? >> on the safe haven assets and treasury bonds, german bond them
everything safe is overvalued right now. all the safe haven bonds are overvalued. you see gold rallying. as if weis panicking are in the midst of a recession in the u.s.. these are risks that are there, they are small, there's my new chances of these things happening, but the market is pricing things as if we are in the midst of a recession. mark: everyone will start realizing that. 95 billion barrels of oil being consumed every day. that is near a record high. people look at the oil price and say no one wants oil anymore. oil is being consumed, it is just being produced. and: one week russia
saudi's say we will freeze output and then iraq and iran rubbish that and saudi's essay we will not cut output. where are we in terms of output production? >> even if a deal is struck, there will be cheating on the what you want to buy oil you see inventories being drawn down. there's huge amounts of inventory. the futures rolling from spot prices at 30, next month they have to buy contracts at 33. there is a 7% role cost every month. equitiesre you buying for your clients? where are you buying this equities? >> european industrials is where there is a big amount of pessimism. we bought air must today -- airbus today. they have strong cash flow. pessimism around european industrials.
of all the panic and fear out there right now, buying something from a cyclical angle is a good value. mark: the stocks in 600 down by 25% -- you are buying european banks? >> we've been holding them for a wild come unfortunately. we think the banks are still a good value. we are short in canada right now. the canadian market is where more risk is. i would like to see a bit of momentum. i would like to see what mario draghi does on march 10. he will be cutting interest rates more likely. i've got some bank exposure right now. give us a quick rundown of what you are actually buying. >> we bought airbus, we've been
shorting oil. we are sticking with positions right now. i'm already on a program of this growth -- pro mark: patrick armstrong. from europe to south africa, the country's finance minister taking a pledge to bring down the country's budget deficit. he talked about how the country is handling its credit cards. sometimes they shipped the goal post as we go on. shift the goal post as we go on. that weto demonstrate can put a package together. plans that are credible and sustainable and viable. i think we have managed to do that.
>> the financial markets have reacted to the budget -- do you think investors have unrealistic expectations of what can be done in the budget? >> depending on the kind of you take those issues set, you can often unrealistic expectations for oneself. what is the difference between you increasing that by 2% and maddening -- managing the revenue side as we have? expectations surely could not have been that we were going to cut our deficit any further. were that weions would barely match the target. done that on the revenue
side as well. lastly, the budget is not something you can just simply react to. it will require some studying to in theand the elements proposition we are putting forward. there will be a better response from the markets as well. mark: the south african finance minister made the point about investors looking for credit. in some context, let's bring a correspondent from our johannesburg newsroom. the rand is dropping after this. all eyes were on the finance
minister today. what we have seen with the market's reaction is that the rand has lost some of the gains that it had over the past five days. it reached the lowest in six weeks. , seeminge rand gaining maybe there was some optimism in the five days leading up to today. we have seen those gains reversed. what we are seeing in the bond market is that bonds are soaring. investors not particularly convinced with what the finance 's focus was on the budget today. mark: are we closer to another rating downgrade? where we are seeing the disappointment in the bond market and equity market. we are anyinced us further away from that possibility? economistsa lot of
are saying that they were not entirely convinced that the country would avoid a possible downgrade to junk status. randbeing reflected in the and equities market -- what the hisnce minister reiterated that he wanted the budget he delivered to be a viable one, sustainable one and credible one. he admitted that some of the biggest risks to the economic outlook are the global downturn facing -- hery is was very candid about the problems the country is facing but sing the government will focus on fiscal consolidation and ensuring that they do not spend money they actually don't even have. what is it like in the streets of johannesburg at the moment? our people feeling the pinch? >> on the grand level, there is
a sense of feeling the pinch. we saw the inflation rate going 3% and 6% last month. be the drought putting pressure on food prices and that is being felt on the ground. say he wants and believes economic growth should be inclusive at the moment. vonnie: thank you so very much for that update from johannesburg. we will have more on south africa and its economy throughout the week. coming up in battle of the moving what is the averages telling us about the concerns about the dollar? ♪
time now for our global battle of the charts where we take a look at the most telling charge of the day. and what they mean for investors. you can access these on the bloomberg by running the function at the bottom of your screen. -- we have thet from mark barton. mark: we've been missing technical analysis on sterling. today, it fell to its lowest level since 2009, below $1.40. i've been desperate to do some technical analysis on the pound against the dollar. 2009-2016e pound from . the 200 day moving average and 50 day moving average. the green line is the 200 day, purple line is the 50 day.
the 200 day is above the 50 day moving average. that is not good for momentum. sterling has fallen by 10%. guess what happened at the beginning of november -- the trend there is not a good one for the pound against the dollar. the relative strength index is also fascinating as well. any figure below 30 shows that sterling is oversold. near ate are at 30, 30.3. we are not quite oversold. sterling's decline could have a bit further to run. vonnie: i like it. has quiteot sure it what it takes. i will handed over to abigail doolittle for her debut. mark's technical
analysis. toent back to 2000 and tried 2000 and chart about three expressions of risk in the financial market. in blue, the euro against the yen come in yellow, the dow. spectacular air crashes in 2008 and 2009. we see the dow going up to another bull market, same thing for the emerging markets. the emerging market when into a series of little bear markets perhaps on the threat of rising rates. in the currency land, euro plunging to new lows. after ating higher confirmation of this risk cycle. where are we today? we now have the emerging markets back in a bear market from the official peak of 2011. we are down sharply for months here, confirmed by the bearish downtrend in the euro.
what makes a watch leap your proof -- leap year proof? >> if you're a watch geek come of this is your go time. thatant to have a watch can keep track of the day and the month but when it gets to the very 29, know that it is leap year. that is a complication that can cost you quite a bit of money. mark: give us some examples. brand, they were the first brand in 1955 to put a leap your dial on a watch. we have one of their perpetual calendars, the world oak can cost $60,000 in stainless steal. this the royal oak. a normal calendar watch from them can cost $16,000.
it is a lot more expensive to get this complication. love, onetch brand we of those brands that creates -looking watches. when to gold can cost $60,000. -- $160,000. this is a time of year when you want to wear them so people know that you've got that kind of expensive watch. chris rouser, thank you so much. you are not wearing one, right? >> know, i'm a journalist. , i'm a journalist. nipursuits ono the bloomberg.
we will have a look at the major indices and some of the major movers today, including the british pound. 39 -- $1.39. yieldrman 10 year 15 basis points off. mark: the biggest drop for the stoxx 600 in two weeks. it was led by every single industry group on the stoxx 600. basic resources, autos, banks, oil and gas. airbus profit rose less than estimate. sterling is the story of the week, the day. that is the european close. ♪
scarlet: good afternoon. : new home sales tumble falling at the fastest pace in four years. we will look at what is behind the slide. examines itset sales goals. lew'swater jack expectations for the g7. scarlet: we need to look at today's activities. need to go over to julie hyman. julie: we are seeing a bounce in stocks from the lows of the sessions here