tv Bloomberg Markets Bloomberg October 23, 2015 2:00pm-3:01pm EDT
from bloomberg world headquarters in new york city, good afternoon, i am brendan greeley. the imf reportedly is ready to give its blessing to naming the yuan a reserve currency. chinese officials are happy. is it just a symbolic gesture? britain that's big on nuclear power, but will it get burned on its investment? finally delivers a profit that makes jeff bezos one of the richest men in america. let's head to the market desk where julie hyman has the latest. seeing a rally on the back of the chinese rate cut, on the back of earnings, and it's holding pretty steady right now. we had seen him give up some of its momentum early in the day but now seems to be resuming at the nasdaq in particular, doing
well, getting double than the -- major averages averages. --e a look at the text index tech index inside the s&p 500. health care also bouncing back after a steep decline yesterday that was based on earnings from hospital companies which sort of spread to the others as well as specialty pharmaceutical makers. on the bottom end, utilities declining. as rates go up today, they tend to move inversely. ,omething i wanted to look at the high low index. 52-week highs versus the lows in the s&p. during august selloff and in the summer we had more lows than we did highs. now that balance is starting to shift once again. if you are able and are looking for reasons to buy, this could
potentially be a positive signal. we were looking at your direct messages from mario draghi. thank you, julie. now let's get a look at the first word news with mark crumpton. mark: thank you. there are new signs that jeb campaign is faltering. the florida governor is imposing an across-the-board pay cut for staffers and is also removing some senior advisers from the payroll and canceling some fundraisers. lincoln chafee, a democratic candidate or the white house, drop-down earlier today. showstest politics poll ben carson leading in iowa. he has the support of 28% of the state republicans. donald trump is in second place with 19% and ted cruz is in third. us forand cruz will join
a special edition of "all due respect." the house has approved legislation that would erase key components of president obama's health care law. it would also block federal payments to planned parenthood and earn a certain veto in the event in reaches the president's desk. lawmakers use the partyline vote to approve the bill and sharpen political differences with democrats in advance of next year's elections. residents on a stretch of mexico's pacific coast are prepared for what forecasters say is the strongest hurricane ever recorded in the western hemisphere. patricia is packing sustained winds of nearly 200 miles per hour and could come ashore as early as this afternoon. it is a category five storm and could bring coastal flooding, distracted waves, and flash floods. a tragic ending to what was supposed to be a day of sightseeing for dozens of retirees in southwestern france. the bus they were riding in collided with a truck in the
city of bordeaux, causing the bus to burst into flames. at least three people were killed. the collision was france's deadliest road accident in more than 30 years. wordis a look at our first news now, you can always find the latest on bloomberg.com. brendan: china's central bank cut interest rates for the six time in a year. they may soon be part of a reserve back get of currencies. the imf has given them strong signal that the yuan would join the dollar, euro, and other currencies. china is so confident it is apparent statements to celebrate the occasion. joining me now is daniel moss. help me figure this out. what do we know so far about what is likely to happen when the imf ask a decision in november? we know the imf has communicated to chinese officials that there is a strong
likelihood that this happens. this has been on china's wish list for quite some time. they have presented their case, they have made changes to the way the yuan is treated. there has been an effort to internationalize the currency. if it comes through, this would be seen as an important culmination of those events. remember, the to sgr, which is like the imf -- rve, it really resembles the pre-1978 thed, the world before opening of the chinese economy. the dollar,ust euro, the yen, and the british pound are in that basket. we know this has been a huge goal for china. this is something they have been
chasing for a while. this pending decision by the imf, is this economics or politics? dan: it is both. it is rife with symbolism for the chinese government. next year, china is hosting the g-20. this would be a signal that in the eyes of the imf, the premier international lending institution, then the country has, if not arrived, then pretty much close to arriving. what are the likely knock on effects of this? if this is included in the sdr, it does not automatically mean that it becomes a reserve currency. our going to see countries increase their reserves of you on, or is that something that we have to wait to see? it is definitely a green light and encourages the imf members to do that. this is something that will take place over a pretty long time frame. in a standard -- standard
estimates $1 trillion worth of assets will eventually be converted into yuan as this makes its presence felt. brendan: this morning, bloomberg news had a great piece from someone from the imf who said that this would prevent china moving backwards in a liberalizing of its financial system but there is much liberalizing yet to do. what is the incentive for china to keep moving in that direction? reformers and the technocrats who would have pushed for this have been rewarded. confidence, and while it does not mean china has fully arrived in the club, it has certainly arrived in a club. but you are right, there is work to do. show closestatistics
to two thirds of global reserves are held in dollars. the much-maligned dollar. remember when that was supposed to be in decline? so there is a way to go. brendan: the way you define currency, a unit of savings or transactions. let's talk about transactions. with the state visit to the u.k. , london is becoming a much bigger offshore center for trade in yuan. what is the role of the yuan right now in trade? dan: comparatively small compared to the dollar, but it is growing. compared to where we were, 10, 15 years ago, very little role. now it has some. the chinese government just sold international bonds denominated in yuan. this is all an incremental process. , butwill take some time if, what we reported comes to
pass, if, indeed, the recommendations of the imf board are excepted next month, it will be an important milestone. in the journey china has been on since the late 1970's when they first began opening up china to the world economy -- of course, the world economy was never the same again. there were a lot of measures taken by the central bank in china this morning. want toow on time but i talk about increasing caps on deposit rates. is that liberalizing the economy as a gift to the imf, or is that stimulus? which way should we see that? dan: probably a bit of both. our reporting does not show that they needed to do this to get the imf's blessing, but again, step-by-step. some chinese officials are abolish, loosen, not
loosen the reins of the state on the financial system, and this is another step in that direction. brendan: dan maes, thank you for helping us understand this a lot better. moss, thank you for helping us understand this a lot better. mario draghi signals the ecb is ready to boost its stimulus program. did he ignite a currency war, and would you trust china with your nuclear power plant? britain has said yes. donald trump finds himself in an unfamiliar place, second. the latest poll has a new front runner. ♪
brendan: welcome back to the bloomberg market day. time for a look at the bloomberg business/. germany is already feeling a page from the diesel a emissions scandal with a three point or billion dollars tax shortfall on the horizon. several towns linked to the automaker are halting projects like new playgrounds and ice rinks and road work due to projected reductions in tax revenue. volkswagen has more than 270,000 employees across germany. amazon's stock surges boosting the founder of the list of wealthiest people. jeff bezos is now the third richest person in the u.s. amazon shares are on the rise today. yesterday, the company reported
profits that beat estimates. microsoft's push into cloud computing is paying as first-quarter profit beat estimates. the ceo satya nadella has been focused on selling cloud services and since christian-based products. -- except corruption-based products. you can always get more business news at bloomberg.com. we will take a look at the markets desk with julie hyman. technology is a big story of the day today with earnings coming out from this trio of companies, microsoft is at its highest in 15 years. really interesting movement for the stock since it was viewed by some as a so-called value trap. a lot of valley manager said it was undervalued, yet it still kept being undervalued. seems to be breaking out of that range. alphabet, also known as the
owner of google, rising it percent, at a record today following its earnings report and announcing its first-ever buyback. as you just saw, amazon is also on the rise. those shares also at a record today. it is not just the companies in tech that have come on with earnings. apple shares are higher. buy atre raised to a maxim. above $100 forup the first time as well. because of the size of these tech companies, what they are chicken -- contributing to the gains today is substantial. take a look at my terminal. is hard to read and there is a lot on the screen, but when you can chocolate by looking at this is the index points that each individual stock is contributing to the overall gain in the s&p 500. if you look at the big cap
stocks, half of today's gains in the s&p is coming from just those five stocks. something else we have noticed is that if you go back to the august 25 low for the s&p 500 and cackling the returns of the sectors, you see that attack is the best performer of 18%. it really has been powering the rally not just today, but from the lows. be talking will about some of those tech movers with emily chang. moving back to economics, central banks are dominating the markets. good news for equities. the stoxx 600 is up. joining me now to help us figure out what is going on is dartmouth college economics professor daniel blanchflower. blanchflower, stock markets
are up, yields are down, all good news. do you see any bad news? daniel: looking at the graph in front of me, 17 european countries in deflation. if you look at the same measure, the u.s. is in it, too. these economies are reacting to this serious deflationary shock. in a sense we are now in currency wars because the ecb wants to help themselves to appreciate their currency, against other people. it is not a coincidence that other central banks respond. the people's bank of china respond. and others then what happens in the united states is the dollar appreciates , and the question is, are you then going to make a rate rise? this is a beggar your neighbor strategy to a huge inflationary stock, presumably driven by china's slowing. war,an: do you see a forex
or countries trying to create some kind of domestic inflation? there are two ways to look at these moves. david: obviously, every war starts from a battle or opening salvo. the question is if this is an opening salvo. be mindful that all of the central banks are having to deal policy.y tight, fiscal if you like, how well this monetary policy works is somewhat limited, so they are struggling to get any traction. in a sense, you would like to improve -- you would like your country to be able to export a lot, rather than others. we will see, but it certainly looks like this is an opening salvo, which will probably continue. we will see what happens in december. ecb says they will do more quantitative easing. they are doing it now but will just wrap it up further.
i suspect this will continue to happen for the foreseeable future. and the fed, presumably, will not be able to raise rates, because everyone is trying to stop them, if you like. brendan: they said they may do a couple of things in europe, change the duration, size, or the nature of the qe program. i got a sense that mario draghi was a little bit bewildered watching the presser yesterday morning from frankfurt. almost as if the world was not behaving according to his expectations. talking not only about raising in december but figure out what is going on. have the fax changed on the ground in europe? somewhat. what they forecast would happen to inflation, as ever, has been overly optimistic. voted onntral bankers quantitative easing into cut rates, in a way, it is scary
that we did not know what to do on the way in. we did not know what was going to happen. and they do not really know on the way out. i have to jump in. we are going to lose you in a second. we are all bewildered but we will figure it out. david blanchflower, thank you. ahead, london makes a huge investment on nuclear power with china. with energy prices dropping, isn't going to get burned? ♪
higher relative to cheap oil and gas. ramy inocencio is with me now. ramy: remember this name, hinkley point. it is the area where that new nuclear plant will be. let's take a look at what it looks like today. currently, there is one nuclear station here that has been operational for the past few decades or so. thes majority owned by french company. china is putting about a third of the bill, $9 billion. share price, it has been rising as the chances for a deal with china rose. now up 12% in the past 30 days, but looking back, it turns out that is a recent uptick in an otherwise downward trend. has lostil 2014, edf 40% of its market value, and
that has generally been the trend for nuclear stock since 2011. that was when the fukushima nuclear disaster happened. let's take a look at some etf's. market vector uranium and nuclear etf, down by 30% since then. this tracks utilities and uranium companies. another etf to look at is the uranium etf. that has plunged down further, 87%. this only includes uranium miners. on the back of all of this, i was curious, if the uk's new plant means a renaissance for stocks, so i asked our friends at bloomberg if there was an investment opportunity. states,e united definitely something to sit around and wait for. if you want to invest in uranium stocks, there is a lot of excess
capacity in the market as a result of shutting down nearly 80 reactor since fukushima. so the utilities that are buying uranium, long-term contracts, and have accumulated them, and now are making that available for resale because they cannot use it specifically in japan. the suggestion is to sit on the sidelines now because of excess uranium supplies. as you were saying earlier, cheap gas is making things relatively more expensive. brendan: how does the cost of nuclear compared to other sources right now? ramy: it is much more expensive. to power a home. coal and natural gas are much cheaper. to $118.ng in at $66 natural gas coming in at around
the same price, $76 to $118. for hinckley, there is a guaranteed price per megawatt, about $142. with inflation, that could double by the year 2030. even more expensive than what we are looking at now. still ahead, as commodities fall, is all that glitters gold? thinks gold has not lost its shine. ♪
residents on a stretch of mexico's pacific coast are preparing for hurricane patricia. it is packing sustained winds of 200 miles per hour and its impact could be found in texas as well. brian sullivan joins me now from boston. where is hurricane trisha at this hour? it is 140 kilometers off the coast of mexico, moving toward the coast at 12 miles an hour. just how dangerous is the storm? of the mostis one dangerous storms on the planet ever. it ranks up there with andrew, with camille. they do not get that your instructor than this. typhoon hyantioned
n. we expecting that kind of destruction from patricia? is more -- more tightly wound. the needle.d building construction was not as sturdy as what you find typically in along the coast of mexico. there are some advantages. that could work to their favor. mark: you mentioned manzanillo. it is mexico's biggest container port. how vulnerable is it because of the approaching storm? like i was saying before the positive side is that the really powerful winds are 15
miles across. the hurricane strength winds reach 35 miles. if the track is just right those parts will be spared some serious damage. if they take a direct hit all bets are off. this kind of thing would disrupt the ports for maybe weeks if they do take that direct hit. a port like manzanillo, i am sure there are no ships moving in or out and it has been shut down completely and it will have to stay shut down until they -- the danger passes. mark: you can always find the latest news on bloomberg.com. back over to you. brendan: let's look at some of the biggest movers. big.num is longest stretch since the beginning of the month.
for more on the moves and gold we have a huge tree today. jim grant is here from grant's interest-rate observer. let's talk about gold. it is down from its spot rate highs in 2012. holder ofmously a gold, a believer in gold. what do you know that the market has been wrong about for the last three years? before.has happened if the market is missing anything, one yields to the markets final judgment. classifyinguld be gold as a commodity. it competes with the issuance of the world central-bank. they are in thrall of the currencies. gold is a great -- not a hedge but we have that.
it is an investment in monetary disorder. brendan: gold has always been liquid. double -- a transact transactable unit of money. brendan: it yields nothing but it cost something. one of the things i have been serious about. we are breaking all the rules of things we assumed to be true if you look at negative interest rates. people have not been withdrawing their cash. gold costs something. you can just keep it in the hall closet. what is the negative interest on gold? jim: i should be able to tell you. i have it in an deposit box. , andis something to hold
investment in the disorder of money as manipulated and managed by central bankers. they believe they can impose stability from on high by manipulating interest rates. that is a doctrine for instituting instability. they seem not to believe that interest rates are rice's. they are the critical prices in capitalism. measured risk and they have been manipulated by central bankers. we are looking at a regime of price control which almost invariably has a bad ending. brendan: let's talk about this word. there has been a lot of work what thehe fed on natural rate of interest is. this is a difficult topic because you can go out in the world and see what it is. researchers are arguing that the natural rate of interest is below zero. this manipulation you're talking uput is dragging them
instead of down. what is the natural rate of interest? that would be the intersection of the supply of savings with the demand for savings absent the materialization of central bank credit. without attempting to penetrate , one can observe the nominal interest rates. higher under the depression than the are now. these are the lowest interest rates in the history of the world. it is different. awayed cannot explain them as a force of nature. these are to a great degree rates administered from on high. i want prices that are discovered in markets rather than administered but these are administered prices. argue --what about the the argument that the force
reduces the return. >> i would make the distinction that it is not so much a glut as it is created credit. this is not consumption deferred. materialized. i think it is a substantial difference. brendan: when you talk about central-bank created credit, the central bank creating more credit. where does this end? jim: in and this way. there is something called the -- the more asset grow the more the final returns to shareholders. central bankers hate deflation. is a closedds in loop of intervention ever more radical.
flash.ness issued a sales forecast that fell short of estimates. they are recording charges of $82 million to settle legal disputes with the music industry. pandora is facing stiff competition from spotify and apple while battling publishers over how much it takes to play their song. shares topped $100 for the first time ever. facebook made the fastest run ever to a market value of $250 billion. among the admirers of the business model, steve ballmer. he talked about it earlier today. steve: i think facebook is a great company. they took a germ of an idea and they continued to build it out. they have been thoughtful about not over monetizing or
under-monetizing. super impressive company with a clear direction. brendan: shares have gained more ahead and 450% in three years, the fourth best performance in the s&p 500. jack dorsey says the company wants to reinvest in its people so he is starting by donating one third of his own twitter stock. shares are valued at $200 million. they will go into an people for employees, something that could increase morale after recent job cuts. businesslways get more news at bloomberg.com. let's head to the markets desk where julie hyman has the latest. we were talking about all the winners on the west coast. who is losing? julie: you talked about one of them and that is pandora. the stock is down the most since we saw the ipo. we had a plunge of shares in that litigation expense and this gets to the heart of one of the concerns about pandora and other companies like it. that is -- shares down 35%.
this concern about litigation about trying to get the rights for songs from various companies and how much it will have to pay to get them. as for some of the other big decliners, this is a company that provides medical waste servicesand waste generally. these shares are down 20%. the company's earnings-per-share unchanged year-over-year. missing analyst estimates by $.10. a couple of reasons behind this that we saw, lower industrial waste project. also slightly higher currency. currency has affected so many companies on the international site and also a off in the higher-margin business hazardous waste management. and also whirlpool shares are falling. that is the biggest intraday drop. the company is talking about currency effects hurting its business. the company also cutting its forecast looking forward at this
year's earnings. whenever you get a big earnings day even if you have overall market strength you always have those outliers that are declining because of their earnings related news. brendan: it is always raining somewhere. chile: that is true. the outsider is getting beat by another outsider. the door and -- ben carson has stormed past time to take a commanding lead in iowa. carson is at 28% of likely gop caucus participation. that is up 10% since august. followed by ted cruz. we will bring in mark halperin who sat down with ben carson you -- ben carson. the polls and said he is not just doing well on the top line but all of his internals look dutiful as well. what is he getting right?
mark: and carson has risen up in lots of places. particularly in iowa. carson is a better fit for an iowa republican electorate that has a lot of evangelicals in it and people who connect to his personal story. we talked to him about where he stands and why he is feeling so good about things. let me ask you some questions about donald trump. do you expect now that you are ahead of him that he will start to go after you and if so, what will you do about that? does attack me i will continue to talk about the issues. my personal interactions with him have shown him to be a gentleman. i think there is another element when he is on camera.
mark: how about being guest host on "saturday night live," doesn't interest you? been: i think being president is a serious thing and i do not want to put it in the light of comedy. >> we would talking about some of the other candidates who were not doing as well and you said some the about that. : i would leave. this is about the people in the will of the people. not about a position i want to ascribe too. -- to. other people were pulling much higher in the was more enthusiasm i would say ok. it has been nice. let me go do something worthwhile. not trying to go after donald trump but he is willing to contrast himself.
it will be interesting to watch over the next few weeks. brendan: speaking over your shoulder is ted cruz targeting that retail politics that is so important in iowa and new hampshire. what other retail politics does ben carson like? mark: he is very good on this stuff. we interviewed him in kansas city. he told us that [inaudible] at least 1000 people. sometimes we like 2000 and that is big. interviewed, he is a great retail politician. he is also in the mix here. 11 in the poll and that puts him in third place. he is poised to not just doing well in iowa, he is working hard in other states around the country. keep your eye on ted cruz as well as carson.
this is a very wide-open race. brendan: someone missing in that list which was jeb bush. the other news today is his campaign is cutting staff salaries. they say it is a shakeup. it sounds more like a shakedown. what is happening in that campaign? been a cycle with extraordinary developments. this is a big one. jeb bush making major cuts to salaries as well as some people being let go completely. jeb bush is going to try to focus on iowa, particularly on new hampshire and south carolina. more time with voters, less time fundraising. skeptics are saying this is a last death -- gasp to save himself. these changes will allow them to save money, apply it to getting his message out. he's at five in the latest polls. the needs to make these major
changes to save the campaign that once had him as a clear front runner and is now struggling for survival. brendan: he won early in the money primary. were to step out, who gets that money, where does the money go? k: i do not think he plans to leave. he is still raising a lot. it -- kasush and case ich. they are thinking if they can hang on and improve they will be the establishment alternative. the party has always nominated the established candidates. standing at a ted cruz event in iowa that is not hewing
brendan: welcome back. i am brendan greeley. the buzz of the west coast has been amazon's surprise earnings in the third quarter. michael wolff talked about the company's huge primed a sales on "bloomberg west." they say it at a 2% which is extraordinary. not only do they make fun of it but they wonder whether it would have any impact. amazon saying they're going to keep doing it. they will have to do it every
year in the will have to do it even better next year to maintain that sales growth. brendan: emily chang joins me now. she will help us understand the highlights from the west coast. a lot of earnings surprises this week helping this rally today. is there a trend going on or broadly or have there been a couple of one-off successes? emily: i looked at what was available i did not want to buy anything so it was a huge surprise that that was of any consequence to amazon's profit. the big thing is cloud. aws you look at cloud, accounted for a lot of their income. we are seeing that repeated with google. another big cloud business and isrosoft where the cloud growing 135%. that is incredible. they're playing but they're
doing a good job of it. if you look at the sales of windows to pcs actually dropping, it is the cloud business that is placing a big bet that is growing. . did speak to satya nadella he said it is not about margins, it is about growing the pie. the other thing we're seeing is partnering with a lot of his competitors and that is something a wanted to drill down -- i wanted to drill down with michael wolff. michael: microsoft is opening saying we will be a great partner. all they're going to do is help drive their business forward as well as the businesses of their partners. emily: right now it seems like that strategy is working out for microsoft.
the competitive landscape is changing. l has done that huge deal. oracle is about to kick off its big conference here. oracle is wanting to play a big role in the cloud but certainly amazon, google, and microsoft really impressing wall street today. you step off the airplane in san francisco or oakland and the first thing you hear is we are moving to the cloud. exists.y it let's talk about microsoft -- google. big earnings today. at 718, came in at 735. what are they doing right question mark >> we are talking about that. it is confusing. we are talking about alphabet. they made some strong moves. dollars share
buyback. isy're doing a buyback, it $5.1 billion. the squarember is root of 26. that is another thing that is keeping investors very excited about google today. thank you very much, a lot of good news out of san francisco today. coming up in the next hour, where covering the jump in stocks to close the week. our guest is on at the top of the hour. this is the " bloomberg market day." ♪
from bloomberg world headquarters, good afternoon. i am betty liu. loss in aped out its year. china's decision to cut rates helping fuel that buying. the imf tells china that the yuan will join the fund basket of reserve currencies. what the decision means for the chinese economy and their status in the world. facebook shares are triple digits. companies are passing the $100 mark aztec shares rally. tech shares rally. hour from the close of trade. julie hyman has the latest and we are get i