tv Bloomberg Markets Bloomberg February 2, 2016 11:00am-12:01pm EST
next hour live from london and it is day two of the selloff. european stocks falling for a second day. to the chief executives of both companies, the european close starts right now. ♪ betty: we will take you from new york to london in the next hour and mark, kicked things off as we look like we are settling near the low. the third biggest declines of 2016 for the stoxx 2600 earnings. as well as these declining oil prices. let's get straight to those earnings because a couple of the big companies in europe. reported disappointing earnings bp is the big recliner in london.
shares are down by 9%, biggest drop since june 2010. the horizon disaster. what is fascinating -- fascinating about today's earnings, the four-year net loss of $6.5 billion was double the loss of 2010 when bp took charge cost link tollion the disaster. today, fourth-quarter profits greater than estimated because of the decline in the price of crude, profit has been low and year on year for six consecutive quarters as oil prices tumbled. we will have the cheese -- chief executive a little later. story wasbig earnings switzerland big lender, ubs, down by 8%, biggest drop since
august. rose -- syngenta rose thanks to a chat game. big drop in wealth management earnings and investment banking profit as well. we also have sound from the ubs ceo as well. betty: we will play that, later. ubs was not the only banks up to report. bank, one that we don't normally talk about but there are some banks that are actually gaining. the bank in denmark, the biggest lender is going to back back -- by back another nine point billion, nearly double its -- previous program after it exceeded capital targets. a bank in europe has exceeded its capital target, it has more capital than it needs to the film regular targets so it is
buying back stock. this is a company we rarely talk about. pfizer up by 4.2%. onreported for your profits declining bad load -- bad loan -- it is trying to improve its capital ratio. not all banks are declining and caucuses, we are trying to figure out why u.s. stocks are in decline and one reason could be that the u.s. election cycle -- is that right? betty: maybe you are a lame-duck resident, you are not that great in terms of helping the stock markets. let's bring up this chart. s&p returns during the last year , it two-term president
usually results in a decline in the s&p according to net davis research, down 6%. sojanuary, we are down 5%, who knows, this could be one of the worst years in the stock market for the president, but we have a lot going on. we have new hampshire coming up next. the trading day and there is still a lot of uncertainty in the market. we get to julie with the latest. julie: i had to do some research into lame-duck, why we call it that. betty: it does not get anything done. julie: but why a duck? betty: that is above my pay grade. julie: let's take a look at the major averages, definitely trading near the lows for session. the s&p 500 at the today performance has declined for two straight sessions.
even the yesterday's the klein was very small, and makes for a two-day decline of about one and a half percent. year-to-date performance has been lousy, it was that three-day losing streak at the beginning of january kerley kicked it off. in my terminal at what's for dragging things most, energy because of lower oil prices, being dragged by those ubs earnings and also negative earnings on insurers, asset managers down as well. industrial falling on negative earnings. consumer discretionary being pulled down from the cruise line operators. a lot of negative earnings weighing on things and that of course oil prices. oil islook at where trading, we are a decline of about 4.3%. it is still a steep decline at
$30.25. stocks,s money leaves where are some of the prices going? julie: people are buying treasuries, indicating that there are not a lot of -- there is not a lot of optimism when -- have a 10 year of 1.8% 1.87%, the lowest since last april. we are also buying up currencies other than the dollar. and the eurosing, is getting a tiny lift. gold prices are trading at their highest in about three months, or they were. it looks like they are coming back down. betty: thank you so much. let's check in on the bloomberg first word news with courtney donohoe. courtney: the shop like -- the spotlight shifts to new hampshire ready provincial primary will be held a week from
today. bernie sanders was campaigning they're not long after the results from iowa. he lost to hillary clinton by a fraction of a percentage point. for the republicans, ted cruz one in an upset over donald trump and marco rubio had a surprisingly strong finish in third, just one point away from trump. with thes working multi agency team investigating the contamination of drinking water in flint, michigan. officials have not said whether the probe could lead to criminal or civil charges. when switched its water source in 2014 to save money. the river water was not treated properly and led to some pipes -- led from pipes leached into homes. according to a defense official the u.s. military also wants to -- $3.4 billion or european security initiatives. is makingan union
more concessions to the u.k. over its membership. the eu president has proposed that there be some limits on welfare payments to non-british eu workers in the u.k. and that is where the demands made by british prime minister david cameron. cameron once a referendum on whether the u.k. did stay in the eu. in egypt, tourism has been devastated and it suspicions that a bomb down a russian airliner. tourism plunged 41% from a year ago. the october plane crash led to the ukraine -- the u.k. and russia restricting flights. betty: thank you. as we head to the break, let's get a quick check on how the markets are trading. the dow is off about 200 50 points, down as much as 265
the vice-chairman does not think is a bad idea. >> it is working more than i can say i expected in 2012. i was not on the committee at that stage. the u.s. they had of strategy in the capital markets. michael, thank you for joining us. >> thank you for having me. mark: the bank of japan has implemented negative interest the swedes,ghing the danes and the europeans, does it mean that central banks running out of ideas, running out of ammunition? >> i think there is two parts of this. one is that as the fed has moved intomove, it the tightening side of things, we are starting to see some of the cost of qe. one of those costs was a dependency problem for risk assets without the support of
qe, we have sort of seen as what -- seen what has happened. in addition, some of the operational costs, it is much harder to run monetary policy with a massive balance sheet. those two things have made people say if we have to do more , maybe we will try to push a little further on the rate side rather than run out and buy assets. trillion of government debt globally and -- sendingpending investors everywhere in the search for yield. the risk curve should we go in the search for yield? >> i think there are some opportunities in corporate bonds right now. i think some of the whitening we have seen is more technical. to thinking about
wider spreads as a sign that default rates are going to pick up, a sign that the economy is about to slump, but i think if we look at the u.s., the consumer looks good right now. things,usiness side of it was about a third of businesses that are weak right now, when you go into recession, close to 100% of all major factoring is weak. we are a long way away from recession, i think that means that we price in a sort of technical whitening. it is hard because so much is running a rest of these assets, people worry that money could run out. that causes spreads to widen. in addition, because we have much less liquidity in the market, we see more volatility in prices. if people are going to live with assets that have greater price volatility, you need more yield. i think those two things are
responsible for a good chunk of the spread whitening we've seen. there are some opportunities there. betty: what you think a 10 year yield under 10% is selling us? normally, people are reluctant that -- just in front of a big economic indicator like the employment report. the tells you the fact that we sort of broke through and moved back the levels we have not since last april. that means right now, people are not as concerned about the data. this is more about how far is oil going to go, how far our risk assets going to go. surprisingly, we have not really seen any impact on consumer confidence yet, but the market is pricing as if we are going to get that flow through. what about the handwringing?
the treasury at markets, the handwringing over those liquidity and the breakdowns in market structures. is that overblown? >> i think it is a different world than it used to be. the trending market, you have three different markets. in thell sized trade very recently issued treasury, liquidity is very fine -- is perfectly fine right now. were you hastert -- were you have trouble is larger trades, trades in bonds that the treasury issued years ago. the bankhappened is balance sheet has gotten very expensive with some of the new cap other rules so if a bank buys a treasury bond from somebody, if they can't get it out the door immediately, there is a much larger cost than there used to be. chart ault, you need to much bigger bid offer on those trades and that is going to take
you a while to move the risk. to show you a charge -- chart, mario draghi's favorite inflation game. today, it fell to the lowest level since january of last year and it closed for a record low. it essentially tells us inflation expectations are going in the opposite direction. mario draghi wants them to go. in thehave any faith boj, the ecb, the bank of england and even the fed's ability to meet their inflation goals over the medium-term? -- median term? >> there are studies that show if you think about these forward inflation rates, what is happening to oil price today should have no impact on those because you assume that five years from now, energy will of
gone back up to a more normal level or at least stop falling. if you look at the history, they tend -- those board inflation indicators tend to be extraordinarily sensitive to what's happening to oil. i think a lot of these measures are highly distorted. the fed seems to have downplayed the five-year inflation expectations as a result of that. one thing on these measures, we think tomorrow, the treasury is going to announce big cuts, they are trying to cut through bond auctions to issue more bills because demand for bills is very high right now. when we get those coupon cuts, we will see a very technical jump in these breakeven rates. this does not tell us anything about inflation, but i think the story is going to be a little less compelling for people talking about deflation after tomorrow morning. betty: thank you. the head of u.s. rate strategy at rbc capital markets. ahead, two huge oil
>> we think it is going to last throughout the next six to nine months and we will be characterized by a trend this market with lots of all its ability between $20 and $40 a barrel. betty: that was the global head of commodities research at goldman sachs giving his outlook on oil prices. 91% in thetumbling fourth quarter, the company posting and net loss in 2015. the ceo spoke about the challenging quarter and the company's spending plan. we have big projects going on
and we want to make sure we don't threaten the growth of the company, but we will manage the capital really tightly. >> you have been guiding the company towards 17 billion dollars. at the end of 2016, where do you see that number coming in? >> the low end of that guidance. >> when you say there is stuff to cut it further, that would be contingent on what if you decide the oil price is persisting longer than you anticipated? year, we defer to a number of projects because we see the deflation coming in. i think there may be a couple of those this year, as well. >> if you look at your leverage, a group -- it grew to 21.6%. that is an increase of 5% over one year. review anticipate it being in one year's time -- where do you anticipate it being in one year's time? >> points of it down as a result
of meat in uncertainties in the gulf. i'm very comfortable with a 21%. >> where do you see it in a years time? >> we will see what the results are. this year looks to be the year of two halves with the oil price. supply and demand tightening in the end of the year, we will see higher oil prices. >> how high are you prepared to let that go before looking at the dividend? >> let me but the dividend in perspective to give you the numbers, which is really important to shareholders, they make that very clear. $6.6 billion a year is our dividend payment. our operating cash flow in the fourth quarter was $5.8 billion. we generated about $20 billion of cash last year. $17 of capital to
move around and $24 billion of cash cost across company so you have all those pieces to work with to ensure we can continue paying the dividend was ever gearing is low -- plus our gearing is low. isk: -- what to me significant is the share prices down 9%. loss ofs year's net 2015's loss was bigger than that year. it shows how bad a year 2015 was. >> had to go back to june 14, 2010 tissue that see the share price fall more than it has. here.i was right >> you are getting ready for your 40th birthday. what was going on at bp was the board was meeting and they were discussing the dividend and sure enough, two days later, the lake
of the gulf spill, the announced they were cutting the dividend, canceling it to be more exact and they did that for three quarters. people expected a payment on june 21 and the yanked it -- they yanked it. they put in a fund to pay for the gulf spill and now in 2016, we are back and people are concerned. mark: what has to give? there are two things going on, one is, he says the dividend is safe. the dividendyield, expressed as a percentage of the share price is over 9% to investors are skeptical that he can keep this pledge. the dividend yield has not been that high and a quarter century but he says he will keep it because he knows how important it is to investors. to stayr thing that has as far as he's concerned is capital spending. they have been guiding people to
$19 million this year. that is what they think they need. they think anything else would be detrimental to their future growth. the only thing they can do is borrow and a plan to raise that and it looks like an out think it is ok to borrow up to about 30%. he says oil prices are going to recover in the second half? >> he does think that the oil price is going to recover. he is very hopeful of that. the way he sees it is, he expect those that expects those show producers to begin to decline and that will take us into about -- mark: market close in just a second. ♪
presidential primary will be held in new hampshire. bernie sanders was campaigning there earlier today. iowaal hours before the democrats said sanders lost to .illary clinton and hav marco rubio had a surprisingly strong finish in third, one point away from trump. will tryaker paul ryan to override the president's veto of the bill that will defund obamacare. he plans to bring up issues linked to terrorism. president may bring up the fight against cancer and -- north korea has declared plans to launch a satellite this month. they are seen as an attempt for onth korea to avoid a ban
long-range missile tests. raul castro meeting with several top officials in day two of his visit to france. he is seeking to boost business ties between the two countries. on monday, francois hollande called on the u.s. to lift its economic embargo. global news 24 hours a day powered by our 2400 journalists in more than one fee news bureaus around the world. that's 150 news bureaus around the world. mark: this is the situation across europe. markets settling for the day. the fifth biggest decline of the year for the stock 600, down by 2.13%. 600.ockoxx it was a day dominated by earnings. three of europe's biggest companies the biggest decliners
to they. bps biggest decline since june of 2010. its biggest ever annual net loss of $6.5 billion, double the loss in 2010, the year of the oil disaster. it was the fourth quarter that investors focused on, profit fell 91%. crude prices dragging on earnings for six consecutive quarters as oil prices tumble. i want to show you what happened in switzerland today. , shares down by 7%, the biggest decline in over a year. fourth-quarter net income did rise better than expected. negatives investors
are focused on today. blue-chips -- two big blue chips disappointing the markets. betty: they focused on the banking side -- what about their reports? mark: it was not just the negatives in the banking industry, the worst-performing 600 this the stoxx year. denmark's biggest lender, look at chairs come up by 4%. shares, up byir 4%. this is a bank that has excess capital, more capital than it needs and it is giving some back to shareholders. this is a bank we don't often focus on.
the austrian lender up by 5% today. provisions.d loan it will not be recommending a dividend because it wants to improve its capital position. there are some lenders that are rising amidst this year of decline for the industry. betty: i know we are waiting for earnings from europe. reporting goods maker that results in just a few moments. we will watch how the stronger dollar, for an exchange, how that hit the earnings and sales. what about the u.s. slowdown or sluggish growth as well as what happened late last year with the paris attacks and whether that took a dent in the fourth quarter sales? shares of ubs dropping the most in a year today after profit
drop in the fourth quarter. -- a dropped in the fourth quarter. at the dynamics of the fourth quarter and a into how january started, we see this a trend continuing. with a high level of risk aversion. people are heavy with her asset allocations in general. they are paralyzed by this high volatility and the geopolitical news they see. mark: more highlights from the -- if you look at the shares some investors seem to be questioning that story. is it too early to make such a call? i've given this some consideration throughout the day.
it is too early to make that call. the question is, is it cyclical or structural? the dividend has come out -- what has shaken the market is it is what management and profits 50%.ed there was a high level of risk aversion. margins on the business are the lowest since the financial crisis began. valuation -- if you own ubs and you apply the valley because of the dividend, that is the critical issue. wiese --mping credits credit suisse. i asked, have you back yourself into a corner? >> our dividend is a reflection of a very strong year. also a reflection of a very strong year in our operating profits. -- we the reason why our
had a very strong operating environment in terms of profit. we are also adding $.25 of dividend because of the valuation. >> that is a balancing act. the dividend play was great. the market was looking for 75. the balancing act is this -- you look at the volatility in believe these guys are getting -- are going to deliver. betty: we just had a conversation about that with an interest rate strategist. how is ubs dealing and eight negative rate environment -- in a negative rate environment? >> they've had a year to get used to this with rates being negative -- the swiss rates being negative.
positive -- we could bring a suite of money into the banks. we are managing and reflecting and time goes on. >> we are getting used to a negative rate environment for at least one year or maybe more. that. well prepared to do you see that in the way we manage our balance sheet and our deposit base. we are already wired to manage this kind of challenging environment. they are wired for the negative rate environment. is the direct -- zurich. mark knows this very well. mark: i do. great job. you get inside. looks chilly there.
we will see you soon. i am. better than where let's get a quick check on how stocks are trading right now. not a great view. abigail doolittle has more from the nasdaq could abigail: we are looking at a broad-based selloff here at the nasdaq. two high-profile stocks down ahead of earnings tonight. one is yahoo! fourth quarter earnings reported after the bell. not only did the company have the pressure of meeting or beating estimates, but they also will have the first offer details on the reverse spin out of alibaba and the possible layoffs coming. if you can percent layoff. 15% layoff. the number will be down 41% from when012 profit number
marissa took the helm. also reports today after the bell. they may soften the tone a bit. the company will be discussing the upcoming management change takes the ceo helm at the beginning of march. afterock has been down that was announced -- gilead is the 800 pound gorilla in the space. merck is just the minnow. betty: you know what is coming next. we know what is coming next. battle of the charts is next. -- a charge that
betty: it is time now for our global battle of the charts where we take a look at the most telling charts of the day. what they mean for investors pretty can access them on the bloomberg by running the function feature at the bottom of your screen. ready.ller is battle segmentwas watching the about ubs earnings and i thought very interesting stuff, and wonder if the options market could have foreseen this move. i quickly whipped together a
-- here you see ubs's stock price. they have a rough time over the last couple of months, but they were picking up a little bit ahead of earnings. if you look at the options market, you would have been warned about this. the blue line is the ratio. it shot up here. traders were buying five times more put than they were calls. 18,000 put contracts changing hands. that is a sign that something bad is about to happen. they are making a bet that something bad is about to happen. everyone thought ubs is brilliant, they reduce their investment banking source of revenue and they focus on wealth management, that is the best idea. .ot such a great idea now here's the ceo saying people are more worried about this market and they happen about any market since 2008.
this option sign tells you -- thecan check this out with function -- betty: you could have made a lot of people a lot of money with this yesterday. --cing bets on the grexit mark: i don't have a team of 16 people putting my chart together. who putst yours truly the grind income of this wet in, the oil into his daily chart. that puts the grind in, the sweat in. -- morganaving the eu stanley says there is one corner of the rates market that is not a verse to those risks. investors are betting the bank of england will tighten policy inthe same time as the fed
2017. organ stanley puts the probability that morgan stanley the probability at more than a third. morgan stanley puts that probability at more than a third. , these two have converged in the last month, showing expectations that the u.s. and u.k. will tighten monetary policy at a similar pace in 2017. the gap narrowed one basis point last week. it was 15 basis points, then the market was pricing and more tightening for the fed in 2017. says votes to leave the eu could force the boe to keep the rates at record lows for an extended. of time. -- extended period of time.
their understanding the likelihood of the brexit. instead of the 16 people who helped matt miller, focus on the one. stanley.k uses morgan he has a hold bank and i just have hillary over here. has a cheerleading squad behind him, too. matt: on twitter. want mark crying over his chart. i will have to hand it over to mark today. [applause] chart. love miller's i'mtaking february -- matt: taking february off. no beer.
bloomberg anchor stephanie ruhle will get the lesson in greatness from the nba's most valuable player and under armour steph curry from the golden state warriors. dwyaneie: i was into wade's house. let's see. i'm a lefty. all the cool kids are. ready? steph curry: let's see it. nothing but net. i have a lot to learn. this is a 27-year-old kid without the highest paid -- the sixth highest paid player for the gold state warriors. you have kevin durant, lebron, they have much bigger shoe
deals. he is there to play the long game hurt he's been the underdog since the beginning. does it bother him that he's underpaid? stephanie: he said underpaid in what context. maybe it makes you more part of the team. he is the best shooting record in the hole nba. three quarters of the game, he hits more shots than the rest of the league. see. curry: we will it's all about timing in the nba. each year is different. we will see what happens down the road. --is hard to predict everything is so fluid in the nba. i want to stay in the bay because i love it. i love living there and playing there. the like the year-to-year contract idea like lebron has? or do you like to know where you
are going to be for a long time? steph curry: you have to assess the situation as you go through. lebron is doing that for a reason because he wants the get what he is owed. having that security is great for some players. it depends on what you're comfortable with. stephanie: the flexibility is lebron only signs one-year deals because he always wants to renegotiate. even though he is two more years in his contract come in september -- there will be a lot more money rushing into the nba system. he could say time to renegotiate. betty: he has the leverage. stephanie: he certainly does. havel sports expand? -- how will
sports expand? it is about going global. pushing -- they have such a following in asia. steph curry just came back from china. steph curry: it's going global. whether it's in asia or india or europe, you find more and more people following the league and being a part of it. and silver is doing a great job of catering a lot of things we do here in the states to make it more appealing for the worldwide audience. they are becoming greater basketball fans. stephanie: he is a special guy. under armour's shoe sales are in asia. by steph michael jordan has put out 30 editions of the air jordan. steph has the never to jersey
and the league behind lebron and the number one sneaker -- the number two jersey in the league behind lebron and the number one sneaker. sport is there any other beside soccer that translates around the world? it's basketball. stephanie: we will see how it goes. right now, he is winning literally and figuratively. we talked about his habits, lucky charms. for him to gohose with under armour -- his wife cooks a special meal for him before every game. he is a massive carolina panthers fan. he will be at the game this weekend. betty: thank you so much. stephanie: did you ever know i had those basketball skills? betty: check out bloomberg pursuits. travel, watches, dining
and property. guy. you are a pretty tall a half.4" and i have to have a special meal before the market close show everyday. what you suggest? betty: a good cup of bloomberg coffee is what i recommend. mark: i will do it from tomorrow. you will see a change in my performance. i'm full of energy. toe a look at what happened the european stocks. another day of declines. i will see you tomorrow. ♪
markets. ♪ bloomberg world headquarters in new york, good tuesday afternoon. alix: here is what we're watching this hour. the slide in oil prices continue very tha. that is weighing on global stocks. can investors in china turn it around? ofst, we want a snapshot market activities. we check in with julie hyman. declineening oil continues to weigh on stock. ks. julie: it does. as terrible as this year has felt we has not had this kind of losing streak since the very beginning of the year. at the is not in the