tv Bloomberg Markets Bloomberg September 14, 2015 10:00am-11:01am EDT
people are gathered in germany for the international auto show. we'll hear from the chairman of volkswagen. it's one of the federal reserve's most anticipated meetings. whether or not to raise interest rates. that will come down a thursday. economists are split on what the decision will be and will stock market volatility play a role? oil production is showing signs of slowing down. we will discuss us what that could do to the u.s. economy. good morning. welcome to the bloomberg market day. i want to get paycheck of where equity markets are. the decision will be coming down at 2:00 on thursday.
stocks have not seen a lot of action. i also want to show you what's happening in the bond market right now. treasuries have little change. -- yield and the 10 year look where we started the year. we are seeing more movement in terms of commodities markets. we have seen weakness again in a copper. it is down 1.6%. the head weaker than expected industrial data coming out of china. all industrial metals are following today. equities in china are down 2.7%. i want to get straight to an exclusive interview with one of the world's auto leaders. .he chairman of volkswagen sales have increased for 23 state months -- straight months. nichols: good morning.
good afternoon here in frankfurt. we are gathered for this auto show. we are surrounded by these pitiful cars. they are the number one manufacturer in the world. they have a great outlook on what the take of the gold of -- global economy is. we just talked to the ceo of the volkswagen group. he said he was not concerned about the slowdown in china and he thought it was normalizing. have a listen. enormous -- normalization process in china. grow, surelya will no longer into judges, -- two digits, we are getting ready for this. there is still growth, this is factory twop a new years ago. our plan is to build a budget for the rest of china.
nichols: i asked if he can ever see exporting autos from china. he dismissed the question. it is not a real possibility. the other big situation we are talking about is the humanitarian one. it could potentially be an economic one. i asked about the refugee crisis. he said that fall's wagon might be ready to do their part by having some sort of training program for arriving refugees. we follow that intensively from all of our locations. a lot of highly qualified people are coming over. to usean opportunity these skilled people to give them jobs at our sites. opportunities to train other refugees who are not as skilled. this would be our contribution to deal with the crisis. hans nichols: you cannot have a
conversation with the ceo without asking him about the state of the euro and what is happening with the exchange rate. he thought it was a little undervalued and it would come back up. he is in a great position to know that. he can't do something like this without talking about the cars they will be unveiling. more, we have a bentley suv. aren't you supposed to have a chauffeur? i will let you make the decision. olivia: it's a great debate. i have been looking forward to bentley. hans nichols, you can watch his full interview on bloomberg.com. what stocks are doing and what the fed is going to do, people are struggling with that. emerging markets are
still in the red. how is this impacting where investors put their money. thanks for a much for coming in. we are trying to figure out what these that is going to do this week. my first question that does not matter. >> i think the impact on the points with its 25 basis is right the minimalist. confidence effect on could be dramatic. the one thing it people are fearful of is raising prematurely before the economy starts to accelerate. if we don't get positive numbers from the economy, that could have a negative impact. you bracing for a hike?
how do you avoid the crowded trades. vadim: you have to be thoughtful about how you diversify. best. is the you want to have some exposure in the portfolios. olivia: you are one of the only guests who is looking for buying into energy right now. where you bullish on energy? thinkn sachs says they oil can go to $20 a barrel. vadim: that is probably a little excessive. i think the risk reward is starting to get positive. what is the cash cost of producing oil? we think it's around $35. $35, parts oflow the supply will be shut down and that is a self-correcting cycle.
olivia: there is money to be made in energy. how do you play it? do you want to buy the economy etf? vadim: it's one of the more creative things to do. what we have been doing in the portfolio is if oil drops below 40, we sell puts. you pick up significant premium. i am very comfortable owning oil if it declines below $35. you own some of the oil users area --. they have been beaten down the most. i out last had cit week. vadim: a lot of them can meet their dividend payments. i think it's a reasonable place to be. it's a very safe place to be. i don't know that it's a bet on energy. olivia: what is the impact of $44 oil on equities in general?
you oneistory tells thing and the president environment is different. history is clear. it is positive for equity. it gives more money to consumers. what is recent -- interesting in recent month, it has been indicative of weaker demand. i think it's still a supply driven market. uighur oil is still favorable for the economy. olivia: what is the role for alternative assets? vadim: if you look at the traditional assets, bonds, acronyms -- equities, the return is low. olivia: some people would say now is the time to get into real estate. vadim: you might be a --. could you buy a home and lock in a?
leverage is one of the cheapest assets out there. darling money is very cheap. you do quite well if interest rates go up. i think there is some miss pricing in the market. they could deliver those incremental returns. i think alternatives have an increasing role in the portfolio. olivia: thank you so much. still to come, one of the world's chief economists weighs in on the feds. whenjanet yellen will do --. don't go away. ♪
we have an update on what's happening. ramy: good morning. stocks are following this morning. they are near their session lows. this is a turnaround from last week. right now, the s&p 500 is down. it is similar down to the dow, down by a third. metals and industrials are leading the fall. new data from china shows industrial outputs missed forecasts. the increase of the slowest place -- pay since 2000. let's head over to alibaba. the share price is down three and one quarter percent. 50%firm could fall another as volume growth falls. the consumer spending is falling and that is hurting the company. analysts give them a
buy rating with a price target of $93.20. the stock closed friday at $64. that is below its ipo price when it first opened up. it's take a look at shares of apple. this is the best performer on the dow. it is up 1%. the iphone plan could boost shares by 50%. says shares to be valued at 11 times their earnings value. that is an interesting note across the louvered terminal. modelsays the new iphone are on pace to surpass last year's record first weekend of 10 million units. that is when they go on sale september 21. that shows demand for the flagship device. they did not give figures for
preorders. the new models feature a better camera, a faster processor and 3-d touch that provides shortcuts to common tasks when you press the screen. supervalu is a focus. this is the retailer of supermarkets and pharmacies across the country. they may spin off save a lot in the future. that is according to joseph feldman. olivia? olivia: thank you so much. now a look at some of our top stories we are following for you. are running free in afghanistan. the taliban attacked a prison. four guards were killed in the fighting. the attackers wore military uniforms and use a suicide
bomber to breach the prison mall. 12 people were killed when egyptian security forces opened fire on tourists. the tourists wandered into a restricted area. troops were tracking terrorists in the southwestern desert. some of sites to and from japan at being rerouted after volcano interrupted. officials say they had no warning or injuries reported. says there is a 55% risk of a global recession. said -- madehor the case on surveillance. >> the global economy is slowing down. it is led by emerging markets. brazil and russia are already in
recession and getting deeper into the hole. china is slowing down rapidly. the most likely outcome unless there is a dracula's last-minute conversion of the chinese authorities to do the fiscal stimulus that could keep china on its feet, a recession in china. it does not mean every advanced economy will go into recession. it means across the board it's below 2%. : what is the fed going to do? the rates of been so low for so long, they've just got to go up. >> that is a non sequitur. are the conditions in terms of the objectives of inflation and employment such that an increase make sense? that's the question. that's the only criteria that matters. the fed is doing at what it does
objectives. inflation and unemployment dictate an increase now. it's not obvious. past, it was certainly pointed the other way. brendan: we've been talking about interventions the chinese government could make. the chinese government doesn't know how to do this. they are not particularly good at intervening. >> they cut rates. they provide additional liquidity. the exchange rate is still pushing. what they need to do is a large-scale fiscal stimulus aimed at households or at public consumption, not it. -- not at.
that, they are not ready for. thatwe did not notice chinese stocks broke support. that is a huge deal overnight. you talk about a china policy bomb. what you mean by that? what make sure lawyers let you say that? writes what he wants to write. we thank you for that. meltdown wecial have had in the stock market and the policy response to that was followed by acre for awful in the foreign exchange market. provide convincing evidence that it knew what it was doing. the lack of action in stimulating demand, they have a
supply-side solution. lagardeuld christine step in and say where are the demand solutions? >> the same person who is lecturing the fed on not to raise rates insist the chinese are doing ok. management, china is in much worth -- worse shape. tom: this is a huge deal. brendan: they can do whatever they want when they decide to do it. what is holding them back from this demand-side stimulus? done a have never household or consumption oriented stimulus. they have never funded a stimulus to the federal government. they have always done it to the banking structure. to come cleanve
badly. >> of the 35 companies that listed with ipo's, 40% of them are trading low their ipo price. you throughout some notable names. investors were super excited to get into. the stock was up 88%. as of the end of trading, it is down 11%. we have seen it. investors were really excited to get into these new business models. -- it isthat growth the internet site that sells handmade goods. they have been pushing to find a new customer base. they haven't pushing overseas, but that has gone slower than investors would like. they reorganize the company and are making some lengths. it's up in the air as to whether this will be a big global company. commerce, lending
club. this was an exciting one for investors. it's the first of its kind to go public. , you get toitement buy into this new business model. it has the potential to change the way you get your hands on money. the first day of trading, the stock was up 56%. now they are down 16%. the market cap broke $10 billion at one point. now they are down to $4.5 billion for lending club. a lot of that is, the revenues are growing. they are adding new customers. the cost of acquiring customers and the new deal origination is not where investors would like. olivia: these are new business models and maybe it makes sense for them to be more volatile. snacks, it's a
different industry. shares were down for this one on the first day of trading. their ipomped up price the day before trading started. now they are down 28%. now, the company might not have as much and attrition in stores as some of the bigger brands. people like skinny pop. i have munched on it myself. maybe it hasn't grown and gone in front of new customers as quickly as they would've liked now that public investors can get their hands on it. olivia: what are bankers saying? where some of these ipos mispriced? alex: people will pay close attention to pricing going forward. is the lasting told few months of the year will be really busy at the market and give them an idea to go out and price companies or if it's andtile, it could be a slow
of the year for me covering ipos. not a lot of big wins this past month. square is eyeing a fourth-quarter ipo. first data could go public. that is the transaction processing company. to put $5 billion ipo there. -- eight caribbean company is eyeing an ipo this year. we will be really paying attention.
has defeatedull tony abbott. turnbull had condemned management of the economy. the german vice chancellor says germany can take one million migrants this year. eu ofbreaking down the voters policy. germany is bringing back porter call -- porter control. there are sound reasons behind the change. >> you have to do it safely. that means that in. i expect temporary closure is to facilitate a better vetting process. you use big data searches. you look at social networks. you can't do that with 10,000 people a day. you slow that flow down. i think that's how we do it safely. olivia: slovakia is joining germany.
the former traders sent to jail for interest rates is appealing his sons. while found guilty working at citigroup. he is serving a 14 year prison term. the kentucky county clerk who was jailed for refusing to issue same-sex marriage licenses is back at work. she is promising not to interfere with her deputies interfering. she says they would not be authorized by her. she questions their validity. she was overcome with emotion while discussing her predicament. >> i am no hero. i went to be with my family. olivia: she was released from jail with strict orders not to
interfere with her clerks. bernie sanders's surging to double-digit leads over hillary clinton in early voting states iowa and new hampshire. clinton% ahead of mrs. among iowa democrats. he has a 22 point edge in new hampshire. third evens in though he is not in the race. the widow of steve jobs once to rethink high school. she is starting a $50 million project to create high schools with new approaches to education. the current system was created for the work force america needed a century ago. educators will submit ideas. those are your top stories. we want to look at where markets are trading. u.s. stocks are slightly lower today. there is not a lot of action or volatility. all eyes are on the fed.
they will meet wednesday and thursday. that decision is at 2:00 on thursday. the 10 year yield is trading at 2.17%. that is exactly where we started off in 2015. coming up, much more, including volatility in the stock market lately. can you predict the next recession from the data? apple says pre-orders for the new iphone are on pace to be last year's record breaker. cory johnson will join us from san francisco. new allegations in the corruption scandal at the front -- fifa. is it worth the wait. some say it's time to hike and argue that rates should catch up with where the u.s. economy already is. some worry that a will spook markets further. there are compelling markets --
arguments on both sides. expert.ee is our he joins us now on set. michael: the waiting is the hardest part. our team surveyed 100 economists and 50 say they are going to go up and 50 say they will say. -- stay. , a couple of years ago told his colleagues at the israeli central-bank something he repeated at jackson hole. doesn't necessarily bring the clarity everybody is talking about. a lot of people who say the fed should wait say give it a month or two and you will have a better idea of how china and the dollar is going to affect the u.s. economy. arian'somy top -- six taught him you don't get -- experience taught him something
may come up. olivia: you just referenced a survey we did. see traders are reducing their that's. that's -- bets. what's interesting about this, look at the reasons that are listed as to why the futures are going up and down. none of them are economic data. the fed is focused on what the data are telling them and what the economy is going to do. they bounce around a lot on headlines and on commentary that people are trying to interpret. the fed is looking at where the economy is going to be one year from now. stan fisher has noted that if you look at inflation right now, it is low. component,et the oil
that should be out of the data a year from now, it will be rising again toward their goal. something could change. now, you are making your policy based on what your forecast is going to be a year from now. olivia: this is a point you have made before. 2014, just a couple of months before he became vice chairman at stanford university, we do underestimate lag time that it takes for policy to impact the real economy. michael: they have long in variable lags. that does not changed. those people would put that at 12 or 18 months. if you raise rates, the sooner possibilityhe more you can be gradual going out. if you wait for it to show up, then you have a problem and you have no choice but to hike rates
very quickly. if something changes in the economy where you won't get that rapid increase in inflation, that is the great debate out there. olivia: can we say that stan michael: he isk? a pragmatist. he wants to look at what is happening a year from now. is, does itstion matter if it's september or october? probably not. alsothe fed is looking at to the extent there is volatility, how much is being driven by all of this debate over the fed. if you get it over with, people move on and start looking at fundamentals like economic data and corporate earnings. olivia: that's a question i have been acting -- asking all of the strategists. they say it doesn't matter. michael: they are looking six to 12 month out as well. olivia: who are the strongest voices in all caps?
the boston president? michael: he has been on the more dovish side. from minnesota, he is the most extreme. be ainks the fed should hold well into 2016. from richmond, he says we are past the time when they should start raising rates. he will be for a move in september. the interesting question is who else is with him at this point? will we see more than one dissent? if the fed goes on hold, does anybody else feel the fed should move right now? that's the real question. olivia: thank you so much. finally at last, it's arrived. michael: maybe. we might be talking about this in october. olivia: thank you.
one big story coming out of the region, chinese indicators showing the economy is falling further into the rust patch. some measures announced on tuesday. >> it is beginning to cool and beginning to change. policymakers seem positive they can rise. chance to jack up the credit tabs. china is embarking on the biggest overhaul in the public sector in 20 years. they will be channeling or encouraging more private capital. they will hopefully make better use of those assets. a more detailed blueprint in the month ahead. it will be affecting tens of thousands of chinese companies.
the -- it is a painful transition. olivia: mark barton is standing by. : stocks are falling today after the biggest increase in two months. i hate the semi-can broken record. it's all about china and the fed. there are missing estimates. the weakest since 2000. that's hurting the mining sector. it was the best performing industry group in europe. this is a stat for you. since the fed last raise rates 600 is uphe stock 12%. come take a look at the currency market today. this is a lovely stat for you. the euro is up for the seventh consecutive day against the dollar. investors are still contemplating what the fed is going to do on thursday. it's lower against the dollar.
tomorrow is the big day for the pound. we've got consumer price data. it should show inflation at zero in august. what does that mean for interest rates. the bank will raise rates in the first quarter of next year. seconde short for the half of next year. that reminds me of what people are thinking of the fed. there are differing views of what the fed is going to do on thursday. a quick peek at what is happening in the bond arc it. bonds are rising. it yields are falling. over to you. ramy: stocks are falling of this morning. they are off their session lows. the dow had fallen 100 points early. now it's down by 21 points. the s&p 500 is down 2/10 of 1% and the nasdaq is down by about a quarter of a percent.
for the ninth consecutive week, the s&p 500 has reversed its previous direction. it fell 3.4% in the previous week. this happened three times in the past 20 years. materials and metals are leading. in part because of china, new data shows the industrial output missed forecasts. let's get into my bloomberg terminal. if you are a bloomberg terminal user, you can see the materials are down the most. energy is down by 8/10 of 1%. are the gator. financials are flat. utilities are up 6/10 of a percent and investors are searching for yield. let's look at commodities. copper is the big topic. 15%,r futures are down by falling after that week chinese
production output. they are the biggest metals consumer. they had been down a little bit more than that. along with that, let's take a look at the fix. x. vi this is the biggest rise since september 4 when it rose 8.5%. volatility, investors are pushing into some safe havens. some of those are treasuries and .02.ield is near with regards to a fed rate rise, the odds of an increase this month have increased to 30%. this is a little
flat. olivia: thanks so much. here are some top stories. a surprise from the united autoworkers. they are negotiating a new contract. chrysler is the weakest of detroit big three. the union usually fix the strongest to get its best terms. auto industry executive is leading google to lead the driverless car unit. fordeviously worked for and ran hyundai's u.s. operations. facebook is working on a virtual reality for smartphones. it would support 360 degree videos. mark zuckerberg has called a virtual reality the next big computing platform. those are the top headlines at this hour. stocks are in correction territory. what does this mean for the
actual economy? michael regan is here. can you predict the recession? mike: it's an interesting dynamic. when you have a correction like this, a drop of more than 10%. highs.record it doesn't always mean we are headed for recession. of the 40 corrections we have had since the 1920's, 13 of them preceded a recession in the economy. if the drop gets worse and we enter a bear market of more than 20%, then the track record gets a lot better. it's 10 of 13 bear markets pray looting a recession. as of now, it's less than a 50-50 shot. explain this, for sure. bars are shaded
recessions. are corrections in the market. it's showing basically that every correction does not foreshadow a recession in the next year. olivia: the s&p has predicted 20 of the last? mike: if you think about recessions and corrections. their markets are a little bit more accurate. 10 of 13. if we get to a 20% drop, that's going to be more scary for the prospects. it kind of makes sense. everybody talks are at the stock market looking forward rather than back. trying to look at actual in the books data is very poor. olivia: there is a point where what happens on wall street does affect what happens on main street. correctionthe equity
getting before we worry about the real economy? mike: the longer it goes on, it becomes more of a serious omen. study and found that every economic cycle top, where it peeks out, it has been down 9% over the last 12 months. , 12% from aown 10% record for that long, the longer it goes on it, the scarier it becomes. olivia: we are about a month in. it,: if you look back on this did started in may. this was right before memorial day. olivia: it has been four years. mike: it had been a long time since the last correction. looking at that 12 month. time, ramsey looks
olivia: airbus is spreading its wings into owings backyard. they just opened their first plant in the united states. it is expected to help the company cut costs and increase sales. matt miller is on site and you chance to talk to the president and ceo of airbus. take away. matt: you can see the gigantic
airbus plane behind me. --s the most single successful aircraft in the world. even when they get to full production of almost 50 a month, they won't have enough production to satisfy demand. i asked about that and he said they may need to expand. so successful. we are close to 6% richer. we need to produce more faster. this will contribute to that. monthl reach about 50 a by 2000 17. then there is extra production and we will make a decision this year if we go up again. matt: where could you do that? where do you have room to produce that? oure continue to strengthen yield.
any idea of going to mexico? >> you are right. stress.t we are here for north america. mexico,r countries like we would look at the parts. matt: just to clarify, they will be able to build four planes are month here. almost 50 a year. that will add to the total. they are going to need more. they have back orders for over 5400 versions. 700 orders another over the next few years. that will employ another 1000
employees. there will be a total of 5000 employees in the united states. room to grow, especially if they can add a military component to the civil aviation factory they have now. olivia: that's interesting stuff. matt miller is joining us with the chairman of airbus. this wednesday, a special primetime addition of bloomberg surveillance. that is at 6:00 on wednesday night. we will be back in a few.
whitey stocks and economy seem to be heading into different directions. as oil prices falter yet again, production is slowing which may be good news for opec. we will discuss how shrinking supply may drive demand higher. good morning everybody, and welcome back. i'm olivia sterns. scarlet: let's get straight into the market because we are 90 minutes into u.s. trading day. stocks are down. consolidating since there biggest weekly advance since july. olivia: all in all, quite out there, .2%. .25% for smp. this is what i would expect to see in the middle august. let's show you what is happening in the treasury markets. the 10 year yield, 2.1. it is 2.18%.