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Speaker 1: Global business news twenty four hours a day. If Bloomberg

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Speaker 1: dot Com, the radio plus mobile last and on your radio.

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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters.

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Speaker 1: I'm Charlie Pallett. Stocks are trading higher on the way

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Speaker 1: to the strongest to day rally in nearly three months

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Speaker 1: of Signs of a stronger economy spurred speculation that can

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Speaker 1: withstand higher interest rates. The SMP five hundred indecks up fourteen,

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Speaker 1: a gain of seven tenths of one percent. The SMP

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Speaker 1: at two thousand ninety naz stack up thirty one points,

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Speaker 1: a gain of seven tenths of one percent. Down industrials

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Speaker 1: up one d forty nine points, a gain of eight

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Speaker 1: tenths of one percent. The tenure down to thirty seconds,

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Speaker 1: the old one point eight six percent, Gold down four

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Speaker 1: sixty the ounce to twelve twenty four A dropped there

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Speaker 1: of four tenths of one percent. Crude up one oh

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Speaker 1: seven of arrow forty nine sixty eight, a gain there

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Speaker 1: of two point two percent. I'm Charlie Pallett, and that's

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Speaker 1: a Bloomberg Business Flash. Charlie Pella, thank you so very much.

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Speaker 1: Now it's time for the e t F Report brought

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Speaker 1: to you by van Eck Vectors e t S expect

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Speaker 1: more from your muni's target taxes and income by maturity

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Speaker 1: vanek dot com slash Muni Vanek access the opportunities, and

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Speaker 1: for today's e t F report, we go to our

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Speaker 1: own Catherine Cowdery. Investors are taking their fascination with low

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Speaker 1: volatility stocks to new heights. That's the word from Joseph

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Speaker 1: Cieli of Bloomberg News. He says that Power Shares SMP

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Speaker 1: five funded Low Volatility Fund and the I Shares Edge

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Speaker 1: m SCI Minimum Volatility USA e t F saw their

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Speaker 1: combined assets reached twenty billion dollars this month for the

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Speaker 1: first time, and they've added seven billion dollars so far.

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Speaker 1: They see here. The reason, Sioli says, some of it

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Speaker 1: has to do with uncertainty about when the Federal Reserve

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Speaker 1: is going to raise interest rates again. So there's a

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Speaker 1: lot of debate as to whether a rate hike could

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Speaker 1: be a positive or negative for the stock market. So

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Speaker 1: the safest thing to do is just to buy an

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Speaker 1: instrument that that's insulated from from either of them and

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Speaker 1: kind of just benefits from arrangement market. You also have

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Speaker 1: concerns over global growth in China, which has really been

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Speaker 1: one of the major themes in two thousand and sixteens

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Speaker 1: so far. The Brexit vote coming up in in the

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Speaker 1: U k IS is also adding a little to the turmoil.

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Speaker 1: And then just overall just a dispatch of economic data

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Speaker 1: that can really swing the market one way or the

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Speaker 1: other on a given day. That's your Bloomberg ETF report.

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Speaker 1: I'm Catherine Cowdery. This is taking stock with pin Box

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Speaker 1: and Kathleen Mays on Bloomberg Radio. Economic growth in the

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Speaker 1: United States versus economic growth in the Eurozone. Eurozone GDP

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Speaker 1: growth surprised to the upside in the first quarter, up

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Speaker 1: six tenths of a percent. Go Ahead annualized that in

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Speaker 1: order to compare it to the United States where two

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Speaker 1: point four quarterly growth. Let's find out more from Jeff

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Speaker 1: klein Top. He is the chief Global investment strategist for

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Speaker 1: Charles Schwab and Come Company. He joins us from Boston,

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Speaker 1: of course, home to Bloomberg twelve hundred and he can

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Speaker 1: be followed on Twitter at Jeffrey Klinop. Jeff, thanks very

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Speaker 1: much for being with us and start us off by

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Speaker 1: giving us some details about economic performance in Europe. You bet,

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Speaker 1: it's great to be with you. So here's the thing

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Speaker 1: about Europe. Not a whole lot was expected for Q one,

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Speaker 1: but we did see quite a rebound and lately we've

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Speaker 1: actually just gotten the flash p M I numbers um

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Speaker 1: and and it looks pretty good. In fact, Germany just

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Speaker 1: saw a nice rebound, and we also got the i

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Speaker 1: FO data, which is a big business survey over there

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Speaker 1: in Germany's had also showed a nice upticks three months

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Speaker 1: in a row. Now for the manufacturing economy in Germany

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Speaker 1: coming back, it's good to see. And so you've got

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Speaker 1: a broad based of support from consumer spending which is

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Speaker 1: strengthening manufacturing sector coming back. This is important. Remember just

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Speaker 1: a couple of years ago, gosh, less than a couple

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Speaker 1: of years ago, Europe was in recession. So it's still

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Speaker 1: earlier in a teconomic cycle, and we're seeing that vibrancy

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Speaker 1: in better economic growth. But Jeff, there isn't a lot

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Speaker 1: of this confined to Germany, in Europe's biggest economy, the

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Speaker 1: economy that is benefiting so much from being part of

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Speaker 1: the euro Area, very very export dependent. Much of the

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Speaker 1: rest of Europe is not doing anywhere near this. Well,

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Speaker 1: that's true. A lot of particularly southern Europe has has

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Speaker 1: had a much tougher time than northern Europe has. UM.

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Speaker 1: But you know, we are see broadly speaking, uh, the

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Speaker 1: economy continues to move in the right direction. I think

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Speaker 1: you want to be careful when you're investing in Europe

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Speaker 1: to make sure you understand what you're getting exposure to. UM.

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Speaker 1: You know, we like the financials within Europe, and that's

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Speaker 1: naturally gonna orient you more towards the northern part of Europe,

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Speaker 1: countries like Germany and France as opposed to the south.

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Speaker 1: And and so you know, I think as you invest,

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Speaker 1: you think about healthcare also another area in Europe that's attractive.

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Speaker 1: That's uh, primarily northern Europe where you're going to find

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Speaker 1: those health care companies, and that's where we're sending to

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Speaker 1: focus on finding value. Hey, Jeff, is Spain by any

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Speaker 1: chance and exception. I mean there's some investment opportunity you

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Speaker 1: don't want to buy when it's already high. You know that.

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Speaker 1: That's an interesting point. So Spain, Spain has shown some

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Speaker 1: signs of turning the corner there have been labor reform

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Speaker 1: recently implemented there and some increasing momentum in that economy,

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Speaker 1: but the unemployment rate is still very high, so that

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Speaker 1: economy has got a long way to go and is

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Speaker 1: vulnerable to some risks. So while Spain looks attractive and

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Speaker 1: many Spanish stocks look attractive from a valuation perspective, they

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Speaker 1: do come with a lot of volatility, given the vulnerability

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Speaker 1: to geopolitical shock or other economic shocks. We know, our

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Speaker 1: colleague our stocks and are Dave Wilson. We were talking

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Speaker 1: about the Euro Area Minister's meeting and you know, trying

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Speaker 1: to help Grease stay on its feed and get through

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Speaker 1: its debt payments and all that, but basically point out

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Speaker 1: that the Greek stock market has been quite a performer.

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Speaker 1: What do you think about that? Yeah, well, you know,

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Speaker 1: some of that uh you know, rebound, a lot of

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Speaker 1: it just reflecting just the risk. I mean it's interesting

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Speaker 1: to see, you know, just make a parallel with with

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Speaker 1: Brazil this year, right, I mean, you know, the economy

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Speaker 1: took off on prospects for for change and reform, and

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Speaker 1: ultimately it's a long road to recovery, both for Brazil

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Speaker 1: and for Greece. And investors may be disappointed. Certainly, Greece's

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Speaker 1: European country, but it's also an emerging market, and we're

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Speaker 1: a little bit more cautious on the emerging markets, and Gosh,

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Speaker 1: i'd include Greece and that given the very long road

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Speaker 1: to recovery there. Jeff the Nikkai in Japan down nearly

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Speaker 1: four percent so far this year. Invest in Japan or

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Speaker 1: wait for perhaps another recession or another attempt to forestall

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Speaker 1: a recession. Yeah, you know, Japan does not look very

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Speaker 1: attractive to us. Japan's got a number of issues, including

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Speaker 1: the uh, you know, deteriorating manufacturing sector. Unlike what we

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Speaker 1: see going on in Europe where things are improving. Japan

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Speaker 1: very dependent on China. China big customer of Japanese products

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Speaker 1: in China seems to be slowing here once again as

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Speaker 1: they maybe moderate some of the stimulus that they injected

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Speaker 1: earlier this year, and that's going to be a drag

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Speaker 1: on Japan, as is that stronger yen, which seems to

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Speaker 1: be a real point of weakness for it. For that

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Speaker 1: economy so much more focused from a developed market standpoint

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Speaker 1: on Europe rather than Japan. Also, Jeff are was one

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Speaker 1: of the reasons you're focusing on the rest of the

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Speaker 1: world is that you see fewer opportunities now in the

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Speaker 1: United States in the stock market. Well, you know, the

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Speaker 1: US has UH is a little bit longer in in

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Speaker 1: the twoth I mean, the economic cycle has gone on

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Speaker 1: quite a bit. There's less momentum UH and and I'd

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Speaker 1: say there's less room to grow profit margins in the US,

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Speaker 1: whereas in Europe, for example, profit marches are still relatively low,

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Speaker 1: a little bit below average. And so I think profit

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Speaker 1: growth has a lot more momentum to it as we

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Speaker 1: look to what's going on in Europe than than perhaps

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Speaker 1: the US does. What about the Latin America, Jeff, are

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Speaker 1: we waiting waiting and seeing what happens in Brazil? I mean,

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Speaker 1: is that is that just the sort of a political

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Speaker 1: issue at this point for investors, It seems to be

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Speaker 1: Brazil very tied to to put all of Latin America

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Speaker 1: very tied to both politics and commodity prices and pim

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Speaker 1: you know, noticing recently, I'm notwithstanding oils move today, raw

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Speaker 1: industrial commodity prices have started to roll over a little bit,

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Speaker 1: and you know, talking about things we used to make

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Speaker 1: other things from rubber and comport at ten and lead.

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Speaker 1: They seem to be stabilizing after a pretty strong run

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Speaker 1: up in prior months. That's bad news for commodity exporting nations,

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Speaker 1: including those in Latin America. It's gonna be a tough

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Speaker 1: ride for them. Okay, you're looking at stocks as you

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Speaker 1: look globally. Are there any sovereign bond markets you like?

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Speaker 1: Are there any corporate bonds or corporate bond markets in Europe, Asia,

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Speaker 1: Latin America you like? We remained um focused on on

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Speaker 1: the US for fixed income, not finding a lot of

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Speaker 1: value overseas, still believing that dollar might be heading a

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Speaker 1: little bit higher over the remainder of this year, say

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Speaker 1: flat to higher, and that's a drag on your returns

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Speaker 1: from international fixed income investing. So it isn't necessarily a

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Speaker 1: credit view as much as it is a view on currency.

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Speaker 1: Jeff Fer. Everyone wants to know when do you think

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Speaker 1: they're going to raise interest rates? You know, we we've

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Speaker 1: been saying that the Fed is likely to raise rates

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Speaker 1: uh in the second half of this year. You know,

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Speaker 1: we had thought maybe September. Perhaps that's a little bit

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Speaker 1: earlier now, but the doors open to one, maybe even

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Speaker 1: two rate hikes later this year. And that's uh. That's

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Speaker 1: encouraging is that the FED finally feels the global economy

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Speaker 1: is strong enough to do that. But it's negative news

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Speaker 1: for the emerging markets. You know, earlier this year, the

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Speaker 1: emerging markets were leading, leaving things higher. In fact, through

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Speaker 1: the end of April they were up six or seven

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Speaker 1: percent on the year. They've pulled all the way back

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Speaker 1: here in the month of May as prospects for FED

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Speaker 1: rate hikes have picked up. And that's because emerging market

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Speaker 1: performance is so dollar dependent. The revival in the dollar

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Speaker 1: after a slide earlier this year has been toxic for

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Speaker 1: emerging market assets and really helped them underperformed. That maybe

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Speaker 1: a recipe for the second half. Look for volatility and

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Speaker 1: a lagging performance out of emerging markets. UH So, are you, then,

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Speaker 1: um in the camp that thinks, uh a fedrate height

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Speaker 1: could actually be the state destabilizing, especially overseas well. I

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Speaker 1: think it could be. It could raise concerns and and

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Speaker 1: and tighten financial conditions for some emerging market countries, but

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Speaker 1: I'm not worried about a crisis. I we don't have

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Speaker 1: the same type of UH dollar denominated debt emerging markets

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Speaker 1: that we saw in nineteen nine, seven or nine that

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Speaker 1: led to the global financial crisis. Back then, gosh, Back then,

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Speaker 1: South Korea had eight percent of its debt denominated in dollars.

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Speaker 1: Now it's eight. So it's a problem, but not a crisis,

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Speaker 1: all right, Jeff clientop, thank you for joining us an

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Speaker 1: investment look around the world. Jeff is chief Global investment

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Speaker 1: Strategist at Charles Swab. He's up in Boston, home of

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Speaker 1: Bloomberg twelve hundred. He likes European banks if it comes

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Speaker 1: to fixed income. He's keeping his money, his client's money

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Speaker 1: in the United States. I'm Kathleen Hayes along pim Fox.

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Speaker 1: This is taking Stock on Bloomberg Radio.