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tv   Bloomberg Markets European Open  Bloomberg  July 9, 2019 2:30am-4:00am EDT

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anna: good morning, welcome to bloomberg markets, the european open. the markets say consider the dove. you can u.s. equity futures point lower as markets await testimony from ron paul. the cash trade is less than minuteses what -- 30 away. ♪ anna: bad news from basf, cutting sales and profit forecast on a slowing global economy and u.s.-china trade
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fallout. deutsche bank's sweeping turnaround gets a thumbs down from investors but what will it exit from equities mean for other banks? tech tensions. japan says a resolution to the trade spat with south korea is dependent upon souls response. we should hear more about that this hour. is the european market open, 29 minutes ago until the start of the european equity trading day. bitres look a little sluggish. we are slipping around the global equity story. we were slipping on wall street yesterday, slipping in the asian section, slipping back on european futures, slipping and waiting to hear from fed officials, waiting to hear from the fed because the market is betting we will get a rate cut in july despite the strong data on friday and the markets will be looking to test that theory dayshe hypothesis in two of testimony from jerome powell. let's show you where we are on equity markets.
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is close to the markets right now, that is something we are watching and watching fed minutes on wednesday. cpi data on thursday. we have the geopolitical tensions making themselves felt. hong kong down once again. the hong kong dollar weaker. this is despite carrie lam saying that the extradition bill is dead. slippingea's kospi because of trade tensions between south korea and japan. australian assets a little weaker, the dollar down by .3 of 1%. down .2 of 1%. we way for gdp data to come through tomorrow and the survey of economists does not look like a positive topline story. we are to show you selling equities, getting into fixed income. we see that in spain and germany and a quick note on some of these other volatile bright red
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commodity prices. .ubber down by 4.4% concerned that maybe the chinese auto sales data is not as strong as it appeared on first blush. something that market participants are talking about. mark cudmore is joining us now from singapore. great to have you with us. let me ask you about the global picture for equities. you have been saying this morning good news and bad news economically could start being bad for stocks. is this your bearish side to the fore, what is driving that thinking? >> we are in this cycle of the reaction function for stocks to data. what we have seen in the last month or so, we have seen bad news as being good for stocks and good data bad for stocks and we are in this environment where we are focused on easing. the monetary policy response is
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seen as the primary driver of stocks. ways, it is to perceived the fed response, the policy response is sufficient to turn the economy around we get back into that world where policy is appropriate for the economy and good data is good for stocks and that data is bad for stocks. the problem is a we start realizing that policymakers are impotent to turn the economic cycle around, that the deterioration is too drastic. that is the camp i am in. if we are in that world, we get 2008to like we were in where we saw a dynamic that you have an asymmetric reaction function to data but it is skewed to the downside so bad data becomes bad news because it emphasis -- emphasizes policymakers are impotent and it does not support the environment. we might move to that world in the next few weeks. for most people, we need the data for the next three or four weeks to confirm which path we're going down. from powellhear
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something dovish and that sends equities higher, you would ask whether that will be sustained. mark: i think very much so. we see despiteat the fact that markets are on hold ahead of powell, i don't think it will change the picture unless he comes up with the tariffs. happened itever would betray between five basis points. he would never do 15 or take that away. unwised be a surprise, pricing for a cut and he is not going to suddenly 150 basis points so we are on hold in case of the tail risk surprise and people are looking for guidance of what comes next. what comes after july. powell will try to give guidance to keep his options open. i think overall, easing is priced cannot we know the easing
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is coming. it cannot support equities and we have on hundred percent chance of the cut coming in july. when that comes it will not support stocks from there. data will be increasingly important. you aboutme ask question of the day. availableeem to be now. what impact will the korea-japan trade spat have on global markets? we have been taking a technology look and i have pulled up the ectr function on my screen, showing exports to japan. mark: there are two elements, the one is overall emphasizes that trade tensions are not just u.s. and china and it is not just u.s. eu and u.s.-centric. there are other countries that are getting more protectionist. that is worrying given we are in a vulnerable state.
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it is important that -- because korea is part of the global supply chain on the technology side so there is a risk of a knock on effect if it does not get resolved. the fact they will have more this is constructive but is a long-running affair and the core issues that underlie these tensions go back decades. thatare worried given voter -- the voter base have expressed support for the hardline, that could derail technology supply chains globally. from ae are hearing spokesman that they will raise this issue of japanese export curves at a wto meeting. some headlines crossing the bloomberg. the u.k. economy according to a survey, probably shrank for the first time in seven years we will get this data later on this week. that the pound is a
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little weaker today, down .2 of 1%, that -- can the pound be moved or is it all about brexit? mark: i think brexit is the key ,tory and the political turmoil is it a hard brexit or not, are we heading toward the general election. it was notable how bearish u.k. investors were. a domestic bearish bias that was more extreme. the rest of the world has got bored of the u.k.. -- no one but because cares anymore, no one wants to be involved. the fact is the u.k. investors are and clearly worried and even though they do feel that all the negativity is priced there is no over linings to be seen anywhere. the people are biased for more downside but realize there will be the occasional squeeze. that is the context. it will not shocked if we get more bad data. it is hard to get a relief rally because people are looking to sell those rallies. anna: no offense taken, we'll
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keep calm and brexit on. you can join the debate on today's question of the day. korea-japanwill the trade spat have on global markets question mark you look at the tech sector. reach out to us and the markets live team on your bloomberg. let's get a first word news update. olivia: carrie lam says her controversial bill that would allow extraditions to china is dead. if stopped short of saying she would withdraw the bill entirely. the announcement follows weeks of mass protests. organizers say they will keep planning major new rallies. >> lingering doubt about the government's sincerity or worries whether the government well we start the process and the legislative council. there is note here such plan. the bill is dead. new primeeece's
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minister has chosen the finance minister. one of the tasks is to renegotiate the relaxation of [inaudible] two free of taxes and other measures designed to boost economic growth. jeffrey epstein is in held in a correction center in new york as he awaits ale. the charge encloses -- includes sex acts with girls as young as 14. -- epsteinckstein pleaded not guilty. and taking another step toward opposing brexit. they agreed to start a second referendum. the union chiefs say the policy must need to oppose the eu on any terms negotiated through the ruling conservative government. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.
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this is bloomberg. anna: thank you. next, deutsche bank dwindles, the stock closed down in yesterday's session 5%. bloomberg radio is live on your mobile device or on dab digital area -- radio in the london area. the team putting out the broadcast this morning. this is bloomberg. ♪
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anna: welcome back to the european open, 60 minutes to go until the start of cash equity trading. waiting to hear more from jerome powell, always saying the same thing this time tomorrow. we will not hear from him until wednesday and thursday of this week. deutsche bank's overhaul received mixed reaction. closing down more than 5%. some are concerned about the focus on the competitive market and low margin financing. joining us now, nicholas comfort and frankfurt. good to have you with us. what is it that made investors lose faith in this turnaround -- so quickly. is it a focus on the home market, a fear that fairweather -- what is the thinking? >> we see so many overalls in the recent couple of years.
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it's time they say they will pull out of businesses and the revenue losses are minimal and so when deutsche bank is saying, they say a conservative estimate to revenue growth among people add do you think you can revenues given all the retrenchment and the second pulling outs of equities and so people are pulling into question whether they can reach their profitability goals which are based on what deutsche bank calls conservative already revenue assumptions. jobs story,bout the for anyone who has been working at deutsche bank, this has been a nervous time and no doubt many have received bad news. what do we know about how many of the people from equities are other parts that are being shared will able to find jobs internally? the -- there was a report
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a german magazine saying that 2000 cuts would be within the equities space. whether people can find other thatwithin deutsche bank, is a tough one. if other areas are cutting it would be a hard internal market. we saw people leaving offices in london and sydney and elsewhere in asia with boxes and unload yesterday the job cuts have a gun. including those who are not finding jobs. there may be in germany where they are trying to make it as palatable as possible. evil could get moved around but there will not be that many internal jobs going. limitedunds like openings. thank you very much. nicolas sarkozy comfort, our
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banking reporter in frankfurt. here are images of employees leaving the post yesterday. let's get a bloomberg business flash. here is olivia howard in london. olivia: wall street has not been this pessimistic on apple for a long time. rosenblatt downgraded the company bringing the total number of eris analysts to five, that is the highest number since 1997. apple did not release the imac until year later and the ipod did not debut till 2001. sweepy recession will not the economy according to henry mcveigh. market over did it cutting by 50 basis points this month. >> the market got to dovish on the fed, the idea that they would do 50 basis points in terms of easing in july is too optimistic. ultimately, the fed sees low inflation and i think they see slowing growth.
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the prudent thing to do is to do 25 basis points. could: virgin galactic become the first spate -- spaceflight company to go public. planning to invest 800 million dollars in the company for a 49% stake. the company would be publicly listed. that is your bloomberg business flash. anna: here is a look at what you should be watching for. appears court decides whether the orange ceo helped to cheat the french government out of 403 million euros. p.m., and economist will answer questions live on twitter. the markets live team out with an interesting piece on what fisting lagarde means for the strength and weakness of the
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euro. president trump will hold talks emir.utters -- qatar's well the longer be invited to that and this evening at eight, boris johnson and jeremy hunt will go head-to-head for the first time in front of a live tv audience. we are minutes away from the open. next we will take a look at your stocks to watch at the opening including danske bank after the lender cut its profit forecast. this is bloomberg. ♪
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the: welcome back to european market open, eight cents go to the start of equity trading. let's find out what stocks our team is watching today. let's go first to francis who is looking at danske bank and basf and the fallout across the sector on that story and the latest on unicredit. what is the story? >> good morning. the new ceo has cut the profit estimate by a billion krone. it comes as the danish bank faces tougher pressure on trading, income, and net
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interest income. as you know is facing a massive money laundering scandal. that is what has led to the change. to spares taking steps the bank with a future. they're planning several initiatives which they will announce later this year about how to handle the tough conditions. we will see. the share is indicated to fall a little bit, 3% to 4%. it is taking quite a beating in the last month. at: yes, it has. is a story that will have repercussions across the sector. tom: it is indeed. its flashed its -- cut profit forecast and expect profit to fall as much as 30%. that is opposed to an earlier prediction of a slight increase.
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it is blaming the economic on --wn worldwide aced based on trade conflicts. are down in premarket indicators. eye on thell keep an sector on the back of that story. you have been looking at the italian banks and what is the story? >> a couple things going on, we had headlines coming out of reuters that they hired advisers corporate structure. they sold the remaining stake. unicredit called higher on that because this is improving their leverage ratio but look out, they are listed, called down as much as 5%. anna: thanks ray much. thanks for joining us. you can get the latest stock stories from our equities team if you go to first go on your mobile app.d the
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we are focusing on a story out of south korea. speaking minister is in seoul at any moment. we have these live pictures coming to us. curbs ong japanese exports. starts a story having its when a court in seoul made the decision about the japanese occupation. the japanese did not like that and imposed some curbs on south korean experts. we will keep across this tense story, something that has weighed on south korean assets and continues to do so. in terms of where we start the trading day, we are expected go -- to go lower. we are waiting for some weakness and waiting is what we are doing here, we are waiting and drifting lower as we wait for jerome powell to speak and he speaks a couple of times this week.
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equities are expected to be weaker at the start of the trading day at saw that focuses on the german market. storyesult of that basf that tom just took us through. the open is next. this is bloomberg. ♪ hey! i'm bill slowsky jr.,
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trading. let's see how the market is position, and andover from asia to the european session. it is negative but not much. asia-pacific.sci we are expecting to lose a little ground. the pound is down against the u.s. dollar. gdp data out tomorrow. a debate between tory leadership hopefuls tonight. the u.s. 10 year yield, here we really are waiting for jerome andll to speak tomorrow thursday, his testimony in
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washington. we will get more details on his expectations and his level of dovishness despite the stronger jobs data. u.s. futures point down, and european futures also point down. chemicals sector very much at the heart of things. we have chemicals retreating all the german market. european equity markets, the ftse 100 is open. the turkish market is open and bouncing a little bit after the losses from yesterday some of to thee-jerk reaction unexpected firing of the central bank governor. the spanish market giving us something more we expected to see. we are waiting for the german market to get up and running. that is where we could see real weakness on the chemical story.
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are putting trade tensions front and center. the pound is a touch weaker, the dollar fairly flat. let's look at things from a sector perspective. we can see health care is weaker, materials weaker. defensiveness or more risk assets. we have both on the rise. financials looking mixed. industrials retreating. in terms of the moved to the downside, 420 stocks moving lower this morning, 138 moving higher. you can see we have this real downside bias. we are seeing a lot of weakness at the start of the trading day. we are waiting for chemical companies to start trading.
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these stocks remain closed so far. let's start with the upside. aak is the biggest gainer by 1%. ocard -- ocado up by 0.8%. if we go to the downside, micro focus, did not change their guidance. the market has reassessed them. randstad also down. sector isthe chemical down by 3.6%. we are seeing chemical companies opening.
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-- of this on the back of european equity markets opening lower. the german market coming under pressure as a result of moves in chemical stocks. the asian stocks retreated. the u.s. counterpart flipped for a second session. the trade tensions between japan and south korea are threatening samsung,ipmakers like after japan slapped restrictions on exports to korea for materials crucial to semiconductors. south korea's trade minister has just begun addressing the issue in huawe seoul, more with tom giles. it bring us up to speed with the latest on these tensions between japan and south korea. hashat is right, japan
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basically imposed severe restrictions on very specific materials that are used for making displays and chips. of course that is affecting two of korea's biggest companies in a profound way. the latest is more saber rattling. we had south korea threatening countermeasures, and japan saying we have no intention of lifting restrictions. at the same time we have japanese officials saying they are open to talks. to hear fromg south korea. a lot of back and forth and people standing the ground, and not willing to talk about ways we can come to the negotiating table. anna: to bring you up to speed this addresss from in south korea, they are urging
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japan to stop making groundless claims. minister iss speaking at the meeting. how does this affect other parts of the world? this is the latest episode of trade tensions. it does affect the tech sector. >> that is right. this is japan taking a page from other countries. one in particular that has been using trade negotiations, tariff intoreats to cajole china making concessions when it comes to trade. japan taking a page from the u.s. in this regard. in particular, the two most directly affected would be .amsung this could have a knock on effect around the globe. japanese makers of these key
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materials that are used in chips and displays, they could be affected. what will the impact be on handset makers around the world, not just samsung, itself a major handset maker? companies and chinese who have become a force in smartphones globally. the list goes on and on. if you have something that will disrupt the supply chain, if it will be harder for samsung to supply chips, will apple and other of these companies have everything they need for the crucial holiday season? .hat is still many months out in the supply chain you have to start planning many months in advance. as far as we know, we talked to people at samsung who told us they have a months worth of
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supply. what do you do be on that? these are specialized materials, and in some instances japan is responsible for as much as 90% of south korea's supply in some of them. anna: thank you for the update. other news on this story, japan may hold talks on this trade spat on july 12. you up-to-date on the developments. it is hammering south korean assets in recent days. the warning is being felt here in europe. this is on the back of trade tensions in a profit warning. thanks to tom giles in tokyo for bringing us up to date with the asian specific story.
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let's talk to patrick armstrong, cio / managing partner, plurimi wealth. trade tensions have many directions today. the chemical sector falls. normal wear trade tensions are used as a weapon? patrick: it may be, weaponizing trade used by the u.s. with china against huawei. and china has threatened curtailing exports to the united states. it is something that is not productive for global trade. you have seen it falling for several quarters. is falling, these are symptomatic of the slowdown in global trade. the last 40 years, the world economy benefited where goods are produced cheaper. that tide has turned and is
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reversed into more nationalistic frames and weaponization of trade. has saidsident trump he benefits from the trend. you think he will declare a victory at some point. what does that look like and what does it mean for markets? patrick: his strategy is to talk tough and declare victory. we saw that with nafta. with china he will get some concessions where they will increase imports to united states and get other minor concessions, but it will not be the all-encompassing deal they hinted that in may. there are too many irresolvable differences. at some point trump will want to declare victory going into the 2020 election. anna: we are waiting for jerome powell to speak. we have jobs data on friday.
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fed funds and the expectation of futures for rates in the u.s., and the gdp forecast in the u.s., what is the point they are trying to make? patrick: they are decoupled. you expect futures to go up and down as the u.s. economy goes up and down. you are saying u.s. economy expectations flat lining. you see fed futures falling dramatically. you will see a re-coupling. bit of it will be a both, 2.5% comes down a little bit. two and a half cups is pessimistic for the outlook of the united states. unless we get a re-escalation of trade tensions, i think the u.s. economy is not a shape or you can require one or maybe two cuts would be too much. jobs growth is good. a little bit.ed
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the real wage growth of consumers is strong at 3% wage growth. they will probably cut in july, and i think that will be it. anna: thank you. patrick armstrong, cio / managing partner, plurimi wealth stays with us. the robot revolution is heading for fixed income. as the credit super cycle reaches its peak, traders are onto theg their arts bond market and hope it will make them billions. here to explain his dani burger. dani: it really has long been a moneymaker in equities. and the giants figure they can revolutionize bonds next. you can use data, take advantage. you buy foreign companies because investors tend to underprice them. this is called faster investing. it is huge in equities, but the
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bond market is so far behind. if we use u.s. etf market is a proxy and similar strategies, 97% of assets using the strategy are in equities. now we have big players betting the next of billions will be made by cracking into the less crowded market. --i spoke toased the manager at the firm, and he wrote about this idea in a 1998 thesis paper. the giant intting equities launching a fixed income mutual fund in 2018. they are also raising money based on credit factors, and a few others coming in here as well. breaking down the strategy, it is similar to what we see in stocks. we will seek out securities that that the rules, like momentum, value, low volatility.
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fixed incomein given the sheer number of bonds per company and the difficulty getting the data, not to mention the liquidity issues. this pitch is timely, the super cycle is a decade old. it could hit traditional investors who outperform by chasing yield. we spoke to j.p. morgan, who said the next backup and spreads using quant funds will be outperforming. performance, just how has it been? if you look at robeco's fund, yearyears old, this slightly outperforming. over the long-term, this volatility adjusted approach will be out duration risk. anna: thank you dani burger with the latest on thatqu -- quant story.
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we talk about trade tensions in asia. that has unseated the chemical sector. some of the rivals in the sector falling more. we will talk about the chemical sector next.
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anna: welcome back to the
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european open. 16 minutes into your trading day. the chemical sector falling on a warning. could qe make a comeback? investors talk about an ecb headed by christine lagarde, it canelsen told us become a more prominent force again. >> they could be a situation like when the ecb started. easing was immensely powerful. he had been running a small central bank. it became incredibly powerful. whenyou had this shift on he took over and the economy was not as prominent.
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became the dominant figure. we could turn back to a situation where she is an important person. anna: patrick armstrong, cio / managing partner, plurimi wealth is still with us. your thoughts on an ecb under christine lagarde. the chief economist has a bigger role to play when you work with someone who has great political strength. patrick: she is a -- she is surrounded by great economists. she may have to pivot before demanding more fiscal stimulus to promote growth in the eu which is below potential. has current account surpluses and an unemployment rate that is too high. those things are screening out for something that is not there. richard jones making the point that he thinks christine
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lagarde will be positive for the euro. focus that she might get more fiscal stimulus. patrick: i think her role will be all-encompassing, trying to create stability to central bank policy. she will communicate effectively. the begging union is important. engineering some fiscal stimulus and getting germany to allow countries to spend more and slack on their budgets. and getting germany to spend. it does not look like that will be an easy task. given that they are running a surplus, fiscal stimulus out of germany would be a big boost. anna: let me ask you about inflation expectations. you said draghi was about trying to reset and boost inflation expectations in the market. did he not managed to do that? patrick: he had to front run the fed my he knew it would become more dovish. he had been indicate they would
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be more dovish themselves. the ecb have to be reactive to federal reserve policy because they cannot explicitly target the euro exchange rate, but you cannot get inflation if you have a strong euro. everything they do will make sure the rally does not rally significantly. think 25 basis points from the fed, and 10 more from the ecb. and probably getting qe back in the cards. are inflation expectations on the screen. thank you very much, patrick armstrong, cio / managing partner, plurimi wealth. he stays with us on the program. dani: it is the story we are hitting today, basf cutting its forecast. here is our price update. more than 4.5% trading at a
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month low. micro focus is one of the biggest software companies in the u.k. they did meet expectations in the first half update. the issue here why shares are trading lower by nearly 3%, some issues from the company as they try to incorporate the $8.8 billion with of assets the acquired. it has shareholders attention. there a highere up end may, but this is an interesting one eke as they were out with earnings and an update for 2019 saying it is stronger than expected. they are saying demand for new homes in the u.k. despite uncertainty about brexit. hedge funds returns still lag. the s&p 500, this is bloomberg. ♪
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anna: welcome back to the european open. 24 minutes into the trading day, a negative session. the stoxx 600 down by 0.4%. hedge funds have reported their best first half since 2009.
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the average fund rose 9%, but have of the top performers firmer investments in tech. doubled the average returns for equity managers. it was european stock focus that -- a rose 33% in the first half and managed to outperform the s&p 500 index. , cio / armstrong managing partner, plurimi wealth is still with us. what is your favorite pick? we like multinationals, large-cap space if you are starting to compete with the ftse 100. we think sterling will weaken. whoever the next pm is has to keep the thread alive to have negotiating power. we do not think it will result
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in negotiating power or there will be a hard brexit, but there will be a lot of hard brexit rhetoric. anna: i have a chart that shows how some of the stocks are pretty cheap by historical averages. you specify go for some of the larger cap health market. what about the gold for the preference? patrick: gold has a great backdrop if you have negative interest rates. old is a safe haven opportunity cost. -- gold is a safe haven opportunity cost. negative 410 years, you have less of a drag buying gold than other safe haven bonds. we think the backdrop for gold is favorable. we have the fed likely cutting and ecb following up with more stimulus. trade wars are stagflationary. much,thank you very
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patrick armstrong, cio / managing partner, plurimi wealth , he stays with us. more on the markets next. we wait for jerome powell this week. ♪ xfinity mobile is a wireless network
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trading day. section lowere after slashing profit forecasts. tensions, japan's spat with south korea is dependent on seoul's response. lam backs down. she says the controversial extradition bill is dead. good morning and welcome to "bloomberg markets: european open." i am anna edwards. 362 stocks on the stoxx 600 are moving downward.
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we have a downdraft for european equity markets. bad news around chemicals. ocado put out a trading statement and changed the guidance. that is one of the bigger movers to the upside. on the downside on european equities, the chemical story around bsaf is very much there. f down by about 5%. other companies that supply the auto sector are weaker on that bsaf morning. dt down. bank polska down by almost 6%. >> hong kong leader carrie lam
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says her controversial bill that would allow extradition to china is dead, but she stopped short saying she would withdraw the bill entirely. organizers say they will keep having major rallies. >> lingering doubts about the government authority, and worries that government will stop the protests and the legislative council. there is no such plan. the bill is dead. minister has prime chosen his finance minister to renegotiate fiscal targets. tensions between japan and south korea are threatening to hit chipmakers like samsung after japan slapped restrictions on exports to korea of materials crucial to semiconductors. much depends on if shinzo abe
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and moon jae-in can work out a compromise. the vicious cycle of measures and countermeasures will not be ideal for both countries, but if south korean companies began experiencing damage, the government will have no choice but to respond as necessary. i hope it does not come to that. we urge japan to withdraw its measures. >> deutsche bank's rebound will leave 5000 employees out of work. they may struggle to find jobs. risk-taking has cut the positions available. --s stock trading unit global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you so much for the update. bsaf is the latest chemical
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maker to sound the alarm on economic weakness. it is cutting its profit forecast. those warnings have been racking up committed. additional manufacturing. let's go to berlin to kris bryant. isis interesting to see bsaf blaming trade conflicts. a very bleak update from seen ast night, widely a bellwether of the global economy. bsaf was fairly optimistic about its opportunities for this year, up till now forecasting an increase in sales and expecting profits to be better. willt is saying sales decline, operating profit will be down as much as 30%. thanh bigger downgrade
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analysts were expecting. everyone knew the second quarter would be difficult in part due to the trade tensions. release wast basf bleak across the board, weakness and industrial production, and autos as well, and of course difficulties in the american agricultural sector. really being hit across the board. anna: this is having an impact on others in the sector as well. tie this into the broader slump in manufacturing. i know the german company and u.s. manufacturer are a couple names that have been cautious in their guidance. we had been tracking weakness over months. yes, the industrial and manufacturing sector has been a weak point of the global economy this year. a little sign things are improving, trade tensions adding to the mix.
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the auto sector is a big customer, a fifth in sales. that sector is struggling not just with weak demand, but structural shift on the way from combustion engines to electric vehicles, which is making it a difficult sector to navigate. the agricultural warning was interesting. climatebeing hit by change as well, heavy rain across the midwest of the united states the laid the growing season. that has a knock on impact for anybody who supplies agricultural chemicals. you have a slowdown and climate change which make a difficult environment for the company. anna: thank you so much christ bryant, joining us from berlin. the chemical sector is trading weaker today. patrick armstrong is still with
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us. contrary to expectations last year, the trade tensions between the u.s. and china have not eased. this will be an assumption many companies have made, and they could find themselves in this position. patrick: they have not eased but not have -- but have not deteriorated. you have the narrative that really hit basf's main product line. agriculture, the chinese being a big importer of u.s. crops, those are also playing a factor too. within industrials we do not have chemicals exposure. companies that have more defendable -- dependable profit. the profit outlook has been lowered severely. to give up margin to maintain sales in chemicals, whereas other industrials may be
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more defendable. anna: deutsche bank was a big story out of germany. your take, 48 hours after the announcement from deutsche bank on the scale of restructuring and the goals behind it. the market took a dim the view. -- dim view. 2022 fourhey say result is a long time. the market would prefer a quicker return on decisions they will make. 18,000 employees is huge, almost as big as lehman before the financial crisis. anna: it is reminiscent of the people leaving with boxes. patrick: we have been attracted img, and banks and bonds out of lloyd's in recent weeks.
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it stays as a 7% yield right now. we would rather not chase the upside in banks, but capture the high dividends. what is the risk with that? what is the risk people will counter? patrick: a big recession and bad debt goes up. it is pegged to the u.k. economy. a severe need write-down of assets, so we think there is enough buffer given their capital level that it will continue to pay its debts. a bank that default is such a bad signal that it does not become a viable as an entity. these banks are heavily
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incentivized not to default on their loans. what tempts you back in? the year weing into went long european banks and cut it back in april. we were more optimistic on growth in the eurozone, and expecting the ecb to get interest rates back to zero which would improve robert margins for banks. a review has changed and we expect cuts from the ecb that will erode profit margin for banks. i do not think there is a lot of upside right now with more negative interest rates coming. anna: patrick armstrong, cio / managing partner, plurimi wealth spending the last 40 minutes with us. he will join me on bloomberg radio at the top of the hour. up next, stocks on the move. forecastng sales despite a warehouse fire that is
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having an impact on the share price. this is bloomberg. ♪
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anna: welcome back to the european open. 43 minutes into the trading session. down by 0.4% on the stoxx 600. a lot of the virgins.
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weakness in the german of divergence. gearing up for jay powell's at the senate banking committee this week. many wonder how he will react to friday's strong jobs report. market ist says the too dovish on the fed. >> i think the market got too dovish on the fed. the idea they would do 50 basis points in terms of easing in .uly is too optimistic ultimately, the fed sees low inflation and slowing growth. do is 25nt thing to basis points. ahead of the jobs report is where we stood, now the market will come around. >> there are a few times in
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funds 50here the fed basis points above the two year, and what happens, the fed eases. i would like to bring of a chart that illustrates this and we can show you everyone what is happening in the short run. many people may have missed this divergence. >> when the market gets like 1998, 2000, 2006, almost all those times you had slow growth over the next 12 months. the fed needed to get ahead of the curve. i can 89, 2000, 2006 it got bumpy. 1998 the market went to the upside. we will not have a nasty recession, but we will not have a 1998 run-up. >> that is the big question,
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does this look like 1989? does it look like 1998? 2000,t look like 2006 or where instead of having markets higher 12 months hence, you had a major correction. through those. the case of 2007, companies over earning abnormally, i do not see that. 2000, evaluation issue. 1989 would be a bad test case, you bubble through and the central banks got dovish vucevic corporate profitability issues. i would say it is found in theory that signifies nothing. we think the market is capped on the upside. he will not get more multiple expansion, but on the downside you have a protective fed. head of thea new ecb, christine lagarde, not a
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technocrat, does not, with anywhere near the background in monetary policy and finance that mario draghi had. what implication will that have for the fed? jerome powell and his colleagues would like to believe that they control monetary policy. increasingly it seems that the market is. if the ecb acts one way or another? points, we follow the ecb as closely as the fed because ultimately the ecb helps set the lower end, and the treasury never trades much about it. if you look at the 10 year treasury and the u.s., they have never traded in the last 30 years more than 250 basis points above the german bund. that is -40. longif the fed wants the end up, they will have a hard time doing it.
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aggressive going into his exit to set the course of action. i think he will do more quantitative easing. we think he has lowered the cost of debt, but not the cost of equities. it would not surprise me to see him move away from sovereign debt and into corporate bonds or something with equity to drive down the cost. there are a lot of stocks with huge dividend yields when bonds are yielding negative. there is almost 5% of the european high-yield index that actually has negative yield. that strategy worked on the sovereign debt side, and it seems crazy, but it is true. on equity they have not lower the cost. anna: fascinating conversation links to what we were saying yesterday about where the ecb goes next. would they buy financial corporate debt?
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storiest to our top with dani burger. dani: one of the biggest movers to the upside today is ocado, maintaining their forecast even though they had to cut their first year revenue by 50 million pounds because of a fire in one of their warehouses in february. a lot of licensing other technology helps them keep the revenue in line. shares trading at about their highest since february. cutting their 2019 forecast. chemical makers are moving lower today. this looks bad for the entirety of the sector. 6%.stro is down about it will be the biggest drop of the year for the company. remainder selling the of the stake in the company, about 18.3%.
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9.8.sold their shares at that is a lower price than what it is trading on, but trending in that direction. lam mayming up, carrie have pronounced her bill as dead, but lawmakers protested that it could rise from the ashes. we are live in hong kong. this is bloomberg. ♪
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anna: welcome back to the european open. this is how we opened, to the downside. the ftse 100 down by 0.2%. the chemical sector very much to the downside there. carrie lam says her controversial bill that would allow extra addition to china is dead. her announcement follows weeks of mass protest including the ransacking of the legislative council building. >> there are still lingering doubts about the government theority, worries whether government will restart the process in the legislative council. i reiterate here there is no such plan. the bill is dead.
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anna: joining us now from hong chief. our bureau does this mean carrie lam is withdrawing the bill? that seems to be nuanced language. yes, it does not mean a complete withdrawal. that is a technical different from what she said. by saying the bill is dead is the strongest sign the government has sent about this bill. to put it in context, what she is trying to do is ease concerns of arrival. people still worried the bill can come back. has costare the bill sentiment in hong kong society. she is open to constructive dialogue. it is not a complete withdrawal,
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but it does send a signal to the public. reaction are we getting from protesters? is the signal being interpreted the way carrie lam would like? >> it does not look like it. we talked to a lot of protesters and opposition leaders. they do not accept what lam has said, and demand a complete withdrawal. say it is lawmakers too little, too late. one protest organizer in hong kong said they are planning more protests and will keep the pressure on for carrie lam. it is not coming to an end yet. anna: thank you very much to our hong kong bureau chief. let's look at the end of the first hour of equity trading. markets on the
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back foot, down by 0.6% on the stoxx 600. whereells us a lot about the losses are coming, chemicals and auto parts. that does not bode well for german markets. the chemical story emanating from basf. some of that links to the auto sector. both of those stocks moving lower. adjusting to see also the way markets and investors might interpret this, one of my colleagues talking about how basf is one of the first blue-chip companies to cut prices on the earnings season. chemicals might not be the only sector in for a bumpy second-quarter. in autos, positioning suggests profit warnings are widely anticipated. analystsomething ubs
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wrote about yesterday. that is it for the european open. up next, "surveillance" will focus on the selloff on equity markets, as we wait for jerome powell to speak later this week. this is bloomberg. ♪ ♪
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francine: powell back in the spotlight. the key question: the strong jobs report. the controversial extradition bill is dead. demonstrators val to fight on. -- vow to fight on. what was deutsche bank's exit actually mean? -- what will deutsche bank exit actually mean? morning, everyone, welcome to "blooer


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