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tv   Bloomberg Markets European Close  Bloomberg  August 27, 2018 11:00am-12:00pm EDT

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30 minutes left in europe. i am vonnie quinn. romaine: i am romaine bostick and this is the european close on "bloomberg markets ." here are the top stories we are covering. president trump is expected to speak about trade. we will bring that to you. u.s. and mexico have said to have reached a bilateral trade deal. u.s. stocks are reaching an all-time high. london is close. global equity rally is what we're seeing today. investors are optimistic about that trade deal, among other reasons. the budgetto veto after feeling shunned. we look at what it means. 90 minutes into the u.s. trading session. let's get to abigail doolittle.
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abigail: it is a risk on session. the bulls are out. we have solid gains for the dow, s&p 500, and the nasdaq. a bullish tailwind last friday from fed powell's comments last friday. they feel confident the fed will be raising rates but in a gradual way. investors liking that. the nasdaq on pace for its best two days since july. the weak dollar, take a look. seven out of the last eight days. similar to 2010, 2011, 2012 when a week dollar fueled stocks higher. we have a similar dynamic here but without qe. for that text strength, take a look at facebook, alphabet, amazon, and twitter, all
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rallying higher on more buy the , investors wanting in if there is the sense the fed has the markets back. if we take a look at the likelihood that the u.s. and mexico have reached a trade deal, let's take a look at car parts makers because we are going to see a rally. mexico is the fifth-largest producer in the world. if there is an easing of trade tensions, it could help these companies. we also have a rally for the commodity complex. let's take a look at the 10 year yield, reversing what we saw last week, the best outcome for the fed that we have a dovish tone for stocks but not for yields which would match the possibility of hiking rates as the year goes on. back, giving ag lift with that weak dollar to the medals complex.
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will that last? what we're looking at is a long-term complex of gold. in yellow, we're looking at gold. we see here the short futures low as it went into its record nominal high in 2011 and down as the shorts have increased. the shorts now surging to a record high. this is the medium term and long-term snap. there could be a rally and it could continue. there could be more pain ahead. vonnie: abigail, thank you for that. the canadian foreign minister has issued a statement after the u.s. and mexico reached a trade deal. anticipating the president will speak in a few moments. "canada isnt says incurred by the optimism shown by our partners.
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it is a requirement for any renewed nafta agreement." we have in the studio michael eric, also joining us is , outside the office of the u.s. trade representative in washington. it's start with eric egos looks like we do have a deal with the u.s. and mexico. saying he is going to speak to donald trump on nafta and mexico aims to conclude a trilateral nafta this week. what are you hearing? yesterday, asted of the weekend and friday night, mexico and the u.s. were poised to reach a deal. we were not sure about the timing but we had reported it would be as soon as today. we were able to confirm this
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morning that they have reached a deal to resolve issues between the countries. that leaves canada needing to come back to the table. a trilateral deal, there are provisions like dispute settlement and the automatic expiration and both mexico and canada have insisted it remain trilateral despite u.s. preference for a bilateral deal. we are looking for signs of wing canada might come negotiate. vonnie: let's get to josh in ottawa. to a tweet, he spoke with justin trudeau about the state of nafta. mexico is hoping canada will join. what does canada need to agree to jamaica's happen? agreed to make this happen? needs to be that canada
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needs to remind everyone they are here. it cannot be nafta without all three countries. the big ones for candida are going to be the dispute panels. -- for canada are going to be the dispute panels. they are considered a dealbreaker. there has been little indication they will take any deal that includes killing those. gary is another big one. --dairy is another big one. what we are seeing is in the markets, reaction. it is a breakthrough but a lot of steps remain. there: michael mckee, were sticking points between the u.s. and mexico, not least cars. why wouldn't we be able to solve those problems with canada? >> they are not little problems.
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i suppose we could come up with a graphic saying the devil is in the details but that is the case. there is a lot that has to be done. know that the u.s. and mexico have reached agreement on autps and that isautos probably acceptable to canada. we do not know the story on the sunset clause. details on dispute resolution and procurement is another one. governments can control how much is bid. we do not know what the deal is with steel and aluminum tariffs. how quickly would they be dropped? ,he aspect is this situation canada puts on a system called supply measurement quotas to
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match the amount of demand to supply. if you go over that, additional supply is subject to tariffs which donald trump has cited. that is not under nafta now. the president would like it to be. where do they go? a lot left and we have not gotten into the ratification which will take time. romaine: i have a question about the oil sector. one of the things that had been holding up talks was his language that the new president was looking for with regards to foreign investment in oil. was that resolved or if there was any sort of agreement between them with regards to how they were going to sort this out? hearing that they were close to getting a deal and
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this energy issue and concern hist how restricted administration would be in terms of the way it deals with energy companies. go fromis negotiator washington back to mexico, meet with he and his team and come back on friday and be here on saturday. energy was the stumbling block. we understand it was acceptable to all size. dor has long opposed the opening and is happy with what they have agreed. ae person described it is straitjacket. and how the sector looks and how the government relationship with the sector looks going for.
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romaine: josh, i am curious as to the political sentiment in canada considering they were not involved in the talks over the past few weeks. i know they spun it as that was ok. i'm curious how much pressure that is putting on them to compromise that they would not have been willing to do. >> i think there is some pressure, the biggest province elected a conservative thatnment that has broken have been trying not to criticize the government on nafta. that is starting to fracture. that could put pressure on justin trudeau to make it look like he is not the one standing in the way of a deal. they have always said they are not going to just sign any deal. it would be catastrophic to look like he is caving to donald trump who is not popular in
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canada. vonnie: the mexican peso is at its best level of the session. the canadian dollar is stronger by .5%. our thanks to our panel for now. new york, joshn when growth in ottawa and eric martin in washington, d.c.. thanks to you all. let's check in with courtney donohoe. you could save it out boy tripling down on the iphone x. the company plans to launch three new phones that will keep the edge to edge design of last year's flagship. the new phones will have a wider range of prices, features, and sizes to increase appeal. none of the three will be new designs like the iphone x was. the u.s. trade war with china is about to get uglier. hawks in the trump administration have gained the upper hand and they are about to launch an offensive. last week, talks resulted in little progress towards a
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cease-fire. the u.s. is planning new tariffs on an additional $200 billion of chinese products. beijing has vowed to retaliate. emmanuel macron says that the u.s. seems to be turning its back on its history with europe and the continent can no longer count fully on america to provide security. he announced a push for a european defense project today. italy is threatening to veto the european union budget over migration policy. the italian government is not happy that members failed to follow through on a deal for handling the flood of migrants. the deputy prime minister said italy will block whatever budget measures are not convenient. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm courtney donohoe. this is "bloomberg." vonnie: thank you.
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we are waiting an announcement from president trump about that deal with mexico. he has started his comments. we will bring you play back as soon as we get it. he said it is a big day for trade. the president saying he is going to get rid of the name and call u.s.-mexico trade. this is bloomberg. ♪
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vonnie: we are waiting for president trump to make comments. he has begun speaking and we will bring you that as soon as we get it. the president saying this is a big day for trade. there has been a u.s.-mexico
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trade agreement today. a short while ago that the u.s. and mexico had reached a deal, getting through some of the things that had been great blocking the deal. let's go to michael mckee in studio now, the u.s. and mexico can come to a deal the congress has to have a role, right? >> this is not a treaty. this is something called executive legislative agreement with nafta. congress would have to approve any change in u.s. law that this treaty creates. -- that this agreement creates. both houses, unlike a treaty where the senate has to, old houses would have to ratify -- both houses would have to ratify. can the president get this through? the president would like to have
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two bilateral trade agreements. that,sses do not want mexico does not, the canadians do not. is this bilateral? this is being negotiated under fast-track legislation which means no amendments are permitted. that authority only gives the president the authority to negotiate a three-way deal. a bilateral deal would not be permitted under that. i am not sure what the president is talking about or how that would go through. is odd because the mexicans are pushing for canada to be part of the deal. maybe they know more than the president does. opposed toess be bilateral deals? is there any potential for legislation to be rewritten? >> you can always rewrite
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legislation. whether they would do that is problematic. i do not think they would. most members of congress would prefer a three-way deal. this is a set of supply chain where products go from canada to the united states to mexico and back-and-forth. if you of different deals with different parameters, you're going to have a tough time keeping supply chains. nobody wants that. has a focus some bilateral deals that he has bush. the mexicans want the canadians in it. romaine: that seems like it would take us back to before nafta. i am curious as to what is changing. when i look at the details, it seems like there is a lot around the margins. is the fundamental structure of our trade relationship with mexico changing? dofrom what we know and we
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not know a lot, the structure of trade may change because it looks like the u.s. has succeeded in getting mexico u.s.ree to a higher produce level of content. it may go as high as 75%. to do that, the u.s. has gotten mexico to agree to ways -- raise wages in mexico and that is a big deal for the u.s. and canada because mexico will be less competitive. if a plan does not comply with the treaties, they would be subject to a 2.5% duty on products shipped over the door to -- over the border. would be to not go after additional truck or car production for the u.s. vonnie: two more headlines
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crossing from president trump, saying talks have not started with canada. he wanted mexico first and he is going to call justin trudeau soon. canada is going to be brought in shortly. president trump the talks have not started with canada but mexico is in place. thanks to michael mckee. we will bring you more. this is "bloomberg." ♪
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vonnie: president trump says the u.s. and mexico have reached a deal. he says we will see if canada is separate or part of the agreement. he said he is going to get rid of the name. deal is incredible for workers and he is saying we will be able to work out a deal with china.
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we will bring all of that live. let's bring in christopher gannatti, wisdom tree europe. [no audio] 24 years and we might be seeing some differences. in europe, you look at the markets this year. oriented companies have been stronger than many haveted given that you been hearing about trade talks and trade war's depending on the day. vonnie: what are your clients
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asking you? question because each time you go in, you see clients concerned about different factors. what is exciting is there is opportunity outside the u.s. but at the same time the feeling is, clients are most comfortable continuing to ebb best -- to invest in the u.s., in those same companies that have driven returns higher. markets are hitting yet another record high. the dayo them leading and people are excited about that. -- momentum leading the day and people are excited about that. i would say, with the euro doing as it has, weakening, not forget about european multinational exporters.
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those type of companies could surprise to the upside. ataine: when you're looking the economic picture in europe, are you seeing factors that are making you think that investors globally would begin to embrace european stocks over u.s. counterparts? chris: it is a great question. every statistic was positive. the datarprising with to the upward direction. equity returns were in the mid teens, the euro was in the mid teens against the dollar. and 2018 haslar brought more volatility, activity on the trade front. amidsts exciting today the headlines, germany put out a statistic that was the first time it indicated economic growth and confidence for the
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last nine months. you are seeing these green shoots in europe, positive activity. germany is growing, the eurozone is growing. things are not heading in the direction of a recession. valuation is cheaper than the u.s. as long as we stave off a trade disaster, european valuations could be attractive. vonnie: thank you for joining us. we are going to continue to monitor for a playback from president trump after making headlines on a u.s.-mexico deal, saying he is calling the canadian prime minister soon. this is "bloomberg."
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>> i am sebastian salek. stocks finishing the day in european trading, the stoxx 600
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up by .5%. positive momentum filtering through to your. london is closed. we see lower volumes, about one third of what we usually see in trading, affecting how things are playing out. we are led higher by the carmakers, we saw that in bmw. that is playing through the dax and the cac. bmw,are rising as we see daimlerchrysler trading higher. they have got metro there, the supermarket group outfitted buying a stake there. this is the biggest intraday move the stock has had, up by 12.4%. , a semiconductor company, a short position being announced. the biggest drop or is --
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dropped is ambu, more losses today. look at the currencies and your bonds and start by looking at the turkish lira, down by 2%, earlier by 4%. if you have a look at the risk reversal, you can see a picture, options seeing a less frantic move ahead for the currency. $ up by finally, the germany 10 year , the yielding a bit rising, the bonds of dropping as we had strong numbers earlier out of germany. that is a look at the european market. vonnie: thanks.
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another headline from president trump saying he is going to terminate nafta and begin on a new one. he is going to speak with canada shortly. how markets are trading and let's have a look at how they are trading. the canadian dollar is trading at about $1.29. it is stronger by .3%. stronger, 18.64. futureshave crude oil trading at $68.69. it is higher across the board from russia to canada. germany is higher, mexico is higher in china, being reflected in currency movements. won is higheran
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in anticipation that any kind of breakthrough on a deal in north america will lead to a breakthrough with china. in terms of commodities, plenty of higher prices from coffee to copper to platinum. romaine: thank you. italy will start the process of opposing the next budget according to the deputy prime minister. it comes after the member states failed to follow through on a deal in june. we haveus from rome bloomberg's latest. why are they trying to block this? the problem is that the italian government has been dealing for years with the -- the migrant situation from libya and north africa and they feel abandoned. governments populist
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which is trying to change things. they want to show they are tougher. is a place where things are negotiated slowly. they are saying things that are stronger than the past. romaine: what is the -- vonnie: what is the risk that they say go your own weight? >> italy is one of the biggest thatries in the e.u. so would mean a breakup of the union. italy has said they do not want to exit. they want to change the way things are done. want toaten and you change the way things are done. they have taken that and they are applying that to the e.u. they have raised the level of noise. romaine: thank you. let's turn to turkey.
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markets have free opened after shutting down for the holiday. awing lira, it is weaker by on concern the economy will worsen amid a feud with the u.s. and they deepening current account deficit. joining us now from london. , isooks like we have come there the possibility now that markets have reopened that the lira mike start getting -- might start getting whipsawed again. and inon is closed today liquidity, the leader is being tested. -- the lira is being tested. it is a different picture in the bonds market. the stock market is doing ok.
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this is no hesitation going to continue this week because no matter what is --pening, turkey, the issue the current account deficit and on mines and are they're not likely to banish soon. have not been any announcements of reforms of any kind. what will markets be looking to as a next catalyst? >> the markets are looking for action. that has not been forthcoming. is a plane in top he weather and there seem to be no pilots in the cockpit. that sums up the story. who is answerable? there seems to be no one.
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is running at almost 16%, three times the central-bank target. where would we want the central-bank benchmark rate to be? the one week rate is at 17.75%. that is hardly any compensation for the inflation at the moment. investorsking -- would be looking for at least 500 basis points. it is clear that interest rates will have to go up from here. they cannot say where they are. vonnie: we will be talking to you later on. the turkish lira trading at 6.15 now. are a few moments away from the president but we have headlines from what he said. saying that he is going to terminate the existing nafta deal and go into a new one with mexico and bring canada in.
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he is going to speak with justin trudeau. we want to turn to michael mckee. is this something he is entitled to do? >> congress does have a role in a couple of areas. they gave him the authority to negotiate with canada and mexico. a is doubtful he can just do u.s.-mexico deal without canada. that would be a question for congress. it appears he cannot. the other issue is anything in change u.s.t would law has to be ratified by congress. this is not a treaty. legislative administration agreement. cannot put through things that would change u.s. law without congressional involvement. some aspects would have to be ratified by congress.
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,e has to give 60 days notice 90 days notice before he can sign the deal and 60 days before the deal is signed. vonnie: we have to stop you because we to get to the president speaking on trade. we do, so does mexico. they used to call it nafta. call it the to united states-mexico trade agreement and we will get rid of the name nafta as a bad connotation. now it is a good deal for both countries and we look forward to it. i believe the president is on the phone. enrique?
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you can hook them up. are we in? a lot of people waiting. hello? do you want to put that on this phone, please? hello? it would be helpful. thank you. president trump, how are you? good morning. pres. trump: we have all worked very hard.
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your representatives are in front of me and i thought we would congratulate each other before it got out. we will have a formal news conference in the not-too-distant future. >> thank you very much, president trump. this is something very positive for the united states and mexico . the reason for this call is to celebrate the understanding we have had between negotiating teams and nafta. the interest we have had for to renewew months now
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it, to modernize it, to updated -- update it. framework that would improve productivity in north america. it is our wish, mr. president, that now, canada will be able to be incorporated in this. i assume we are going to carry out negotiations on the sensitive issues between canada and the united states.
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i am grateful, mr. president, i willnize your political and your participation in this. and, at the same time, i want to bear my testimony to both , especiallyteams the team that is headed and led by mr. robert lighthizer. and also, the support we have had from the white house through and i also extend
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this recognition to the mexican .eam they are listening to you and are close to you now. the foreign minister and the secretary of the economy minister.
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this has been a negotiation that has taken months. it has been a hard negotiation with difficult moments. nowledge the fact that we have been able to reach an agreement that we are about to make public and this is the result of good understanding and good work and i am hopeful that now canada will start discussing with the united states, sensitive bilateral issues. congratulations. grateful and i am attentive to your comments. pres. trump: mr. president, thank you. you have been my friend. it has been a long time since i traveled to mexico. we had a good meeting.
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some people were not sure but i was. time and thislong is something that is very special for our manufacturers and our farmers from both countries. it is great trade and it makes it a more fair bill and we are excited about it. we have worked long and hard. your representatives have been terrific. my representatives have too. along well andn they have worked late into the night for months. that i think we will be talking about for many years to come. it is good for both countries. we have not started with canada yet. we wanted to do mexico and see if that was possible to do. it was not from any standpoint something that most people
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thought was doable. many people thought this was something that could not happen because of the different factions and the complexity. we made it much simpler, much better for both countries. candidate will start negotiations shortly. i will be calling the prime minister soon and we will start negotiations and if they would like to negotiate fairly, we will do that. of almost 300%fs on some of our products. we cannot have that. canada, the easiest thing we can do is to do a simple negotiation that could end in one day. we will give them a chance to have a separate deal. we could have a separate deal or put this into this deal.
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i would like to call this deal the united states-mexico trade agreement. nafta has a lot of bad connotations the cousin was a ripoff. it was a horrible deal for our country. it has bad connotations for a lot of people. you and i will agree to the name. we will see whether or not we or do ao put up canada separate deal with canada. it would be easy to do. i will tell you that working , it you has been a pleasure has been a special time. you came together for your country. that is important for the media to know. we have media in our presence.
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the media should know that the president and the president elect worked together because the president felt it was important that the president-elect liked what he was seeing. our teams work together and your team was well unified. i was impressed with the fact that the presidents came together and worked out something agreeable. it is an incredible deal for both parties. it is an incredible deal for the workers and the citizens of both countries. our farmers are going to be happy, the farmers have stuck with me. mexico has promised to start purchasing as much farm product as they can. they are going to work on that. withu know, we are working other countries.
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china is one. they want to talk but it is not the right time. it is one-sided for too many years so it is not the right time. we will be able to work out a deal. we are doing well with china. our economy is up. it has never been this good. it is only going to get better. mr. president, you have been my friend and have been special in a lot of ways. we talked a lot and i would like to congratulate you and the mexican people. >> thank you, mr. president. i recognize this would be good from the point of recognizing what we're reaching on this deal. hope and i wish that
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the part with canada will be materializing in a concrete fashion. so we can have an agreement the , a tripartosed it heid. the agreementrate between the united states and mexico because we are a final and iof understanding hope that in the following days, we materialize the formalization of this agreement. , it has todditional
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do with the involved and committed participation of the administration of the president-elect of mexico. as you know, we are going through a period of transition. creates been possible to between theont negotiating team of this administration and the people appointed by the president elect .f mexico
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and the observers participate in this and to reach the point we .re reaching the president-elect has been aware of everything that has been happening and i have had the opportunity of talking to him directly about the progress being made. you have also had direct conversations with the president-elect. the thing we have to do and i hope we have the space to do it is to sign, have a good toast with tequila to celebrate this
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understanding. pres. trump: i think that is exactly right. good relationship i have established with the president-elect, i was impressed with him. in every way and he loves your country like you love your country. we are doing the right thing for all of us. i enjoyed that. please send him my regards and i will speak to him shortly. this was great you were able to do it together. as opposed to just you doing it. between yourement administrations was a fantastic thing. i suggested that and it was embraced. it was a fantastic thing you were able to do it. greatth rate spirit -- spirit. that is great.
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one of the things i am excited about is you are going to be ,elping with us at the border working together with us on agriculture. we are going to be working with you in different ways. this is a comprehensive agreement. i will see you soon. we are going to have a formal ceremony. this is one of the largest trade deals ever made. it is something very special that the countries were able to get it done. i want to thank all of my people, bob and jarod, the way you have worked so long and i know you have been going up until 3:00 or 4:00 in the morning. i want to thank you very much and i can say mexico is proud of you. thank you all. i will see you soon and talk to you soon. congratulations and job well
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done. you, mr. president. [inaudible] we will be waiting for canada to be integrated. hugnd you an affectionate and all my greetings to you, my regards. pres. trump: a hug from you would be nice. so long, thanks. goodbye. so, we have made the deal. i think it is a great deal. we are starting negotiations with canada pretty much immediately. those --tell you where
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it is a smaller segment -- mexico is a large trading partner. andave concluded our deal it is being finalized and bob, when would you say it would be signed? there is a 90 day. because of our statue but we will be beginning that friday. 90 days later it will be signed. ans. trump: we have agreement both with canada and mexico. i will terminate the existing deal. when that happens, i cannot tell you. it depends on the timetable with congress. i will be terminating the existing deal and going into this. we will start negotiating with canada soon. they want to negotiate.
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one way or the other, we will have a deal with canada. it will either be a tariff on cars or a negotiated deal. looking to help our neighbors. if we can help, that is a good thing. we are going to start that minenetly.n i i will be speaking with prime minister trudeau in a little while. i want to thank you, what a great job you have done. a lot of people thought this was not doable. it is going to be great for our people. we will see you at the signing and many times before that. congratulations to the people of mexico. great job. thank you very much, everybody.
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[indiscernible] >> that was president trump announcing the u.s. has reached a tentative deal to revise or replace nafta. he said was an incredible deal for workers, for citizens. he said would help the agricultural sector and it would increase requirements of north american content in automobiles. the next episode turn to canada. he is going to call justin trudeau. --'s bring in the senior michael mckee. the first thing is to figure out the timing of all this. they said, there is a 90 day period with congress. what happens next? >> in theory, they negotiate with canada. they need a deal with canada to move forward. he has been negotiating under
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fast-track that allows the president to renegotiate the nafta deal, which is a tripartite agreement, not a bilateral deal with mexico, so congress will try to reject it if they just put footed bilateral deal. presuming they do get that agreement, they have to send congress a notice 90 days ahead of any signing. that is what they were talking about. the goal has been to get a deal office onto leaves december 1, so they are really under time pressure, that 90 day clock will start taking. -- ticking. 60 days before they sign the agreement, they have to send a full text of the treaty to the agreement to congress. and as we understand it, this is only an understanding and a preliminary deal, so apparently a lot needs to be worked out and the language needs to be put together. a flat they need to do before anything happens. shery: you heard the president say -- david: you heard the president


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