tv Whatd You Miss Bloomberg January 5, 2016 4:00pm-5:01pm EST
u.s. stocks recovering after yesterday's worst start to the year since 2001. >> the question is what did you miss. the central bank and jacking the most cash since september. are these enough to put out the market fires. >> market ripples across the world and europe. we discussed the consequences. arabia be the first country to devalue its currency? we began with the markets. , a big struggle for direction. we found some at the end.
the dow swung 150 points today. compare that to monday. telecom and utilities let the gains. there wereteel definitely some jitters today. they rallied back. they sold off. muted results. still nervous about what is going on in china. one thing that caught my eye is december u.s. auto sales not that great. and shy of expectations. ford and gm came in lower. a record-breaking year, but they could not sustain the momentum into december. that's one of the big question ns. inventory is falling,
demand is not there yet. nevertheless, part of what was a weight on stocks had to be apple. midday, nikkei japanese newswire saying perhaps reducing iphones by 30% in the first quarter. apple erased 17 points on the dial. without apple. we would be in the green today. resuming the decline from 2015. >> i want to piggyback off of ix said.x sa identifying 300 13 companies that supply parts to apple, ranked by revenue on the left.
, almost 20uppliers of them rely on apple for a third of their revenue. they are color-coded here. we've been talking about how thee has been week, one-monster price percentage drop. joe: you don't want to be in the business right now. i want to dive into the terminal and follow-up on the deep dive i did last we.
they have not broken out. you can see this red line going love 2013e middle representing some sort of ceiling on five-year-year-old. five-year yields. of-year-olds is not is notg -- of yields breaking out. is this the moment where all the bearish analysts will be right? joe: they are usually wrong. scarlet: year after year, right? u.s. i was looking at the dollar against the canadian dollar. the canadian dollar fell up to its lowest love all thousand three. since 2003.vel
check out this chart made. the u.s. versus the canadian dollar versus the oil price. oil prices are stronger, so is the canadian dollar. ability or dois you have the problem with that currency now. dissent,continuing its visiting the $35 level. not much mystery to the canadian currency, is there? we will be right back with more on "what'd you miss?". ♪
up, senator bernie sanders will join with all due respect of 5:00 p.m. eastern. you don't want to miss it. alix: i am alix steel. first word news. obama says it is time for the american people to demand congressional action on guns and for elected officials to stand up to the gun lobby. in an emotional appearance, the president unveiled a series of measures aimed at tightening control and enforcing firearms. he also paused remember the many victims of gun violence and wiped away tears as he
remembered the 20 children killed in newtown, connecticut in 2012. rights wereenable andpped from college kids .rom first-graders every time i think about those kids he gets me mad. >> mitch mcconnell says mr. obama is more focused on hundred cutting second amendment our rights than fighting terrorism. promising a repeal of the president's executive actions. one servicemember killed and two wounded in fighting in southern afghanistan. commandm the military that fighting reflects intensified efforts by the u.s. and afghan partners to push back
against recent taliban gains. that battle still coming in. ceremonies and hers to remember the 17 people killed in islamic extremist attacks on charlieh hebdo and the kosher market. the president unveiled for plaques -- unveiled plaques to honor victims. hebo will offer a special edition to lampoon everyone. moreerate acts caused airline desk than accidental crashes last year. year's eight accidental crashes killed 161 people, the lowest total in 70 years. 374 people died in crashes that were called in all that --
called preventable. the russian airliner went down in egypt last october. news 24 hours a day followed by her 24 hour journalist and more than 150 news bureaus around the world. i am mark crumpton. >> thank you. china moved quickly to avoid a repeat of monday's intent selling. onulators extending a ban sales by major shareholders. the central bank intervened, injecting liquidity and supporting the currency. thank you for joining us. will these measures be enough? what do you think they are designed to do? what china is faced with is a , andbig structural problem
it's trying to make the process as orderly as possible, so it ins not want huge collapses its credit system or stock exchange while that is happening. i think it is a process of trying to smooth out what will be a difficult problem for them because they are transitioning and an export led investment led economy to a service consumption economy, and that is a hard road. i think that just trying to get things orderly. book aboutote the , but does itnomics work when you have to undergo a structural change? government do a smooth handoff between one economic model and another economic model , or will there be more pain? >> they have got to try.
policies aren't effective if your problem is to change the structure of your economy. the slowdown in china is not a cyclical slowdown here it is a structural slowdown. the population is aging. its growth right will slow down inevitably. at 6%ently it should grow or 7% this year. on number of commentators believe that growth rates will be less. that's slowdown is part of the transition. really by kinsey themethods is to prevent landings from being too hard as they arrive. >> part of the rhetoric when we it the disappointing p.m.
doubt it the q3 stimulus did not work and did not make a difference. what do you think about that? there are lots of credibility issues. there is a big power struggle andg on between xi jinping his predecessor. reforms are-- challenging power buses of their predecessors. as to how they will work out, that is very unclear. that is the egg is risk factor of china for the next two years. biggest riske factor for china for the next two years. scarlet: as we talk about the
chaps -- collapse in chinese stocks, we overlook of the yuan as well. what does that mean for the rest of asia and the world? >> it is bound to be on the greater weakness as its current account surplus it disappears. chinese authorities have been doing is to try to prevent the loss of competitiveness by keeping up the value of the currency, but that loss is absolutely inevitable. what will it do for the rest of asia? be able to asia will export more to china.
the loss of chinese competitiveness is the big story , and what happens to the currency is a consequence of that. last summer when we saw this chinese stock market volatility, regulators point in measures to stop the bleeding, shortselling restrictions, zoning restrictions in general -- selling restrictions in general, now and looks like they will be extended more. to these measures prolong the --vitable or make it worse do these measures prolong the inevitable or make it worse? >> you've always got>> to try to manage the markets. you don't want things collapsing around you. we are very exaggerated, take a very exaggerated view of what it means for mus. 1.5% foreign a
exposure in the shanghai stock market. only one in 30 chinese own stocks. it is not of huge importance to us or the chinese. the perception is everything, i agree. scarlet: i want to switch gears to the developed economies. sweden put global markets on alert that it will instantly intervened to weaken its andency, sending the euro dollar stronger against the kroner. why is it so hard for sweden, the eurozone, u.s., japan, to get to the you -- 2% inflation? >> there is not enough demand in the european economy. this isn't a structural problem.
it is a cyclical problem. there's never been a very robust --re convincing recovery robust or convincing recovery from 2008. britain is doing quite well, but recovery, rather lopsided. recovery, rather lopsided. huge gambleking of on pumping money from the ecb into the european economy in the hopes of stimulating it. i think you have got to wait. there is not going to be a quick recovery. that will be a drag on the growth of other economies, including the united states. -- mentioned eurozone growth
spain is one of the faster growing economies. even germany and spain despite in proving labor markets, were not seeing inflation pick up. what does it say about the framework with which people understand inflation and the relationship between inflation and employment that even in these economies were not seeing inflation pick up? we have come to expect that it is important to have a healthy great of inflation, and that is that target set by central banks, about 2%. if we fall below that, everything necessarily goes down
, the real economy comes down with the inflation rates, but again, i think you have to ask about certain parameters in the structure of the economies and whether they are shifting. forces in the tend toconomy which raise prices. of oil fall in the price and other commodities. any is going to depress price movement. what do central banks do then? ignore inflation targets? what is the right prescription? >> it would be much more honest to say, look, there is a problem of demand. output,rget investment,
and not worry about whether that is consistent. just drop that mandate for the time being and it a decent right of growth going. ofyou get a decent rate growth going, you will get a pic cap in information -- a pickup in inflation. they think if you pump money into the economy, then you'll get inflation, and inflation will lead to growth. that is the wrong way around your do have to get growth in real output, that prices will cap -- pickup. brx: the likelihood of a exit. the potential risks, next. ♪
joe: "what'd you miss?" said he will allow ministers to decide on a possible brexit. people, not the politicians, who decidee. it will be open to ministers to take a personal position while remaining part of the government. >> on lord and emeritus professor of economy, thank you for staying with us. tothis the right approach
let ministers decide for themselves? >> absolutely. it is what happened in the 1970's when they have the only other referendum, about whether -- to ratify the terms of membership that had just been negotiated, 1975. to beers were allowed four or against it. or against it. i think it is right that should happen. i don't myself think that there is very much doubt about how it will go. joe: you think it is almost certain that the u.k. will vote to stay in the eu? better the devil you know than the devil you don't.
although the eu is not popular and has not improved its popularity recently by its a dismal performance, especially that of the eurozone. i think the brits will decide that it is safer to stay in than chance life outside. they have got used to it. let's say voters duties are to take a gamble and want to get out of the eu and vote to leave, what are the ramifications you would expect to see in the u k economically or politically if that goes that way? affectramifications will individuals and not having a single currency to travel around europe itself. not so important. the important ramifications will be financial. will be ramifications for
the city of london. it will lose some business. people put their money in the city partly because they expect it to go into europe, and that will become more difficult. there will be some restrictions on that. know.t will besee that there many other huge ramifications. i think life will he perfectly possible outside the eu. the real issue is whether staying in the eu is going to commit britain more and more to edge closely to becoming a member of the eurozone. joe: we have to go. thank you for joining us. member of the u.k. house of
scarlet: i am scarlet. let's get to mark crumpton. mixed responses today after being snubbed by saudi arabia. iran says it regrets the attack by protesters on the saudi embassy in tehran and is telling the united nations that it wants to arrest those possible, but saudianian president says arabia cannot cover up crimes by cutting off relations. clericcution of a shiite infuriated iranians. top officials from denmark,
sweden, and germany will hold talks in brussels tomorrow, concerned about new border control measures aimed at stopping refugees entering northern europe. sweden introduced id checks on all people traveling to denmark, and denmark tighten controls on its border with germany. federal authorities are keeping their distance from an armed antigovernment group that took over and national wildlife refuge in oregon. the group's goal is to turn over the property to local government so people can use the land without federal oversight. the fbi says it is working to bring about a diesel resolution. some scary moments for passengers at spokane international airport in washington state today, united airlines flight bound for denver slid off on icy runway, no injuries reported. news 24 hours a day powered by our 24 journalists -- 2400 journalists around the world. i'm mark crumpton. back to you. scarlet: let's get a quick recap
on u.s. markets. thet of a comeback after markets were start to the year since 2001, all except the nasdaq, down one quarter of 1%. it wasn't that big compared to monday. it was a struggle for direction at times. ont's compared to 450 points monday. over all, things get pushed into the positive column. joe: not nearly as exciting as yesterday was. there was selling, back-and-forth, and it felt jittery, even though the markets ended in the green. one thing that was interesting work car sales numbers. ak december and does raise the question about whether
auto sales is starting to fade a little bit. brands! has said that david mode -- executive chairman david novak will retire in 2017 and they will announce a new nonexecutive chairman after the next meeting. david novak is retiring or fact, andown, both in a new nonexecutive chairman and made. they are rising in after hours trading in response to the headlines. brands struggling in china. days, howt two resilient u.s. stocks have been. yesterday, the comeback, no massive followthrough selling. oft speaks to some kind resilience. below 20.s fallen
it does appear that cooler heads have prevailed. scarlet: we're back to the pavlovian response, we buy the tips. alix: unless your apple. scarlet: which feels the burden of china circuit breakers, which sectors. i want to take a deep dive into the bloomberg terminal. ratio of h shares. h shares arehat trading to the biggest discount since 2003. they were at their most expensive premium to global stops just before 2007 global housing market crash. arabia and oil
speaks to what is going on. you're looking at the official selling price of saudi arabian light crude to europe. they have continually lowered february.through that is significant. that is potentially when iranian oil could come back online. demand in europe and that is why saudi arabia has cut their price? poor are they trying to get ahead of the curve? to the overall tension in the market and how desperate saudi arabia is to retain its share and market control of oil. growingve seen the pressure on the budget deficit, the government fiscal situation, consolidating spending recently, so they are paying the price
domestically for falling oil prices. alix: "what'd you miss?" will saudi arabia be the first country to devalue its currency in 2016? low oil prices took their toll. joining us now for more is brenda kelly. at what point do you feel that saudi arabia would be forced to deepak from the dollar -- depeg from the dollar? fiscal stimulus is one part of it. they are waiting for something to happen in the oil market is another. aat needs to happen is , but it doeslution affect a few goods.
it does create a problem for them and inflation wise if the saudi arabian currency went the same way as the azerbaijan currency. i don't think that will be in the offing in that near-term, but it could be a black swan event. you described it as a black swan event. we see in the forwards market that traders are increasingly betting that saudi arabia might be forced to depeg. one of the lessons learned what francas frank is that -- is that it moved incredibly fast. if saudi arabia were to depeg, how rapid of a move would you expect to see? >> i think it would be reasonably rapid. 12 monthsking about 3.8.2the fact that
percent is one area that is sending people towards a speculation but i don't somethingy see it as that given that you could more likely see quite a strong depreciation in the reality is the u.s. dollar if saudi arabia does go go down that route but i think that cutting back the supply and of course the fiscal measures they are taking would have to begin a chance to work before they would even conside d depegging. having said all that, what does austerity look like an saudi arabia? does it look like greece, u.k., u.s.? >> i don't think it will be like greece. we've already seen some actions being taken like the energy subsidies, cutbacks in government spending.
i don't think it will be like greece at all. we are basing this budget on oil prices eating around $45 per barrel, and we are significantly below that presently. kept in mind is that everyone is bearish on oil, and that could indicate a squeeze could be in the offing. it won't necessarily be down to demand, which is quite sedated but ae time being, constant supply from some of the other oil producing countries could be the reason and a catalyst in the next few months. joe: you touched on this earlier when you mentioned azerbaijan, but we've seen quite a few countries undo their pegs. tell us a little bit more about inflation and what else happens to the economy. saw the likes of azerbaijan and kazakhstan giving saw air dollar pegs, we
significant decline in their currency, and this could lead to rising inflation and saudi arabia as well. that would likely be something of a problem its saudi does go ahead and do this so it has to be borne in mind that export is one thing and oil prices are another but they do have to remember that the domestic situation and import prices and inflation levels would have to be very closely watched because higher inflation would not even a welcome there. u.s. is the only one go call the saudi arabian depe a black swan event. if they did, what are the ramifications in the currency market? think you could clearly see major ramifications among emerging markets, and certainly we could see a rollback in what is happening with the federal
reserve on their tightening cycle, but i think it would start to play havoc in the likes of china and its devaluation of yuan, but the fact that it has been 30 years in place means it would be a big surprise. as far as i can see saudi arabia has really committed to doing what they're doing for the time being with no real intention to look at that particular scenario or possibility. scarlet: thank you so much for joining us. soon bell china's yuan the reserve currency? we will talk about the impact of the stronger dollar. it might not be what you think. that is next. ♪
it is time for the bloomberg's and's flash. j.p. morgan will pay $48 billion to settle accusations that it mishandled foreclosures. j.p. morgan was one of several banks accused of robo signing or fraudulently endorsing closures. the bank also failed to live up to an earlier settlement. twitter building a new feature that allows messages that exceed the traditional limit. with thefamiliar situation says the company could be looking at a 10,000 character limit, equal to a 20 minute feed. this could launch at the end of the first quarter. japan's nikkei review says apple will cut production by 30% in the first quarter. it gotdid not say where the information. production of the iphone 6 and
success is expected to return to normal levels. shares of the most viable company fell today on this report. that is your bloomberg business flash. alix: the dollar will rally and and euro.e yuan what's up with that? we've seen a huge acceleration in the yuan. >> my argument is that it will help increase their role. there are two elements in the dollars rally, cyclical and structural. there's a huge shift in the north american energy balance. we are producing more oil, importing less. our trade deficits have shrunk relative to our growth rate. the dollar is the
world's leading currency, 80% of trade finance, 60% across border lending. this creates a problem in terms of reduced international liquidity. what this suggests is that this creates problems and places with that and dollars. in dollars. it creates an alternative source of liquid e -- liquidity. it opens up the possibility for euro to function in that role. it is also more likely to happen by different channels. 's case, freely convertible, enormous to mystic
bond markets in the public and private sectors, and the world's largest banking system. this creates opportunities for euro-denominated issuance. is -- this iss where the geopolitics come in. there are places where it might make sense to talk about a petro there areuse countries that are closely linked to the european cycle. they are big oil exporters. is happening is the eurozone is the world's largest oil importer. joe: are we talking about russia? >> exactly. that is where the geopolitics come in. our call is that what we will see is an easing in eu sanctions relative to u.s. sanctions in the second quarter of this year. that potentially creates an opportunity for russian corporations to replace
dollar-denominated debt with euro-denominated debt. companies are then able to borrow more in yuan, doesn't that add to china's growing debt? china is off the charts. i think it will not happen the same way as the euro. something muchin closer than the europeans. internationalization will take the foreshadowing of other currencies in the region. , otherepreciates countries are more likely to the currencies
depreciation and order to preserve trade competitiveness, creating an ankle for the role for-- an anchor the currency in asia. internationalization of debt channels will take much longer. alix: you are sticking with this. scarlet: what kind of global player does china want to become? we discussed beijing's primary goals on the global stage next. ♪
one third of growth in the last seven years, imports and exports or than 10% of global trade, responsible for a quarter of global carbon emissions. of global director strategy at the eurasia group with us. what will china choose to do with the influence this year? have a lot ofyou different things. that is one of the issues here. is a structural transformation in the economy that needs to take place, which means slower growth. there is a third issue, which is the idea they have taken seriously, of being a responsible international stakeholder, particularly when
it comes to macroeconomic issues. i think one of these things is going to be somewhat harder to do, and this leaves us with the potential for the renminbi depreciation. that is one of the ways they have an outsized impact on the range ofrge competitors, spills over into potentially global monetary settings, because you have -- , if it does depreciate, 5-8 percent, what does that mean for policy settings. does that mean the fed is more imci focus. joe: we don't think of china playing a role in trying to contain isis. we are missing the areas where china is active geopolitically because they are not on our
radar? , they aremiddle east likely to be less present. the initiatives they have rolled regional the lament banks, this is where the confluence of china andbetween those who benefit, so perhaps in the more economic arena than in the strategic arena, particularly in the middle east, which seems fairly crowded already. trying to help the development of the asian infrastructure bank, china development bank -- the customers of these bank, the rise of soft power, the rise of china's influence in regions demandrica, doesn't that
more of china's participation in terms of what is happening geopolitically? -- the middle east is a trouble spot because you have this issue of eight u.s. that is more energy independent, but the primary geopolitical guarantor of stability in the region. while china and india will be bigger oil buyers. this is part of -- alix: thank you for joining us. coming up, what you need to know to gear up for tomorrow's trading day, next. ♪
scarlet: i am scarlet fu. "what'd you miss?" at 2:00 p.m., lingering questions at the meeting where the fed raised rates. how much confusion was their among to officials? what is the likely timing of the next fed rate hike? gradual isaning of important. whatrrow, s willnt santos say -- what monsanto say?