tv First Up With Angie Lau Bloomberg October 19, 2015 7:00pm-8:01pm EDT
top story, morgan stanley afters overnight reporting a loss related to private equity investments in china. james gorman described last quarter as the "worst for fixed income since the financial crisis." let's get on this now and the rest of the trading news. following onnley the heels of goldman sachs and j.p. morgan chase with a similar story of a very rough quarter for fixed income. trimming an earlier loss of more than 8% in the session. a lot related to private equity investments in china, and also suffered a drop in bond trading revenue. as we mentioned, the ceo calling it one of the worst bond trading quarters since the financial crisis. james gorman has about to run a less volatile bag, and says "we had an unusual pick up in the
merchant bank -- pickup in the merchant bank." $.42 a share mississippi three shins per share, missing estimates by a lot. missing $.63 per share, missing estimates by a lot. full-year profit forecast, 14 straight quarterly decline in revenue, affecting the challenge of a turnaround for a tech giant. the strong dollar also had an impact on ibm. overseas, and ibm gets the majority of its sales overseas. halliburton, fell 36%, oil route has reduced their fracking operation, that is taking a toll. cut another 2000 workers in the past month, bringing the total to 18,000 workers cut, or 21%.
again, you can talk about with the bigger picture is for earnings season, the expectation , about a 7% to klein in revenues, a lot having to do with a stronger dollar. angie: still, the san francisco fed said there are reasons for eight rate hike soon. tell us more about that. >> we are hearing from fed policymakers. and what john williams says is that he sees the labor market almost back to normal, looking good, and that he sees a case for raising rates soon and slowly. that is the key point. let's take a listen. >> the new normal for interest rates is likely to be lower than it was in the past, partly due to slower growth and demographics. that argues in the end for the fed moving back to a lower federal funds great when we are done with the tightening cycle that we seen in the past. it also argues in my view for this gradual pace of removing accommodation.
of different policymakers are saying that if we go to soon, it can do more damage. he is coming out and saying there is nothing wrong with raising rates now, and if we get more bad news down the road -- he's pointing out the case that it can be flexible. back to you. all right. thank you so much for that out of new york. let's check in on markets in asia. for those of you monitoring from the united states, this is how it looks and australia right now. we are four minutes in, 1/5 of afterer, $.70, better-than-expected third-quarter gdp from china. we go as well, because china is also a major trading part of for new zealand. kiwi --
japan, closing in the red. futures in chicago pointing to a higher open. if you look at what happened yesterday, that did not play out. we will see how it plays out today. dollar-yen holding steady. commodities have taken a hit. data showing china grew at its slowest pace since the 2009 financial crisis, oil, gold, copper, all have tumbled. a commodity bear is back. >> we have seen a big fall and commodities in new york trade. pricen see the oil continuing its decline, down 2% over the past two days.
it actually fell by 2.9% in new york trade. oil extending last week's decline. there is a couple of reasons, china slowdown, but also opec is still pumping, so concern the other suppliers -- supplies will not dissipate. by threeent crude down point 7% in london, and copper prices also falling. -- down by 3.7% in london, and copper prices also falling. down 1.6%, futures contract over the last two days. gold also dropping. normally a safe haven, but concerns about the china seeing signs of u.s. housing revival, therefore interest rates might increase,
concerns that gold will not be in place, so gold also falling back. aluminum, levy, nickel, zinc, all lower. , nickel, zinc, all lower. better than expected. tooa might not feel pressured into easing, which is not necessarily good for equity markets. have can we expect all this to play into markets? >> australia expected to come under pressure, but if you look at some of the major players open at the moment. down 2.6%. fell 3% in new york. rio shares are down. also, atlas iron unchanged at the open, but you would expect a
little pressure to, through. also a look at the japanese , a little bit of a flat start there. the australian dollar weaker. listening for comments there about china and the rest. thank you so much for that. released quarterly production numbers today, gold numbers missed estimates after holdups at two mines. let's get over to paul allen standing by in sydney. >> that's right, angie. quarter,uction for the 583,700 ounces. that was amiss. the market had been expecting more like x hundred 22,000 ounces. the good news is that the cost $1088 per ounce, australian dollars. the gold price is significant a
higher in australian dollars. that production cost closer to $700 u.s.. ounces, but miss there as well, maintaining full-year guidance. copper, 21,337 tons. the market had expected 24,800 tons. the market not responding well, off 6.73%. take a look at oil, still waiting for that open, but the story there, 7.4 2 million barrels of oil equivalent revenue for the third quarter, $379 million. they do say that operation and png is performing well above, and it was those assets that got woodside interested in them early this month. the oil surge knocked back and offer, mainly for $8.6 million.
oil search saying they are open to further proposals in the future. still waiting on the shares to open at the moment. ok, and offer better. thank you so much for that. we will check in on oil search when it resumes trading this morning. checking other headlines for you right now. the slump in crude is starting to hit saudi arabia. sources say that they will be delaying payments for contractors. some have not been paid for at least six months. the government is considering pay cuts for state workers. oil prices have fallen by half over the last 12 months, leaving saudi arabia to its worst deficit in six years. 87% of revenue comes oil. ship makers -- chip maker on reports that western digital may be interested. sandisk has also spoken to micron technology, and a deal
with either can be reached this week. a market cap of $14.7 billion at since firstthan 16% reported last week. japanese materials company, the latest to push up corporate bond risks after it admitted that one properly failed to install something at an apartment building that is now tilting. now jumped 31 basis points. toyo tire also. the story about toshiba, bond risk has increased by 90 basis points since accounting irregularities were revealed in april. that should be irregularities. earnings season on the way in
oil saying it's on track to meet full-year output, now trading more than 2% down. as oil search comes online, we wanted to check back on that data for you after paul allen's report. checking some other stories making headlines. china's president has begun his state visit to the u.k., where expected to sign deals worth of billions of dollars. the u.k. was the first major
western country to get behind china beijing infrastructure bank, and says it wants to be china's "best partner in the west." bloomberg has been told that moscow's long-term aim is far broader than previously announced. the goal is to help president bashar al-assad retake as much lost territory as possible, including that controlled by u.s.-backed rebel forces. russia's campaign, which includes dozens of warplanes, could last than more than a year. the head of european football says he is bulletproof and being dragged through the mud in a widening corruption investigation. he says he still has support to fifae fee for president -- president. there is no contract for the $2 million paid to him in 2011,
nine years after his role had ended. he said that the money was "a thing between two men." all right then. my guess lowered her target for the s&p 500, a bullish outlook. she is head of u.s. equity and at banc ofe strategy america merrill lynch based in new york. it's just something between us two women here. just a follow-up the fifa drama. china in come from global equity markets. where do we stand? what are clients telling you? >> it is interesting. positioning is very light in emerging markets. emerging markets are not all the same, but positioning in china in commodities has reached really record low levels, so i
think a little bit of what we have seen over the last couple unwind ofs an negative positioning in commodities, china, kind of everything that hasn't worked for the last 5-6 years. rolling a lot of these growth stocks falling off. china we see as a risk. the good news is that a lot of that risk is discounted in industrials, energy, even technology, all the strong-dollar china plays have massively d rated, analysts have cut their expectations, energy expectations have been slashed in half over the last 12 months, so i don't know how much more downside there is for those sectors him about what i do worry is the consumer place. u.s. stocks with a lot of china consumption exposure, those haven't d rated at all. you haven't seen analysts cut , the retailers,
restaurants, that have a lot of china consumption exposure. angie: is it a risk when a lot of money managers and analysts looking at china sea that growth in the services sectors? and we heard that from the data, that it is propping up the weakness in manufacturing and ask sports -- and exports. >> you have had a couple of companies miss expectations. missed.ds that's an area to watch. that has been one area within the u.s. market. if that cracks, what takes leadership from their? we lowered our target, and that was driven by a couple of things. the fed's failure to raise rates in september, i think was a big negative as far as i am concerned. we were expecting the fed to say green light on the u.s. economy.
they were 50% pricing it in. it felt like we were ready to get off of an emergency level on the short rates. the fed said we are not ready to go, so that to me was a little bit of a warning sign. either the fed is seeing something that we are not seeing or it is either a policy, tactical delay or saying that they are not ready to get off of this very, very low interest-rate. angie: how are you positioning your clients for the fourth quarter? >> we think the fed is going to go in december. angie: ok. is ready to lift off in december, then i think it's time to get more cyclical. what we callour chicken cyclicals, big cap cyclical companies that have a little dividend, dividend growth
potential, so they meet that rising interest-rate, but also offer yields to yield-oriented investors. , three favorite sectors industrials, energy, and technology. these are three sectors that i know have a lot of --, dollar risks, china risk, commodity pressure, but the big cap stocks are high quality, big multinationals, while they do look risky and a strong doar environment, they tended to survive a slowdown in global growth. those could be underpriced opportunities in the market today. overcrowded has underperformed, so it is very interesting. thank you for sharing that with us. lynch inmerica merrill hong kong today. thank you so much for that. we have some breaking news to share with you. united airlines is naming rep part as acting ceo.
china's economic growth is better than expected, but jamie dimon says there are bumps ahead. he spoke to stephanie ruhle on bloomberg and said beijing is still facing some huge issues. >> china has had 20 years of 10% growth uninterrupted, never before seen on this planet. reform, itto market is the state owned enterprises have more transparency. they need will bond markets, collateral markets, reduce corruption. they will have bumps in the road. in the summer, they showed they will have bumps in the road and the growth will not be 10%, might be 6% to 7%. that's $600 billion of growth. that's a lot more than 15 years ago when it was 10% growth. 600 billion dollars is more than most countries on this planet, so they have the wherewithal.
3.5 train dollars in foreign exchange reserves. they are quite bright. they move rapidly. they had huge issues. they are dealing with their issues. we should work with them. greatestas the military defense ever designed, the atlantic and the pacific, and we have friendly neighbors in canada and mexico. we have all the food, water, and energy we will need. china is surrounded by historical enemies. russia.d a war with japan, philippines, north korea, pakistan, and india, and they don't have enough food, water, and energy. they have huge issues. it will be a long time before they overtake america in any way, shape, or form. , --american maturing military, the biggest threat to dominance is when the economy
isn't strong. we need to focus to make sure our economy is the best in the world. angie: china construction bank zürich,a shingle in granted a license to offer commercial banking services in switzerland. the bank has been on an international push, beginning operations in paris, amsterdam, barcelona this year. ,xtending declines in hong kong the most in a month. las vegas and in gm also dropped. macau hit back at steve wynn's criticism of policy. he complained casinos were not told how many gaming tables they would be allocated, sing the policy is outrageous and ridiculous. the macau government summoned casino representatives and demanded total compliance with the rule. already battling pollution in , aonesia, a new blow
worst quarter for -- [inaudible] } third-quarter profit was $.42 a share, missing the average estimate of analysts surveyed by bloomberg. asian tumbled in extended trading after slashing its profit forecasts. the company also reported a 14th straight quarter of revenue declines as it struggled to boost growth in all of its major businesses. the stronger u.s. dollar reduced sales. a selloff in commodities has resumed following data that shows china's economy growing at the slowest pace since the 2009 financial crisis. down onpper, both are concerns about china's weakening demand, but oil halted its slide near $46 a barrel ahead of data expected to show u.s. stockpiles
have expanded. let's check in on the markets in asia. in new zealand, we see games, 0.5% higher. of thateels better-than-expected third-quarter gdp figure from china, to australia we go, where china is its number one trading partner, and australian equities look like this. it's down. lagging today as we see australian equities hit by this commodities slumped. the australian dollar spot, i wouldn't say it's unchanged. also, counting down to the opens in japan and korea. let's head over to japan. yesterday, 18,131. dollar-yen.
the u.s. has released its semiannual report on foreign exchange policies. david english is here with the softer language. david: one of my favorite comments on this was from accel murphy's comments. he said, there's very little you can complain about. don't force the issue. before we get to china, the ofort also did not label any america's trading partners as currency manipulators. the last one named china. it was 1994. this is a semiannual report mandated by law. they have to come before congress and give their assessment on these foreign exchange regimes. that is the dollar-yuan. this.s. treasury left out
phrase, significantly , which is something that was on the present in omnipresent in recent years. described thehey south korean won. they are saying the forces that would typically drive up the current-account surplus, etc., they are still there, so china must keep its promise of n.whenakening the yua it does intervene in the markets, only do so when necessary, and when you do, please disclose it. there's very little that can do. china acts according to its own interests. angie: they are starting to do that with the imf. moreare trying to be transparent, not necessarily to the rest of us watching. we are also tracking other stories. china is finding more subtle
ways to influence the yuan. what is this all about? talk david: about transparency. this is connected to the treasury report which came out of the next, -- which came out with an estimate of how much money china has spent in three months defending the yuan, $230 billion, roughly speaking. this is relatively backward-looking. this was flagged by the likes of bowman china merchants. this is a typical trade. of the swapbalance market. you have the big local banks. they essentially borrow u.s. dollars on the onshore swap market, and they dump those dollars in the spot market, and then the pboc comes in and squares both of those positions. why would you do this? first come it you don't necessarily -- first, you don't
necessarily have to burn through your reserves. you don't necessarily have to go into the spot market and buy up renminbi. it's optics, as well. angie: you let your banks and do it for you, your state-owned banks. david: then the pboc takes it on its balance sheet. it's not illegal. >> it's front-facing versus behind the great wall. david:david: again, its optics. it allows them to do so without necessarily tightening policy in, which is something china doesn't need. angie: great insight right there. time for a look at some of the top corporate stories on the bloomberg terminal. here is juliet. priced japanhave units at the top end of their ipo range, shrugging off a stockmarket slump. japan postbank shares were
offered at ¥1450 each. $6.2overnment will raise billion from the sales to shares in the japan post holding company will be priced next monday. credit agricole is said to be near a settlement over a u.s. investigation into sanctions busting. a deal could feature a payment of as much as $800 million and a deferred prosecution agreement with the justice department. it would allow to credit agricole to avoid a criminal conviction over dealings with iran and sudan while admitting -- broke theaw law. vietnam's biggest companies surged to a biggest -- its rise, after announcing foreigners could increase holdings as much as 100%. shares jumped
almost 5%. i'm juliet solly. a lesson in what not to do when starting a banking career. deutsche bank may face the harsh regulators in washington and brussels after a rookie's errors meant a payday for one of its american clients. zeb is here with more on the gaffe that caused deutsche's stock to plunge. i wonder what his of valuation is going to look like? zeb: i don't know if you will get to the evaluation stage. sources familiar tell bloomberg that a junior forex trader in frankfurt made a trading mistake , and that trade mistake sent a u.s. hedge fund client a 600 -- a $6 billion payout. that would be nice to receive. the problem is, the bank had to take it back the next day and had to explain why this happened and explain to regulators why it
happened. the foreign-exchange sales trader in frankfurt process to the trade using a gross figure rather than a net figure. that prompted a payment that was an order of magnitude higher, according to this person who asked not to be identified, does the matter has been deemed private. nonetheless, it is not a good cryan whot for john came in in ceo -- as ceo in july. he is shaking it up in terms of management, clearinghouse to change the strategy of the already and deal with high legal bills. we know deutsche bank is paying regulators in germany and around europe for missteps of the past. a rookie mistake does not necessarily look good at this stage. angie: how come it was so easy to do that? aren't there safeguards in place? for regulators, they must be wondering how to respond.
is there any precedent they should be looking at. zeb: we know banks have been fined in other jurisdictions for these errors. $6 billion is certainly not a rounding error. that is a big error, because it has an impact on the balance sheet. of deutsche bank, they plunged when this report came out. they later recovered. in the intraday session, they are recouping about 2.5%. this is an issue that will be looked at. regulators, we understand, have been informed. the federal reserve has been told. the ecb in frankfurt and the uk's financial conduct authority, looking into this. the banking industry is really from this and other ongoing issues. it does not need any more headaches. angie: there is a difference between gross and net. zeb: do your math. angie: thank you so much.
angie: checking some other stories making headlines. there are new claims that the stampede at the harsh pilgrimage in saudi arabia killed more than 2000 people. comessociated press total after official comments and media reports from 30 countries, and it is almost three times the official saudi arabia toll of 769 dead. the ap says 465 iranians died. deaths on blamed the arabian royal family. more than 600 south koreans are preparing for a rare reunion with relatives from the north.
they will travel to a mountain resort to spend up to two days with families that many have not in years. most of those taking part in the first reunions since 2014 are now in their 70's and 80's. they are allowed to bring small gifts but banned from talking politics. the first ballots have closed in canada's general election, a vote that could and the decade-long rule of stephen harper's conservatives. polls suggest the liberal party led by justin trudeau, the son of former pm pierre trudeau, will win the most seats but fall short of a majority. that could mean negotiations on forming a minority government in a country that is never had a formal ruling coalition. china's president xi jinping begins his first full day trip to britain today. it is a visit marked by pop and circumstance and deals worth billions. we know if the u.k. wants to rebalance its trade with china,
what does beijing see in this trip? let's discuss all of that with asia analytic a's poly mall. welcome to the show. this monitor this visit, five-day visit, meeting with the queen, staying at buckingham palace, what is the real trade-off, political capital for economic deals? pauline: actually, it is both. it's obvious there's an economic china doeschina, but need western technology. it wants more assets overseas. britain still has a restricted list of exports to china, and china would like them to ease the gray areas a little bit. it's also about setting up relationships in the western world, showing at home that
china has finally arrived, and is being received with all the .omp and ceremony angie: i think if you say it enough times, golden era of the relationship between china and britain, perhaps it will be believed, but is it true? what do you think? pauline: could you repeat that? thee: golden era between chinese and u.k. -- is it true? pauline: i don't believe it at all. it's very nice words. countries look after their own interests. if it suits them at a certain point, they will be allies. they will be trade partners. when it doesn't suit them, they won't be. 1979ember from the days in
, chairman mao's hand-picked successor disappeared from the scene. he went to britain. the koreans gave him a huge -- the queen gave him a huge banquet. when heads of state meet, they always talk about how wonderful it's going to be. it's part of the script. angie: the script has been messy the last couple years, the visit with the dalai lama, being frozen out with china, very tepid relationships until recently, and now we have jeremy corbyn, the british opposition leader, saying he's going to bring up the issue of human rights with china. these are things that are not part of china's desired script. pauline: no, but it also reflects the fact that perhaps -- while the western world is trying to understand what makes china tick, the chinese are
still trying to find out how the western world operates, how .ivil society operates the chinese investors said the day before, human rights issues should not be brought up. he more or less in short everyone was going to jump on the bandwagon. it is interesting to see how three or four decades after the opening up, china has yet to the groundps with rules of civil society in the west. angie: it is one thing to be embraced at the queen's level, with the prime minister there, and it's another to have the average man on the street wondering -- steelworkers, for example -- wondering where their jobs are going as china drops cheap steel and the u.k. that angie: is a problem for the british prime minister.
it's not a problem for the chinese president. pauline: it may be true, but ultimately, if china wants to be a leader on the world stage, it has to be mindful of all of those things, does it not? pauline: yes, but it's one step at a time. that is further down the road. -- on his lot of his plate right now from the economy to his neighboring countries. that is further down the road. right now, he wants pomp and ceremony with wall-to-wall reporting. angie: what value is there in that for him personally and politically? pauline: credibility. constituentsto his , under our leadership, china has become great again. we are standing on equal terms with leaders of the world, with the americans, the british prime
minister, the queen. angie: is there a winner and a loser in terms of this visit? the perception that one is in a weaker position to the other? pauline:pauline: no, because i think both sides want slightly different things. the chinese want to invest. they want the exposure to the industries, to various investments, and britain wants the money. that's how i see it. angie: thank you so much for joining us and helping us figure out what the next five days of this visit are going to look and between xi jinping prime minister cameron. we've been talking to businesses that count chinese consumers among their most important clients.
we represent about >> 20% of the retail spend all of the chinese and the united kingdom. we are a hugely important part of that. it's driven by trust. they want to know that they are getting the right brands, the right price, and in all of those ways, it's going home to their with the fact that they bought and said, i went to london, i bought that wonderful louis vuitton bag, and i bought it in herons. that's almost a validation after validation after validation. it's not simply that they are not shopping here. all of the evidence shows that when a person goes to milan, the largest percentage of goods bought are from italian manufacturers. if they go to france, exactly the same statistic, exactly the same for the united kingdom. if a person goes to paris or
malan, they are less likely to be buying mowbray or burberry than they are if they come to the u.k. they want to pay homage to that heritage. what they want to do is to go see where the history and culture surrounding the manufacturer is. for burberry and mowbray, that is in london. angie: coming up next, some good medicine for a japanese hospital manager. all the details when "first up" continues, back in two. ♪
[laughter] zeb: some people may need some rehydration. looking at a pharmaceutical compa, pharmacies in japan, it releases equipment and provides consulting services and rents out tvs. angie: for your stay when juliet puts you there. : i hope they have a playstation come as well. i would be unconscious, and the tv would be a waste of money. o medical, first-half profits, beating estimates. when they report of the first quarter numbers, investors were impressed. that came back down. they continue to impress. juliet: are you finished? that was a long spiel. [laughter] talking about a biopharmaceutical company. it hasn't done well year to date, but its preliminary first-half net income beats of the companies only -- own forecast.
54%.perating profit, this is a pharmaceutical company. they go into that traditional medicine space. they use mushrooms and things like that in their medicines, as well. angie: alternatives. huge fan ofm not a mushrooms, but if they will cure us, i'm a believer. angie: get in there. break these two up. zeb: juliet, you are looking lovely. everyone on our team looks lovely. especially at the ungodly hour we wake up to do morning news. let's take a look at shipping. hard assets. line, big, bigng asia freight carriers. bloomberg industries, bloomberg intelligence out with a new analysis on the shipping demands globally, and they see it
>> with all due respect to larry david, bernie sanders impersonated you, first. >> it struck me that a communist pipeline into cuban seleka to happen to this organization. ♪ >> and our personal e-mail to larry tonight, and donald special mailbox. but first, nobody told us 2015 was going to be this way. joe biden is basically the ross and rachel of 2015, will he, won't