tv Bloomberg Markets Bloomberg January 29, 2016 10:00am-11:31am EST
betty: from bloomberg world headquarters in new york, i'm betty liu. bank of japan stunning investors moving to negative interest rates to juice up their flagging economy, while the u.s. barely eked out growth in the fourth quarter. in the meantime, that move propelling a rally in asia and european shares, and one here in the u.s. oil is also climbing, but still no word that opec will meet to discuss any type of production cuts. zero splitting in two after pressure from after the investor paul icon who gets three board seats. we hear from the chairman and c.e.o. head straight to the markets. that's where bloomberg's julie hyman has the latest "on the markets" and other triple digit move for the dow. julie: bank the japan going to negative interest rates there.
stimulus in japan seems to be creating this ripple effect across the globe. there are other elements we'll get to in a moment. all three major averages up. as betty said pretty big moves here, up by 1% at least. look at my terminal for what groups are moving this is an important part of the story. earnings do seem to be helping to some extent today. technology, the leading group here. industrials also rising. pretty broad based rally. the only group lagging is consumer discretionary because of one company in particular. so let's get to that company. look at some of the tech movers today with technology as the best performing group. the exception would be amazon which is in that consumer discretionary index. that's the reason we are seeing it get pulled down. amazon coming out with earnings that miss analysts estimates as the company once again ramps up spending. microsoft, on the flip side, out with its numbers after the close yesterday, coming out ahead of estimates helped in part by the cloud business and apple and facebook rising, too. facebook is trading at a record
high after having a pretty stumbley start to the year along with the rest of big cap technology. betty: it's not just text but oil is also a high. julie really strange trade. it's the fourth straight day we have seen oil rise. up by 3%. it had a bumpy ride earlier. we have been following this narrative over the past several days with the russian energy minister saying that he planned a meeting with opec-producing nations on some sort of production cut plan in the next month. then pulled back on those comments early today saying, nothing exactly is planned in terms of a meeting. and all nations that produce oil, not just opec, would have to agree on some sort of production cuts. that's when we saw oil come down. this latest leg up is a little mystifying. it's not clear what's going on. we'll keep digging into that. also the other big story of the morning going back to the bank of japan story has been spending ripple effects not just through
equities. the dollar is rising versus the japanesen -- japanese yen. we have been watching government debt as well. the japanese 10-year note yield falling to a record low. 0.1%. we think we have low yields here in the united states. 0.1% as people weigh the effects of the further stimulus in japan. we are also seeing buying not just of japanese government debt but of government debt around the globe. in europe and here in the united states. here's the yield over the past 10 years for a 10-year note, 1.95% right now is the lowest we have seen since last april. betty: julie, thank you. julie hymen at the market desk. check in now on "first word" news this morning, bonnie quinn has more from our newsdesk. bonnie. bonnie: thank you so much. u.n. diplomats are restarting syria peace talks today in geneva. even though the main opposition group is not there. the absence of any rebel residence any hope for a quick break through. pentagon officials don't think
air strikes alone can wipe out islamic state. "the new york times" says they are asking the white house to send more commandos, advisors, and trainers into the fight. iran claims it flew a grown drone over a u.s. aircraft carrier in the gulf and took pictures. individual grow today was shown of a drone hovering over an aircraft carrier. the u.s. is not commenting. the frontrunner was nowhere in site at the latest presidential debate. still fuming at fox. donald trump sat out the event. that gave those trailing in the polls a chance to make an impression. >> this is why you need to send someone from outside of washington to washington. i feel like i need a washington english dictionary converter. stop the washington bull and let's get things done. nnie: headed to a fundraiser for veterans. on the democratic side, bernie sanders is airing a new tv ad today in iowa.
it criticizes goldman sachs for its roll in the financial meltdown. it doesn't mention hillary clinton or the $600,000 speaking fees. her campaign still says sand certificates breaking his pledge against nellingive ads. -- negative ads. leading up to the caucuses on monday, with all due respect it's live from des moines. right here on bloomberg tv. a guitarist from one of rock 'n' roll's most influential groups has died. co-pounder of jefferson airplane and wrote some their biggest songs. the group broke out of the underground scene in the 60's to become hit makers in the 70's. he died yesterday in a san francisco hospital. he was 74 years old. betty: global news, 24 hours a day powered by 2,400 journalists and 150 journalists around the world. thank you so much. central banks around the world are having an impact on markets this morning. we have the first glimpse of economic growth in the last quarter here in the u.s. showing that the economy
expanded at a slower pace. in the meantime, the s&p is getting that boost thanks to the bank of japan. the dollar, as we saw that julie showed us, surging against the yen an more easing. glowser look at the global economy, we bring in kevin logan, the security's chief u.s. economist. for a look at the markets, bring in steve wood, chief market strategist at russell investments, which has over $230 billion in assets under management. kevin, start with you with the broad economic take. what did you read into the g.d.p. numbers this morning? kevin: consumers are doing fine. it dipped a little bit. a lot of that had to do with the weather. it was very wet and warm. seasonal good spending was disrupted. public spending construction slowed down because of the weather. things like that. the real interesting thing about g.d.p. is what's happening with business investment spending. the economy is going to continue to grow, it's going to have to rely on continued outlays by
business for new capital goods, structures, and so on. that's where we saw some weakness. that was down in the quarter. some of it's related to the oil -- betty: inventories. kevin: that's a form of investment. businesses invest in their inventory. they are letting the vin -- inventory run off. oil sector, cutting back. things are still growing, but more slowly. the concern is that businesses are going to look around the world and try to decide what do we do this year? how much investment is really necessary to meet final demand? that's the worrisome aspect. betty: do we keep the powder dry. they are worried about what's going on around the world. this is what c.e.o.s are thinking b steve, we just had our worst, about to have our worst january. i believe four years. four or five years. where do we go from here? steve: in the u.s. i think the markets look up from here. but we are -- betty: they do go up?
steve: they come up from here where there's been a rather significant crush in valuation. we saw the u.s. economy doing reasonably well coming into 2016. not much change from 2015. i think the markets in the u.s., equity markets are up from here. flattish year on year. investors should not take the false choice it's u.s. markets or cash. i think we should look at europe. one of the places we have been looking at valuations, cycle, european central bank is more stim la tifment japan right now. more interesting. i'm be back may in japan. i think japan has become very, very interesting for the first time in a long tifmente betty: good interesting? steve: predominantly. there is opportunity in japan. global opportunity. multiassetted, fixed, equity. don't get yourself locked into equities or cash in the u.s. i think the markets look ok from here. but it's going to be a stock picker's gain. betty: let's look closer at the
markets. bring up that s&p chart that we have. we have been debating are the markets signaling to us something worse is to come given this january? and stock rebounds on the s&p over the last several years, particularly over the last 12 months or so, they have been -- they have taken longer to come back. so in august we rebounded on the s&p, the stock swoon from china, we rebounded in two days, 6%. however, this time around in january, we rebounded only 2% in two days. the rebounds are getting smaller. and it takes a longer time to recap -- recoup those losses. kevin, i wonder if you were to look at that as an indicator, does that tell you that investors are worried about a recession? and that maybe those recession fears are not so ungrounded? kevin: not at all. i'm not predicting a recession. there's certainly concern and reason to be worried. we mentioned a moment ago a slow
down in business investment spending. that's a precursor to a recession. if businesses decide it's not time to invest, they don't spend the money on capital. they don't hire people they would be hiring. little by little things slow down. i think what people are concerned about right now is the global economy. and whether the global economy is going to drag the u.s. down. in the g.d.p. report today we saw net exports declined again. exports were absolutely down. flat. exports are falling. we know from the news that there's trouble in china. that related to the incident in japan today. why is japan cutting interest rates again? it's because of concern about expectations for their prospects because of what's going on in the region. worries about capital outflows from china. worries about investors seeking safe havens and so on. all of that is behavior that precedes a recession. it doesn't mean a recession is coming. these are signals. we get signals that turn out to be noise. that may be what we are observing now. for the moment i think --
investors are becoming cautious. betty: they are also looking at the fed and, steve, might the fed be raising interest rates going into weakness, right? self: i'm going to take the fed at its word. so they gave us guidance to four rate increases in 2016. the way i would look at it, has there been something that's changed in the fundamental data that's so off their 2015 december meeting that the fed would have to turn and say we got that one wrong? i don't think -- betty: maybe the four rate increase was wrong to begin with. steve: that could be be. the look at the four rate increases and is there something to take us off of from that. the dollar should appreciate as the europeans print money. betty: the dollar will rise. steve: with oiler lower. the fed is not forced to do
anything. they don't want to do. but inflation is ticking up a little bit. g.d.p. is in that -- betty: we saw wage growth today. only up .6. steve: the data is coming in pretty much where the fed thought it would. i'll take them at their word if the data is where they thought it was, the policy based upon that data is a good place to start. betty: kevin, do you take them at their word? kevin: no. things have changed since the december meeting. what has changed is inflation. the fed policy statement just the other day, they acknowledge that. they said inflation is expected to remain low. that's an admission that since they began the liftoff, there is a lot of information that's come out that suggests an inflation is falling. stronger dollar, wage gains that are modest. now, they told us their guidance is, they will move rates up provided inflation, actual inflation and inexpected inflation moves toward their target. it's not. betty: thank you so much. kevin logan, hsbc securities chief u.s. economist. steve wood, thank you as well. chief market strategist at russell investments. more ahead, guys.
betty: good morning, welcome back to bloomberg markets. now, are the gold bugs cool again? gold is up 6.3% in the past six weeks. a favorite this month as the stock market's ugly start of the year. the worst since 2010. for enthusiasts this could be the sign of the four-year slide we have seep in gold sending. matt winkler says hang on. don't count your gold bars yet f history is any indicator, gold
has yet to find a bottom. he joins us to explain us. his new column, great piece. tell us why this -- we shouldn't be looking for a bottom yet here in gold? matt: two long-term trends are continuing unabated. one is inflation is way hent. everybody knows that. the second is since really the 1980's there's been ever more coordinated central bank authority. monetary authorities globally are more coordinated than they have ever been. those are two big threats to gold's rise. also represents stability in the financial system. then the third thing is that when you look at the federal reserve and you look at its relationship with the markets and its stability of assets, the volume tillity -- volume till -- volatility in the market, under janet yellen, is well below what
it was under ben bernanke. betty: guys, can we pull up that volatility chart in our bloomberg? it shows that. it was quite high. we can see here in the green that dotted line. very high. quite high with greenspan. lower with bernanke. with yellen substantially lower in volatility. matt: from its peak in 2011 gold is still a far cry from where it wound up on a relative value basis when it last tumbled this much, which was 1980 -- betty: you noted then it was down -- matt: over 60%. betty: now it's down about 40%. why do you think, matt, people are still bullish on gold? matt: well, look, everybody's got a lot of fear coming into 2016. january was horrendous. for anyone in the stock market. pretty much anywhere.
there's all this anxiety about china slowing down. there's all this anxiety about growth. so it's sort of a perfect storm for people to, in their fear, to embrace something like gold. but if you have a historical perspective and a long view, and you ask yourself, ok, what's changed fundamentally from where we were this time last year or previous years, the answer is not much. betty: not much has changed. matt: here's something else. that the u.s. economy still the largest economy in the world, is relatively strong in the sense that there's no sign that there's going to be a recession. despite the fact that people are concerned about china. they are concerned about exports being dismal. the other point is we are on the verge of full employment in this country. that's partly why the fed said last year, you know what, it's time to think about tightening credit.
given when you look at that chart about the stability of financial assets, the relationship of the fed, the yellen fed to the financial markets, the market has a lot of confidence in the chair of the federal reserve. has a lot of confidence in the judgment of the fed. and the fed is saying, we better be thinking about where we are going to be a year from now, two years from now. that means the economy is going to be stronger. betty: you're right. the data, particularly when you look at employment, supports a strong, relatively strong economy. but the inflation picture is still very muted. it's interesting even today with the e.c.i. numbers that there is no -- there's practical, matt, no wage pressures. in this bloomberg chart here we show how much the inflation rate has gone down relative to gold prices have gone on with that fear. is there a sense that people -- there are very smart investors, by the way, that trade is now to buy gold just basically on fear.
there is no more inflation hedge when it comes -- matt: inflation is not a variable anymore. if do you it do you it for fear. if you're looking for a return, my goodness, as was just said earlier, last year was a stock picker's market. netflix, amazon, home depot, these were all winners. there are going to be more winners. look at facebook today. this is something that's going to continue. if you're looking for high return, return on investment, you're much better off picking an equity somewhere. betty: or even treasury. matt: yes, even treasuries give you a positive return. gold is really a risk. a big risk. betty: an opportunity cost, perhaps. thank you so much for joining us. matt winkler bloomberg editor and chief emeritus. you can read his column on bloomberg.o -- com.
betty: it appears xerox is listening to investor carl icon splitting the company into two separate billion dollar businesses in order to tap into its growth of its service unit. anurag rana joins us. we know this game after carl took a substantial 8% stake in this company. so, what happens now because they were actually combined seven years ago, right? now they are splitting it back up again. anurag: you had computer
scientists split into two companies. h.p. split into two companies. zero, too. the whole argument is the harvard business is not growing very fast. you can put it aside and people can start to invest in a stable, more services business. which also has its own problems. more stable than the hardware business. betty: ursula burns was on bloomberg go earlier this morning, she said look, this is good for our long-term outlook. nothing to do with carl. here's what she said about that. >> on a go forward basis he will perspective om a when the company splits into two, separates into two, he will have some governance input into the services business. will not be engaged with the document technology business or with current xerox business at all. betty: what do you read into that? anurag: this is a shock to shareholders when you split something off. in the long term there are still
issues that need to be addressed. they are not known to be the go-to person in the cloud or analytics or big data. that's where all the money is. betty: i.b.m. right now. anurag: they are doing a lot of work. t.c.s. is there. if you want to get in the high growth, high margin area, that's where the spending is and not in the legacy i.t. work. betty: when they merged with a.c.s., didn't they get a lot of great accounts they didn't handle very well? anurag: a lot were legacy b.p.o. contracts that were long-term in nature. sometimes you have profitability of those contracts, but you're not going to see a 15, 20 person margin business there. not going to grow more than 2% to 4%. if you need to get to a high growth area, you need these newer kind of services. betty: just quickly, does it
seem like ursula burns is there to stay for the long term here? anurag: sounds like it. betty: we'll see. a lot can change. thank you. bloomberg intelligence. still ahead on bloomberg television, amazon also in the cloud space is still stuck in investment mode. when will the c.e.o. shift to full-blown profit mode? we'll dig into amazon's latest results. mark mahaney. mark is our rallying bigtime. we are pretty much near our high of the session. the dow is up over 200 points.
virus could spread worldwide after the olympics in brazil. more than half a million people. the world health organization is holding an emergency meeting monday about the epidemic. the virus has been found in at least 24 countries now. michigan leaders may have known about flint's poisoned water long before they publicly acknowledged it. an official says state workers in the city in offered bottled water in january of 2015. it didn't emerge until children tested positive for lead in their blood nine months later. governor snyder will sign a bill to accepted $28 million more to help flint. an employee of the california jail where three prisoners escaped is arrested. accused of helping them break out. the orange county central jail. police say the woman gave the prisoners masks. the esamees vn been seen since they escaped.
a hearing is set today for the teaager in the aflue wednesdaya case, a texas judge will decide whether ethan couch should be held as a juvenile or adult. he was brought back to fort worth from mexico yesterday. he violated his parole and his drunken driving crash that kill four people. and drat economic ocean rescue. new video shows spanish coast guard helicopters saving 22 sailors from a listing cargo ship. it was adrift tuesday in rough seas 180 miles from france. it is being toed to shore today. global news 24 hours a day powered from 2400 journalists and more than 150 bureaus around the world. i'm bo vonnie quinn. thank you. betty: we head to the markets where julie hyman has the check and company movers on ady we are near our high for the session. julie: i want to look at technology. we have so many tech earnings out. the big two we have been talking about are sam done and microsoft.
amazon ramping up spending so missing analysts estimates even at its sales continue to climb. microsoft on the clip side doing well with the cloud expansion and cutting expenses. its shares are ben getting. there are companies within technology that have reported as well. seagate and western digital, the hard disk driver makers, both out with the numbers. seagate coming out ahead of estimates. it is taking aggressive cost reduction actions. in terms of western digital, it's more complicated. last quarter the numbers beat, but the forecast is short of estimates. it does say that the bottom should come for earnings in the third quarter of 2016. that perhaps is giving some optimism to investors. we are also looking at sky works, one of the chip makers that supplies apple. there has been concern about its business given weakening demand for apple iphones. the company coming out with earnings that missed estimates, revenue missing estimates, but the forecast is above estimates. some analysts are saying,
apple's reliance, sky works' reliance on apple has already been accounted for in the stock price which has been falling. contract electronics maker, flextronics out with its numbers. it beat analyst's estimates. forecast leaves room for it to beat or miss estimates. upgrading the stock from a buy to hold saying the fourth quarter results were, solid." you can see the shares were up by 8%. finally within technology, electronic arts, the second largest video game publisher down after its forecast fiscal fourth quarter results below estimates. the company among other things blaming the stronger dollar saying, for example, its live services unit had a 22% gain in revenue last quarter because some of its popular titles bike "madden nfl." but if you account for the changes in currencies, that gain was trimmed to 13%. an example of so many companies that have seen the effects of
higher -- differing currencies. not just what's happened with the dollar. betty: exactly. julie, thank you so much. let's stay on the tech beat. bring in star analyst, mark ma lane haynie, he's been covering internet stocks since 1998. head of research on the industry of rbc ing director capital markets. at the beginning of 2015, mark named amazon and netflix among his top picks. that was his big call. he was right. both those stocks were the best performers on the s&p. netflix scored 134% on its plans. amazon up 118% as the company continued to revolutionize retail and lead the race to the cloud. mark mahaney joining us from san francisco. mark, so you still have a big call on amazon where you say it's outperformed. you did take down the price target after their numbers yesterday missed estimates. you're now at 715 on amazon. why? mark: that's right. there was a negative surprise in
the print last night. and we lowered our estimates accordingly. the big negative surprise came in the cost side not the revenue side or unit shipped side but in the cost side. these fulfillment cost, all of the costs they incurred to pick pack and ship products to consumers, that came in materially higher than expected. the question is an investor for us, the stock picker is, that something that structurely changed in the model or temporary? we think it's the latter. the fundamentals can recover and the stock can recover. that's the big question. we think had he this a surge of demand by third party vendors who wanted amazon to do the fulfillment for them. that surge in demand jammed up their expense when is they weren't expecting it. that's what caused the short fall. betty: what makes you think they have taken care of this or that they are taking care of this? mark: we don't know. we don't know that they have -- this is a company that's generally done logistics pretty well over the last 20 years.
they have gotten better at it every year. this is a good problem to have. the idea you have too much demand. you want to run these distribution centers, these sort of like factories, but distribution centers, you want to run them not but not excessively hot. they had so much ghand. my guess is, they didn't give details, they probably had to do a lot of last-minute contract employee work. last-minute expensive kuror services work -- corier services work. they were willing to take on extra costs to meet that goal. and the costs just ballooned out. these are fixable problems. they can build more distribution centers. it's a good problem. there is too much demand for amazon services. you can meet that by building capacity. betty: aren't the margins there in the single digits? mark: yes, they are. betty: ok. how does amazon continue to focus on a single digit margin side of their business , when for instance, their cloud business is seeing margins of
28, 29, 30%. they are never going to be able to get their shipping side, those margins, they are never going to get those margins as high as that, right? mark: you're right. thanks for bringing up a.w.s., amazon web services. one of the key things that may have been slightly overlooked in the print last night, earnings report, is that amazon web services, the results there were a solid a. 70%, surprisingly strong margins in that business, up to 29%. these are fundamentally different businesses. amazon's core retail business is retail. mass market retailers have single digit operating margins. maybe if they are lucky they get high single digits. that is, if you're a retailer, you start with gross margins at 30%. you got fulfillment and shipping costs. it's never going to be anything different than a single digit margin business. that doesn't mean you can't invest in the stock. betty: on a day when xerox has split into two companies, does it make sense longer down the
road if amazon continues to grow in these two different directions for them to split up? mark: that question's come up a lot more with clients and investors in the last year. as amazon gave disclosure that surprised people by how profitable this a.w.s. business, cloud computing business is, for amazon. so it's possible. we have never seen a split at amazon before. that makes you think they are probably not going to do it. they have talked about cloud computing as being a core part of their business for the better part of five or six years now. it's unlikely, but they are tumultuously two pretty different businesses. there are parts of the market that would be happy to invest in the cloud computing business because there are very few assets that have that kind of growth. 50% margins of 30% operating margins. people would love to invest in that separately. i don't think they'll split. betty: let's move on to a if a bet. they are reporting their results on monday. people keep saying, look, the more businesses google goes
into, the more significant they are. we need more transparency. you agree? mark: yeah. generally any more transparency we get, the better -- i have companies in the internet sector like netflix, expedia, and amazon that have provided more disclosure. the markets have been responsive. we think the same thing happens with alphabet, google on monday. we thut this was the most ible knee-term cana list. how profitable the core of google business is. their youtube, search businesses combined. display, advertising business combined. clearly higher than the corporate average. they are way down by these investments into what they call long-term bets. we'll find out how high those margins out and how much they are losing on all of these long-term bets. it's a $3 billion, $6 billion? betty: i still have a hard time calling alphabet, alphabet. i got to call it google.
you mentioned youtube and the ando side of their business the advertising. we just saw these gang bufter numbers coming out from facebook and their determination to be the flat form for advertisers on video. how does you tube respond? do they need to? mark: well, you tube should benefit from some of the same trends that facebook is been fitting from, which is that you're seeing these migration of tv ad budgets over to the internet. it's really consolidating that video advertising spend on the internet, is consolidating to two games -- facebook and google/you tube. google has something that most people would love to have, which is they have the tv for the next generation. people under 30 i think watch more you tube than they watch tv. their mistake. that's what they are doing. and it's a great -- betty: why do you say it's their mistake? mark: i'm just kidding.
is being introduced for the first time. bank of japan governor hopes it will push banks to lend despite japan's sluggish recovery. banks that need too much money on deposit with the central bank will now be charged a fee. russia's central bank is leaving its benchmark interest rate unchanged for a fourth straight meaning but warning it may take inflacerisk intense fifmente the key rate will stay at 11% in line with all 42 economists surveyed by bloomberg. votion wagen may buy back diesel cars in the u.s. if they can't make them client with air quality rules fast enough according to "the new york times." it's the clearest indication yet the german automaker may not have the technology to bring emissions for some vehicles into line with regulation without hurting performance and fuel economy. that is the bloomberg business flash.
to london where my european close partner in crime, mark barton. you are seeing european stocks rise. a lot to do with the bank of japan. mark: crafty koroda. didn't check the idea of negative interest rates. are you allowed to do that? one week say we are not going to do it and do the opposite next week? betty: when you are a senthral banker you can do what you want. you live with the consequences. mark: yes you do. hopefully he'll be thinking the consequences will be a weaker and quicker inflation. i checked before i game on the yen is weakening against every single currency in the world, all 155. it's been a month of two halves. the first two weeks stocks got hammered. last week it was the ecb indicating we'll have more stimulus in march. that lift the european stocks. this week it was the fed and the b.o.j. as well. two weeks of declines. two weeks of gains. two weeks of gains is the best
run since december. we are on for a 7% decline for the month of august. weren't for the month of january, worse month since august. worst january since 2008. better, looking betty, than they did two weeks ago. betty: they are, indeed. we have a lot coming up in the next hour, mark. mark: we'll speak to chris ton balding. why capital control for china might not be such a good thing. he's a bloomberg columnist. ryan spoke to the russian energy minister earlier. their interview moved the oil price. simon smith research director at f.x. pro, we'll talk about the b.o.j., negative interest rates, are they the new trendy thing? we'll ask simon. james murdock has returned to sky as chairman. he's rupe pert's son. is he the new king of the murdock empire?
brendon "the slugger" greeley is back. and finally, we are looking at norwegian southern prices have hit their highest level in 30 years, betty, which is going to lead possibly to smaller salmon on our sushi. does that bother you? betty: or my bagel. i read part of that story had to do with the shortage sea life. which is making me not want to eat any salmon, period. mark: we are going to hear all about sea life in the next hour. it's skin crawling stauf. betty: thank you, mark. i'm sue in the next hour. for a look at u.s. markets, we are coming off our high of the session. it's been a pretty big rally as well. abigail has more. abgallon: much more appealing than sea life. we are looking at a rally at the nasdaq. one small cap is stratgist the stock appears to be up on a relief rally after a real roller
coaster ride. post a j.p. morgan downgrade to neutral. the firm took the rating down on rising competition, a lack of catalyst, and also the likelihood that numbers will come down. some investors may wonder whether or not there is a buying opportunity here. betty, this stock is down a whopping 89% from its 2014 peak. when you consider that piper's macrowork matches the bearish economists from j.p. morgan and a high shortage of about 23%, it seems likely the crash is going to continue. betty: abigail, thank you. abigail doolittle at the nasdaq. much more ahead on bloomberg market. did you stay up late and watch the republican debate? it was held in iowa last night. one notable no show, an empty podium. people break down the winners and losers and what happened to donald trump.
television. i'm betty liu. last night the republicans running for president faced off for the last time before monday's iowa caulks. frontrunner donald trum is a no show. that didn't stop him from stealing the spotlight last night. after bowing out after a fight with fox news, the donald held a veterans fundraiser five minutes down the road. >> i didn't want to be here, i have to be honest. i wanted to be about five minutes away. i have enjoyed that. i have enjoyed that. all the online polls said i have done very well with that with the debates. and i have had a kick with it. you have to stick up for your rights. when you're treated badly, you have to stick up for your rights. betty: he still dominated the political conversation last night. particularly his absence was noted at the debate. we now turn to bloomberg's washington bureau chief, megan murphy, who joins us live from des moines. megan, did donald trump gain anything by skipping the debate last night?
megan: you know, it was such a circus last night, it was a moment of the campaign everyone will remember. you had these two events, both of which were unavoidable to take your eyes off for very different reasons. one was you had a debate that focused a lot on issues and policy, immigration. focused on the fight against the islamic state. focused on many things in a level of detail that we maybe haven't deviled into with donald trump on the stage. five minutes away he's having this unbelievable rally, moment in time with veterans. i'm not quite seen something like that and people will be discussing who won and lost. the ratings were the second lowest for any debate this cycle so far. yet they weren't what people thought. people still tuned in. people were still watching on fox. betty: they wrfment they probably wanted to see what the reaction was to his absence as well. picking up the newspapers today, megan, it was interesting how people poked fun at this whole circus, as you call it. a lot of people have.
the "new york post" had this funny cartoon this morning, i almost spit my coffee out. this cartoon that says, latest poll, trump's empty podium now eading jeb bush. megan: poor jeb. betty: ted cruz had a really good trump moment as well. i want to play that for viewers who might have missed it. senator cruz: i'm a maniac. everyone on this stage is stupid, fat, and ugly. and ben, you're a terrible surgeon. now that we have gotten the donald trump portion out of the way, i want to thank everyone here for showing the men and women of iowa the respect to show up and make the case to the people of this state and the people of the country why each of us believe we would make the best commander in chief. betty: who won last night? i know very much a cruz-rubio show, right? megan: here's the thing. we just had one of at the cruz's
senior person with us at breakfast. ted will announce on sunday he has $19 million in the bank at the end of the year. this is a campaign built to last. even if they don't win iowa, which they highly expect they will, he has the data to show how many voters they are going to turn out, they are going to take this campaign on. they have the metrics, they have the theme, and that they have the message these resonating with movers if trump should move on. here's the thing, the issue for rubio is can he hit that sweet spot if we see this ted cruz clash collapse f we see trump win here and moves on to new hampshire with unbelievable momentum, we might see cruz fade. i'm not sure you talk to many voters in des moines, i am, it's very cold out herer who are hugely exexcited about a rubio campaign. they call it marcomentum. if trump wins, he'll be hard to stop. betty: how about sanders' momentum? megan: we had breakfast with him yesterday. he was on fire. he was calling out goldman
sachs. explaining with a his message resonates more and why he's hit this moment. we see on both the left and ride side of american politics. i think the big issue for bernie will be can he get the turnout that he needs? can he get that youth vote? particularly can he get the older vote? can he hit these middle of the road voters who maybe aren't convinced about hillary, have never been convinced about hillary, can he get them to turn out? can he get them to caucus for him? it's a very different question. if you support someone's message or come out here on a very cold night and caucus. betty: megan, thank you so much for joining us. megan murphy, joining us live from des moines. a reminder on monday, don't miss our conversation fed vice chairman stanley fisher. ♪
you've got the power, to turn on the light shape the best sleep of your life. sleep number beds with sleepiq technology adjust any way you want it. the bed that moves you. only at a sleep number store. betty: and is 11:00 in new york, 4:00 p.m. in london and midnight in hong kong. good morning. i am betty liu. locum to the european close. mark barton join you meet live
as we wrap up trade in the next hour. we seem to be ending on a high note today. yes, european stocks set for a second weekly gain. help to know smart by boj governor -- helps in no small part by boj governor. betty: we will take you from new york to london in the next hour. mark, high session in europe, right? mark: 1.6 set up for the day and looks like we finish up for the second consecutive. since not done that december last year. we are heading for the biggest monthly drop since august. this index has all and by roughly 7%, equating to roughly 700 and dollars.
every single industry on the stoxx 600 has fallen this month. it is very much the first two weeks of the month where we saw big declines and then the fed, boj and ecb came to the rescue. roughly 500 stocks have fallen on europeans benchmark gauge, led by banks, basic was orders, interesting to see the fear , but, the volatility index it is up by 26% in january, the most since august, but it never surpassed august's high. the london listed south african-based minor benefited probably, boosting the profit margin. i went to show you some interesting bond prices today because we are seeing record low belgium,d france, holland and germany after we had negative interest rates in
japan, which percent japanese yield to a record low. look at the yield on the u.k. 10 year. -- the u.k. to year, much higher than the eurozone, aching it attracted to investors. european two-year bonds had their best month since 2009. the bank of england was buying debt in 2009. it always comes back to central banks. betty: it really does. mario draghi, the ecb president, he must've been happy with the inflation numbers. mark: 24% increase in the month of january. previous month. biggest increase since october 2014. take today's inflation data with a pinch of salt or a rock of salt because -- i was going to mario draghi has warned inflation could did because of low oil prices and
inflation expectations are falling to the lowest level since january of last year. it was in march that the ecb stopped the bond buying program and it leads to the question, are we going to see more bond buys or possibly more negative rates when the ecb meets on march 10? kuroda raising the bar, mario draghi, the ball is in your court. betty: indeed. how much lower can he go? back in the u.s., despite the rally that we had today, investors are losing more and more confidence in this rally. take a look at this chart and the s&p 500. it shows that it is taking longer and it is more choppy to come back from lows like we saw earlier this month. kind of made up our losses about 2% over the course of several days. back in august, look how sharp in twobound was, up 6%
days. it is just an indication that investors are becoming less confident and they are not buying up stocks at such a rapid pace. ok, speaking about the markets, let's stay with the rally we are seeing, about 90 minutes into the trading session. i went to had to julie hyman with the latest. julie: we are rising to the highs of the session in the united states, and in the week on an up note and maybe erasing some losses for the week as well. all three major averages are trading higher. some stocks contributing most of the game in the s&p 500. it is a mix of earnings and a comeback for some stocks. microsoft up on their earnings report, apple coming back after a recent underperformance, these set up on their earnings report. general electric looks like maybe it will be rising related to it and announcement that they will be investing more in italian factories, so that could be bouncing things for that stock.
facebook is trading at a record, j and j, mastercard also rising on earnings. mastercard and visa were both lower in the premarket, so they both turned around. finally, honeywell on earnings. this is a day, each day during earnings season, you kind of way the scale in terms of earnings, and it is not hurting today. betty: it is not, but what is this rally? what does it do for our losses? smaller butkes them they are still pretty big as we get into 2016. if you take a look at what we have seen for the s&p 500 for the year, we are still looking at a loss of more than 6%. the balance that we have seen this week, it does not look that much on the chart. bit,have climbed a little but still a negative start to the year and a negative january. if you look around the globe at the returns we have seen this
isr, the shanghai composite the big loser, down 22%. the nikkei has lost a stock share of 600, the dax, there is a pain everywhere and it is all relative in terms of the amount. a big mention on other stories, the yen is something we are watching, not quite at the high or i should say the dollar versus the yen not so high in the wake of the interest rates in japan. finally, oil prices have been all over the map today. we saw them zigzagging on this speculation about possible production cut plans by oil producers, so coming off of the highs, pretty sharply. want to seedo not oil going long into the weekend carried the fourth day in has rally. betty: interesting trade for oil so far. thank you. julie hyman at the markets desk. let's check in first word news with courtney donohoe. courtney: good morning.
we look to syria with peace talks aimed at your -- ending serious civil war resumed today in geneva, but the absence of the main opposition group's dimming hopes for progress. pentagon officials purportedly do not think that airstrikes alone can like out islamic states. the new york times says they are asking the white house to send more commandos, advisors and trainers into the fight. iran claims the drone was over a u.s. carrier in the persian gulf and took interest. they show video today of a drone hovering over what appeared to be an aircraft carrier. the u.s. is not commenting. it is the latest close encounter between them. some may beat soldiers were held earlier this month after iran said their boat drifted into their waters. -- some may be soldiers were held earlier this month after iran said the boat drifted into their waters. egypt has lost tourism after last year's bombing. 20% inds at less than
cities with more than $250 million each month lost each month. britain halted flights the sharm insheikh after the incident october. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. betty: thank you. much more ahead. on monday, a confrontation with stanley fischer from the council on foreign relations. he will be sitting down to anduss the economy, the fed monetary policy. that is monday at 1:00 p.m. in new york, 6:00 p.m. in london. we will be back with much more on the markets. ♪
this is the european close. i am mark. betty: i am feeling better. spring is coming and it is not nighttime in london. mark: hooray. betty: i am betty liu. shanghai composite index, we will take what we can get. it grows for the first time in four days, gaining 3%. it is still the biggest move .ince october 2008 michael dell says he remains bullish on china and he talked to vonnie quinn and with michael bloomberg, the parent of bloomberg news, and they discussed the challenges of doing business in different cultures. >> i think the consensus can often be wrong. to go withou have your gut and have your own conviction, your own beliefs. when i started, there were not supposed to be american computer
companies. all the computer companies were going to be japanese. this was in 1984. we just had a dorm room. and $1000. we were maybe one year away or so from having had chelated revenues of one million -- of $1 trillion. i am sticking with my -- vonnie: are you sticking with china? michael: oh, yeah, i am very bullish on china. the path in the next 30 years, --knew it was going to be all the developing markets that don't go on a straight path upwards, but when you look at ,he enormous number of people the incredible opportunities that are there, the use of
technology, it rapidly has like a country to sell her products outside of the united states. while there is volatility, punctuation, etc., long-term, quite positive on china. the third of the world's population is in india and china. how do you walk away from that market? vonnie: lack of transparency. >> we hope our competitors walk away from china. [laughter] thingsn show you as many wrong with our system, our society as you see over there. you just have to learn to deal with it. everybody wants something that they are comfortable with, and they want to set a little bit from other countries and part of the world and you have to balance that out. when they say no, they mean something different depending on
where you are. i have always loved the japanese. they are so polite. we go over there and they say, we would love to buy a product but we cannot, and we walk out of the meeting and say, they really wanted to buy it and, no, they did not. they just told you know in a different way. all the cultures are so different. japan, india, africa are enormous potentials. nobody thinks of africa as a technology have, but 50% of all people in africa have a cell phone. technology will let you jump the requirements from a lot of the infrastructure. you will have cell service, solar panels, batteries that will let you move from one time of the day to the other, and there is an enormous market. bloomberg lpas majority owner michael bloomberg and dell founder michael dell talking with bloombergs vonnie quinn. china, a story in at theor of economics
business school has written a over column on the debate capital controls in china. professor, thank you. some should know better according to capital controls in china, but might disallow china time to deal with some of their issues, cleaning up the banking system, to use your words, juicing the economy? clear whatt exactly capital controls would accomplish to cleaning out the banking sector work stimulating the economy. you have large sectors of the economy running up 50% capacity. a lot of individual consumer markets are essentially flat year-over-year, and the banking sector is quite a mess. credit growth at about twice gdp, i think nonperforming lows can conservatively be estimated at five times what they are officially reported that.
it is not clear how capital controls would help the issues. mark: does it put off what is necessary, the much-needed fundamental economic reforms? >> yes, that is the issue. thessentially delays inevitable and puts out the restructuring and gives people a reason not to address the issues they need to address. betty: professor, today capital control work before for other countries? you outlined malaysia during the asian financial crisis that that turned out to be the right move for the country. yes, and malaysia is often held as the example of why children -- by countries should impose capital control, but it is an outlier. one of the issues that happened in malaysia which is not true of china is that there was a lot of foreign capital in china that was flooding out of the country, so malaysia took the time to stand still. the money that is leaving china is chinese citizens and firms taking their money out of china
and voting and saying, we do not have confidence in the economy and we want to put our money in vancouver real estate, sydney, the united states and london. betty: what should the chinese two, professor? should be allowed the capital markets to work even though it is so painful to watch? professor christopher: yes, that is the direction that they should go. right now, they're burning to about $100 billion a month and fx reserves. in reality, if you look at how their foreign exchange reserves are composed, you are probably looking at 2016 been where they either have to float or impose card capital controls because burning $100 billion a month, even for china, they will not last. mark: do you see them freely floating the currency so soon in 2016? professor christopher: i would put it at at 70% chance of part capital controls. as compared to floating. you can already see in china that they are turning up the
body one capital controls. they have not imposed hard capital controls, but they are absolutely tightening the capital outflow methods that people have used to get money out of the country. the impossible trinity. tell our viewers what it is because china is really struggling. christopher: the basic idea is that you can have a fixed exchange rate, sovereign monetary policy, but that means you have to have a free flow of capital. they sickly, they are trying to have operate -- basically, they are trying to control capital, set in exchange rate and have independent monetary policy. right now in china, you can essentially by junk provincial government that for 10 years at almost the same yield you can buy u.s. treasury. there is probably about 25 or 50 basis points difference. even chinese investors know, where is my brother risk and reward ratio, the u.s. treasury urgent provincial debt?
and money is leaving the government and their struggling to contain it. betty: the bank of japan governor, before he surprised the market overnight, he talked about china and his few on where that country is headed. i want you to listen to what he said. >> the chinese economy is gradually slowing down, but i don't think the chinese economy is faced with risk of heart banding -- hard landing or anything like that. it is 6% to 7%, which is respectable. betty: i am curious. can china avoid a hard landing while still allowing the capital outflows and, as you prescribe, keeping a hands-off approach? i think china is already in a hard landing as george soros says, a much more accurate comparison. if you look at individual industrial production output, if
you look at growth in a lot of retail products and by foot traffic in stores and things like that, you are just not seeing the type of growth he would see in a 7% growth economy. china is already having that hard landing that george soros is talking about, and we can see this across a range of areas. the question is, the real worry realt if it is a slowing economy but how this will affect the financial sector, specifically pressure on the r&b in the nonperforming loan? those of the two real issues of concern. mark: thank you for joining us. professor christopher. coming up on the european close, ryan chilcote spoke with russia's energy minister. and exclusive interview with a big impact on the oil market. mr. ryan chilcote joins us next. ♪
live from bloomberg's world headquarters in midtown manhattan, you can see the relatively calm day today. you are watching the european close. i am ready little. mark: i am -- betty: i am betty liu. mark: i am mark barton. according to russia's energy minister, he spoke exclusively to our own ryan chilcote and interview had a big impact on the oil market today. ryan is sitting next to me. not every day i sit next to a man who was responsible, not single-handedly, for moving the oil market. tell us exactly how your chat went this morning? i think the russian energy minister wanted to dialback some of the expectations that some of
the people had on the market yesterday that we might be looking at the meeting of opec officials, non-opec officials were they might even discuss production cut and we might get production cut. he made some comments that suggest that there might be a meeting on the cards for february and they might discuss a 5% cut, but what he told me is that that was misinterpreted and that is and what he meant. the venezuelans would like a meeting and the russians have said, yes, if there is one, but it is not clear who else would be the, when it would be, where it would be and what would be on the agenda. mark: and like before, not much happens. ryan: that is right. the only example we have been history is like 15 years ago when the cut can happen. mark: if a cut happens, will it raise prices? to the russians believe that. ryan: i'm not sure they're convinced it would work very i
think in the short term they think it would work. if you have the saudi's and the russians agreed to cut production, you would get the price rising for a little while, but they are concerned about the shale producers. that is what the saudi's are concerned about and the russians as well, so that would just give the shale producers, who in a lot of ways, have experienced them anothergives opportunity to live again. if they come back, that pushes the price down again. i'm not convinced the russians even think it is a good idea. betty: is there a pain point for the russians were they would cut production on their own? ryan: no, that would not make sense. recently, the lower the oil price goes, the more the russians increase production because they have to fill their budget somehow. 40% of the budget comes from oil and gas. they just need to get whatever money they can in and fight for market shares. they will not do it on their
own. theirget me wrong, production could fall but not because they want it to, but because they cannot pump as much oil and gas. curious about the overall environment. we keep hearing about how russia is falling further into crisis and it continues to fall, what is the popularity ratings of vladimir putin right now? ryan: it is above 80% but it has come off. their concern this oil price could persist for a year, two years and beyond and that has them worried. mark: great job today, ryan moving the oil market with the russian energy minister. the european closes in a matter of minutes and looks like we are going to close higher. stay with us. ♪
for the second consecutive week. 1.74% german by crafty corrode or. governor indicated there would be no cuts in the negative rate territory. a real boost to risk assets. to be fair safe haven assets worldwide falling to record lows across europe. it's been the month of two halves. the first dominated by volatility in china. and then central banks came to the rescue. the boj, the ecb and the fed. yes it's up over the week for the month it was like it will fall about 7%. worst month since august. worst january since 2008. every single industry group on the stoxx 600 is going to fall in the month of january led by the banks, the