tv Bloomberg Markets Bloomberg October 12, 2015 2:00pm-3:01pm EDT
from bloomberg world headquarters in new york, good afternoon, i am david garrow. it is the largest technology deal in history. dell is buying emc for $65 billion. what this means for the company and their competitors. after a turbulent 2014 that saw two crashes, malaysia airlines is try to turn itself around. hannah las vegas strip is getting bigger. we take a look at the companies betting on the expansion of sin city. let's head to the markets desk. julie hyman has the latest on this columbus day. julie: which means, apparently, some people stayed home. volume is about 20% to 30% lower than average. that much direction in stocks.
the s&p is slightly lower, but no big moves on any of these. however, we are seeing a big move in oil prices. a sharp downturn in oil prices. today,ched above $50 $50.13, before dropping. hope excess production by members is the highest in months. all of this is seeming to question oil prices in today's session. a drop of nearly 5%. david: how about energy movers? julie: some of the affiliated names -- familiar names that have been falling hard dropping again. transocean, southwestern, among the declines. broad-based selling among the energy stocks. , energyd, last week
had the best week this year. the s&p energy index is down 1.5% today. for more context on what we have seen over the past month, take a look at my terminal. this is a three-month chart of oil prices in march versus the index. both reached their lows in august. the energy index the lowest in four years. since then, we have had a rebound. yes, there is news from opec and goldman, but we are on the back of what has been a substantial rebound in the past couple of weeks. david: thank you, julie. mark crumpton is at our news desk. the european union is telling russia to stop bombing modern groups opposed to syrian president bashar al-assad.
the demand comes days after cruise missile attacks. foreign ministers of the eu's 20 nations say russia's actions are of deep concern and must end immediately. ministers are concerned that vladimir putin's intervention could widen the country's civil war. the dutch safety board is set to release its findings in the crash of malaysians airline flight 17. it is not likely there will be any definitive finger pointing. instead, the findings will likely describe the damage observed and what weaponry may have been involved. the plane crash on its way from amsterdam to call him for in 2014. an iranian court has convicted washington post correspondent jason rezaian of espionage.
the u.s. has criticized a run for trying him in secret. he has been held for more than a year. in roseburg, oregon, students return to class at a community college where a gunman killed nine people and wounded others. day ofarks the first classes since the mass shootings 11 days ago. the 28-year-old gunman shot his victims in a classroom before killing himself. the associated press says chase his two gamel for suspension is unlikely to happen today, which means he could be eligible to play in tonight's game three nationally division series game in new york. that is our first word news. you can always find the latest on bloomberg.com.
david: this morning, dell announced lands to acquire emc for $67 billion. it is the largest technology acquisition ever and has a lot of moving parts. helping us to break it down is jeff mccracken. let's talk about how this deal changes things. aboutl will be borrowing $50 billion. we are still try to get the exact numbers. then there is $3 billion in equity that will come from dell, another billion from silver lake, and then other billions that come from other areas to get us to 67 billion. there is also a termination fee. a lot of complicated factors here to get us to 67. david: an important part of that is vmware. talk about that company. we were reporting, 40 times earnings for emc.
i will not pretend to be an expert in what they do, but it got emc into an area they had not been before. they were the data storage center. when amazon came along with cloud computing, and you did not aed something the size of refrigerator to control data storage, they started to struggle. vmware was the best thing emc had going. they will have a majority of the aware, going forward. david: you talked about the debt that dell is taking on. talk about the timing of that, why this is perhaps a good time for that. >> this is getting ahead of any interest rates height -- interest rate hikes that could be coming later this year. jamie dimon said that the financing is there. banks will syndicate the loans. it is a concentrated deal, but we can get it done. david: jeff mccracken, head of
global m&a, thank you. for more on the deal, we are joined by abhey lamba, analyst with mizuho securities. i read that this would create an enterprise solutions powerhouse. do you agree with that? >> it will be interesting to see how it pans out. if you look at what ibm and hp are doing, they are going the other way, creating more double organizations. have everything from pcs to storage, so they are going in the opposite direction. who will be right? only time will tell. at the same time, dell will have the portfolio that others would not have. about howk complementary these companies are. emc historically works with larger enterprises. is this a good fit? >> it will be interesting to see
how they come together. has beenight, dell working a lot with small businesses and emc's sweet spot has been large corporations. the products that are different, which isy or storage, going to be more appropriate for the cloud computing environment, which is where the market is headed. it will be interesting to see. if you look at the market trends , they are definitely moving against where emc is. those are the factors that dell will have to work against. david: let me ask you about the component part of the deal. dell was public, went private. what shape is that company in today? >> from what we hear from customers, they are doing fairly well. hp has been getting a lot of market share on the server side. side, they have not
been gaining as much air as hp. to get a view into what is happening because they at leastte, but michael does not need to worry about quarterly earnings, so he .an place bets a few years out when he feels the company is on a solid footing, they can come back to the public markets. david: let me ask you about emc now. the company has not been forecasting great revenues this year. challenge bynly the portfolio of its legacy products. if you look at the storage market, a lot of it is moving to technologies,er where emc does not have as much strength. change those dynamics with the deal but they do theease their reach into
new markets. at the same time, they have to worry about the declining storage portfolio. david: we were talking about vmware, a company that has been going well. how much is this going to change the company's way of business, as it continues as a public company, but majority-owned by dell? >> this will be interesting. [indiscernible] now they were not have to worry about that, and they can stay fully focused on their own targets. i'm not sure if there is a whole lot of merit to that statement. we are more concerned about what happens with vmware's relationship with system integrators. servicesa large
package. vmware toe tough for adopt the technology platform. david: you mention some of their competitors. how will they be affected by the deal? essentially, a lot of them were playing nice with vmware, promoting the infrastructure. 80% ownedare will be by dell, they will have to rethink their positions. rightof new technologies now are on different web services, google web platform, competing cloud technologies that are coming up. some of them could align with those technologies and try to compete against dell. david: thank you for your time, abhey lamba. coming up, ab inbev has confirmed it is raising its takeover offer for sab miller.
the bond king. investors pulled $47 million from the janice investment fund. -- janus investment fund. for our rate is off to the races in the stock market. fiat chrysler launched its initial public offering today. it is expected to price between $48 and $52 a share. ferrari will trade under the ticker race. plantes is the top luxury -- brand for the third straight month. sales were driven by suv's followed by bmw and audi. you can always get more business news at bloomberg.com. let's get back to our markets desk where julie hyman has a check on social media companies. julie: what better place to
start and facebook? they said on a company blog, they were testing buttons and adds to increase shopping from the site. i noticed, they are now about 4% below the record high reached in late , so they have regrouped a lot of the losses we have seen since that time. twitter shares are going in the opposite direction on reports the company may be cutting jobs. it has 4100 people. jack dorsey just became permanent ceo of the company, so this would presumably be part of his efforts to change the business. the cut look to be mostly in engineering. yelp.also watching there does not seem to be a sharp catalyst for the stock to be falling but it is down for the first time in seven days, down by about 10%. if you look in my bloomberg terminal, versus the 50-day moving average, just last week,
and then did that back below. so it could be an area of resistance for it. i look to see how volume was looking today, as it is a low-volume day overall, but the volume is tracking to be the average over the past six months. priceline is another stock trading higher, not necessarily social media. up by 2.5% after cantor fitzgerald said hotel room rates continue to improve in europe and the u.s., and this should have good feedthrough for their bookings. david: thank you. shameless plug for your twitter handle? @juleshyman. confirmedinbev have it will raise its takeover offer for sab miller. they are living doing the u.k. brewer to the negotiating table before a wednesday deadline.
for more, let's go to duncan fox. good to have you back. we are talking about a change of about 3%, nothing radical. doesn't seem to be enough to change minds -- does it seem to be enough to change minds? >> the key thing is they want them at the table. --y want to get [indiscernible] we have heard nothing from the parties today. i think this is all about getting to the table and talks. so far, we have seen nothing. david: i mentioned the wednesday deadline. how much time do we have before these companies have to decide what they will do? by 5:00 london time, they have to get sab miller to extend the deal, or there is an option they will go hostile, but you think they would have tried that already, if they were interested in going that way.
a slightly more dangerous option. they have another day and half of talking to get the deal in line. i suppose they could also walk away, but that means they would not be able to do anything for about six months and sab would have to really drive their business. the danger is, of course, that the price goes up. how important is this barking at the heels of altria, is that making the moves and easier? >> i suspect that is my you heard nothing at the moment. they said they'd be interested in a deal, would want to talk, but would potentially agree that $43.15. you would assume that would stay the same. we have heard nothing from bevco. i think you need both of them aboard to get this deal cooking. ab would have to get both
parties on board to get to the deal at the right rice. as they mention altria are the biggest shareholder. thank you, duncan fox. reports from a dutch safety board on last years malaysia flight 17 is due out tomorrow. ramy inocencio looks at the airlines tortuous year -- airline cost to mulch it was year. ♪
david: welcome back to the bloomberg market day. get the final word into the cause of the crash of malaysia airlines like 17. the flight went down in ukraine last year in july 4 months after mh 370 disappeared somewhere over the indian ocean. the malaysian kerry -- carrier has now contracted, gone o reveal and has t
itself. ramy inocencio has more. ramy: it's been 15 months almost to the day where the public saw images of the billowing smoke in ukraine. you can see the wreckage from malaysia airlines flight 17. of course, the financial impact was quick as well. malaysian airlines stock price plunged 13%. managed to climb back 33% through the end of december, and then it stopped. that is because the company delisted from the malaysian stock exchange. it is now owned by the malaysian sovereign wealth fund. totructuring is now underway the tune of $1.9 billion. capacity cuts was one of the big results. biggestalia, seeing the hit, down 40% incapacity. six cities down to five.
this is according to the sydney-based center for asia pacific aviation. north asia is seeing one out of every five cuts flight. south asia is also seeing similar cuts. europe is the second biggest hit after australia. the one in every four flights are gone. frankfurt, istanbul are gone. there is one positive number. southeast asia just 1%. malaysia airlines is now focusing back on its home turf. change, america, 0% because there are no flights. the only flight to l.a. was canceled in 2014. around the world, the company is cutting 16% of its capacity, more than one in every 10 flights no longer in service. looking at our own data, you can see cutting capacity have been
needed for a while anyway. this shows passenger numbers from 2012. they hit a three-year high at the end of 2013, and then plunged by one million passengers in the nine months after. since they are private now, we don't have those numbers available. david: what about leadership changes? i understand the ceo has a colorful nickname. ramy: the terminator. on that andd back says that it is not nice to talk about him like that. the other guy right here, christoph mueller, he is the first non-malaysian to head a non-european carrier. he has the nickname of terminator because he has a reputation of firing people. this june he proved to be true. 20,000 was the original employee base for malaysia airlines.
mark crumpton has the first word news this afternoon. angus deaton of princeton university is the winner of this year's nobel prize in economics. he was recognized for his study of poverty in india and the fact --linked to health and rich in poor and rich countries. >> people keep congratulating me today and i keep thinking, or what -- for what? it takes a long time to sink in and hard to believe. have to pinch myself and wake up. i am slowly getting used to it. will scottish born deaton receive his award on november 10, on the anniversary of alfred nobel's death. claiming responsibility for shooting and
killing an aid worker in kandahar. she was on her way to work when gunmen opened fire. earlier, nato released the nationalities of the people killed in a weekend helicopter crash at their base in kabul. the dead are identified as to british service members, two americans, and a french contractor. scotland yard is withdrawn the officers standing guard outside of the ecuadoran embassy in central london. they have orders to arrest wikileaks cofounder julian assange. the officers have been stationed there on 24-hour watch since assange sought refuge in 2012. london police say through april of this year, the cost to run the operation is nearly $18 million. assange is wanted for failing to answer a sexual assault charge in sweden. police say they will use what they call covert tactics to try to arrest him.
look at our first word news. you can always find the latest on bloomberg.com. david: as commodity start to settle, let's look at today's biggest movers. oil slipped from $50 a barrel as opec output climbed. zinc is holding a two month high. coffee futures jumped to a seven-week high on concerns on the weather in brazil. aving on to metals, it's been week of oversupply and wheat production. ken hoffman is in london for metals week. he joins us now. i have to ask, what is metals week, what is going on in london? once a year, a lot of traders, buyers, sellers of metal come to london to try to figure out a price for 2016. you come in with a framework, how much metal will live by,
copper for myers, aluminum for cans. a lot of festivities, conferences going on. it is pretty fun if you are in the metals space. david: there was a plenary session called focus on paris. china must be on everyone's mind. jim chanos was on this morning. as china inexorably slows, and as it builds on its infrastructure, demand for hard ,ommodities, copper, iron ore are going to be under pressure. people expanded their investment in the space to meet that demand, as if it would never end, and now we have the hangover. who knows how long it lasts. is china on everyone's
mind, is this what everyone is talking about in london? >> china is all everyone is talking about. the big question is, is this a blip or a two-your pull back? copper demand is down 4% this year, steel is down 18 months on a domestic basis. know, will the government come to the rescue, as they had done in the past, and throw a lot of money into infrastructure, or is this the new china, where demand has peaked, and will only go down from here? david: are people leaning either way? >> everybody is all over the place on what they think. privately, people are very nervous. they do have the five-year plenary coming up in china where they will make some announcements on what the plan is for the chinese economy. people are hopeful for that. then when you meet with people worried., they are
week, glencore shuttered a number of mines in south america and elsewhere around the world. now there is talk about spinning awesome copper mines. talk about why glencore is doing any more if this is than one company doing that, or are others following? >> a lot of companies have run into problems in the gold space and are selling off assets. glencore is the first major minor to do that. that made people look up. ierot of small and mid-t to do that.ing the question is whether you can get a foundation where metal prices can bottom and then finally had back up again. david: you are talking about where the bottom might be for copper. is there a consensus on whether we have hit the bottom? >> none whatsoever.
some people -- we look at cost curve. at how low the price of copper could go, it could go significantly lower. was fars ago, copper lower than this, about 30% lower than today. others say, wait a minute, these mines are newer, lower in quality. people are arguing back and forth on how low it could go, or if we have seen the bottom. it's the number one question. a lot of m&a. people like glencore selling of their higher selling mines. others are eager to buy those assets. david: in this industry, when you have a company like glencore shutting down a mine, how quickly can that happen? if you go back into the 1990's, mining company were rapid. they would close mines within
months of a downturn in prices. we are four years into this bear market in metals. besides glencore, none of the majors have done a thing. actually, they have increased output. they could shutter they wanted to, but they don't want to. david: thank you, ken hoffman. , charting a new course in sin city. we will take a look at the latest resorts in the pipeline. and we will translate this investord speak about clues about raising rates. and that investor strategist tom eighs-in at 3:00 eastern. ♪
david: welcome back to the bloomberg market day. i'm david gura. it is time for our business flash. the ntc is pushing back the deadline for the staples-office depot merger. companies and both agree to extend the review and decision to december 8. staples wants to pay $6.3 billion to acquire its one-time rival. lily will stop development of an experimental cholesterol drug because the drug was not effective enough and clinical trials. they will take a charge of as much as $90 million in the first quarter. french police have arrested six people in connection with that skirmish at an air france union meeting a week ago.
manager glenources the meeting with their shirts ripped off their backs after they were allegedly assaulted by union activists. for were protesting a plan job cuts and longer hours. you can always get more on business news at bloomberg.com. let's head to the markets where julie hyman has the latest. not a lot of movement here. volume is lower than it typically is. if you look at the major averages, you continue to see the dow and nasdaq continued to gain, the nasdaq very little changed -- the s&p little changed. it appears to be a mixed bag in terms of who is winning and losing. is not a clear pattern, although on the downside there is more of a pattern. materials and energy stocks are the worst performing groups. commodities-related shares are falling today. oil is part of the issue, but keep in mind, here is the
monthly look at the groups doing well this month. energy is the best performing group this month, up 10.5%. material shares are up 9.5%. in other words, the pullback in these groups coming on the back of what has been a strong pound already for energy and materials. finally worth mentioning, the vicks. it looks like it will be the 10th straight session that the vix has fallen. it has been below 20. a lot of traders have been watching that level. in august butck now it has come down to below historical levels. if it finishes the day lower, that would mean the longest streak of these declines since 2009. bettinge still traders on a return of volatility, but not happening. you.: thank
las vegas is getting ready to welcome more visitors. construction on to hotels is now underway. they will have thousands of rooms to sin city and will push the boundary of the strips northern edge. for more on what this means for las vegas is brian egger. let me ask you about the geography. what technically constitutes strip, and where in relation to that is the new hotels? stretch of las vegas boulevard from russell to the south and sahara to the north. these two properties will be on the northernmost mile of the strip. david: have others try to do this before? >> other companies have. in the 1990's, we had a 14% capacity increased win mandalay bay and others opened up. this is about a 5% increase. still, on the somewhat untested
northern part of the strip. you say most of these are clientele from the east. they had a very prominent casinos in the philippines, malaysia, and it would be illogical to try to cross market those properties and target their customers to las vegas. david: talk about this moment in vegas. we are hearing after the financial crisis, has the city rebounded? >> overall fairly good. the slots in this year has been up about 6%. convention business is stronger. in one week spot, the achilles heel, is baccarat. very weak in asia and biggest, year thisear over year. it's a mirror image of what is happening in macau. david: what accounts for that? >> austerity, anticorruption
crackdowns. all of that is putting a damper on asian vips. david: i think of trends in hotels like smaller, boutique hotels, but we are talking about .hese two outfits many hundreds of thousands of rooms. is this not a bellwether for the hotel industry at large, does las vegas operate separately? a lot of the recent openings in las vegas have been smaller .r boutique hotels this is a bit of a departure. it is back to the old 1990's style mega-resort attraction. david: how long will it take to know whether these containers -- these casinos are a success? on the of it is based las vegas economy, whether we see a return in certain games
like baccarat, and whether these properties are capable of bringing infrastructure and tories into that last about northern part of the strip. david: i always thought if there was any rhyme or reason on what hotels people pick when they go to vegas. how does a casino like this choose the one that they want? peoples is different as go to the city to visit the hotels. these no properties will be in manatee-range and will have -- ill be in manatee-range -- mgm resorts, they are about 60% non-gaming, 40% gaming. over the years you have seen a migration where the non-gaming resort convention, entertainment business, constitutes the majority of revenues. david: we were talking about action in the eastern hemisphere. these big new markets.
how have they recovered? >> macau is going through a tough spot. gross revenues are down 36% this year year-over-year. las vegas has been somewhat more resilient. that market is down 4%. all the weakness is in the high and, vip, asian-source table business. that there isher good business in getting people over to macau. huge tourism properties around that. are we seeing the same thing here, where people from asia are coming to the states? >> macau gets 90% of its visitors from hong kong and mainland china. las vegas gets 80% of his videos from the u.s., so still principally a domestic business, but baccarat is 20% of revenues, and much of that comes from the far east. david: thinking about the big casino companies, thinking about what is happening in atlantic
city, is that continuing? >> certainly come atlantic city has gone through a major shakeup. las vegas had a tough time during the debts of the financial crisis but seems to be on a reasonable recovery trajectory now. you.: thank brian egger with bloomberg intelligence. coming up, fed chair janet yellen is getting lots of advice from her counterparts. what some fed officials are saying today about a future rate hike. ♪
david: welcome back to the bloomberg market day. i'm david gura. it is a busy day for federal reserve officials. the bank of america president dennis lockhart kick things off by calling for a liftoff due to an improving job market. charles evans the fed should delay left off. the final speech will come from lael brainard in a couple of hours. mel gonzalez is here to help break down the fed.
this is a big week. we will be hearing from the st. louis fed president twice this week. what accounts for all this talking and is each of these presidents making news? >> we have the fed meeting on october 28. the black up until the start of a week before that. so there is lots of chatter before the blackout. the question is what new information we have. we have folks like james bullard which have spoken several times. , lessdditional speech chance of new information, on the spaghetti economic data in the interim. this week's highlight will be the speech from president dudley, who speaks on thursday morning at 10:30 a.m. he will be talking about the level of the fed funds rate, ,hat is appropriate, the timing past and future, of policies. we did get some interesting headlines over the course of today.
true toying that he is his dovish roots, that he does not want to raise rates until mid-2016. on the other hand, dennis lockhart saying october is a , but dead, given the market expectations. nonetheless, he continues to lean into the wind, suggesting he believes it's possible to raise rates before year-end. david: your call is nothing will happen in october? >> i think october is dead in the water. the fed wants to emphasize the slide. they do not want the press to thes to mean more non-press conference meetings. market expectations are only about 10% for a rate hike at that meeting. there is still too much uncertainty lingering over the economic data. we are still digesting this market swoon that took place in
august, continued into september. we need to see how the economy is taking that in stride. we will get some data points on retail sales on wednesday, and also the first round of october economic indicators with the new york empire and philly fed survey. those are in contraction, mind you, so it has been a significant blow to the economy. we need to get beyond that for liftoff to happen. even lockhart says he favors liftoff before year-end, but the risks for inflation seem to be tilted toward the downside. that is not somebody ready to hike. you were down in peru for the imf annual world bank meetings. dan fisher was there. he says there is an expectation, not a commitment, to raise rates at the end of the year. how news making were those comments? not particularly newsmaking. every time we talk about liftoff
before year-end, iwatch for the qualifier word. we hear things like still may be appropriate to lift up by year-end. that is not a firm commitment to say i want to raise rates before urine. the fed continues to echo this refrain of data dependency. the fed has not painted itself into the corner, that is the exit ramp for them. if the data is not cooperating, they have the free pass to delay until next year. if we look at what the markets are pricing in, it is not until march of next year that the author greater than 50% for the fed to have moved up off the zero bound. david: how much difference is there between what fed policymakers are saying and what investors are saying? a disconnect. lockhart said it was not dramatic, but this fed does not want the possibility to raise rates by urine to completely roll off the table. right now there is only a 1% chance. now we have a dovish fed in an awkward position where they have
to talk tough when the economic data shows signs of possibly losing momentum. david: the imf meetings, any big news out of that, status quo? >> it is like watching a very central banks back and forth -- originally, emerging markets were saying you cannot raise rates on us. that will torpedo the global economy. now there is this other story say, even if they do high, there is just as much uncertainty about the future path. david: carl riccadonna, thank you. up, what is next for u.s. stocks after their best week of the year? tom lee will weigh in. ♪
market day. betty: from bloomberg world headquarters in new york, good afternoon. a mixed day in the markets. oil and the dollar are tumbling. two years after taking his theany private, largest tech acquisition in dell, yes orhelp no? building on her frontrunner status what will other candidates say to cut it to her lead? we are one hour from the closing now. latest and has the we just cannot hold onto this rally. julie: keep in