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tv   Bloomberg West  Bloomberg  October 23, 2015 4:30pm-5:01pm EDT

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scarlet: i hate let's more news this afternoon. get first word news this afternoon. forecasters are calling hurricane protection or a historic storm, the strongest ever were in the western hemisphere. she is backing sustained winds of 200 miles per hour, and could impact millions of texas as well. it is a category five hurricane could bring coastal flooding, destructive waves and lifeless --ublican presidential
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destructive waves and floods. presidential candidate jeb bush is shaking of his campaign. lincoln chafee dropped out of the race earlier today. congressman paul ryan says it is a chance for a clean slate. the clouds of has agreed to run for house speaker now that he has the backing of his party. a formal election will be held next week. the first two items on his agenda, congress has to read the demo limit by november 3 or basic possible default. less lawmakers have to has a spending bill by december 11. if not the federal government could shut down. tragichwestern france a ending to what was supposed to be a day of sightseeing are dozens of retirees in the bus they were in collided with a truck to the city of ordo, causing the best to burst into flames. at least 43 people were killed. it is the deadliest road
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accident in more than three decades. that is your first word is at this hour. scarlet: thank you. on howet a pick recap u.s. markets closed. tech stocks rallied, and that is after amazon has google reported better-than-expected earnings. microsoft as well. sent out with highest level. the s&p 500 is no positive in 2015. it is no green for the year. the nasdaq has been positive and continues to build on that, of about 6% this year. the dow is still negative and this is on the back of china's interest rate cut at 7:00 a.m. this morning. alix: you had the easy become in and estimate really backing the idea of more stimulus. what is significant about today's of the s&p closed above its 200 day moving average. in the last year and has closed above that level three times and has rallied 1.4% since then. let's have it procure was about
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the fall of 2013. forad a sustained rally nine months. we have the central banks fueled rally the last few days. next week we have a third and the doj. cannot continue? alix: we have earnings from all the major tech names, positive earnings. the waye leading higher. but it is not all roses and sunshine. i wanted to give you dive into my bloomberg terminal. chart for me it is an amazing job. they were able to turn the s&p 500 earnings growth, which is now negative, you can see that on the right-hand side of my screen. the s&p is still rallying higher. the s&p winds of folding when earnings growth is negative. but we have not seen that. it is fueled by vivax, dividends, but what happens when they fall off, investors do not want that anymore. they want strength in the balance sheet. scarlet: they want organic
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growth, and buybacks are not organic growth. back to my terminal reality show you what is going on in hong kong overnight. this is the index futures that will expire on monday. can see the jump right there when china announced its interest rate decreased. they was a big spike announced the 25 basis points rate cut. the index, since it is low on september 29, the benchmark has rebounded 13%. alix: a correlation between central banks and -- earlier joe weisenthal spoke to our former chief economist and economic advisor george magnus. they discussed the huge selloff in emerging markets. would be rash to say that the worst is over.
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there are some countries for who i think there are's health very turf outeconomic there. countries like turkey for example. contrast you a look at a country like brazil is a how much pain can they go through? reality drop 65%, the stock market is down, and a lot of bad news. but i think the u.s. interest , how far the will tight, and how far they will go, that clearly will be another problem for finance. i think there is a lot of capital that could still leave emerging-market universe. there is another problem that i is financialering crises, which has not really come to light jet in this crisis we're going through. it is about hitting debt. has written about
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previous experiences that we have seen in greece most mexico, in the 1990's in thailand. the 1990's, when it was only when the crisis began to happen that we began to see exactly where some of the liabilities actually work, where we were hidden, and they can delay -- they came to life. i do not think we have reached the and a full financial disclosure. the other point that is very important is for emerging countries nowadays, i do not think this is like asia in 1995. the external and fiscal risk indicators for a lot of emerging countries are but nowhere near as bad as they were. there's no question in my mind that what many emerging trees have developing countries are going through is a growth crisis. i have lost that capacity to be
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put to follow through on that promise that we all thought they had for 20 years. joe: what will it take for them to grow? obviously massive consumption of commodities is seen as one driver of growth many emerging targets. everyone agrees that reading is not something that we can bank on in the future. what would be needed for some of these emerging markets to actually extend growth? about that is time. maybe more time than a letter investors have got patients with. havenk emerging countries basically run into a hiatus of growth. it is four years since the peak growth in emerging countries. 2011, now 2015. it may take another five or six years before we can get through to the end of this some of them have politically dysfunctional issues to resolve. there is no telling how long it will take to resolve the
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political dysfunction in resell or to see for example. some of them have political issues like china which is very lucky and transparency. which is very opaque and transparency. we do not really know what is going on. and a lot of the countries we have problems in commodity prices, they go up and down with the win. in the 2000,we saw that is not coming back anytime soon. or until such time as capital spending in and commodities is being squeezed sufficiently. actually, the key to regenerating growth in countries that have on conference or in the last 20 years only about robust institution and about allowing a little less state-controlled, it or market orientation. these are very difficult. any countries
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that you see you getting that right, moving for towards the market position, and you like the reforms you're seeing? is early days. i would not want to hang my hat on it. there are countries that i would look interesting. india looks interesting, mexico is interesting to philippines, vietnam, cambodia. they have a strong manufacturing and government policies that are basically quite encouraging and nurturing. there are a handful of trees that i think to look into emerging companies. today, the market might have already priced that, but those looked for.ave horses for courses. scarlet: part two of our conversation on china, coming up next. ♪
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scarlet: i am scarlet fu. it is time for the bloomberg business flash. some of the biggest stories in the news right now. germany is always feeling the pinch from the diesel emissions scandal with a $3.4 billion tax shortfall on the horizon. many are halting new projects due to projected duction tax revenue. more than 270,000 employees across germany. alix: a third straight unprofitable quarter for greenlight capital. they posted a third-quarter net loss of $220 million. the stock has dropped 24% this year. scarlet: amazon stock surge is hosting the founder of the list
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of america's wealthiest people. he trails only bill gates and warren buffett on her billionaire index. profitrted an unexpected . that is your bloomberg business flash. group joeier, arco in weisenthal spoke to george magnus. in addition to discussing emerging markets they also talked about china, and why they are getting so close with u.k. been cozying up to each other for some time. obviously, this year. the finance minister went on a date, let's - - -- went on a big, much publicized trip recently. the president had the invitation made in march of this year. there is something going on in the letter i like to bring the countries-- the
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closer together. the united kingdom has been china's preferred destination in europe for direct investment. we have had a number of projects in which the chinese capital has been involved. obviously now we have some publicity and some information about new projects, particularly in power stations, in which new details are being fleshed out. there is something a little bit different about this, which did not feel quite right. why is the british government cozying up to china in a way that the germans do not, for example? and why is it that china feels very warm about a relationship with united kingdom, which until quite recently they were very dismissive about an old empire that is decaying and relatively insignificant and so on? this has been quite interesting. my personal view is that a lot of this has to do with london and the ambition that the city
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of london can help china realize with regard to its goals for its currency for the team. joe: what specifically are the goals, and more specifically how can they help them realize those goals? >> the avowed goal of the chinese leadership is to internationalize the yuan. china is the world's biggest exporter. it soon will be the world biggest economy. it is only fitting. they understand that they realize and acknowledged that it should be right that the yuan should playfully -- play a .igger role in world finance they have a big issue in the dollars dollars of financials around the world. anything that would help the yuan to be more widely traded.
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london has already had china's permission to become the major western financial center for clearing supplement trading. studynnounced recently a which should link the london, shanghai, and the stock exchanges. but there is also a program which has recently been announced that is about to get underway or the chinese sovereign will issue yuan denominated bonds in london. these are all a part of china's ambition. aboutad ambivalent views becoming a reserve currency, but they certainly want to point a bigger you want in print global finance. i think that london is a place to get it done. u.k.and from the
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perspective, is there potentially a lot to gain from being at preferred destination for china? >> yes. -- the london would financial services, they all go hand-in-hand. it is not always financially the premier center. but i think that london would definitely gain from it. in the financial services allowing a new and much more expensive all chinese be to thethink would city's benefit. preferredion in a destination for direct investment. what is the appeal there, especially as you had said the case fading and relevant? i think that china likes the idea that the united kingdom and i kind of conduit to the eu.
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-- andll come injured- dangerously fun have to assure them. i think that would have to be seriously rethought. with the regulatory environment is agreeable. we do not have a big brother chinese orery single foreign investment into the u.k.. the united states is an agency that does this, the other countries in europe do. it is more liberal, it is english-speaking, it is hard and inherited culture in this economy that has been welcoming foreign investment. george magnus.as what was interesting was that he had kate middleton and the royal during the visit of xi
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jinping. thisress went gaga over caterers were in chinese red. a charm offensive. alix: a point of how these are intertwining. match up, a price niche -- mismatch. -- fascinating story and the commodities world.
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alix: i am alix steel. what did you miss? falling even as production levels are in a deficit. frank kaufman is a senior economist at ihs. how does that make sense?
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they should be rallying. >> of the last 12 months we have a surplus of 200,000 metric tons. that is due to production increasing in china. slowing consumption growth. that is mainly been focused on emerging markets. but china in particular. we have some large mines coming off line. the largest in australia closed in august. and one in ireland is closing in november. we also have the notes glencore closings. that is about 4% of global production. alix: if you have a production off linei going from you should be seeing the rally.
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so what gives? >> it takes a little bit for to permeate through the supply chain and into refined zinc production. that will take a couple of months we actually seeing the past three or four months showing deficits. at zinc you take a look prices and weight glencore announced those closures, you did see the stock pot higher. since then, they have given back about half of that client -- price gain. what does that tell you about with the market believes? >> there has been a souring in market sentiment. that speaks mainly to concerns about global consumption. and also, roughly 5% of the cost curve is actually underwater. a way that prices
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can go down before you start to see a lot of producers start to take action. and actually, just the other day they announced that they will be taking advantage of the production cuts by glencore. they are actually increasing production. all things considered, the market is maybe thinking that this tightening and the market will not be so severe. alix: glencore takes money off the table, and other guys don't been. particularly her thing in the market has been the inventory that we have been. the rumor and the chatter has been glencore is liquidating some of its zinc stock and putting it in inventory to raise cash and what do you think about thesis? >> it is a thesis that is certainly what the market has been thinking. that has accounted for the downward movement in prices actually saw this unwinding as
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visible inventory in earlier in the year. that started a minor rally that brought prices up front close to $2000 in venture time in january 2 peaking just about 2400 in late may. what really happened there was a shifting of inventory to warehouse. we are starting to see that hard to the market. i think that a lot of the tours are misinterpreting the as the market being a little more surprised than we originally thought. but pretty much it is the same situation as it has been throughout the year. you. thank we wanted to get to the bottom of why this does not make sense for a long time. do not go away. we will have what you back. ♪
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scarlet: i scarlet fu. do not miss this. next week china will announce its five-year plan. top officials will announce what they have in store for the next five years because they plan five years in advance unlike some other countries. c will present a plan next week and that will be a big focal white. alix: and what we will hear from the doj as well as the fed as they have a huge meeting next week. production numbers, will come out the day before. that will be key for this country. exports have been weaker. they have been worried about overproduction issues.
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it will the fed may be, not have any press, so the odds of a rate hike are not factored in. alix: and we want to know what they say.
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>> with all due respect to lincoln chafee, governor, we hardly knew you. ♪ greetings and salutations. the birthplace of glenn miller, who spent the day to day with two of the top republican candidates, including our i will pull leader, ben carson. also on the show, i will poll standings with rooms in ted

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