tv Bloomberg Markets Bloomberg January 7, 2016 10:00am-11:01am EST
betty: good morning. i'm betty liu. here's what we're watching at this hour. breaking news moments ago. china has second thoughts and suspends the circuit breaking rules that have not kept investors from panic selling chinese stocks. we will go live to beijing for the impact. that is causing more selling around the world. it has been a bad start to the year and it is getting worse. u.s. stocks are plunging at the open after european and asian equities take another dive. and if you think stocks are doing badly, look at oil prices. crude falling to a 12 year low now. $32 a barrel is not far off at all. we are about half an hour into the trading session. has her hands full with a lot of action in the markets right now. julie: not as much of a decline
here in the u.s. as you might expect. or as the futures were indicating. let's start in china. if you look over the past week or so, we have the shanghai composite. the circuit breakers triggered on monday and today. i want to zoom in on today and what we have seen overnight. only 29 minutes of trading. stocks,op in chinese 7%. that closed the market for the entire day. drop in u.s. a 20% stocks to get a full day closure. but the chinese authorities have now suspended the whole idea of circuit breakers for the moment. all of this happening as we once again saw a devaluation in the chinese currency. let's take a look at that chart as well. this is theling --
dollar versus yuan on the day. that is what sparked all of this. concerns about just how worried they are about chinese growth. betty: they are indeed. chinese growth prospects are spilling over into other asset markets. oil prices tanked not all of this. julie: oil prices definitely tanking. we saw it trading at its lowest closing since about 2004. is, you are you already have ample supply. what if the demand is falling off even more than people have expected? what does it mean now that we are underway here in the u.s.? futures were indicating declines of close to 2% or more. it's not falling quite as much as that. the s&p down 1.3%. nonetheless, at this to the declines we have already seen in the first week of the year and
it all reflects profound concern about global growth. take a look at the sectors on the move. it's not an energy led selloff despite the decline in oil prices. notgy is doing poorly, but in the bottom spot. technology is. industrial, financial. these groups that are very affected by economic growth. it is a broad-based selloff. a lot of pain to be felt. here's apple, which is declining. ubs the latest to cut its estimates for iphone sales. the analysts are saying it's not a matter of a lack of new customers, it's a matter of people not upgrading their phones at the same rate. betty: a lot of pain in tech. a longer cycle perhaps. i'm told you have been up since 4:00 a.m. covering the markets?
julie: 5:00 a.m. betty: i will see you back at 3:00 p.m. vonnie quinn has more. a devastating bomb in libya. at least 60 people were killed. 200 others were wounded. al jazeera tv says the bombing was probably carried out by isis. korea will restart blasting propaganda to north korea tomorrow. this is in response to its latest nuclear test. pyongyang considers the move and act of war. tomorrow is the 32nd birthday of -un.er kim jong aesident obama will hold national town hall on gun violence tonight. it will air at 8:00 eastern on cnn.
is expected tont quickly veto a bill that would repeal the affordable care act. the house passed it yesterday. vote to overturn it. republicans do not have enough votes to override the veto. i'm vonnie quinn. betty: thank you. let's get back to our big story today. stocks are tanking in response to events in china. not just in the u.s., but europe as well. regulatore securities just announcing that they are suspending circuit breakers after shares plunged 7% for a second day this week. that triggered those circuit breakers and shut the market down. this came a day after china cut its reference rate for the chinese yuan. that was boosting fears that the slowdown in the country is way
deeper than official data suggests. joining me now on the phone in beijing is our beijing bureau chief, nick wadhams. they announced this on webo. why are they suspending these circuit breakers? >> it was pretty clear this wasn't working. the circuit breaker was set up so trading suspense after a 7% drop. but what was happening was that once you started to get to the 3% or 4% drop, that was creating panic. terrified about the circuit breaker kicking in so they wanted to sell all their positions before it hit. so that just only encourage stocks default even further. it was clear they had to make a move to make some changes. betty: what happened here? we are all trying to figure out, what is this panic selling about? >> that's a very good question. on the one hand, it's a question
of whether there really is panic selling. because this is a very volatile market. we looked at the data in the last year. had beenrcuit breaker in effect, the market would have been suspended something like 25 times. betty: wow. >> moves like this are not actually that uncommon in china. the issue before was when there was not a circuit breaker, the market would come back from it. it would sort of bounce around. but when you have this in place, it triggers that sense of panic. nobody wants to be shut out of the market like they were today 30 minutes into training. betty: some would say this is just a delayed reaction. saw with the selling in august. bans, they had put were barring institutional sellers from mass selling their holdings. that i believe is going to be lifted on friday.
maybe we are seeing a delayed reaction to this. ban is still in place for the time being. there is a lot of uncertainty over what the government intends to do. today they just set the reference rate for the yuan at another low. it was by about .5%. you are seeing a lot of uncertainty about why the government is allowing the yuan to depreciate so much. is it that the government is guiding it lower or are they furiously trying to defend it and they are just sort of keeping a finger in the dam that's breaking apart? are seeing isou responsive concerns about -- nobody really knows where the yuan is headed at this point. messageslot of mixed going on about the growth of china's economy. nick wadhams, thank you so much. for more on china, david rosenberg joins us. -- i don'ts reacted
know if you saw his remarks at an economic forum. -- basicallyaid, he said, i would say this amount to a crisis. when i look at the financial crisis, there is a serious challenge which reminds me of the crisis we had in 2008. would you agree with him on this? >> i wouldn't agree at all. anduse the collapse in 2007 and was a global financial banking collapse of historical proportions. you could argue that we have duress,m of stress and questions over china's economy, the spillover impact to emerging markets. we have been talking about this for some time. accelerating right now. this is the year where we have dodd-frank. if you look at the banking
system today, not in my lifetime have the been this transparent and this heavily regulated. almost like utilities. is goingu believe this to turn into a gut wrenching financial event, there is not a snowball's chance in hell that this looks anything like 2008. betty: and yet you have acid prices, oil prices hitting 12 year lows. pricesyet you have asset , oil prices hitting 12 year lows. that would normally indicate some sort of recession. david: i would tend to disagree with that. these are not levels we haven't seen before. we saw levels of oil like this 12 years ago. tok in 1986, oil was down $10 a barrel. 1999, oil was down to $15 a barrel. we have seen oil at these levels before. betty: but the direction was different, david.
the direction was different. david: you called oil and asset. oil is not an asset. a house is an asset. you get the costs upfront. the winners are consumers. it's a double-edged sword. oil is a consumable commodity. most of it goes into an automobile. a houston is not going to an e does not go into an automobile. it's a different asset class, different set of problems. a supply's been think aboutn they
if this is truly a demand situation, how is it that global oil demand has only gone up during this period? if you believe the shanghai index is telling you something nefarious about a hard landing in china, you will get oil prices down a lot more. it will be a demand event. it hasn't been that way so far. it has been purely a global supply shock. betty: so to you it's all about supply. what oil is an indicator of right now. david: unless i need a new set what thels, that's data have been telling us. atc has been pumping out oil 32 million barrels a day above its quota seven years in a row. you have not had a supply response in the u.s.. -- you will find the inventory numbers turning the other way. the numbers themselves are telling you it has been supply.
demand is not contracted yet. you believe the shanghai index is actually telling you, it's going to go down a lot more than it is right now. it has been a supply shock. shanghai indexhe has a huge correlation with the s&p. the bottom line is last year's price action in the u.s. stock market -- we never resolved the chronic overvaluation. the schiller,at we are trading above historical norms at a time when you have tremendous global uncertainty in every aspect. part of thek problem is you have an overvalued stock market going into a period whether it has been north korea, the tensions of the middle east and saudi marka -- a big question
over china. betty: that's what people are saying. at the markets do seem overvalued and we are seeing that adjustment. just hang on for a minute. we need to take a commercial break. i want to talk about the u.s. markets. david rosenberg. as we head to break, a quick check on how stocks are trading right now. can see the s&p is lower by 1.4 and the dow is off by 200 points. we will see if we stabilize at these levels. we will be back. ♪
jeffrey lacher was speaking this morning as well. he says he is still certain that inflation will hit the fed target. >> the future is uncertain and we know that the appropriate path of monetary policy should depend on how economic conditions involved. so one should expect that the rateal reserve's interest target is going to rise at a pace that is gradual but dependent on the economic outlook. betty: in his remarks, he described gradual and still a one percentage point increase per year. realisticthat still given what we've seen over the last week or so? david: you know what's interesting is, when you read the fomc minutes that were released yesterday, what was really striking was all the emphasis on the downside risks to inflation. and since then we have only had
the commodity complex take another big leg down. so we do have service sector inflation up in the u.s.. it has been the good sector. and that antidote just got a lot stronger. elusive movee ever towards the 2% holy grail target is push that much further into the future. toy two rate box as opposed four -- rate hikes as opposed to four is looking pretty prescient right now. betty: is that where you stand on the number of hikes this year? david: it is so situational. number they you a could be none and i could give you a number that could be four or five.
it is so situational and it's not even dependent on the data. we saw in september, the fed was ready to go because of the data but was held back because of global concerns. voila, the global concerns are back on the front burner. no matter what happening on the domestic side, as long as we have local turmoil, the fed is going to be on the sidelines. in the next few weeks is beijing releases -- if beijing releases a huge fiscal package or anything changes the global markets and causes them to stabilize, we are back in december. so are we in september or are we in december? predicated onbe how the global markets are responding. i'm not worried at all, by the way, about the u.s. economy. not one iota. this is going to be the year of finally where the wolf shows up at the end of the story and we get the wage breakout.
i think consumer spending will hold up very well. went markets stabilize globally probably raise interest rate. i don't think they will move more than three or four times if they move at all. betty: and it is contextual. if we were looking at jobs data alone, then we are talking about a pretty gradual and solid rate interest -- rate increase. we are not. there are so many factors. david, we are going to have to leave it here. we will have you back on again. thank you so much, david rosenberg, chief economist at gluskin sheff. still ahead, a shakeup at morgan stanley and why that led to the departure of one of its top executives. we will be back. ♪
greg fleming is leaving. of course, the markets are down in general. he led the firm's retail brokerage unit. in may, he talked to bloomberg television about growth for the investment management division. >> i think we're on track. our investment management business sometimes gets less attention because of the size of the investment bank. a really good investment performance in most parts of investment management and the investment management business, if you manage money well for your clients, you tend to get more money from the existing clients and you tend to get new clients. we feel like we are on track for that target. michael moore, who covers morgan stanley for bloomberg news, is here with more. tell us about this shakeup that led to his departure. what happened? >> you had greg fleming talking about the investment management there.
in october, that part of his empire was taken away and given to another executive. so there have been a little bit of foreshadowing here. part of this is, fleming was seen as the potential medium-term succession candidate. but the indications are that jim gorman is going to stick around longer than perhaps people thought. maybe even five to seven years or more. betty: was there speculation he might step down soon? >> not soon, but maybe more like the three to five year range. timeline, he wanted to have a president in place to allow him to focus on longer-term things. inwhen he put colm kelleher that position, that in the extended timeline is kind of what prompted fleming to leave. betty: he's a year older than gorman. he's not younger, he's older. so it doesn't really seem like gorman is saying, i'm putting
summit in place was going to be my successor. >> right. that's not the long-term plan for him. r is a morgan stanley lifer. having him at the top of the house provides reassurance to some of the longtime morgan stanley people that it's not just about the brokerage. it's also about the trading division. i think it allows some room for that next generation to kind of be groomed over the next few years while gorman is in place. betty: we know the stock is down. it's kind of hard to tell today because there is selling going on in general. if some of this shareholder unfriendly at all? don't seemysts overly concerned. morgan stanley had a very strong three-year run between 2012 and 2014. and 2015 was a down year for them. i think investors are kind of waiting to see some of the
improvement that has been promised in the roe. it's more about the business results right now. roey have set that 10% ar target. the investment business has done a lot better. you hate to see him go because he had made so much progress, or it is in a much more stable position for the new people to take over. betty: thank you so much, michael moore on the shakeup at morgan stanley. much more ahead on bloomberg markets. we have the ceo of pandora media , positioning itself as the artist friendly music service. ♪
-- a vonnie quinn. iran's diplomatic isolation intensify today when some all you cut all relations. the saudi's cut ties to iran sunday when the consulate was attacked. by saudi's prompted executing a shiite cleric. one year after the trolley up to attack -- charlie abdo attack from an attacker was killed in a paris subway station. two civilian jets landed on the airstrip of a new island china build in the south china sea. the plane made the two-hour flight -- earlier test flight saturday drew angry protests from vietnam, the philippines and japan. major league baseball looking east to expand -- they will
stream games live in china. deal is backed by a jack ma. global news 20 hours a day powered by our 2400 journalists 50 news bureaus around the world. cor johnson has been at they consumer electronics show all week in las vegas. he is standing by with brian mcandrew -- interesting, the company dominates streaming, one of the leaders. talk to me about why you guys are here at ces. this is a hardware show, not a software show.
mike: pandora isn't streamed through a lot of hardware. -- pandora is streamed through a lot of hardware. 40% of automobiles today roll off the line with pandora integrated into the dash appeared really excel a ration of connected cars. cars having their own connection. cory: you use the events to make certain announcements. mike: we do a lot of meetings with our partners here. everyone starts the year off right. we have a lot of advertisers here that we spend a lot of time talking about the new year with. a really important event for us. it has been for years. this is our seventh. >> the importance of the media --iness at ces has changed
this is become an ad event as much as anything. >> it hasn't shifted from a pure technology integration partner to one where we are meeting with her agency partners and advertising partners and focusing on planning for the year. >> how is the marketing pitch unique. i'm a big believer in spending money on advertising on radio. >> audio advertising to the digital world. world,connected audio we've broken ground in terms of measurement come integrating into the platforms that radio advertisers use. we will really see that accelerate. tos an important time for us lay the groundwork and have conversations with the agencies so they can bring their plans --
in terms of moving $17 million traditionally spent on terrestrial radio, moving that to digital. >> is there a certain pitch networks? what is the unique appeal that pandora has? >> the beauty of digital connected radio, you don't have to listen to the same thing. we can guarantee who is listening, who the audience is, we can guarantee delivery. that a not hoping certain audience heard it because you play at a certain drivetime. you know exactly that one million people in this demographic heard your advertising message in a certain timeframe. that is a really valuable thing. >> the market in turmoil today with a big selloff in china, the second time this week. what are you seeing and hearing
this week? >> the advertisers we are meeting with our thinking about their u.s. campaigns and we are not seeing any slowdown from that perspective. we are not an international business. we are in australia and new zealand but primarily in the unites states. -- united states. those advertisers are still entering 2016 with confidence. >> no sense of nervousness? >> not here in las vegas. unfortunately, what happens in vegas, stays in vegas. you guys are paying more than your competitors do -- what is the latest on that ongoing battle? >> we had a fantastic finish to 2015. the copyright royalty board issued their learning this their ruling that lasts the next five years.
ruling thateir lasts the next five years. we enter 2016 with certainty around our costs so we can plan over a multiyear timeframe, really an exciting time for pandora. and for the music industry generally. we've put a lot of things behind us and now we can move forward aggressively going after the digital opportunity. >> what are your long-term plans? >> the biggest governor is licensing issues. we've solved that issue in the united states. in order to do that internationally, we have to work closely with the partners to make that happen. that is a big objective of this year. we think pandora will be an international business. it is a big part of our strategy over the next 2-5 years. >> how do those negotiations happen?
do you have to go country to country? >> increasingly come the industry is trying to make it easier. we are working together to figure out the right way to allow licensing teams to apply to multiple jurisdictions. right now, it is a country by country basis. once you establish the framework, it's like an and in them to that agreement. -- an addendum to that agreement. >> how many organizations do you have to contract with? you have bmi, a handful of major labels. >> the good fortune is that there are organizations like oflin that aggregates a lot independent labels together and negotiates on their behalf. that weble to do a deal did two years ago with marlin to
bring those independent labels together. that has been a fantastic deal. you have the major labels and we aggregate independent labels through these associations. some of the bigger independent labels use direct deals. interesting. thank you very much. a biga, connected car conversation here and pandora is a big part of that. betty: thank you so much. in lashnson at the ces vegas. we will be talking to the white house chief technology officer about how they are encouraging encouraging women and diversity in silicon valley. ♪
betty: welcome back. this is bloomberg markets. time for the bloomberg business flash. united airlines says the ceo will be back at work in april after receiving a heart transplant. he had a heart attack in mid-october just one month after taking the job. he 67 years old. it is the end of the trail for explore. will nosday, microsoft longer support the 8, 9 or 10 versions of its internet browser. security updates and technical help will be stopped. that is your latest business flash. mark barton is standing by as european stocks are falling for the third time in four days. we can blame china for the selling. 3.6%, nowere down by
down a mere 2.1%. still, the biggest drop in the month. china lowering the reference rate more than estimated by the biggest amount since august for the eighth consecutive day. the yuan falling to a five-year low. every industry is falling. earlier, only eight stocks were rising on the stock 600. -- stocks 600. you try to look at the brighter side of things. we will talk to a lot of guests in the next hour. whether this any opportunity here. chinadavid page will talk , talked it out of eurozone. -- talk date out of eurozone. unemployment falling. u.k. was interesting today. the comments from george osborne
certainly made me take notice. -- retail cutting jobs. tom will be talking oil as crude falls to its lowest level in 12 years. we will be comparing the u.k. and new york luxury housing market. i know you like your luxury housing. now that i know what car your drive. what: we are talking about is less expensive, essentially, between london and new york. mark barton in europe for us. for a look at the u.s. markets, abigail doolittle has the latest . a lot of stocks getting hit to date. -- getting hit today. down are all the top
five tech members. these five comprise 24% of the composite index. --h of these top five microsoft and facebook. microsoft in a global selloff. there doesn't seem to be anything specific here. kind of surprising kids it is the most mature of the bunch. considering -- kind of surprising considering it is the most mature of the bunch. what to do with tech, buy or sell? the head of technical analysis at oppenheimer called the idea that we would see a correction in the first half. he says he expects to see the selloff continue but large tab indexes like the nasdaq 100 are buythe top of our
list." betty: abigail doolittle live at the nasdaq for us. we've been covering the consumer electronics show from las vegas all week long. the cool gadgets being unveiled. pushes theirse agenda on silicon valley come including encouraging more innovation and more diversity in the work place. joining us live is megan smith, the u.s. chief technology officer. i know you will be talking about women in the tech workplace and why the numbers are still so low. how are you going to try to put those words into action with these companies? so great to be here at ces. we will be talking about diverse the intech. -- in tech. the tech companies are making
progress. intel, microsoft come up interest are doing things like when they are considering candidates, they make sure they have a tech group inwomen -- the tech sector the 1980's was 40% women and we just dropped because of all kinds of unconscious bias. there's certainly more public awareness of this. shareholders are taking action as well. there was a story about an apple filing with apple saying their racial diversity is very poor. droppeder of blacks has to 3%, hispanic strapping down to 6%. dropping down to 6%. should regulators be involved? eld a: yesterday, we h
supersession. -- of the leaders in oakland tech higher uses these quick trainings to get somebody into the tech sector. we have half a million jobs in the unite states in the tech sector. they are all over the country and pay 50% more than the average american salary. we can use these new training methods. 35 cities already in. we want to use these methods that are working. a lot of what we are doing is showing people things that are already working. companies can come get this talent. oakland is in the middle of silicon valley. group intoet that the silicon valley core? betty: in recent months, the president has urged tech companies to join with the
government with the white house on a completely different topic. adjoining with the white house to fight global terrorism. and their use of dark networks, dark social networks, the internet to further their agenda. what kind of response are you getting from tech companies on coming together to fight terrorism? megan: we are seeing great response. one of the things that is interesting about the tech sector is this idea of open innovation. in addition to direct competition, we are seeing these paris, there will be 500 people gathering monday start on lightning rounds with sharing ideas and brainstorming throughout the weekend to work on the problem.
in oakland come we are seeing lots of different cities doing this. the cto of seattle was with us today. gathering the community together to work on the commute. case ofit's in this global terrorism or smart cities or inclusion of everybody, we use open innovation to help us gather together. working with police chiefs all over the city to bring together innovation. betty: thank you so much, megan smith. much more ahead on bloomberg markets. one man fighting the white house, robert murray. waging a legal war against the president for regulations he says are meant to put the call industry out of business -- the coal industry out of business. oil having its worst ever start to a year.
betty: he is cold the last king theoal, fighting to protect declining industry from what he calls trickling in regulations. his fight has landed him in several courtrooms as he sues the government for rules he says are putting coal out of business. cheap natural gas is also taking coals market share. he's the president of murray energy. he joins us live from cleveland. good to have you. you look like such a nice man, you don't look like this warrior here. >> im because it is a human issue to me. barack obama and his democrat supporters have destroyed so many lives in the coal industry.
we had 200,000 coal miners before barack obama. today, we'll have 71,000. it is a human issue to me. betty: i do not doubt that. the public does feel for everyone who loses their job. how can you blame that entirely on the president and federal regulations when consumers are also going to cheaper sources of energy come including natural gas? is not cheaper. historically, natural gas has btu -- coal ison cents wind and solar $.22 a kilowatt hour. he's picking winners and losers. he said he would bankrupt the coal industry when he ran in 2008.
he has made good on that. we do have natural gas creeping in. he's responsible for that, too because he is holding up the ports where weng can get this excess gas out of the country and improve our payments in the unit states. he is responsible. he does support natural gas. hillary clinton has said she will expand on her policy -- his policies. wondering, is there anybody on the republican side that you would support that you think is going to help your industry? >> i think anyone but barack obama and hillary clinton will be better. betty: are you putting money behind anyone? >> i don't know how this republican struggle will turn out. i leave that to others. what i do know is that obama is destroying low-cost electricity
in america for people on fixed incomes and for folks who want to manufacture a product for the global marketplace. he has destroyed it. i understand your position. the president says we can no longer rely just on cheap coal because it is destroying our environment. is that not a valid argument? >> it is not a valid argument. the earth was cold for 19 years. when mr. obama went up to the arctic and said fossil fuels is that she did not tell the public that that glacier had been melting since 1815. we used wood in 1815. he did not say the antarctic ice is larger than it has ever been in measured history back to 1979. he is a liar. don't does that mean you
believe the science behind carbon emissions contribute to global warming? >> i have 40,000 scientists i know of, four i have corresponded with that say the global warming is a hoax. it is a facade for a washington takeover of the unite states of america. by passing the states, the tilde commissions of the states which are supposed to regulate electricity. a political power grab of america's power grid. i see the fire in you now. bob murray, think you so much. we will be back on bloomberg markets. ♪
it has been ugly again for the bulls. mark: coming off the lows. events in china continuing to slam stocks here, sinking for the third consecutive day. the european close starts right now. betty: we are going to take you from new york to london in the next hour. we are coming off the lows in europe. mark: down 3.6% earlier. that was the biggest decline since august. earlier, eight stocks were rising. 600 losing 5.4% this week. the lowest levels since a september.