tv Bloomberg Markets Bloomberg February 8, 2016 10:00am-11:01am EST
from bloomberg world headquarters in new york, good morning, i am brendan greeley. we are a half hour into the trading day, the route that set the nasdaq to its lowest level in october 2014 is deepening. oil also resumed its slide today. chief executive of the world's largest energy trader says low crude prices could persist for a decade. voters in the nation's first presidential library -- primary heading to the polls. we will have more after this weakens contentious republican debate. let's head to the markets desk where julie hyman has the latest. bad news on both sides of the atlantic. isie: the market selloff deepening. if you look at the three major averages, we have the nasdaq leading the declines.
the selling is fairly steep. a selloff that is not only steep but broad. , everythingthe imap is in the red. energy is declining the most, not surprising with what's happening in oil prices. financials, discretionary also participating. i want to point out one stock, chesapeake energy. reports that the company will be one tranche of its debt. there has been a lot of concern over the oil and gas producer. the stock has been halted several times this morning. i believe it is currently halted once again. this is what happens when you see big movement in a stock. it looks like that is happening with chesapeake as it declines.
let's get to oil prices as well. $30.08 a barrel, as there is still the same concern as in the markets as far as the demand equation. interest inat open crude futures, on the long and looking atso we are short contracts in yellow come along contracts in white. added together, you have the largest amount of open interest on these futures going back to 2006, when they started keeping data on this. what is interesting it is on the long and short side that you are seeing open interest. an enormous amount of volume being placed on the future of oil prices. brendan: we will talk about price will be
between 30 and $40 a barrel. where are we with the nasdaq? julie: the worst performing the three major averages. i'm going back to july 20, when the nasdaq was at its height. it is down 18% since then. nearly in a bear market for the nasdaq. h continues to selloff. brendan: now to politics, let's check in with vonnie quinn. president obama will ask congress for a 1.8 billion dollars in emergency funding to fight the zika virus. thousands of pregnant women in the caribbean and south and central america have been infected by the virus which is spread by mosquitoes. german chancellor angela merkel says she is outraged by the human suffering caused by a new syrian offensive. that and alongside russian offenses have cost thousands to
flee to turkey. she says turkey should not have to bear the burden of handling the refugees by itself. a more him medals to the foreign minister, and nuclear chief for the agreement on the nuclear program which lifted sanctions last month. in taiwan, for survivors from the earthquake were paroled out of a high-rise building. saturday's earthquake hit and killed at least 37 people. needs to pay $5 million for a super bowl ad when you have peyton manning? he gave shout outs to budweiser twice during the after game. inbev says it did not pay manning. meanwhile, the game had the second-highest overnight rating in history.
brendan: i am going to spend the rest of the week practicing my eli face, to look a little bit like this. amid growing concern over china and interest rates, market watchers have lost faith in bullish stock calls. things may get worse before the carnage continues to drag the nasdaq come as it index to its lowest level. seven strategists have lowered their year and projection. president and chief investment made anaxel merk argument for climbing all the way back. he is with us from san francisco. what should we have seen a last august that you were already looking at? >> i don't think it's china or russia or this and that. these are all just symptoms. we have had years of central banks compressing risk premium.
investors are overexposed to risky assets. now, what happened in early august, the fed decided to pursue an exit in earnest. that means risk premiums will rise. rather than buying the dips, people will sell the rally. people will not realize immediately that the markets have changed. as the market is changing, people will be interested in preserving capital. what is amplifying all of this is we have janet yellen looking at the labor markets, rather than one bernanke did, which was look at it inflation expectations. she will be slow to react to this which means the market will cascade much more slower than the fed will take action. brendan: there is some evidence that she is looking at inflation expectations, but there is no sign anywhere that there is why wouldpressure, so
she change her mind based on assumptions about inflation? >> compare janet yellen and mario draghi. they are looking at related sets of data but they have completely opposing interpretations. is the glass half full or empty for investors? for central banks, is inflation a problem? we are talking about longer-term inflation expectations. the fed says it is all transient, the markets will go through it. have basedw is, we this economic recovery on asset price inflation. so when the fed takes a step back and prices deflate once again, it will cause economic headwinds. it is that aspect that the fed is not recognizing. that is why we will have these headwinds, economic growth will be dampened, and they will realize down the road, maybe we should have done something. policyot in favor of the before, but they are at the
sleep -- asleep at the wheel now. brendan: there was news out of china that $99 billion in forex was paid out. that is a massive number anywhere. in nigeria, concern that they are doing too much, spending too .uch are we on our way out of an old currency regime and into a new one? >> we have been for some time. the reason china has to subset either currency is because of capital controls. to countries like nigeria, the imf will come to the rescue of some countries -- not nigeria specifically -- but they will be expending -- extending the agony. it is one of the themes as we go through this. because of low interest rates, people can sustain a business model longer. these are all reasons why the markets will be and having for a
considerable period. when it comes to currencies, the markets are on track. banks are frustrated because they are much less effective than they have been. brendan: thank you for that. the presidential candidates have one more day to make their appeal to the voters of new hampshire before the nations first primary. the results of a new full just out today. and a quick look at the markets. the dow extending losses today. 600 down as well. s&p down almost 2%. ♪
brendan: u.s. equities deeply in the red. the dow is down 300 points. the nasdaq down 2%. euro stocks down 2% as well. it is bad on both sides of the atlantic ocean. voters head to the polls in 24 hours for the nation's first are married. on the democratic side, the latest polls show bernie sanders leading hillary clinton by a margin of 56% to 46%. on the republican side, donald trump is in the lead followed by marco rubio and ted cruz. the candidates took aim at rubio saturday night after his better-than-expected showing in iowa. did he fight for his legislation? it is clear he didn't. a leader must fight for what they believe in, not handicap and say maybe because i cannot win, i will run.
that is not what leadership is, that is what congress is. brendan: let's get more insight on the race. joining me from manchester, new hampshire is megan murphy. in from thecame republican debate, they were not good for marco rubio. what happened inside the party, are their frantic phone calls trying to figure it out? >> we have heard reports that jeb bush's campaign, chris christie, getting phone calls from worried donors. in that moment, he knew that standout moment, he needed a standout debate performance. the consensus is that he choked and that he had a bad night. that will affect things in new hampshire and may change the trajectory of the race as the establishment continues to search for a candidate to rally
around to put a speed bump in front of donald trump and ted cruz. what the establishment has to offer is cash. do we have a sense, having thought about it in new hampshire, of what money could do, if applied in the right way? >> a lot of people say something interesting. the money is a little bit frozen right now, a little bit locked up. people are waiting to see what comes out of new hampshire. we could even see john kasich rise. if we see donald trump with the kind of margin we expect him to have here. people don't know how it will shake out, and they also don't know what we will see in south carolina. the big money that flooded into the race right now is wanting in waiting and watching, waiting to see who has the best chance. and you have a democratic race that is very hard to predict now.
bernie sanders has a double-digit lead. people are waiting. i don't think any of us know what will happen. we certainly don't know what will happen tomorrow night. brendan: i love hearing about the possibility of kasich momentum. maybe this time we will get a policy. bill clinton has been on the stump. didn't you miss bubba? >> it will be interesting to watch today. he came out with a hard-hitting attack against bernie sanders yesterday. we have not seen them before. we saw what happened in 2008. she has been getting a tax on both ends. big stiraused this about whether they are bullying young fema voters into trying to vote for her. now she has these comments from bill. people feel very strongly about him here.
the last thing they want is to a cajoled into voting for candidate who has struggled to build enthusiasm, not just in new hampshire, but nationally. brendan: thank you so much. ofan murphy, she is deserving burn, if not feeling it. we will have a special on a new hampshire primary at 5:00 eastern right here on bloomberg television. as we go to break, another look at the markets. the dow is down 307 points. the s&p is down 109 points. saw this in europe as well. ♪
being maintained, if not accelerating, in the first hour of trading. what is interesting, there does not seem to be sharp catalyst for many of these sharp selloffs we have seen so far in 2016. it just seems to be this underlying concern over global economic growth. all three major averages are trading lower. oil prices, sharp declines in the market as well. of course, we have seen the correlation between stocks and oil, maintain not entirely consistently in 2016, but certainly more than not going in the same direction. oil breaking below $30 a barrel. conversely, we are seeing money go where investors at least perceive themselves to be a bit safer. the 10 year yield, 1.75%. we have been seeing some buying of gold as well.
brendan: thank you. julie will be watching that all day. the economy of columbia, parts 9%,t, could grow at according to the president, whose country is on the verge of a historic deal with marxist rebels. it would open up large areas of the country. i spoke with the president last week at the imf in washington, d.c. there is a law in the books in colombia requiring a balanced budget. do you believe that will need to be suspended, as you make this transition? >> on the contrary. i have made a commitment to myself. i will be very disciplined in our fiscal administration. my government, the first amendment to the constitution includeroposed was to
the concept of fiscal responsibility. this was a big discussion strange foras very everybody but i see that as a way to protect the rights of citizens. an economic crisis affects the citizens. after that, we approved a fiscal rule that is a way to maintain discipline. we have been complying with the path, and will continue to comply for the future. brendan: you are an economist, so looking at the balance of trade, it seems there is some adjustment in the economy. the highest negative balance that you have ever had. u.s., -1.9 billion dollars. how do you make that adjustment? you have a healthy middle class that is consuming. ultimately, this is not sustainable. >> the deficit, the projection is it will go down by $3 billion
from this year to next year. you cannot adjust from one day to another, but the trend will be positive. that is probably the only indicator that is off-balance. the rest of the indicators are very positive. have that projected in the theum-term, to reduce deficit in the balance payments. we have no problem financing that deficit. we are making the adjustments by maintaining our growth. we are leaders of growth in the region. we were last year, probably will be this year. that was the colombian president juan manuel santos. joining me now is matt winkler. two years ago, i pitched a cover
story about hedge funders moving from brazil to columbia -- colombia. i am looking at a piece that you wrote in august. there is hope for colombia. >> it is, not just because there is a deal unfolding with the farc agreement, but colombia is one of the least developed infrastructures in latin america. this is likely to accelerate dramatically. it will be a massive stimulus. secondly and far more importantly, the banks in colombia are generally healthier as a group than anywhere else in latin america. the income they are getting from interest is a lot higher than what their peers are getting. that is reflected in the valuations of the banks themselves.
finally, when you look at the bond market in colombia, which is as good a barometer as any, they are hanging in there, despite the collapse of oil, its chief export, in a way that brazil has not come in a way argentina has not, venezuela has not. colombia is bigger than country than spain in population. when you think about the number of people, potential for infrastructure, which is likely to come quickly with this agreement, and then you think of the fiscal discipline that your interview touched on with santos. he is the former finance minister, so he knows all about balancing the books, keeping your discipline, as he puts it. this is something investors like. brendan: the classic example of an lsc trained investor there to clean house. christine lagarde said
that he was doing a good job. brendan: showing fiscal discipline, but at the same time, this infrastructure spending will have to come from somewhere. when you look at the balance of trade, there is a yawning gap that has showed up over the last two years with the drop in commodities. he said something funny off-camera. on the record, i said, are you confident the super cycle will return? he said there are three things that are certain in life, death, taxes, and business cycles. is that misplaced hope in a new commodity cycle? you could equate them as the countries that are most likely to do well, coming out of any kind of downturn. colombia, in-- particular, has a lot of appeal to north american investors.
that is why it is considered a dark horse in the group, the one that has perhaps the most potential. an extraordinary and underrated soccer team as well. thank you, matthew winkler. as africa's biggest mining weference kicks off today, will hear from the ceo of anglo-american platinum. and before we go, equities, still lower. dow jones down 311 points. s&p down 1.9%. nasdaq down over 2%. again, those losses are reflected in europe as well, particularly in banking stocks. ♪
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movers. particularly, chesapeake energy. tumble, itg such a is triggering volatility halts. the biggest drop on record, the lowest since 2000. this is after reports they hired kirkland and ellen. chesapeake is not just down today, it has had a rough year, one of the worst performers in the s&p 500. it has been slashing jobs, cutting investor payouts to try to conserve the cash flows. 91%can see the shares collapse over the past year in the company's value. dgif, thee a look debt loan $9.8 billion. 1.3 billion of that comes due
before the end of next year. that is if you look at this part of the chart. that is the concern of the market, will it be able to repay that? looking at energy transfer, this has been an ongoing story. have thatwe do not up. energy transfer agreed to by williams company. both stocks have underperformed this year on concern the deal will not get done amid the collapse in oil prices. announced ther replacement of the chief financial officer, apparently talking with the cfo jeremy welch replaced by germany long. the stocks are falling because there is confusion over why exactly this has happened. that's contributing to the being felt on the part of investors on the company
-- on the part of these two companies. the other part is the companies that missed earnings estimates. -- lowe'ssmic that and cognizant technology. some pressure for those companies. going to vonnie quinn. >> the united nations security council promising to retaliate against north korea for launching a long-range missile. there was a celebration in pyongyang a day after they carried a satellite into orbit. the security council may come out with new economic sanctions. nearly a quarter of south sudan population is in need of food aid according to the un's, which says at least 40,000 are on the
brink of catastrophe. wars that erupted in late 2013 have left tens of thousands dead. part of another on the benjamin netanyahu and the obama administration. two of this in a key voices are urging the navy to consider delaying the playing of the new combat ships. john mccain and jack reed also urge the navy to tone down the rhetoric about the ships. vonnie quinn. brendan: 2015 was a record year
for mega deals. will this come to an end in 2016? for more, i am joined by john rice, a partner at global heads of reserves -- mergers and acquisition. more than 30 years of fixed. representing all parties and all industries. basically, he knows everything. we had mega deals last year. are we looking at higher volume of smaller deals this year? >> we are hoping to look at a smaller -- higher volume of smaller deals this year because it is hard to sustain the massive m&a pace we have experienced 2014 and 2015 with the larger mega deals. the fact is, a lot of the conditions that were in play in 2014 and 2015 that propelled the activity are things that should propelled the smaller activity also. lots of cash, unacceptable regulatory environment, confidence in executives.
the big uncertainty of course is the volatility in the stop work at, which right now has lasted longer than the last time we had volatility in the stock market in august. that is the big question going forward in my mind. are we all worry the cost of funds will go up in the next year? and the other is, what is the cost of the dollar echo what will this do to company still exporting material goods? >> very good questions. with the cost of funds and interest rates going up, we have seen cautionary aspects in the m&a environment. is anything we have to worry about, it is the cost of the funds, but that will affect to a certain extent more of the deals using leverage than the deals not using leverage. with respect to the dollar, that cuts two ways. what we saw in 2015 was an inbound activity
to the united states. record levels, 200 billion or more just from asia-pacific. 500 billion in cross border activity. as you know, the u.s. is still a environment,ve probably the most attractive environment around the world. --e surveys suggest 79% act suggest the activity will be u.s.-based and china is a very important part of that story. of our producers showed me an externally chart. the deal volume coming from china is on par with what it was in 2014. rise? is this -- we call this capital plight. too dramatic.le are people looking to get out of
>> i do not cost? think they're looking to get out of china at any cost. i think there is commentary that may suggest that babies -- there may be restrictions on capital outflow. whether it is china or europe or anywhere, the united states remain a good place to invest. i think the important thing to understand is how the world has changed between the united states and china in the past three years or so. essentially three years ago you would go and talk to chinese corporations, and they would be --rrified of cynthia's cifius, the corporations that analyzes deals. it is very high profile, but it is much more reasonable than people give it credit for. chinese companies have started
to get comfortable that if they come into the united states, they will get a fair hearing. we used to have u.s. sellers very concerned the chinese buyers were bureaucratic and decisions likely. that is dramatically changed over the past year. chinese buyers know how to get deals done, and they will be a formidable and important and positive part of the merger and acquisition environment. brendan: this is fascinating to hear you talk about this, because culture matters. you have to learn how to do it. i want to turn to appoint you made about the regulatory environment in the u.s. we have the possibility of the hasbro deal. do you the justice department's attitude toward antitrust law has changed under the obama administration? what are we
looking for in the past year of that? >> i think people have a lot of different views. my view is on the antitrust side smart people who work very hard and government to analyze deals and by and large you will get the right answer. i also believe there is an over focus on the number of deals that get turned down. that creates a lot more publicity than the vast majority of deals that do not get turned down. blames they one press for that. thank you, the global head of m&a. thank you for that. talking about culture of m&a. , isl ahead, bank of japan the door open for the federal reserve to consider? that is right, negative interest
-- october 2014. this is the decline, some of the main indices across europe are falling. the ibex in spain and mid-30 down by over 3%. there is an industry group that is rising amidst the selloff. basic resources, which has had a since mario draghi on january 21 signals more stimulus at the march 10 meeting. every single other industry group is declining. media down by almost 5%. thanks down by 4.6%. to the havenmoving of the core european bond market. 4.6%.ks down by to put your a day money into the haven assets.
brendan: the nervous tic when i am watching the european spread. we will speak to the chief european economist at bank of america merrill lynch. joe is looking at what is happening to greek assets today. the greek stock market is getting pummeled. daniel weston, his hedge fund has done so well. beating 96% of his peers. ryan chilcote spoke to them earlier. the fear of the independent trade. he said get ready for oil prices around 50 for the next 10 year. that is a big call. i will see you in a minute. brendan: we are to flip through read how toinet and
talk about greece. the move to negative interest rates may have an impact well beyond its own shores. the u.s. economy weakens, industry watchers believe the fed could adopt negative rates. the probability dropping his jump to 14% higher since july. alexandria skaggs wrote about this. likely is this gekko janet yellen has only spoken about it in very halting, elliptical terms. is that even in the toolbox for the u.s.? is it ishey are saying an option, it is in the toolbox. for people to need to start considering it, we would need to a recession.in do not expect negative interest rates anytime soon. they will also consider quantitative easing, which they
have done before. they will also petition congress for more fiscal reform. brendan: the fear had always been you go negative and people would literally start putting cash under the mattress. historically, that is not what is happening. >> exactly. that is not happening in europe or in japan, at least not so far. i think that was the big concern , and that has not really shown up, at least not yet. brendan: i saw something that said rates could go as low as 10% before we really saw a dramatic flight to cash, -10%, flowugh sweden is a cash society, which makes a difference. there is a little bit more room to see what will happen. next right. there is a huge demand for safety. you look at markets today, and people are buying that 10 year treasury rate.
the demand for safety is so high people will not be wanting to yank their money and put it in a vault. brendan: do you still seek psychological barrier? the taylor rule suggested we go negative four years ago, and that would have us dipping back positive. is that psychological barrier still there? >> i would say it is still there, but probably getting a bit looser. i do think japan doing it was a big deal. they worked out a lot of problems that were present in the u.s. moneyare concerns about funds, which have not shown up in the u.s. and chaos there, also concern about the banks facing trouble because they will be paying on the reserves. because none of those aims have both of, i think --
these guys used to be at the fed. i think the fact that they are considering and all all marks a shift. brendan: sometimes you can communicate by thing we do not have the tool works yet but we're going to learn how to use this. thank you for that. expect to talk about native interest rate in the very near future. stocks tumbling. the dow dropping sharply over 300 points. the government getting into bonds. tech stocks pushing lower for another session. more on this after the break. ♪
crude oil stuck at 30. there is still some hope they are working to talk about that. eurotech around -- stuck around 111. this is led by banking stocks down by 1.3%. the nasdaq,m abigail doolittle has the latest live from the nasdaq. she is from midtown, manhattan. the big story is the nasdaq is less than 2% away from entering an official bear market. apparentlyock trade is going sour. investors are starting to worry about valuation. the big point drop all year long. microsoft, amazon, facebook.
you could make the case that started in biotech. high valuation, this last year was trading at a tripled digit price to earnings multiple. very high and expensive. investors running -- wondering, how long is this sustainable gekko twice this year it has been in a bear market. it appears that could be what is ahead for the nasdaq. brendan: platinum prices plummet, the world's largest producer of the metal said production will fall sharply as low prices are crippling the ability to replace crippling minds. amtrak is cutting costs where it can. thee does this leave producers gekko ryan chilcote standing by. n: anglo-american platinum having a great day. the ceo of the company, the joinss largest producer,
us now. a little bit further south of us. today you announced you would for new projects on hold until the platinum price improved. what kind of price to you need before you say we should bring those back online gekko $925 for announce a platinum right now. >> certainly not enough now. other than look at what the absolute price would be, looking at new market demands. we have pretty much placed the growth capital markets on hold. had in thee execution, we have taken a look at that and looked at the cash outflow and said look in the current environment, given the cash outflow and the combination does not need additional nuances
coming to the market, we said we would put this on maintenance until 2017. two largest peers have put projects on hold but you have not done that. does this include the need for you at any point in the future to go back to investors and --se more capital iago >> raise more capital? >> i do not think we need to go back to investors. one thing you point out is a large number of her peers had to go back to the market to raise capital for new projects and also to keep new companies alive . not only have we not needed to do that, in this kind of price we have been able to achieve in 2015, 4 billion grant of free cash flow and have reduced the net that level for your team .5 billion at the start of the year
now down to 12.8 billion. of bigstanding a number items. i think we are managing the spirit for the current pricing environment. my view is we do not need to go back to the market. what we focused on is reducing the net that level and making sure we have the firepower when the market rises and we need to put money into new projects that we can do that without going back to the markets. ryan: you have mentioned prices. have we found a bottom for ?latinum prices gekk i think we must be pretty close to the bottom. the 2015ow reduced with a massive reduction of 20 4% year on year to $1051.
already we are very happy now that it has reached $900. i think we pretty much must have bottom of the prices as a matter of fact. i think we should be seeing a strengthening of prices. somewhere between 30 and 50% of the market lossmaking. is clearly these prices could not have been sustainable on a long-term basis. even with the economic pressure at the moment, we should see -- brendan: we have to leave it there. we are grateful. coming back to the european markets. ♪
london as we wrap up trading in the next hour. you are there in london. it has an brutal today. what are you watching gekko mark: stocks have fallen to the lowest level since 2014. the european close starts right now. brendan: taking you from new york to london in the next hour. straight declines. we have not seen again since february. we have fallen to the lowest level since october 2014. something significant