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tv   Bloomberg Markets  Bloomberg  January 27, 2016 12:00pm-2:01pm EST

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alix: from bloomberg world headquarters in new york, i'm alix steel. david: i am david guerra. alix: janet yellen and company, will they acknowledge the turmoil threatens their upbeat view of the u.s. economy? david: facebook stock is down about 8% this year. last quarter results justifying the selloff? alix: is the united states rivaling switzerland? we will to you why the u.s. is becoming the goto place to stash wealth. david: let's head to the markets desk where julie hyman is back. volatility is over. julie: that is why, obviously. we have seen major averages come back in germanic fashion.
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particularly the dow and s&p. the nasdaq, at one point down more than 1%. it is still down but only a third of 1%. we have seen a correlation between stocks and oil prices. we have the trajectory of each throughout the day today. you see them moving very closely together. as for oil, let's focus on that by itself. it is dramatic -- it's dramatic recovery, we got weekly inventory data from the u.s. government and it was not as poor as industry data that came out last night might have indicated. it seems as though there is relief being expressed. we are hearing from the heads of russian conglomerates exiting a meeting with other russian oil heads as well as members of opec . there is talk about coordination. something alex pointed out to me. no agreement yet but even the idea that they are talking about cutting production seems to be helping oil prices.
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alix: the saudi's have said they will not cut as other countries do and that other country needs to be russia. that would be a huge impact in the oil markets. in addition we also have the fomc later today that is moving asset prices as well. irp.w.a.r .r. p interest rate futures. i have the chart of expectations for the march meeting. they have fallen off sharply. what investors are going to be looking for today is any indication that the fed is acknowledging the global market turmoil and potential economic turmoil and whether that will have an impact on the fed's decision-making process. foure seeing a look at
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interest rate increases this year. how is it working in other asset classes? we are seeing yields actually move higher. 2.04%. that sort of contradicts the idea that we would not see an increase in interest rates this year. if you look at the fx market and currencies. we have seen volatility in the u.s. dollar. the dollar versus some of the other currencies has been bouncing around. some uncertainty in the market about what the fed is going to do or more to the point what it is going to say. alix: let's check in on the bloomberg first word news. mark crumpton has more. iran's navy has warship.u.s. the agency quotes iran's navy chief as saying the warship received warnings before
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leaving the area. he says he believes the americans approached the area to "learn our tactics." asking if federal judge to order the replacement of all let types in flint toss water system. it is the latest lawsuit filed in the michigan city's water crisis. governor rick snyder has appointed a committee to fix the water system and help residents exposed to lead. secretary of state john kerry faced a hard sell in beijing. secretary kerry could not get china to impose tougher sanctions on north korea. the u.s. wants to put more pressure on pyongyang after its latest nuclear weapons test. >> whether or not he achieved the explosion of hydrogen weapon is not what makes the difference . it is that he is trying. that he wants to do that and made the attempt.
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mark: china has opposed any move that may destabilize the regime of kim jong-un. donald trump says he will skip thursday's debate in iowa. mr. trumps says he has been treated unfairly by fox news which is holding the debate and its anchor megyn kelly. he says he will be at a fundraiser for veterans instead. with all due respect will be live from des moines iowa all this week ahead of a state caucuses. coverage begins at 5:00 p.m. new york time. dayal news 24 hours a powered by our 2400 journalists in more than 150 news bureaus around the world. david: all eyes are on the fed today. investors waiting to see how policymakers will address market turmoil. spoke witherian yesterday.
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the fed may be changing its approach. >> we have lost central banks. they used to be our best friends forever. the minute there was volatility we would get a statement out of the federal reserve. that is no longer happening. lost a stabilizer. oil has lost a stabilizer in opec. the more stabilizers we lose the more volatility you get and the more risk-averse people get. alix: with us now is chris whalen. good to see you. is this what we have been seeing over the last few weeks? market reaction to the fed pulling back on their intervention. particularly quantitative easing. the purchase of trillions of dollars worth of securities took a lot of weight off the markets. the fed stopped doing that. stopped adding to the portfolio. they will continue to reinvest when bonds mature. alix: delayed reaction basically. chris: it is a huge factor.
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frankly they have added a lot of the volatility that everyone now expects them to react to. when you manipulate markets you always get secondary and terse year he affects. -- and tertiary effects. may forceodity prices the chinese to admit how much debt they have inside. it is quite a big number. all the central banks and governments i think are adding to the volatility. for me, you watch the vicks and credit spreads. what the fed does with interest rates one way or another to me is a matter of indifference. investors have to watch spreads. been bernanke, his classic work on the depression he focused on credit spreads. markets stopped working. if i am in the fed right now i want to be focused on what i can say or do to go back to mohamed
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el-erian's good point. to get markets to come back in. david: starting with the economic analysis, what do you expect the fed to say today? how would you like to see in the knowledge that of what we have seen? chris: the question is, do you continue to adjust and try to youback in the sink or do stop and admit right now everybody else is easing. at this point in the cycle the fed should be doing nothing or easing. me, if they indicate the going to continue to raise rates gradually that's almost a good thing in a sense because i would like them to normalize. everybody is waiting. financials have been getting annihilated. everyone in the industry is asset sensitive. instead we are getting a flat curve which is not going to help anybody. alix: could you make the
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argument the fed would want a flat curve. ? we going to aim for inflation, keep accommodating longer-term. chris: i suppose. end,rony is the short whatever you want to define it, is going to rally. a sims the markets get a sense for what they think the fed is going to do going forward i think you're going to see the 10 year rallying strongly. so much money and they are running away from leverage, commodities and oil. i think you'll have more buying forward.agencies going you may see asset prices rise a bit. the bottom line is that the fed caused volatility. until we can get a central bank that's willing to say no and force the fiscal side of the house, forced the government get in the game, were going to have to live with the good and the bad of central-bank policy. draghi speaking earlier this week, essentially
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that is not the role of the central bank. chris: it is their role to say no. we have not had a fed chairman in washington since paul volcker who would look members of congress in the eye and say no. the fiscal role that the central bank has taken funding of these rescues, doing a lot of other things that in the 30's a fiscal agency had to do. authorized by congress. we are taking the politicians off the hook. i think we want to put at least whatever pressure should be on them back there. central bankers should do their job. the fed would be more effective if they did that. alix: thank you, chris. chris whalen. staying on the fed, we have a special edition of bloomberg markets. scarlet fu will be joined by tom keene are. starting just before 2:00 p.m. eastern. david: investors preparing for bad news from deutsche bank.
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the bank will report its first -- petitions are the bank will report its first loss -- alix: reporting a net loss of $3 billion last year. its first yearly loss since 2002. david: he says the company still has huge potential. he will tell us where the value is. ♪
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alix: welcome back. for -- it is nice to have you here. he is not scarlet. it's ok. a look at some of the biggest business stories in the news right now. johnson and johnson is looking to settle lawsuits filed by vaginal meshlt
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inserts for their injuries. j and j agreed to pay to resolve between 2000 to 3000 suits. the company faces david: over 42,000 other cases. another driver has died in a crash involving exploding to cut it airbag inflator's. takata says the driver died last year in india. if the inflator was the cause it would be the 11th person killed worldwide by takata airbags. alix: wendy's says it is investigating reports of unusual activities on payment cards used in its restaurants. it has launched an investigation and is cooperating with law enforcement officials. wendy's is encouraging customers to watch for unauthorized charges on their card. that is your business flash update. david: julie hyman has a look at company movers. julie: the two big losers we have been talking about our apple and boeing. dragging down the dow.
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it has turned around at this point. apple saying it could see its first sales decline in quite a long time. more than a decade as we are seeing waning demand for iphones from which it got 60% of sales last quarter. obviously that is a big issue. boeing declining saying it is seen waning demand for as well. forecasting deliveries coming in below what analysts had been anticipating. there are winners to mention as well on earnings reports. .ne of them is biogen the company saying its multiple sclerosis drug which is its top-selling drug top analyst sales estimates. the shares of 9%. interesting we are seeing a railroad do well. fourth-quarter earnings projection beat estimates. it is going to be cutting 2000 jobs by 2020. united technologies arising on
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its earnings report. state street saying the market turbulence is going to continue to be a problem. tupperware getting creamed on its numbers as well. some other winners are some of the stocks that have been doing the worst over the past year or so. coming back by 18% which sounds a lot unless you look at freeport mcnair and posture -- freeport mcnaimoran posture. alix: fourth-quarter revenue tomorrow and the outlook is murky. deutsche bank announced earnings indicating a whole year net loss of $7.3 billion. a challenging market condition. david: john cryan has to explain how the investment bank in trading unit is pushing the company is to its first full-year loss since 2008.
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nicholas comfort has three charts that are going to paint a clear picture of this. the first has to do with risk. a bank that has taken on much less risk than it is used to in its competitors. .icholas: yes indeed they would love to take more risks than they are at the moment. on the one hand it is because they have had the decline for them dramatically. declines are not trading as much as they would like to. that is hurting deutsche bank. you also have the fact that they are in the middle of this overhaul. the middle of an overhaul, big restructuring. not the time to be taking big risks. that is going to be hampering their trading activity in the quarter. alix: to your point, they are cutting back so much more than they are investing that it's going to make it difficult for them to grow. nicholas: absolutely. this is a feedback we had for
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many investors over the last couple of months saying, we have to cut back on capital incentive trading businesses. now, a lot of the investors are turning around saying, where are the revenues going to come from? same guy saying cut back, cut very deep are wondering where the revenues are going to come from. regardless of whether those people have done an about-face or not the question remains, how is deutsche bank want to generate enough revenue to carry through its overhaul and attract a return? no one has an answer to that so far. david: the final chapter showing the five biggest u.s. banks saw the combined revenue from investment taking in trading fall for two straight quarters. nicholas: indeed. it is all relative. while we may see the european banks declining more dramatically both in trading and
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investment banking in the fourth quarter it is also -- they have a back wind. the strong dollar which should be helping them. tough isto wonder how the environment for them at the moment. it is not going to be a good quarter for european investment banks. david: nicholas comfort joining us from frank ferd. -- from hartford -- alix: why cubbies are cutting back on spending. p.m., is the:00 u.s. slipping toward a recession? we have insight, analysis, and the answers. ♪
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david: welcome back. alix: the continuing downturn in
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the taking a toll on -- in next eight days they are expected to report on the $14 billion in total losses for 2015. i recently sat down with harold hamm. the biggest explorer for shale in the u.s. he painted a rather sunnier picture. >> we have our own estimates of what that will be in the future. certainly i have said we are probably looking toward the end of the year at $60 prices. alix: $60 did not happen for him but he meant further out. a few years down the road. david: was not good enough to help continental this year. is following suit announcing a 40% cut in spending. more perspective we are joined houston.wesley from you hear about these cuts. i wonder what effect that could have on the glut we have been talking about. the sad answer to that is
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you have to cut so much just to even maintain. one example, hess said they are expecting 330,000 to 350,000 barrels a day of production this year. the same forecast they gave three months ago. no drastic cut in output despite the more than two thirds cut for them. a little less than that. despite the big cut in spending. alix: a similar story with continental, forecasting this quarter what they forecast last year even of they're cutting spending by six d6 percent. theyction is staying what are expected to be even though is coming down. how is that possible -- even though cap ask is coming down. how is that possible? david: we are getting so good at drilling wells in north america. you can go down and drill a long way where as in the past you had
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to spend more money to drill more wells and poke holes in the ground. we are getting better at doing this shale production. david: you look at a shift like this and i wonder how quickly these companies are able to adjust to things like this low price of oil. there could have been more they could have done earlier to prepare for eventuality like this. david: a lot of times when i hear -- what i hear around houston is, how these companies not know in advance to prepare for this kind of thing? why are they making such drastic cuts? everybody get into this euphoria during $100 oil and it is hard to hold back a bit and be prepared for the bad times. unless you are preparing your balance sheet better and have a lot of capital room you are still going to drill great and have large staff and be really big companies during the boom
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times. they end up having to cut back quickly and there are different levers you can pull. what we are seeing now with the spending cuts, that is sort of the first big lever these oil companies can do. alix: amazing that they are pulling the lever now after this downturn for over a year. where is this cap x being cut? whether it is future investments, current projects, or maintenance. that will affect different times in their cycle. david: the biggest thing they are definitely cutting his exploration. the most expensive way, to first explorer for it. we are seeing that cut back. beyond that is drilling the new prospect wells. you are not quite sure. you rank it on what seems the riskiest. right now they are going to the safest bet. places like the permian where it is still active because you can get the most bang for your buck.
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less risk to go wrong. all the other plays around the kken and the ba elsewhere, there is more risk. you will be spending on maintenance to keep the well flowing because you need the cash flow going. if it costs less to maintain it, you will do that. you're not spend the big bucks to explore. alix: thank you for joining us. wethe. so fascinating to watch. the first thing that they cut, that will be the next big thing. david: moore bloomberg markets after the break. ♪ . .
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when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. so your business can get back to business. sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. alix: from bloomberg world headquarters in new york, welcome back to bloomberg markets. alix: mark: mark crumpton is at the news desk for first word
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news. two major u.s. airlines are offering refunds to passengers virusd about thezika outbreaks in tropical countries. american airlines says it will give refunds to pregnant women planning to travel to parts of central america. president obama will ask congress for $12 billion over a decade to help feed school children from low income families during the summer. the white house is a request will be in the 2017 budget proposal. the president plans to send lawmakers the plan next month. nearly 22 million low income children received free and reduced price meals during the school year but just a fraction receive meals when school is out. thelia and north korea are most corrupt countries in the world according to a report released by transparency international. denmark is the least corrupt, scoring 91 point out of a possible 100. the u.s. rose one spot to 16th
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place with a score of 76. survivorsholocaust gather today at auschwitz to mark the 71st anniversary of the day soviet forces liberated them from the nazi death camp. global news 24 hours a day powered by our 2400 journalists and more than 150 news bureaus around the world. back to you. carson block, the founder and director of research at muddy waters made his name shorting china stocks but his latest bed is in europe. a french supermarket operator has fallen below 10% since he announced his short last month. david: he was on bloomberg talking about his call. came out with our position only five days after was investment grade. s&p has now put it on negative
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credit watch for a possible two notch downgrade, which we think result of focusing the s&p and the investors on the lack of credit quality of this company and it has far more leverage than it should. >> s&p affirmed them and now they have two notches down -- what does that say about smp? carson: they put them on credit watch. you rarely see credit watch it a possible two notch downgrade. the s&p had a real problem dealing with the complexity of the financials and the accounting. >> how much does a stock have to go down for you to view a short as a success?
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carson: it is really case-by-case. in certain instances, if something is a zero, if it is a substantial fraud, we wanted down more than 30% or 40%. but if something is a real business, down 40% could be a great short. depends on what the thesis is. >> how do you execute your short? carson: in what way? >> how do you express your view? stock? cash shortselling carson: we will short the stock, sometimes we will be in the credit of shorted the standard chartered bank. we did not touch the equity. turned out to be a really nice trade for us. we are all over the capital structure, but we do focus on the stock. >> i hate to talk about disappointing investments, but
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when you look at american power, where did you go wrong? carson: being right and making money are not the same things. for us, the intersection is pretty high. but in amt, this is such of our -- this is some of our best research and if someone wants to give me crop about that, i challenge them to read the -- about that, i challenge them to read the report online. >> then why didn't it work? carson: it was a 30 billion market cap at the time, very mainstream, a very hot name, and the market doesn't always agree. guys that do what i do are not magicians. if they think it's good, the stock will go down. that was carson block, founding and director of research at muddy waters.
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alix: barry diller additional media'sallenge -- challenges years ago, so he knows a thing or two about tech companies. david: today, he was asked whether he would ever by yahoo!. barry: no. >> why not? barry: do i think there is value in yahoo!? i do. it kind of lines up with some of our businesses. , it has had ais 10 year rough ride. not laying for dead in my opinion. just the amount of wear and sturm youstrife and have to go through is not worth the candle unless you got it at such a discounted price. if that happened, sure. ask if you woke up tomorrow and
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were the ceo of yahoo!, what would you do? that.don't do i don't want to go there with ceos. stephanie: and they stand alone? barry: yes. they have 500 million people are so coursing through their system. if you can make a business out of that, something is wrong. tophanie: that takes me twitter and they can't find their groove. barry: that's not true. it's not that they can't find it, is that they are starting to get revenue from it, they do have revenue and they are a growing business. i don't know what the evaluation -- stephanie: they are made up in a room. barry: they are made up by the market. what they are doing is making the product easier for normal people to use because it is not that easy if you are not aficionado. is their biggest problem a
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growth in subscribers or is it revenue? barry: look -- they are not at the point facebook was at, to say the least. facebook has enough subscribers. facebook has enough viewers to last them probably the century, but that is not true for twitter. david: and they have lost half their market value. eerie: investors are telling us something -- very: investors are looking at the past. for may. not jibe stephanie: you need investors to believe in your company. barry: investors will believe in your company with the trailing fax, and they have two trail for a while, particularly if you have been in the barrel. if that happens, it takes time.
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: unless you are amazon and investors just believe in you. barry: the facts of amazon are astounding. meaning from the very first hour of the first day, what amazon and jeff bezos said is we are going to build infrastructure to serve customers. and we don't care about anything else. time ofendless investment. i will make you a little prediction -- jeff bezos will be the richest person in the world within five or seven years. david: how can it be -- think that's enhanced down. david: at some point, you have to make money from it. barry: they do make money. their cash flow is very good. they reinvest -- which is why
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it's going to be one of the most valuable companies in the world. that is why. insane attention to pleasing the customer at whatever it costs. their amazon prime is genius. stephanie: if jeff bezos is going to be the richest man in the world and we have seen the retail industry get shellacked, anyone selling the same product amazon does is getting carried out, does that mean it's the death of all other retail? barry: something doesn't have to die for someone to live. stephanie: walmart is getting a shellacking. barry: let's talk about youtube. there's a lot of stuff on there you might not want to watch, but it is huge. it's a big deliverer of video. why can't they make that
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successful? barry: they really do look at it as a search business, primarily. and it has evolved from a search business to immediate business. and there is a big difference between the two. eventually, i think they do get it but i also think other players have an ability to swing imeo'sh, which is why v platform is going to be a very large platform for video. that is what we are investing in. stephanie: given the size of google, in terms of advertising, can they put pressure on their partners in terms of agreements? barry: can they put pressure? in the landareerfs of google. serfs in theare land of google. it is sensible to treat them
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well because history has said they rise up, get on horses and kill you. alix: that was barry diller earlier today. a great conversation. talking aboutup, facebook -- will investors be clicking like on facebook's fourth-quarter earnings? alix: switzerland, the cayman islands and south dakota -- we will tell you about the new tax haven for wealthy investors. david: and what will we hear from the federal reserve? we will renew expert analysis when they release a policy statement at 2 p.m. eastern time. ♪
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alix: welcome back to bloomberg markets. looks like a beautiful day. david: absolutely. here we are stuck inside. alix: let's get to abigail doolittle live at the nasdaq where she is looking at apple. the reason theis nasdaq is lagging the other major averages. a huge point dragged on the index today with the stock down sharply after the company forecast the first sales drop for the march quarter since 2003 in revenues. , one analystt calling it ripping the band-aid off. it was aueeze says reset as expected, but the company gave negative macro comments on its conference call. you have to wonder whether guidance for the march quarter could become the street newest in session. performers, the top performer is biogen. the biotech giant put up a great
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fourth quarter on the strength multiple sclerosis drug. the company beat estimates by 10%. but what stands out is just a couple of weeks ago, the company was giving cautious commentary. they sandbagged the street to produce an upside surprise. on that strength, the stock is up about 40% from its record week last year. lots of big selling momentum to overcome. plus you have the biotech index still in a bear market. david: thank you so much. abigail mentioning the negative macro economic guidance we got yesterday. still wondering if apple is ringing the bell about something bigger. a lot of concern about what is going on in china. alix: not only apple, but boeing taking points off the dow.
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definitely some more questions. facebook is the world most popular social media site. the company reports earnings after the bell. the company is gaining more users. joining us is cory johnson. we heard barry diller a few moments ago saying facebook has enough users to satisfy it for a century. but still trying to add to the billions they have. cory: it is an amazing story with facebook when we look at twitter and its anemic growth, twitter has had zero growth domestically. turn the page to facebook and you see dramatic growth on much bigger numbers. not only are the user numbers growing, but has that user growth re-accelerated?
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user growth seem to slow down and then suddenly started to pick up a little bit. user growthat the said, sales growth has been inclining a little bit. what about ad revenue growth? numbers surely show you that with virtually all of it from advertising. but another number above was the tell you the, they number of users, you can figure out the average revenue per user. if you think about the value of the user and how much it is valued by facebook and what each is worth, facebook has been
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consistently able to convince advertisers to pay more and more for each user they are hidden. while there is some seasonality, they use the numbers and start to look positive as they are able to squeeze more value out of every user. increasingn that over the entire time facebook has been public. david: facebook has been acquisitive here, buying are we seeing advertising revenue coming in from instagram? cory: i think we might end up talking about that the most. this is the year instagram advertising took off in full force. they might even delineate what those revenues are. instagram has been a phenomenal product. think of when yahoo! bought tumbler for the same price.
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instagramition of looks fantastic for facebook because it has grown in terms of users so much, but we don't know what the revenues and profits are for that business. i know there are some people out there just crazy about instagram. maybe david? biggestal quick -- the question going into this earnings? cory: i think it is going to be the instagram thing. is big question long-term modernization around messaging. they have two messaging products changing the way the world communicates with whatsapp and facebook messenger. potential istising certainly there. they have sworn not to go there with whatsapp but one wonders
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when they might try to monetize messenger. you would not want to screw up the user experience because they want to grow the business. is the u.s.g up, the new switzerland? we will tell you why states like south dakota are becoming a tax haven for wealthy foreigners. alix: it is cold there. ♪
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alix: welcome back to bloomberg markets. the cayman islands and switzerland, the new hot spot for rich individuals to keep their money secret is right here in the u.s. why are nevada and south dakota new safe havens? it's a fascinating piece -- why is it the u.s. is seeing these safe havens? jesse: where to begin? basically, seven or eight years ago, the u.s. started cracking
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down on swiss banks helping rich americans hiding money offshore. dozens of countries have agreed to sign on to international standards to try to prevent citizens from dodging taxes. the one major country that has not signed on is the u.s. what is happening now is fund managers who have clients outside the u.s. who are maybe worried about their accounts in cayman and switzerland who want confidentiality are talking about moving that money into the u.s. and that's actually happening. we spoke to rothschild, a big european bank has set up a trust company in reno, nevada, and they are in the process of moving wealthy clients from asia, turkey, out of the bahamas and bermuda into nevada. alix: so why nevada and south dakota? jesse: they are moving in because the u.s. has not signed
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on to these protocols. some of these states have trust laws that are particularly beneficial to make it easy to avoid taxes and add a next layer of confidentiality. not signedu.s. has on to this yet. there are indications the government will start looking into who is owning what. what is the country say about why they have not signed onto this and the level of scrutiny they apply? jesse: the treasury department has two different responses. they say the laws in place are sufficient and the obama treasury department has made a proposal that would be similar to what the other countries have signed onto. they are proposing to do things that would up the level of scrutiny but that hasn't happened and would require congressional approval, which the treasury department knows would be difficult. alix: what do the state wind up getting out of it? jesse: there's a lot of work
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there for these alix: companies. can we quantify it? jesse: i'm sure someone can quantify it. alix: our big guys moving their residences there? aree: it's not like these companies or people moving to these states, but there is a booming trust company industry in these states and if you've ever been to reno, this is a place that has experienced hard times for a number of decades and to some degree, they are industry ashe trust a way to replace the hospitality and rambling that used to keep the place of float. from a historical perspective, how often does this change? are people sure that by doing going to be safe and they will have confidentiality? jesse: that's a very interesting question because there is the
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possibility the u.s. would sign on to these standards and that would change things. people are banking on either the you will never sign on or have another three years or so to keep your money safe and figure out a new jurisdiction. alix: really fascinating. , a preview of the fed decision. why the market is betting policy makers raise borrowing costs anytime soon. later, special edition of bloomberg markets. we will bring you the fed decision live from new york. stay with us.
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is david: 1 p.m. in new york in 2 a.m. in hong kong. welcome to bloomberg markets.
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david: from bloomberg's world and quarters in your, good afternoon. alix: here is what we are watching at this hour -- does the fed follow the markets? investors are waiting to see how much the turmoil affects policy makers when they decide on interest rates one hour from now. david: oil prices may have crashed but that is not stopping one banker from starting a new commodities trading company. freelancer says it's all about me. we will look at the link to an alternative that is making waves. let's go to the markets desk are julie hyman has the latest. markets are kind of mixed. julie: we saw them recover in the wake of oil prices
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recovering, but the dow is going back to little changed on the negative side. you tend to see this on an fomc day, even on a day when there's ratesspense about the themselves, there is some suspense about the statement itself. we have indeed seen a rebound. weekly inventory data that was perhaps not as poor as some traders feared and we are getting reports russia is in talk with opec nations about potentially cutting production, which would be potentially good news for supply. all of that helping to lift oil prices above $32 a barrel. interesting to note the dichotomy between oil and natural gas we have seen. december 1 of last year, since then, using a bump up in natural gas and it has been larger than
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what we have seen an oil prices. it is winter, so one would think there is some rising. we got the announcement that there will be no press conference, just a statement. how are investors processing this? zero is a chance they are looking at for any change today. this looks at interest rate futures and tries to calculate the possibility of an interest rate change. see the literal flatline in the expectations for today's meeting. at march, you have seen a drop, but it has not been a flatline. expectations have been ratcheted down across the board because of what we have seen globally in markets. a quick check on the 5-year note -- we had a $35 billion auction of those notes in the past few
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moments and if you look at the results, it looks like the bid point 40ratio was two four versus 2.32. in other words, demand rising a little bit for those five-year notes. alix: let's check in on the bloomberg first word news with mark crumpton. mark: u.s. secretary of state john kerry could not get china to see things his way on north korea. the appeal to impose tougher sanctions on north korea following its nuclear bomb test this month. china has been opposed to any move that made stabilize the regime of kim jong-un. they want to restart talks with the north koreans. environmental and civil rights groups filed a lawsuit today asking a federal judge to order the replacement of all led plates in flint's water system. it's just the latest lawsuit filed in the crisis.
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>> that will be faced stash that will be based on third-party expert saying the water is safe. our goal is to get the water coming out of the tap safe as soon as possible. mark: the governor has appointed a committee to fix the water system. the fbi has established checkpoints around a national outpost in oregon. the fbi stopped a militant leader in several of his followers while they were on their way to a community meeting. shots were fired and one of the supporters was killed. the group wants the wildlife refuge turned over to local control. president obama welcomed bernie sanders to the white house today. obamaeting comes after lavished hillary clinton with praise during an interview earlier this week. staffers with both men say that meeting had been scheduled for -- for some time. "with all due respect" will be
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live from iowa all this week ahead of the caucuses. coverage begins at 5 p.m. new york time. global news 24 hours a day powered by our 2400 journalists and more than 150 news bureaus around the world. we are one hour away from alix:d decision and investors are waiting out. chiefg this is a economist at rbc capital markets in new york. we have a stockmarket market selloff in oil prices falling and a lot of worries in china. all of that happened in the last five weeks. how does the fed address that today? take a pagenk they out of the september playbook where they highlighted recent global developments could put some downward pressure on economic activity. frank, i don't think you
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get much more in terms of material or meaningful discourse. how important is the mention you just described? why does that matter so much? think that's the best question i have heard all day. why does it matter if that highlight something that is already going on? i think what is critical is what does the fed c4 the passive policy going forward? they are still looking at for hikes this year. officials have said as much. i think some it knowledge meant be expected but i don't know what that is telling us. that's not a forecast, it has already occurred. questionse are some about what is causing the selloff. is it global growth or u.s. growth slowing or is it global
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liquidity tightening across the world in which the fed is a part of that? guest: let me be emphatic on this one point -- it's not about what's happening from a fundamental respective. fundamentals in the u.s. remain completely sound. u.s. slippingthe into a recession this year. if anything, we are looking for another 2.5% growth year. the market could be responding to a number of factors. when you get iso slipping below ofakeven, that is indicative a potential for a profits recession. the other thing i would highlight is if you look at the big holders of u.s. equities outside the united states, particularly big oil exporters, thereou would observe is has been a sizable amount of companies. those
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oil crisis -- oil prices have declined dramatically and bulked up for reserves. it is not a u.s. fundamental story at all. i want to talk about the difficulty the fed faces -- silly things are positive, yet you have oil prices and an incredibly strong dollar. hasn't gotten tricky for the fed to cleave those two from each other? guest: the fed has the generally right stance on this. the decline in the energy is positive because it benefits the u.s. consumer. there's a huge benefit there. there's no question there are pockets of pain and we get that. but if you think of the net/net perspective, the consumers a huge beneficiary of that. this is what we have continued
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to hear from the fed. alix: we have seen consumer confidence stay pretty strong despite the drop in stocks. come inside the bloomberg terminal and you can see it holding up well. the number of consumers who expect stocks to rise is moving up and you don't necessarily see that. you tend to see them move in tandem. pessimistic but stocks are falling. how does that work? guest: if you look at consumer confidence, consumers have been confident about the backdrop. to the equityrd market in general. while there has been some pullback, the reality is there not nearly -- they are not nearly as pessimistic as investor sentiment. what ultimately drives
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confidence is the labor backdrop. people are still feeling confident about the labor backdrop. david: we have unemployment at 5%. is that low enough for the fed? i would say't know it is good enough. i think they are expecting further declines, as are we. we would expect to get down to about 4%. assuming it is about 5%, you are looking at continued improvement and that is one of the other things that would embolden the fed to want to continue the process. not only are you going to see inflation rates rise, but you are going to see improvement in the unemployment rate. you look forgns do for cracks in the economy? guest: one of the key things you want to look at is what's
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happening from a financial conditions statement. people like to make the blanket statement that financial conditions have tightened. you have to drill into areas where you are seeing conditions tighten or not. one thing we would jump on his if you see a spread in the interbank lending market, you have seen an increase in stress there, but at the end of the day, if you are trying to make a call on whether the economy is going to downshift or fall into a recession, the single best indicator is jobless claims. jobless claims, the odds about a recession are extremely low. they are only about 10% or 15%. but aree risen a bit only facing about 10% of 15% odd s. alix: thank you for joining us.
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david: coming up, we will bring you the fed decision live at 2:00. our special guest will include if overfed governor and jeffrey rosenberg of blackrock. coming up, one bank's profits were almost wiped out last quarter, but the chairman says it was a good year. up about me says it's time for an alternative to linkedin. david: we will talk to a wall street banker making a big bet in commodities. ♪
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alix: i'm alix steel on this is
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your global business report. takes 1.8 billion dollars in charges, so why doesn't the had banker think that's no good. royal dutch shell has approval for its biggest acquisition ever. how has the deal involved as oil prices decline? a banklet's start with that book $1.8 billion in charges in the fourth quarter. much of that was to compensate british clients wrongly sold protection insurance. there is a bit of a disconnect between the financial and what they call the real economy. even though i don't like to separate that -- we are very much a real economy. complex. is not there are a lot of issues happening in the middle east and china transformation and this uncertainty -- there is more
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them plucks the end i think you will get more volatility. we have seen this the last few weeks. spanish business is 18% up, consumer lending, we are the number one consumer lender in europe. people forget 87% of that risk and north america. and europe is doing really well. the portuguese economy is .mproving our bank in portugal is making 60% more than last year. well,america not doing so and on the consumer lending side, also doing well. europe and the americas, let's say a slower growth environment , it is going to be more challenging but i think
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we can do well. fourth-quarter earnings missed estimates at novartis. revenue plunged at one of his units which no virus played -- paid $41 billion for years ago. david: in london, a jury has acquitted five of the six accused of a libor case. the benchmark interest rate is used in trillions of dollars of derivatives and loans. the jury is deliberating alix: charges against the sixth broker. the royal bank of scotland is forecasting losses. they are setting aside $2.2 billion related to mortgage backed securities in the u.s. david: shareholders and royal dutch shell are looking for the company to complete its biggest acquisition ever. shares of shall have fallen in the value of the deal plunged from $70 billion to $51 billion.
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alix: for more stories, visit bloomberg.com. about shell and bg, it is a natural gas deal and that has eroded its return on invested capital to its lowest in 15 years. that's putting pressure to show shareholder result. ford: what was the reason them getting into it? demand, expand, you've got to grow. this is a longer-term play. much more ahead on bloomberg markets. we are going to tell you about an online platform connecting freelance professionals. ♪
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david: welcome back alix:. alix:the u.s. workforce is undergoing a shift. currently one in three workers
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in san francisco and new york are freelancers and 40% of the workforce are estimated to be part-time contractors by 2020. david: which is why about. me was created -- looking for an alternative to linkedin. we are talking about tony conrad, the founder of about me. businessan interesting , but i'm interested in the ways you are looking at the world of employment as an alternative to linkedin. there are a lot of segments to think about -- there's college kids, the millennial generation and an older generation. is of the things we realized a lot of people are using their pages as a resume or a complement to their linkedin resume. we saw a lot of growth with college students and i think
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that makes sense. a lot of college students don't have the breadth of experiences or depth of accomplishment at that stage in their life. so the page brings the context into the forefront much better. but we also see that with millennials, who are either working as independent contractors or in creative fields. something like linkedin does not fit in. you into aforces rubric. cory: the rubric being a traditional resume. think of you are a photographer, that does not show you who you are. : is this more about being a social website for people to people touch and commend when they like something someone else is doing more is this a working site where people can find jobs like linkedin?
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tony: we are not really helping people to find jobs and it is not really a social website. the segment of the market where we feel there is a huge opportunity is for people to present themselves in a more holistic manner. when you sit down for an interview, rarely do they start diving into your background. they tried to build some context of who you are as a person and then they start to drill down. we think and about me helps that importantly. did is ourthing we users who are getting the most value out of the platform are using their pages to point people to a call to action that was super important to them. my applebe download review my photos or listen to my music or view my videos or higher meets or support my charity.
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all of these simple calls to action. we all have one. everybody has a single thing that is important to them in that moment. year, ieginning of the want more followers on twitter or instagram because that is valuable to me. toward the back part of the year, i get focused on things where i'm involved in charities. call to action button will evolve over the course of the year and i think a lot of people are similar. trying to hire someone right now and i find myself looking at a more holistic view. they can be found through the bread comes -- the bread crumbs they leave online or you can just look at their resume on linkedin. tony: if you did not go to an ivy league school or one of the top 20 colleges in the country, like most of us, what you are
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relying on is who you are and the fact you have been industrious and reliable and that you have a certain kind of usefulness to you and spirit. magic in how we bring that to life and it helps to put people in a better position when they sit down to have that conversation. those breadcrumbs you leave online can also go against you. how does someone balance that with their about me profile? the thing about linkedin that makes it useful is that cake stands are not a reason you need a job. tony: spot on. andsetting up an interview we are doing it through e-mail. one thing you will do is copy and paste my name and search for me in google. why wouldn't you put a link to your about. me e-mail which guys
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someone toward the page which represents you in the way you want to be represented. it is that simple. cory: sold about me and bought it back. lied to have you on. and caroly johnson massar, anchors of bloomberg advantage on bloomberg radio. alix: coming up, former wall street banker is bringing up one of the most powerful companies and commodity trading. we will have the details. the only way to get better is to challenge yourself,
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and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20.
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it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. alix: from bloomberg world headquarters in new york, welcome back to bloomberg markets. david: let's start with the
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first word news this morning. mark: a danish tourist has been infected by the zika virus after visiting central america. hospital released no further details but says there is little risk of the virus spreading in denmark because the mosquito carrying it is not found in the country. there've been confirmed cases of zika virus infections in germany and portugal. the refugee flow to europe will not slow down this year. people willmillion seek refuge in europe this year. the fighting in syria and iraq is expected to be the main source of the refugee storm. he will skipsays thursday's debate in iowa. he says he is been treated unfairly by fox news which is holding the debate and by his .nchor, megyn kelly
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"with all due respect" will be live from des moines, iowa ahead of the iowa caucuses. begins at 5:00 p.m. new york time. hillary clinton says it she is open to nominating president obama to the u.s. supreme court. shake knowledged there may be a few obstacles in the way. first and foremost, whether he would even want the job after eight years in the white house. global news 24 hours of a journalistsur 2400 in more than 150 news bureaus around the world. prices might be hitting multi-your lows but that's not getting in the way of energy arbitrage partners. -- multiyear lows. david: simon greenfield is planning on starting a new business to combine, develop and trade commodity assets.
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what does he see in this beaten-down market? folks will wonder about the timing for oil prices low. >> the timing is very interesting. business became available earlier this year after lengthy negotiations. we are happy to do that. it is my view the premier brand and started from small beginnings in hamburg and became the largest commodity traitor in the world. the market is volatile right now. we have liquidity problems. -- commodity trader in the world. the larger traders are struggling a bit now. into a voidnslates for liquidity. alix: you are a legend in the commodities world. did you call it commodities bottom? >> we will see.
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not quite that bold. inis a bold man who steps across the commodities patch -- i would not say it is my view this is the bottom. the pressure is still on. we have increasing levels of production expected from iran coming on the market. that will keep a lid on prices. i wouldn't expect a rally anytime soon. david: how is this company going to function compared to its competitors? >> the model we used at my old value-orientedve as opposed to outright that's in the market. bets in the market. we will use the tried and true method from morgan stanley could we started in 1983. small beginnings.
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it went to a global presence in the marketplace. we certainly hope we can get phibro back to its merchant roots and back on track. thiss a bit off track with it is more -- sticking to your core competencies. that's what i want to do. hibro now and in 10 years, how was involved. that's how has it evolved? >> we will have to see. the business model that we used at morgan stanley was in its early days very entrepreneurial. that is what is required for this market because there is unique challenges presented by the volatility, lack of infrastructure. defect here in
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price dislocations occurring. the producers are stressed. the high-yield market is saying no mass right now. it is shut for a lot of these guys. they need financing solutions and that's what we did at morgan stanley. alix: does that mean you will be mostly infrastructure and looking for distressed that options -- distressed debt options with these companies that are struggling? >> we see a lot of opportunity and relative value place. we have a product that is constrained in the marsalis and the unit cap. -- and the utica. how do you get these products to market in an efficient way? you need more creative solutions per we have some ideas on that. we are working on a couple of fertilizer deals right now.
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the u.s., despite these low gas prices, it is still importing 50% of its nitrogen requirements from the black sea. gas prices over there are higher than they are in the u.s. gulf and higher than they are in the marsalis. infrastructure has not caught up. the u.s. market thought it was short gas. now, the whole thing has turned on its head. we are looking to step into this void and provide the quiddity. -- liquidity. david: are you starting this with a global focus? >> indispensably north america because i think that is where the greatest opportunity lies. my background is mostly energy. etals.ted in m as welltarted in metals and went to energy. i think we will start in energy and go to metals.
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i'm a gold traitor. maybe i will start in precious metals. -- i'm a gold traitor. alix: is there one commodity would not touch? still --ole market is and has this bearish tone. we have inventories building and refined products. initially, we will start in the base metal market because i don't think we have the bandwidth to deal with that. energy is fair game. north american energy is the sweet spot for what we can achieve. david: the state of the oil market globally -- perhaps russia and saudi arabia could cooperate cutting production. >> i've heard that story before.
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alix: haven't we all? >> the recent tensions between the saudi and iran haven't helped matters. that will create a bearish overtone. still had the ability to disrupt markets. they still created nervousness in the risk management community, trading community. opec meetingst come of those days are gone. there is no fear of opec anymore. been through these boom and bust cycles many times in your career. we've had $20 calls for oil. do you think we will see $20? >> a definite possibility we could get down to that sort of territory. that has been pretty robust and certain products and gasoline demand has
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been strong in the u.s. china is the bright spot. everything else has a negative twist to it. iea is projecting stocks will increase by something like 1.5 million barrels a day for the first part of 2016. and then, contrary to some predictions, that stock build will drop off but still be building through the end of the year. i think the pressure will be on prices for longer. i do think the market will turn around inevitably. i think it is a bit further down the curve than the average analyst thinks. thinking $85 -- the market is thinking much more pessimistically. $55. what you see? >> i would sooner believe the market than an analyst call.
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i think the market is right. we are building storage. storage at historic highs. we get to the point where land-based storage is limited or may be close to being filled up, then we go to the lcc tanker based in storage, which is much more expensive, which will cause the pressure to be on the front of the curve. those high prices are way below the numbers we're talking about from the analysts. david: is there appetite for u.s. crude exports? >> i think there is. that has put a flaw on the u.s. crude relative to brent.
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differencethe narrowed significantly. is the international markets are weak and if brent is going to be week, it will take wti down with it. you don't have to worry about it getting to that you have the escape valve now to take it offshore. --x: when prices are lower it was such a pleasure to have you on the show. shield,reen rounder of energy arbitrage. -- founder of energy arbitrage. u.s. crude inventories at levels not seen since the great depression. what is next for the beaten-down market. alix: bond investors holding their breath as the fed releases its decision a half hour from now. david: stay tuned for our
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coverage, coming up. that is at 2:00 eastern time. ♪
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david: this is bloomberg markets pick me are minutes away from -- this isision bloomberg markets. we are minutes away from the fed decision. china proving a big drag in the markets. stocks tumbled to a 13 month low today on news that profits from industrial companies and some 5% in december. alix: growth in china will probably decline further. >> they are in the middle of a
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major transition, trying to make a transition from heavy dependence on exports and heavy dependence on capital investment. they have a lot of overcapacity. they're trying to move towards more consumption and more services and they are not moving rapidly enough. >> the uproar over george soros's comments continues. i know you don't agree with mr. soros. if we don't get his world, what is the world we do get? >> the chinese can avoid a crash landing or the chinese can avoid a recession. they will have slower growth. it is hard to predict the numbers. that is hard to do in china anyway. it will be lower than the predicted numbers in the six range, probably below the sixes. opportunity for
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taiwan and the other adjacent seas to playoff a better china? expect is something we -- is been a lot of gloom last year come even beginning of this year. if you do get some trade, some stabilization and chinese data, that is key for asia. >> the key for china is not so much the growth rate, but the impact on employment. the chinese can find ways of keeping the employment rate up and they're doing a lot of innovative things in the environmental area, technology area. the chinese will figure out a way of dealing with these things. they're continuing to make a number of market-oriented reforms. the market had total confidence that the chinese could keep the market up and keep the economy up by magic. it is much more complicated to manage markets and to manage growth than they anticipated.
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they are very talented, very skilled people. the guardian reporting today sorosthe bush saying mr. -- >> there is hope when you look at consumption in china. will they have to devalue the yuan? >> the question of around the yuan sometimes gets misunderstood. it is not that they want to use the currency as a mechanism to stimulate growth. to us, it is much more a part of shippedft in regime and to much more market forces for the currency. we do not expect some sort of large 15% devaluation at of this. that is not a model and that is not in their interest domestically. >> if they really want to use this to boost growth,
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depreciation would have been a lot greater. there's been intervening to prevent the rmb from going down more rapidly. that's why they are using their reserves. in part for domestic inflationary reasons. it feeds capital exports. they are trying to grady eight the process of decline in a very orderly way. now, we had over to the markets desk for one big check before the 2:00 p.m. fed decision. julie: we are seeing in terms of what interest rate futures are pricing in common a change. irp, a 0% probability of a hike today. it is about what the fed is going to say in its statement. let comment on the turmoil we've seen in the global markets, whether you are talking about oil or any other asset class
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this year. will they comment on what investors have felt some of these global jitters here? take af the statement, look at the major averages and where they stand, we'd seen a bit of bouncing around today. a mixed picture. this is not unusual that you're the bit of a holding pattern for stocks in particular going into a fed meeting when there is an type of suspense whatsoever. yields trending higher today. , despite the idea that , analysts are saying they don't expect the fed to be as aggressive in raising interest rates this year. look at the dollar versus other currencies today, we'd seen a bit of oscillation here. the dollar index is down. the euro higher versus the dollar. the dollar higher versus the japanese yen, the pound the
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lower versus the dollar. a mixed picture on the currency front. quick check on gold prices as well come which tend to react what this to what goes on at the tend to react to what is going on at the fed. 1.4%. we had an inventory report. opec may be talking with russia about cutting production. bond investors are looking to the fed decision today for vindication. treasuries headed for the past month and year. joining us now is lisa abramowicz. you are looking at fed fund futures and what the market expects that rate to be at the end of the year. you can see the kind of action we've seen over the last few weeks. what does this chart point of telling you? >> even before the january turmoil, people were backing away from expectations that there would be more than two
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rate hikes this year. the higher that line goes, the lower the expectation for the interest rate level at the end of the year. ofay, you've seen something a reversal in the sense that you go to the very end, you see a dip down. people are raising their expectations. it is clear that today, bond traders are a bit more jittery than they happen. they have less conviction about the fact that the fed will not hike again this year -- i wonder how much this has to do with the fed and how much this has to do with oil. oil prices have been rallying a little bit. this seems to be a bit of steam. out and say we will start buying energy companies. perhaps oil has seen a bottom. it as this feeling of uncertainty. look at the correlation between it prices and treasuries --
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has been rising. near the highest levels since 2013. how much are treasury traders taking their cues from the fed and how much from oil markets? it will have to be a complicated day to parse out why the market is moving exactly the way it is. michael mckee asked this morning on surveillance, why do these feature productions matter? >> they have been right more than the fed has or economists have. it gives the feeling of investor confidence if nothing else. the fed looks to fed fund swaps tobreakeven gauge future inflation. they are looking at this as well. david: thank you very much. gadf on thementary, terminal. you the fedl bring
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decision live at 2:00 p.m. in new york. former fed governor randy krasner, jeffrey rosenberg of blackrock. stay tuned. ♪
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>> life for from limerick television and radio, this is a special one-hour edition of bloomberg market coverage -- live at from bloomberg television and radio. we will hear from the fed as policymakers confront an economic landscape that has changed since they raised interest rates last month. with alan and randy. seeking shelter in a storm, how investors can protect themselves from volatility. we will get expertise from abby: from goldman sachs.
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from goldman sachs. joining me for the full hour, tom keene and michael mckee. let's get first thoughts here as we await the fed statement. mike: this is about how they are not going to do what they are not going to do. a tricky balancing act in the statement. they are aware of the market volatility, but they don't want people to think it has affected them. tom: you are kidding me. that is like sing the denver broncos can win. the markets matter. davos and all the bank decisions we've seen -- the markets matter. : the added language
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about recent development overseas. mike: words absolutely matter because people will parse every single word. they're likely to put further downward pressure on inflation in the near-term. they will not go back to that language because investors would equate september when they did not move to the next march meeting. will likely drop that but they will tweak the statement to reflect where we are now. scarlet: a lot has changed since the december fed meeting. the dollar index rising as much as 1.7%. tom: as julie hyman just -- let's getore through a data check. i want to get through this
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quickly good futures up five in what has been a journey market. i want to call this quiet. oil lifting. $32.92. this is what i look at when we see the announcement, the two .ear yield goo as the global litmus paper. pimco andsoul o from mickey leavy from behringwerke capital markets. let's start with you. really have a minute before the fed decision is announced. the type you referee between tom and i. markets matter or janet wants to stay away from that?
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mickey: markets matter to the fed. when they get in turmoil, they recoil. do they change any of the language on inflation and inflationary expectations? markets -- does the fed over the markets is some kind of acknowledgment there might be something wrong in the markets? mark: they are watching financial conditions, but only to the extent that it will impact the real economy. they will leave march clearly, they will not do anything today. the markets underestimating the potential for the fed to move higher than what the markets pricing in. the u.s. economy is doing much better than the markets are. paylet: the fed will attention to the oil falling 25% . does it pay attention to fed fund futures rates? mike: no, but they will want to
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oil and watch the stock market. torlet: they are having create the idea that they are monitoring this. let's head over to washington where brendan greeley has the fed statement. brendan: the rate remains unchanged, the fed would like you to know that they are watching things, they see what you see and everybody can take a deep breath and stop freaking out. ofy changed the description what they see in the economy. they've been saying economic activity was expanding at a moderate pace. they say that labor market conditions continue to improve with that job number this month but economic growth slowed at the end of last year. monitoring global economic conditions and financial development, sensing their implications for the labor market and inflation and for the balance of risks. we are aware of the strong dollar, where that the facebo

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