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tv   Bloomberg Markets  Bloomberg  November 5, 2015 12:00pm-2:01pm EST

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good afternoon. here is what we are watching at this hour. been on a net position tear lately. its latest stop is home away. scarlet: another a decline for valiant. shares taking a double-digit decline. alix: mark carney telling the world that he is holding steady on rates. scarlet: we want to get started on today's market activity. julie: we have been bouncing around already in the session. i think people are waiting for
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earnings and other individual names that are moving. all three major averages are trading lower right now. overall, not big declines. even this has been volatile with different groups sort of lagging and leading, depending on what 10-minute interval you are looking at in this measure. materials are down. energy down. financials doing well. at one point, information technology was higher. it has been anything goes today. one thing consistent is the drop in valiant. valiant in the news once again today. a number of little things is contributing to the decline of the stock. earlier, it was down as much a 60% -- 60% to 17%.
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there -- there is more talk on capitol hill about coming down on drug artsy practices. we are seeing others the shall to pharmaceuticals and biotech firms also declining. endo pharmaceuticals were out analystnings that beat estimates. is standout however facebook. that is because facebook shares are at a record after its block buster earnings report of 5%. billionw, it is a $300 company. alix: it was hard to find something to be negative about. another thing is currencies. we heard from mark carney.
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pounduld think that the would be rising. he said it would be prudent to expect a rate increase in 2016. the we are seeing the pound declined because, earlier, he talked about the risk of a stronger pound. and we are still seeing, in terms of what is priced into the market, the expectation that, if there is a rate rise in 2016, it will happen later in the year rather than earlier. thelet: let's check in on news. mark: the possibility that a bomb caused the accident of the has caused an increase in security and in israel -- in egypt.
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theussia, the first of crash victims were laid to rest. all 224 people on board that jet were killed. details of the sweeping pacific rim trade deal are out. it is hundreds of pages long and lazar plans for the handling of trading everything from zinc dust to railway sleepers to live eels. it also sets the stage for extended debate in the u.s. congress before ratification. the effects of el niño are certain to reach the dinner table. global food prices climbed nearly 4% in october, the biggest jump in three years. there are supply concerns for everything from new zealand milk to sugar in brazil and southeast asian palm oil. new phase of donald trump's presidential campaign kicks off
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today. he will begin airing radio ads in the three earliest voting states, iowa, new hampshire, and south carolina. this marks the first time he has spent money on paid ads since launching his white house bid. aboutam says the ads cost $300,000. for the first time, dark -- father talksh's about the effects of his son and dick cheney. he says dick cheney had "his own empire." and he calls donald rumsfeld arrogant. scarlet: the bank of england today cutting its inflation forecast across the board once again. officials voted 8-1 to keep levels at a record low.
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>> growth in advanced economies has continued and broadened, particularly in the euro area. the company nonetheless expects that the overall pace of u.k.-weighted global growth to be more modest than we had expected in august. risk,mained downside including the abrupt slowdown in emerging economies more broadly given high-level's of debt. now is billg us blaine, a strategist at mid partners. a very dovish statement. the market doesn't see a 50% chance of a rate increase now until august of 2016. do you feel that the underlying economics support this kind of a vicious/-- this kind of dovish ness?
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bill: yes. or we can do is wait for the u.s. to give the lead and see what the effects are going to be. a u.s. rate hike is likely to be negative on sterling, which is going to cause elements of inflation back here. but in some respects, the u.k. is doing better than the u.s. when you measure things like a rates, services inflation, average early earnings. all of that is better than the u.s.. so is that totally punting to the janet yellen? is very true, if you wander around the streets in london today, there is an awful lot going on that we can see. but the rest of the economy is only just picking up. there are other parts of the u.k. that aren't so strong and it is beginning to happen. there is also a much greater reliance on issues such as the and any change
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in interest rates would cause a very strong knock on effect. that said, there is no pressing need for the u.k. to have an interest rate hike now. so think carney is quite right to continue, as we see here, knock it on the end. scarlet: if the fed continues to hold off, is there risk in the boe going first before the fed? bill: i think it would be highly unlikely. but who knows where we will be in six months time? if the fed doesn't act soon, the effect on the markets will be increasingly negative. one of the things that people aren't talking about as much as they should be as the effect of global low interest rates. i think the fed is one of the first central bait -- central banks to acknowledge that, when rates are so low, it generates
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all sorts of negative economic effects. if ratehe things that hike will do is an effect on confidence. people will see that the economy is starting to improve. as soon as people think so, it starts to happen. so the effects are underplayed. i do believe that the u.s. will hike first. scarlet: so there is a self-fulfilling prophecy there. you are skeptical of the bullishness that investors are feeling towards the banking sector. bill: the european banking sector is a socially since the crisis. there has been an awful lot of since the unrepaired crisis. there has been an awful lot of work. we still have an awful lot of
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measures that are going on that essentially leave the banks unrepaired in a way that isn't true of the banks in the u.s. in the u.s., we have enforced recapitalization. we had the very brutal turnaround in nonperforming loans. banks were forced to deliver very quickly. that hasn't happened in europe. but we see his banks now being hit by the effects of very low interest rates. an awful lot of them still have very high end -- high in peels -- high npl' that are hidden in theirs books. the big started today is retail in france. but there is others as well. scarlet: obviously a lot to do for big banks. thank you for joining us today. alix: coming up in the next 20 minutes, expedia purchasing home away for $3.9 billion. will this acquisition help the
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vacation rental company fend off competition from airbnb? scarlet: shares of valeant taking another dive today. alix: more on the bank of england rate cut. we will hear right from the source, chairman mark ernie gives an exclusive -- mark carney gives an exclusive interview to bloomberg television.
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alix: welcome back. scarlet: let's head over to the markets desk. natural foods grocers are going in different directions. whole foods are coming up with numbers that missed analyst estimates. reporting its first declines.
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forecasting earnings for the year above analyst estimates. that is after the company's third-quarter numbers beat estimates. it also sees comparable sales in the fourth quarter rising. a $150 millionee buyback. at least that is the plan. at's see what is going on whole foods. first of all, my wanted to look at the stock action over the past 24 hours. when earnings came out, the as 6%.old as much as you can see, it has been recovering as we are heading into the session. but we did see that, sales decline, which is reversing what we have seen over the last several years. this goes back to 2009. we have seen an uptrend. a lot of competition from mainstream grocers, cheaper grocers offering organic foods. expedia has agreed to
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3.9ire home away for about billion dollars in cash and stock. home away features more than a million paid vacation home listings. the shares climbed to as much as $40. the deale away hopes will bolster its position in the marketplace. how much does it have to do with rising competition from airbnb? ceos ofang spoke to the both companies over today. emily: yes, i did ask a lot about the airbnb factor, if you will, in this interview. these two companies have been partners for a couple of years now. i wanted to know why they decided to make this acquisition now. but take a listen to my ceorview with the expedia and the home away ceo. >> we have been very much
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attracted to the home away inventory. home away has unique inventory. we always felt that his inventory that would be attractive to our travelers. so we have been working together for two years now come integrating some of him a inventory into destinations, especially resort type ski destinations where the inventory we think would play well. i think the teams respect each other and certainly our travelers proved to be pretty interested in the supply. and that led to today the company's coming together. emily: brian, you and i talked a few times over the years. you have been upfront about to the competition, airbnb. i'm a user of both companies, for the same thing, short-term occasion rentals. the immediate row at -- the mere reaction to this deal is that you guys are trying to stem the
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threat of airbnb. ?ow do you respond to that always important to stay on your toes and worry about competition. we have competition from lots of other companies, too. priceline is in the business. trip advisor is in the business. frankly, our greatest competition comes from local competitors in the various countries in which we operate. sure, this gives us probably a little more strength and firepower vis-a-vis airbnb, but i think the big business news for us, besides the combination, is the fact that we were going to announce if this deal didn't go through what we announced last night, which is that we are shifting our business model. i think everybody knows that we are taking our business fully online by the end of 2016. certainly airbnb coming into the marketplace has something to do with that. they have proven that consumers like that type of booking experience. so we are going to get there
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very rapidly. we also announced yesterday that we are going to be introducing a traveler service fee, which is something they do. to tell you the truth, most people don't appreciate the fact that home away bookings in the space are well ahead of airbnb. they are bigger numbers. but our take a rate has always lower because we, on average, charge about 3.5% and airbnb is in the 10% to 12% range. with that business model change, it will change the economics of home away. the up at this for this deal ush expedia is more about just building a better company in the space we already operate. the vacation rental space is still a space where we are the leader in. if you go to vacation markets, you will find far more inventory for home away than you do for airbnb. couplefocus for the next of years is doing an even better job in that space. does this create an additional opportunity for us to go into urban markets? we think it does.
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expedia has a lot of demand for urban markets and we have a company, and operating machine that can bring an individual homeowners. so i think we will get more aggressive there. but airbnb was not really the main reason why we did this deal. , how do you think about that? airbnb has a bigger market? kill brain cells comparing valuations. like brian said, with private , we have a small group of investors who get to choose how much they are willing to pay for a company and airbnb is a great company. they built a terrific brand. it for them. i think the public markets are much more efficient. you have to prove your value every day. i think if we do our jobs, our valuation is a combined company will be higher. that is what we can worry about. that is what we control.
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and hopefully, that is what we will accomplish. emily: will we see you doing more deals, dara? dara: we are constantly looking out there for opportunity. obviously, we have done a lot of deals. my guess going forward is that there are deals that will happen for this covenant, although i think we will take a little bit of a breather here. also told me there will be more consolidation in this industry. one of the interesting things we .alked about was partnerships home away already has a partnership with over -- with uber. would they ever do a partnership with airbnb? brian said yeah. he said the inventory doesn't overlap that much, maybe 10%. so i thought that would be interesting that they would consider partnering with the main competition. scarlet: thank you so much.
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if you missed anything, tune in at 6:00 p.m. eastern time. alix: it is shaping up to be the worst year for earnings in six years. we will tell you what is behind that slump.
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scarlet: welcome back. we will get another wave of quarterly earnings. investors may not want to hold their breath. we are looking at what could be the worst earnings season since 2009. i feel like we have been hearing that every quarter. scarlet: but it doesn't pan out. but this time it does seem to. more than three quarters of the s&p 500 have reported results and profits are down more than 3%. that is the most since the aftermath of the financial crisis. insight isth some michael reagan. thirdquarter since
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quarter 2009. what happened all the share buybacks? mike: it would probably be worse if it wasn't for the buyback. like you said, it is the drop in profits. still wayofits are above where they were in 2009. but we had this robust rebound from the session where profit growth is super strong for a long time. now we are getting later in the cycle and it is getting harder to increase earnings. energy, of course, is the biggest component of this. it sort of spread to all the other sectors. the only major sectors with growth our technology and telecom, health care, consumer discretionary. pretty much all the other major sectors are down a little bit in year-over-year profit growth. that said, it was well advertised that this was going to be a bad earnings quarter.
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scarlet: what about the dollar? we have seen rapid appreciation in the dollar. we are coming into 2016 where we could see hedges rolling off. have companies really felt the impact of the stronger dollar 100% through earnings? mike: i think they have seen it us far as it has gone so far. the wildcard is how much stronger lingo? the dollar has sort of -- stronger will it go? the dollar has sort of gotten stronger. it is still a head wind, but not as bad as if we were seeing this unbridled acceleration. to me, the big story for the earnings season is the damage that can be done to earnings just from the volatility in the markets that we saw. -- most sectors are beating here they are feeling a little bit better. their earnings are a little bit down but they are beating
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analyst estimates. financials is the one group out of 10 that is not that missed as a group. by pretty significant amounts. it is sort of the same story through all of them, the insurers, like aig, metlife, hartford. they really had problems with investments in the third quarter. companies like franklin resources, the wall street banks had problems with trading. kind of set the tone for the rest of the earnings season because they set things off. mike: thank you. alix: valeant shares falling off it cliff. now what? we will have analysis.
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alix: welcome back to bloomberg markets. scarlet: let's start with the headlines.
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mark: egypt's chief of civil aviation says his country's airports comply with all international security standards. his comments come in the wake of last month's crash of a russian airline that crashed after taking off from a small airport. chief andt security two other officials have been fired. britain is suspending flights in the region, speculating that a bomb brought down the airbus. thatt can officials call an accident. egypt's president will discuss the crash in london today with the british prime minister david cameron. islamist extremists have claimed responsibility for bringing down that plane. a new poll shows that the majority of americans have doubts of american plans to stop the islamic state.
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3 million more refugees are expected to reach europe before the end of next year. that is the latest projection from the 28-nation european union. that will deepen a crisis that is already overwhelmed at border points. more than 700,000 people sought say sure this year. many of them are fleeing syria's civil war. recognizee u.s. does not artificial islands as an island territory. a decision by mexico's highest court could move the country toward legalizing marijuana. people growet's or pot for their own use. that is a major shift from the nation's major drug laws. activists say those laws should
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be's to defuse violence. since the government crackdown nine years ago, 700 people have died and 25,000 more have vanished in drug-related violence. you can get more on these and other breaking stories 24 hours a day at the new. -- the new bloomberg.com. 's freefall is picking up some speed. valeant has been under pressure over how it prices its drugs and it's relationship with fellow door. scarlet: the drop is painful lost 50% of have their value three months ago. worth $26 billion. any specific catalyst for today's drop?
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drew: a number of things happened yesterday that are some of this.ng the news of congressional .nvestigations there was an article earlier this morning in the wall street journal say, at some point, bill ackman, the company's third biggest shareholder, he has been a massive defender of valeant, and had at one point or another been dabbling over -- he made comments publicly. that they, he decided are doing what they need to do, even though ackman doesn't think he is a good communicator or a public face of the company in the time of crisis. but you look at the shares today. it is probably the accommodation of factors. there were down nearly 20% at
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one point. it is just a stunning last several weeks for this company. alix: at what point will bill ackman be forced to sell his stake? you can say, it is down so much, why would you sell here? you see other fund managers dumping out of the stock. drew: that is something only bill ackman can answer. b has been defending the shares and his investment as best he can over the last couple of weeks. talked an issue have little bit about before. the shareholders are pretty concentrated at the top. anothere in -- there is -- a number big holders who said, if they decided enough is enough, they have had enough of where the company is headed, they have the power to force action. obviously, they haven't done so. mike pearson is still there. the company is continuing on its current course.
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but that power does exist for these people to use if at some point they decide that is the remedy they want to take. scarlet: there is a lot of drama going on. i wonder how much of it is a distraction to the company. it cannot pursue its usual m&a strategy of buying companies and adding to its currency. drew: this company has been all about deals, finding assets that it thinks are somehow undervalued in the market place or that he can do a better job with picking them up, folding them into valeant, cutting costs, all the things. now they have a lot of debt. their currency for acquisition is sears they devalued, which is harder and harder for them to do a big deal. they are not really in the midst of doing anything right now because of that as far as we know. alix: i love that, your stock is your currency.
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it does use a lot of money on r&d. at one point do those become under pressure? drew: the question on pricing pressure we are seeing, washington coming in and saying we want to know how you price your products, and this thing with phil a door at the pharmacy pharmacyhilidor at the , the government is putting pressure on your business model. the insurers who pay for your products are putting pressure on your business model. your stock is under massive pressure. a lot of the things that were the polar of stability to operate and be highly profitable are under attack from many different sources right now. this is an issue where it is not just one thing at valeant. it is a lot of things happening at once. scarlet: this is the story that keeps on giving. it is and him believable soap opera. and it's not hard to understand why some people would consider a
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change at the top. you have to have the guts to change strategy completely and mike pearson may not be the person to do that. drew: it will be an interesting next couple of weeks. nextet: coming up in the 20 minutes, we will bring you more of our exclusive interview with bank of england governor mark carney. investors loving facebook's robust third-quarter earnings. ♪
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scarlet: it is time for the
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bloomberg business flash. the number of americans filing front employment benefits climbing to the highest level in five weeks. according to the labor department, last week's applications increased by 16,000 to 276,000. right now, economists are looking for an increase to 182,000 nonfarm payroll additions. work report activity unexpectedly grew in the third quarter. the increase flex a slump in an hour's work by self employed americans. the output per hour increase to 1.6% on an n.o.i. rate. but quarter on quarter, the activity trend is still lower. traders in the euro-dollar market are increasingly taking their cues from mario. -- mario draghi and a janet yellen. respondentsof april draghi is therio
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more important driver of the euro in this quarter. you can always get more business news at bloomberg.com. alix: let's take a look at how global markets did today. we saw stocks climb after janet yellen boosted the dollar. chinese shares entered able market. however, one japanese stock that is int have a good day doubt. reporter: the drop added to wednesday's loss in the biggest intraday plunge since it listed in 2006. it will this continue the use of its airbags. mitsubishi may do the same.
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and the grandson of the company founder is now acknowledging a risk to the company's very existence. thelet: now for a look at european markets. stocks falling for the first time in four days, although the index in germany and france still ended higher. the ftse 100 coming off of its lows after the bank of england mark carney said the market should see a rate increase next year. manus: mark carney and our editor-in-chief got together with their news briefing. growth will be lower than the market had expected. this is euro against sterling,
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euro rising. inflation will be lower than the market expected. spread is-yellen and widening. stocks finish the day lower. you have the euro rising. you have sterling dropping against the dollar. these are the big global stories that will reverberate for the next 24 hours. but when it comes to individual stocks that has caught the markets attention, it comes to the french banks. we have a couple of interesting moves. what you've got here is profitability rising on the retail business. that is making up for the slump in the trading business. they raised the return on equity. you have banking under pressure. the french banks very much and focus today at the european close. one stock worth bearing in mind is adidas.
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they are going to shed 14% of their employees. the numbers beat. they raise their guidance. they say their margins are getting better. and that is what the market likes. theling on the move as carney-yellen spread widens. alix: for a look at u.s. markets, abigail has the live news. have a go -- abigail: biotech is the news. technology is trading off almost 2%. this index is up about 8.7% year to date. that in their art to official bear markets. in there are two official bear markets. stocksave a look at two
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dragging down the biotech. shares areational all significantly. one analyst said it could be what she is calling "the valeant valent affect." another stock off big today's celgene. they put up a mixed quarter but missed. gilead,iogen, and investors may at this time be taking chips off the table. scarlet: thank you very much. all markets took notice at the bank of england's vote to keep the official rate at a record low 0.5%. the news sent the british pound tumbling to new lows since september. scarlet: mark carney spoke today
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about the uk's disposer took -- exposure to the u.s. mark carney: the uk's ch more exposed to europe than to the united states. we took down the medium-term prospects for emerging markets, including china, to such an extent that it actually has an impact on our forecast. if you look at u.k.-weighted growth, our forecast has gone down by about three quarters of a percentage point over two years. that is the cumulative lowering of foreign demand for u.k. products. presently because of emerging markets. , thee the chinese economy rate of growth is slowing to about 6%. so certainly china is at the center of this, but this is not just a china story. reporter: when you say best the prospect of banks
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inside china, financial stability abroad, how much do you worry about how much bad stuff is on the bounce sheets of chinese banks? have arney: anytime you sharp increase in credit as you have in china and more broadly somepan and asia, at point, there will be an uptick in nonperforming loans. we haven't yet seen that. the increase in private credit, the increase in aggregate credit actually in china has grown two times in the past five years. and as the economy slo and nominal growth slows in china, and to put a figure on that, chinese nominal growth was about aftermath immediate of the crisis. it has slowed to about 6% at present. the dynamics get more difficult. one would expect that there would be an increase in nonperforming loans and banks would have to adjust to that. reporter: do you think they are measuring it correctly?
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mark carney: the loans actually have to start not performing until you measure them. chinese banks have a very strong capital position. i think the chinese authorities are aware of these risks and would take appropriate action. but there is a process of adjustment. and through the financial sector is one of the reasons why we think growth will slow. reporter: are there any other emerging countries you are worried about? mark carney: as a whole, there are a series of issues. latin america has slowed notably. there is a few dynamics year. one, we all know that the commodities super cycle has come to an end. so there is a trade shock for a number of emerging markets a has an impact on growth. the shift in capital flows has been market -- marked over the past years.
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reinforced by advanced economy monetary policy. but that is also having an impact on growth. and then just the case of structural reform and productivity growth in these economies has slowed in the last couple of years. country liken a brazil, structural reform hasn't happened. whole, and: as a this is a familiar tale, that, when capital is flowing in, credit conditions are easy, and one can delay the site is of things. now the tougher decisions have to be taken. the thing to underscore -- our assessment is these are not a series of idiosyncratic issues. they are broader issues. that is why we made the bigger adjustment. reporter: one less thing about china, you always look forward to rebalancing as the chinese economy moves towards services. it moved towards consumers away
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from its export-led model. it seems to be happening in some provinces that it doesn't necessarily seem to be a good thing. mark carney: i think it is a good thing directionally. i think it is positive. we are seeing a pickup and services. that is one of the reasons why there is a bit of a breakdown between historic relationships between industrial production, commodities, and chinese growth. last month deposit ceilings are positive. that will bring this rebalancing. in the medium-term, it will bring a more sustainable rate of growth in china. largests the second economy in the world. these processes never proceed smoothly. and we always have to deal with the bump in that comes with it. alix: that was mark carney speaking exclusively with john nichol quade.
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it was an interesting and in-depth interview. scarlet: facebook's growth is surging answer has the stock. but is it out of hand? we will discuss. ♪
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alix: earlier, we were talking about disappointing earnings, but that is not the case for facebook parent hitting new highs after delivering it another solid quarter. 41% jumpfacebook site in revenues thanks to the strength of mobile ads. mark, you now see the stock going from 132 105. what accounts for the target increase? about 3%, 4%, 5% better than we thought. we are looking at this belmont's
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out at 2017. we think with 35% sustained growth, it warrants it. hard is it to value a company that seems to be on its own? it is hard to compare to any other company in the space. mark: i think that's right, but i have one answer for you, which is google. but not google today, google back in 2007 in 2008, when it, too, was seen this kind of 50% revenue growth in its core advertising business. so there are historical comps. scarlet: you look at margins, too. you say they are really high. although they may come down because of increased on facebook spar. why is increased investment a good idea at this point? mark: it still should be early
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stages for facebook. just to step back, it is only about a quarter of the size of google in terms of ad revenue. to a lot of the same and markets the google has. so there is potential for the company to be a lot bigger. instagram,tising, they have this mess -- these two massive messaging platforms. and there is potentially this playoff of virtually -- virtual reality. there should be investment priorities. they are correctly in our view spending against them. alix: they have seen german's revenue growth. they are able to spend the money because they're making so much money -- they have seen tremendous revenue growth. they are able to spend the money because they are making so much money. it is true that most
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international markets will not monetize as well as the u.s.. that is what causes the growth to fade if there are not new growth areas like video or instagram. they've got over 1.5 billion users. that user base is probably not going to dribble. it is probably not going to double. it is growing midteens year-over-year. so there are really large number is our care. scarlet: thank you. coming up in the next hour, we said down with the outgoing ceo of cit group john stain. find out what his next challenge is. ♪
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>> welcome to bloomberg market. ♪
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scarlet: good afternoon. here is what we are watching at this hour. how are the market filtering out the noise? we will put the question to a panel of experts. a new star wars film is opening soon. should beuarter smashing. we'll have a preview. alix: a reflection on the financial crisis and what risks still remain in the system. julie hyman has a check of the markets. julie: i do not know how she will take it when we get closer to the movie. >> my brain will literally leak out of my ears.
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>> we are seeing a mixed picture today and we have fluctuations. right now, the s&p is higher than lower. it has been bouncing around in a tight range, pretty micro-focused on individual company news and earnings as investors await the jobs report tomorrow, which should be the macro driver of market activities. we have been looking at individual stocks here we heard alex and scarlet talk about facebook and i want to emphasize the move we are seeing in stocks because it is impressive. cap of $300 market billion following the earnings report. here is facebook in white. up 190% or so since the public offering, $38 in may of 2012.
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you have here the s&p 500, up in the neighborhood of 60%, and the nasdaq 100 up nearly 90%. facebook outperforming the nasdaq 500 by about 100 percentage points. it is astonishing. we should mention another couple of records today. amazon alphabet both trading at records and they have been on a winning streak. really doing quite well. is you have facebook, amazon, netflix, and thele that have really led way higher. >> yes. it is not happening everywhere today. you look at qualcomm, the saleslogy forecasting that missed analyst estimates. it is seeing more demand for lower priced smartphones and a
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chipset power those smart phones, but it has a huge licensing business and in china, it has had a hard time negotiating on prices for the licenses. the shares are down by 14% today. that is the counterweight a little bit. it is not like -- [laughter] scarlet: thank you so much for the latest market check here let's check in. mark crumpton at the news desk. mark: the country is ready to ensure the safety of armed tourists. the comments follow britain's decision to suspend all flights to and from the mount sinai peninsula, where a russian airliner took off on saturday, october 31. the plane never made it to st. petersburg. militants claimed they brought down the plane but are not saying haupt are the egyptian leader says british experts looked for security 10 months
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ago and were in his words happy with what they found. those who want to study the fine print of the pacific rent trade deal have the work cut out for them. 30 chapters and hundreds of pages long. the document was released online today. the deal must still be ratified by the u.s. congress and 11 other countries. food prices are up across the globe and el niño is partly to blame. the report detailing an index of 73 food prices says supply concerns pushed cost up by 4% in october, the biggest jump in more than three years. representative's past highway funding bill today were giving paul ryan his first legislative victory is house speaker. removesslation transportation process for six years but only provides transportation for three years. we just completed work
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on a bipartisan highway bill that cuts waste and prioritizes good infrastructure. it will help create good paying jobs, and it is the result of a more open process. the bill also revives the u.s. export import bank. it's charter revised in june. the senate passes own version of the highway bill. the national toy hall of fame of two that -- of 2015 is out. twister, the puppet, and the super soaker. last year, green army men, the rubik's cube, and bubbles, including barbie, frisbee. that is our first word news right now. get more of these and other breaking stories 24 hours a day at the new bloomberg.com im mark crumpton. scarlet and alex, are you ok now? scarlet: do you know what a viewmaster is? i did not know what it was
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either. you put in front of your face mark: well. scarlet fu is knowing her toys. scarlet: showing my age, really. it could be the worst earnings season since the first quarter of 2009. you have stocks trading at the highest levels in three months of 13% from the august low. is the president -- of blank cap -- of capital. the we take a look at earnings picture right now, you are looking at real corporate profits right around those record highs. have we seen peak profits? >> corporate profits are running at 1.28 chilean dollars. the third quarter just ended september 30. 220 companies just reported earnings and revenue are down 20
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5% due to two sectors, energies and metals. without that come earnings revenue would be higher. been talkingave for years now, our investors still willing to look past that? >> come it is are doing record amounts of financial engineering. earnings but it can impact earnings per share to a level never seen before. any: do buybacks by economic value? people who invest in stocks might have a higher net worth but does it trickle down to the economy? josh: they are concerned about what the financial stability situation might be. if people are borrowing low and might buy back shares and deflate the prices because of that, the fed has to take a prudent approach and think, that is a tale risk we have to avoid and that is why they are so eager to get off. u.s. companies now make
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third in terms of market cap. i wonder how much of the swelling we attribute to the fed's easing monetary policy. >> valuations are slightly stretched spending the night states. the value of all u.s. companies combined is $24 trillion in that compares to around $65 trillion globally. u.s. companies represent 36% per we have 4.5% of the world population and yet our company's ribs and 35% of global economic value. >> if you look at aggregate numbers, i am sure you will find interesting statistics on the composition of the value. a service-based economy rather than manufacturing and you compare how that is changed. that growth has been consecrated in services as manufacturing has moved off shores. is a great point p or corporate profits as a share of gdp, talking about how the money filters down to the people. it is right around record highs.
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why isn't gdp better than when you look at corporate profits? qwest corporation's are not the economy.g as the u.s. qwest corporation's are not people? what i will not get into that. u.s. corporations have been a part of the broad expansion into global markets and so more and more of the profits have come from abroad. that is why they are able to expand. they are basically outsourcing some of their growth. for corporategh profits to increase. an aging trillion dollar economy. corporate profits run a 10% of gdp. those are record level. the average is 6%. corporate profits are very high in the big discussion is labor getting their fair share versus shareholders. scarlet: do you think other central banks to loosen the fed moves toward normalizing? the other countries portion of
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equity values will start to decline by comparison? classic will happen. the dollar rising like it has will impact corporate profits. we will see that in the fourth quarter. we have had a dramatic increase in the dollar strength in the last week or two as rates have risen on the short end. you have to look at what the two-year treasury yield has done versus the two-year boon. alone out has totally in the last few days to what are the economic ramifications of for gap over the long term -- from an economy perspective? dopeople expect the fed will verge, if not now or december, but the coming months ahead. the european central bank is expected to be lower for longer for a considerable amount of time. you have got to remember there is another force here besides
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monetary policy and that is regulatory concerns. in response to the financial crisis, there has been a huge more high-quality liquid assets. it is hard to find an asset that is more liquid and high-quality than short-term government debt or that is another factor here. in terms of darling at the two-year point, you think about the most important borrowing rates we have in the economy for households, they tend to be a little longer term and that is where the question of what happens in the short end versus the long and starts to come in, which is complicated. that mean demand for german -- german bund's will increase because the european banks are under so much pressure to increase their capital? the second think that is what you're seeing now. goingt: even more so forward? >> to the point, how do you possibly deal with getting good returns in that environment question markwest you a negative rate. we could get more negatives. it is already -35 basis points.
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to buy that with an expectation of a return is pretty difficult, particularly because you know some of the people you are competing with as investors are not making a purely economic decision. they are not just looking for returns. they have restrictive requirements and ratios that they need to maintain. i want to ask about health care spending you included a chart about how the u.s. accounts for half of global spending, at least compared with the rest of the world, the u.s. spends almost as much as any other nation just in terms of public spending. a lot of shifts in health care spending now. act, thell care companies are still making changes from that, drug companies may result in changes politically, and a lot of m&a in the sector. will any of that move the needle on a chart like that? >> the united states spends around 7% of gdp on health care. you look at other countries and it is so much higher.
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the numbers should get lower and most of the spending is in the last couple of years of their life. that is where it is very expensive to keep people alive. those are the alix: rules and laws of the united states. alix:he brought up -- alix: you brought up health care. it leads me to valeant. we know the market has been under stressed that we have seen glencore and valiant really exhibit all kinds of stress in the market. what kinds of >> are we seeing in the credit market? valeant has around $30 billion of debt, high-yield bonds and loans. less than a point today down, versus a stock down plus or -10%. bonds are ewing -- yielding 9%. today.e down 1-2 points credit holding better than
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stocks in some capacity. a great pleasure to have both of you here. much more is coming up in the next 20 minutes. ap of disney earnings after the bell. alex will be with it. alix: and what the fed will be watching closely. scarlet: and a startup created for mothers looking to return to work. the best and worst maternity policies out there. ♪
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alix: welcome back. it is time now for the bloomberg
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business flash, a look at some of the biggest business stories in the news right now. twolet: a jury convicted traders of rigging a financial benchmark. anthony allen and anthony who both worked at the london office are accused of being in a four-year's game. they were found guilty of all charges. considering whether to open a new criminal investigation to volkswagen after the carmaker said it found faulty emissions readings in gasoline powered vehicles as well as more diesel cars. volkswagen admitted diesel admissions cheated 11 million vehicles worldwide. a decision on a new investigation could come by next week. scarlet: georgia officials are ready to propose tax breaks. ge is nearing the decision on whether to leave its connecticut home of nearly 40 years. a new budget is raising taxes on companies and wealthy individuals. in new yorkaders
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and ohio and texas are also leaving ge. always get more business news at bloomberg.com. alix: let's head to the market desk julie:. julie: talking cyber security. withompany came out earnings and assessments but also cut its forecast for the full year in terms of goings and its loss per share, which will be wider than estimated. the ceo talking in a phone interview with bloomberg news said there is a cyber low in the threat landscape, chinese peace treaties with the u.s., germany, and the u.k., and also that the temperature is changing downward in some clients appetites. the most painelt in the european business. those shares are down sharply by 23% and we see the pain spread throughout the industry's wealth or look at some of the other cyber security stocks and how they are trading.
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all of them have the cyber security businesses. that cyber low as it were not ofecting the last quarter that company. be analyst estimates. it benefited from increased corporate spending to protect against hacking. not huge gains but notable given the decline we are seeing in fire eye. the company is also saying it is pending sale of its veritas division, the data storage division ii carlyle four $8 billion. the closing of that is on track to the company said it received authorization as well to accelerated buyback, $2 billion worth, or at least a r and to shareholders, $500 million in buyback form. supportalso helping their shares. >> interesting, the diversions between the two. thank you, julie hyman. still ahead, disney will be reporting earnings after the
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bell today. we will hear quite a bit about the new star wars movie. tina who kyle is? he is in it. ♪
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disney will report earnings after the bell. no matter what investors think about the performance of the company last quarter, they have got to be excited. i am excited scarlet:. episode of seventh the star wars movie's opening on december 18. it is the first star wars release by disney cents disney films for advanced tickets went off last month. give us a bigger picture on
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disney, we joined by a u.s. media analyst from bloomberg intelligence. we will talk about star wars and a little bit because i know alix is dying to ask you about it. what are the expectations heading into the earnings given ?hat happened last quarter thereyou said, scarlet, is definitely a big focus this time on espn. really seeill whether the company talks anything about subscriber losses. last quarter, they did save at higher than anticipated losses which caused them to take down projections a little bit. affiliate revenue is extremely important to disney. it makes up .5% of sales. this is basically the feed that getsy -- the fina disney paid.
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it is critical because it contributes a most 40 to 50% of operating profit. any reduction in that guidance is obviously a huge deal for the company and the stock. >> great perspective, operating profit is huge. talking about advertisements, we did not get a great read from cbs. is disney going to suffer the same kind of fate in terms of advertising revenue? classes is definitely rebounding this quarter. we had a fairly tepid at market. cvs did report a decline but that was more because of the timing of certain events. they said the underlying advertisement growth was 8%. that signals advertisements do seem to be coming back. the tone is fairly positive. demand. from disney's standpoint, and disney themselves said ads are going up, it looks like advertisements might actually go k -- the ok.
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>> steering away from the advertisement business, disney has theme parks and the movie business, will that all be overshadowed by any discussion of star wars and expectations built into that? >> star wars is going to be the biggest thing on everyone's mind. theme parks are expected to do fairly well this quarter. said trends were up and visitor attendance was up and they did have the 60th anniversary at disneyland. all of those are positive indicators. will bebly, star wars huge and expectations are $3 billion in global box office. that would set a box office record over taking avatar, of course it with disney, it is not just with? box office performance of the movie. it is all of these revenue streams. you will have home video revenues.
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you will have a star wars attraction at their theme parks. and of course, all of the merchandising. disney is a huge marketing machine. this will be a great cash cow for them. alix: thank you so much. also interesting to see time warner reported yesterday a drag down of all media stocks allah disney last quarter. the question is how much of that is still left in the stocks scarlet: a critical question because i think the media selloff last quarter took everyone by surprise. still ahead, we sit down with chairman to see what he thinks is risky within the banking system. ♪
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alix: welcome back. scarlet: let's start with the
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headlines. we have got mark crumpton. many questions still remain in the wake of the crash with the russian passenger plane. vladimir putin told david cameron to a for the results of an official investigation into the crash after the british leader said it was "more likely than not that the crash was caused by a bomb or the first of the victims was laid to rest today in russia. the secretary-general calling out rush over the buildup of military forces from the baltic sea to the mediterranean. is asking therg reliance to come up with a response and says the buildup could allow moscow to eliminate nato's access to certain regions. today to impeach the country's vice president, accused of plotting to kill the country's president. facing terrorism charges after a bomb exploded on the president's speedboat in september.
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the president survived. he has denied any involvement in of blast and is the second their vice presidents in peach in three months. no armed fighters in or near and afghanistan clinic run by doctors without borders when it was hit by u.s. airstrike. that is one of the findings of an internal investigation released today. 30 people, including doctors and patients, were killed in the bombing last month. the military says the bombing was a mistake. information shows [indiscernible] mark: president obama apologized for the attack here at at least two nato and military investigations into the hospital bombing are underway. trumpn radio, donald advertisements begin airing today in three major voting states, iowa, new hampshire, and south carolina. it is the first time he spent money on advertisements since
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kicking off his presidential campaign. that is a look at the first alert news right now. more on these and other breaking stories 24 hours a day. i am mark crumpton. outside since scarlet, back to you. the past five years, john has been busy turning around cit group he rose to president and coo of the firm. he created the stock exchange by merging and he was also chairman and ceo of merrill lynch. alix: two was ago, he announced he would be retiring in march of this -- the age of 50. erik schatzker set down with him earlier today to talk about his illustrious career and what is ahead for wall street. what kind of risk is he seeing in the banking system? erik: it has been slightly more than seven years since the
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financial crisis. he had a front row seat there. he has seen a lot on wall street and knows a few things about risk. i was not entirely surprised, , with the emphasis he placed on one thing in particular. i want to listen to him and his own words about risk to the financial system. >> the financial system today is in much better shape. banks are better capitalize and there is less leverage in the system. if you had to look today, i think the place that there is more risk is in the shadow banks. the regulations have basically pushed the most risky things out of the banking system. is he talking his own book because cit just bought a bank, or by virtue of his experience as a risk manager, and 36 years on wall street, does he have the view that perhaps those at firms
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like lending club are on deck funding circle, that they do not understand the kinds of risks they may be taking in the loans they are making and to his point, regulators, for the most part, cannot see. scarlet: what did he say about a systemically important institution? erik: that is one of the ways lowertors have tried to in the institution. cit is one of those firms by virtue of the purchase last quarter, they have got $68 billion in assets above the $50 billion threshold the regulators currently set. he is among a number people who are aggressively trying to get the limit raised. fed governor who is more or less responsible for bank regulation at the fed publicly voiced a view that it should be raised $200 billion. janet yellen does not agree.
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she said she could see it being raised modestly but not by enough to get cit over the hump. the house itself controlled by the republican party feels differently and has a bill that wants to get rid of the $50 billion threshold altogether. alix: what did he feel was the disadvantage to these banks going forward? the issue to him is size. $100 billion is not big enough to propose a risk to the financial system. cit went bankrupt and had more than $59 of assets when it went bankrupt and it was a ripple in the financial system? no. causing no trouble to anybody but bondholders and shareholders and employees. for 10 firms, the 10 largest firms in america, or perhaps the 10 largest firms in the world, those kinds of restrictions make sense. risk properlyage
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below who knows where the level is, $500 billion, $300 billion, it does not close enough of a risk to the financial system to warrant the county it places and the degree to which it limits the ability to do business and serve customers. >> i find it interesting everyone tries to get out from under it. you cannot avoid it. benefitople saw it as a of sorts. you were effectively too big to fail. in the event of a catastrophe, the government would have to billion about her. that is why the funding cost of big banks ended up being lower in the post crisis time than they were in the others. that banks the idea would have to raise more debt that could be used to bail the
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men, the implication there is they will have to to that so the government will not have to come in. there is less benefit than any. did he have any solutions on how true fix that in the financial markets? gok: as far as shadow baking -- shadow banking goes, no, we did not get to that point but the answer is it needs to be regulated. there is nothing wrong in principle with the kinds of things lending club is doing, modelng a very low touch and some of them are working with banks, that banks and that owning on balance sheets perhaps syndicating and securitizing. there is a symbiotic is there but a lot of origination is happening outside the eyes of regulators just as it did in the mortgage factory, crummy loans.
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ultimately, i'm not saying it is exactly the same thing that the point is not all that different. scarlet: we need to go back to the financial crisis the civic late. he was right there, he felt it. what did he say was the biggest mistake from that time? erik: we love asking anyone in , negotiating with the fed and the treasury department, trying to prevent them from collapsing in 2008 and here's what john said. john: there is no question the singers big it just single biggest mistake was to allow them to go bankrupt. everyone who was part of the process made up reasons why that
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happened and that it was a mistake. a contest for the question was in part ben bernanke's book. skepticism,r to the the criticism ben bernanke has fallen under for painting things the way he is painting them is everyone wants history to be remembered his way. ben bernanke wants history to be remembered according to his telling. mistakes were made along the way no matter what those guys say. much.t: thank you so if you wanted to hear more of that conversation, go to bloomberg.com. up, tomorrow is jobs day. janet yellen says the fed will pay close attention to it. are there signs of job markets cooling-off? scarlet: trying to figure out what employer has the best maternity leave policy. alix: will investors have an
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appetite for shake shack? ♪
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scarlet: welcome back to it i am scarlet fu. alix: i am alix steel. let's get to the market desk. julie: i will go back to u.k.. to reiterate what we heard from the bank of england today. interview sometimes next year, lower versus the dollar. rateto be placed on a
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increase later next year. risktalked about the versus the dollar. that is another reason we see pressure on the town as well. -- lackat the british of increase, also, commentary. on the flipside, the yield on the -- in the united states is rising to its highest since 2010. odds of ae see the rate increase increase. i also want to check on gold prices because we are seeing with the fed rate increase in december that goldman has been on quite a losing streak. it is now the sixth straight session that we have seen gold prices fall and tumble this year. traded products.
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gold is continuing down even --ugh the percentage drop oil prices are falling for the second in a row, down, not necessarily a new catalyst today but downward continuing following yesterday by more than 3%. it has been holding above $46 per barrel today. changed.now $46 per barrel. it looks like there was not any support at that level today. alix: we did see the rally in places like result, taking oil off the market and libya, but not enough to have momentum for the future. , that was news yesterday as well. it is a continuing movement. investors and economists are anxiously waiting
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but a possible softening in the labor market. alix: applications for u.s. jobless claims remained historically low by historical fan -- standards. the chief economist at glassdoor joined us from san francisco with his perspective. how should we look at something like jobless claims? you have to remember it is still below that threshold. it is a slight pickup but this is healthy by historical standards. we had weeks where the unemployment claims were 600000 and more. generally consistent with a gradual slowing in the labor market. not time to ring the recession bell just yet.
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debate that weig have seen in the last month. we have a tighter labeler -- labor market? what do you see? >> there is no question we are moving into something of a slower growth in the economy. the weak gdp number in the fourth quarter long the last two jobs reports, which have been quite week, economists missed the forecast by 50%. significantly lower jobless claims the normal. compared to last year, the job growth on average has slowed significantly. it is a completely normal thing in this part of the business cycle to we are six years into an economic expansion, a year longer than since world war ii. we should expect slowing at this point. alix: we got the productivity report out and you saw unit labor costs are rising.
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seen that to wages but unit costs are rising. profit margins. what do you expect to see in terms of wages? ? the big explanation for the slow wage growth is the figure is not measuring total compensation. it is not measuring all of the benefits like meals that work that seem toefits be growing. unit labor costs are rising because employers are shifting more toward benefits and wages. there are powerful reasons to do so. 80% of employees say if you had to choose between a wage rise, many benefits people would opt for benefits instead. that is what we are seeing in the trend. companieshere are definitely increasing wages and paying the price for it.
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walmart. competitors, they are following suit with their own pay -- pay increases. is this a lagging indicator for wage growth overall? >> it is a leading indicator for wage overall. most will focus on a slow 2% year-over-year growth in wages for the is the average entire u.s. economy. there are thousands of them. the labor market is an occupation in the city at a point in time and there is quite a bit of diversity among cities and occupations. some professions are seeing double-digit wage gains. tech, and on the other hand, people in textiles and manufacturing, anybody shipping overseas, we are seeing wage declines. you have got to dig into the details to understand what is going on. doesn't it also speak
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to a big shift in the labor market in that middle income jobs are disappearing and the lower income job wage run, that in and of itself will put pressure on the wages for the longer term because you will not get paid the way you did 10 years ago at a middle income job? >> there has been a lot of academic research on the bifurcation of the labor force and the reason why there has been a hollowing out of middle income jobs, there are a lot of middle-management jobs and companies coordinating activity and that is getting easier and easier to automate today. scales being left are low positions and retail, they are hard to automate. it is a trend we will see .ontinue, no doubt what will the policy response be
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to alleviate that? my question to you is how much of the job is available in the thousands of labor market we have posted online? at the beginning of the recovery, it was much less than it is now. >> a fascinating development in recent years. it essentially has every job opens online on the site eventually. it is a rare and unique view of job openings in the economy. we actually see in real time last night what was going on in job openings. an interesting and unique perspective. as far as common he jobs out there never come open online, it scalee they are low positions in local restaurants who post signs on the window appear those never come open online can or union jobs. the west coast come all those jobs are handled through the union.
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when we benchmarked against other government figures, 85% of all jobs out there, that is not from service but we are counting every one of them. seen the actual job openings are rising and those hired are falling? are those similar? >> we see a similar pattern in jolts. open jobs today in the u.s. are near a record high. that is as of two months ago. what is going on today? in a recession, the first sign he was the in labor market is not a change in total employment. theanies will not lay off first. they will try to protect employees as long as they can. the first thing they will do is stop hiring so job openings will fall first. in our data, we do not see that at all. they are flat and open at record
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levels. alix: is anything in conflict >> i believe data techare under sampling companies, particularly in silicon valley. jobng to give a picture of openings in the usp or the sample is only 16,000 establishments and there are 7 million. my personal view is just doing some benchmarking of our own, they are under benchmarking the tech companies. amazon, 10,000. alix: thanks. scarlet: women are watching out for one another. a new crowdsourcing site lists
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family leave practices of hundreds of companies. how does your company stack up? ♪
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alix:alix: in the fight to attract and retain talent, companies like amazon and theirx have increased benefits. paid family leave. by one estimate, only five of the fortune 100 companies have publicly disclosed their leave policies. awkward to actually ask when you're going in there for a job interview. two women actually wanted to fix the problem and they started a crowd source database listing the policies of 700 companies. great resourcea for people who do not know how to get the information otherwise. here, we just pulled up the website and you can see a number of companies are listed here. google, women who work there,
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they say what they are how much they make, and they give feedback and anecdotes on what they encounter. alix: we just heard andrew you andhey're paying benefits as well as salaries. really trying to entice you. are gives youhey much more power when you go to negotiate and bargain. scarlet: microsoft is giving 12 week pay leave. twitter also came out with a 20 week paid maternity leave. 14 weeks paid we -- paid leave after. alix: they are all tech companies fighting for talent. coming up in the next hour, janet yellen leaving the door open for a rate hike. the bank of england leaving rates lower. we will talk. ♪
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>> it's 2:00 p.m. in new york, 7:00 p.m. in london and 3:00 a.m. to hong kong. elcome to "bloomberg markets."
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from bloomberg headquarters in new york, good afternoon, i'm david. and here is what we're walking this hour. bankle england is prepared to keep rates lowers and yellen to raise rates. our exclusive interview with carney. we'll get a look at what is behind the latest selloff. home away shares taking off after expedia agrees to buy the alternative accommodation site for $3.9 billion. will the deal help the company compete with the industry's leader? we'll hear from the c.e.o. of home away and expedia. first, let's head to the markets direction where julie has the latest. julie. julie: stocks trading and flat

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