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tv   Bloomberg Markets  Bloomberg  February 16, 2016 2:00pm-3:01pm EST

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from bloomberg world headquarters in new york, good afternoon. i'm vonnie quinn. here is what we're watching of this rally. goldman sachs says it is time to barometer.ar what you want to know about the bearish call. be senate republicans may fearing the most after the death of justice antonin scalia. let's head to the market does where julie hyman has the latest. an upbeat day. julie: mostly up. a little bit of choppiness. the s&p will be up by one point 5%, and the dow, as you can see,
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has been building on gains. au see a mostly upward trend, little choppiness, but a mostly upward trend. if you look at the rally bisect rally by sector, ased rally.ty broad-b industrials,es, tech coming back -- all of the cyclical groups that have been late comingf back. pretty --vonnie: a pretty good range in oil prices. julie: earlier, oil surged before falling below the lows of the day. of course, we learned earlier
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that russia and saudi arabia had come to an agreement to freeze oil production, but the fact that it is only a freeze is causing consternation in the market. something else i want to watch, oil volatility. sharply.e falling we have seen other types of assets down today. school vacation week. that is one of the things causing a little bit more quiet in the market. not quiet for oil this year, if you look at the year to date decline in oil prices, still a 22% pullback, despite a little bit of a bounce last week. thanks, another couple prices anyway. let's head to the first were
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desk and ramy inocencio. garnered 195 it votes, short of the 226 needed hadetro poroshenko and called on the president to resign, saying that they needed "a complete reboot." the united nations said may have to use methods to get rid spreading the zika virus. one of those, genetically modified male mosquitoes. environmentalists said criticized the approach in the past. extremist in the islamic state have slashed salaries and have been forced to pay utility bills in black market american dollars. coalition air strikes and other measures have eroded millions from islamic state financing. retailers that except food
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stamps may have to start variety ofwider healthy foods to keep customers. who domillion americans use food stamps should have better access to food, but the they do not dictate what actually buy. i'm ramy inocencio. vonnie: thank you so much. let's get back to the story of the day, oil prices falling after saudi arabia and russia announced a deal to freeze oil output. venezuela joining the remit. what about opec? joining me, our correspondent from bloomberg intelligence and a former economic adviser to saudi arabia's ministry of finance. so, the market has had a whole session to digest the news and has decided it's pretty
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inconsequential. with that be a good assessment? we are seeing two of the largest oil-producing nations effectively saying we , but wegoing to slow will freeze a record high levels. this is not what the market was looking for. this is much a do about nothing unless you can get iran and iraq involved. case ofisn't this the the market never being happy? we have seen something. peter: we have seen these potential cuts in production. even freezes in production. this is something the market is getting sensitized to. vonnie: i want to bring in john, a former advisor to saudi arabia's finance ministry.
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of this andtions saudi arabia are probably obvious to you. tell us what they are in a nation that is used to record oil production, announcing, saying it is not coming back. absolutely. for saudi arabia, the key issue is a signal to the world market. and the agreement is a good step forward. at least now, i have to remind everybody in march we are expecting a big visit. the king of saudi arabia is going to be visiting russia. and since we seen these signaling of no increase, it may be that in march, we could see something else unfolding. vonnie: call will be next to possibly join this alliance? this has been going on for
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some time. also remember, prince mohammed visited in the first part of 2015, st. petersburg, and there were discussions and they were visitg about a possible of the king. the issue has to do with oil, syria, geopolitics, and there is .ositiveness but they have to agree that these supply issue will be addressed. russia, you may do it. it seems like iran is the country saudi arabia is trying to put the most pressure on when it comes to cutting back and iran is only now ramping up again after getting some of those sanctions. what if it does not make some sort of concealing tory gesture,
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or are there any? , or areliatory gesture , i think? actually we may have lost john. peter, are the consequences if iran does nothing here? -- peter: i think what you may see, iran will be offered additional compensation for dialing back output. that is the only way to get them to the table. one more thing by russia -- this -- incrediblylely smart move by russia. essentially they have agreed to the status quo and gotten saudi arabia to the table. vonnie: i want to bring up a , the pointbarclays basically that the saudi's can withstand some years of this. they cannot withstand it
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forever. "even if the leadership has a big enough war chest to survive a depressed price environment for a few years, surviving is not the same as driving for the house of saud." does that mean that they are feeling the pinch? think saudi arabia can sustain this for a few years. this is not sustainable over the next, you know, 10 years. definitely, saudi arabia thinking of important reforms. they have a humongous were, close to 100% of their reserves similar to the size of their economy. they can do a lot. do notsaid that, they want to signal they are going to be the first one who is going to be cutting production here. thanks to john joining
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us on the phone from riyadh, and peter from bloomberg intelligence. i want to point out that crude dollars a barrel. coming up next on "bloomberg market forecasters making adjustments. we hear from wells fargo ahead. on tougheningari u.s. banking laws. and why goldman says it is time to sell. ♪
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vonnie: welcome back to "bloomberg markets."
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i'm vonnie quinn. time for a look of the bloomberg business flash. challenge --st the the deal valued at $18 billion. the companies can pursue the suit in court. in puerto rico, a last-minute bill to approve restructuring the heavily indebted public power company. they also wish to diversify energy resources. court is the to bill were not approved by today's deadline. new construction in manhattan's park avenue. the least entitles the hedge fund to a view of central park. they plan to pay three and two dollars per square foot for the space, a new record. on the newtart work
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tower before securing any tenant commitment. that is your business flash. let's head to our markets desk where julie hyman has the latest. julie? julie: thank you. we are looking at groups that i've done well today. i want to jump into these little bit more. -- we're looking at groups that have done well today. this is a group that did very poorly this year. because these stocks are so widely held -- apple for example -- because they are down for the year -- it has really weighed on the major averages. we see the so-called fang stocks , alphabet facebook declining. and another group that is down the most, banking stocks, but they are coming back. the s&p banking index is having its best deed of days all the way back to 2009, interestingly
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enough. -- it's best two days all the way back to 2009, interestingly enough. it seems like a recovery action rather than based on any fundamental change in outlook. and finally home depot and headed higher. it looks like this is benefiting them. julie, thank you so much. continue to keep an eye on the markets for us to read we will check back with you later on. and rushing off the weakness and oil prices today -- is so far the concern over crude and has dominated equity sentiment. strategiesestors' changing? with us, the wells fargo head of global markets has released his latest notes. it's a change in the year-end targets.
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tell us what your new target is. -- guest: we continue to see an of trend in the economy and better times ahead. this is based on operating's earnings revised. vonnie: what makes you so bullish on the s&p 500 when we see earnings miss continuously through the cycle here of earning seasons? makes -- what makes you think it will improve? think economic growth will remain steady. we look for manufacturing to recover. there is a bit of an inventory overhang. that will be out of the way by the middle of the year, and we think oil prices will stabilize. worth four dollars or five dollars per share in earnings. yes, we think the s&p will driving market going forward, just not as much as we
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previously thought. vonnie: it is a pretty big jump -- yourom where we were say oil if it stabilizes any -- what is it, the $35, $40 range? are not looking for the net effect to be negative. we are looking for to be positive. vonnie: why? guest: the energy sector has been one of the main culprits in 2015, subtracting quite a bit from earnings, and if you think about oil coming back a little bit, that is not going to hurt very many companies using oil. it will help quite a bit more the energy companies and i think the net will be positive. what about a federal reserve entry or the geopolitical uncertainty or even the election cycle?
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guest: we think the fed will raise it interest rates, not as much as we previously thought, and with some improvement in the labor market and wage is, we think that they will be compelled to raise rates not only once, but twice. we think that will be a positive for the economy and is going to help support the markets going forward. will beso, you think it depend on the energy companies? we will have to see an increase in the price of oil. where else will leadership come from? leadership from the sectors that are most leveraged to the economic recovery. vonnie: so you are saying the consumer will start to spend more of that oil dividend then? yes, we expect so. we think oil prices have had a
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negative impact on consumer sentiment as people think about deflationary times. as oil prices come back, that should help stabilize that fear and consumers can focus on job prospects and wages. what will it take for confidence to return before we can get the s&p up to where you say it will go? right, that is a good question. we think in the short-term investors will be looking very carefully oil prices. as oil prices have gone down, so have equities. is we think the correlation very key going forward as oil prices stabilize and rebound a investors intimate could improve quickly. and we saw improvement on the policy front as the chinese conductor came out and gave supportive comments
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that helped asia out quite a bit on monday. all right, paul christopher. thank you so much. markethe global strategist for wells fargo, paul christopher, here on "bloomberg markets." is focusing on too big to fail, coming up. ♪
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vonnie: welcome back to "bloomberg markets." i'm vonnie quinn. firstashkari gave his speech today and the threat of -- the formeram head of the tarp program once again focused on too big to fail. neel: i believe the biggest banks are still too big to fail and pose a risk to our economy. vonnie: is kashkari's outlook
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fair? my guest joins us from our studio in atlanta. he is based there in atlanta. at one of the dispersed speeches -- or his first speech as the minneapolis fed president, something we have heard him speak about before, obviously, and other presidents have been talking about this -- what makes you think or well, if i can ask you the question, will his proposal coming out of the minneapolis fed be any more effective or any more chance of seeing the light of day than any of the others we have seen so far? guest: last week you had janet yellen speaking before congress, and she put a very positive spin on it.
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things are moving ahead, dodd-frank has required stress capital, all of the positive things happening, and neel kashkari says wait a minute. despite all of the progress we are still in the same place we were 10 years ago, too big to fail is still a problem in something has got to be done. tohink that view is going really resonate with a lot of people and it's not just the head of the minneapolis fed, as you point out -- the head of the banks city fed, a former regulator says, what is wrong with breaking up the banks? there is still a problem. fed.ead of the st. louis there is a divergence and views -- maybe not in the sense that people agree with the basic facts, but the people out in the field are saying something has got to be done. what can be rolled back
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at this point? this seems like a debate that should have happened years ago. what kashkari said was congress did not go far enough and a solution, has to be dealt with by congress, and i think with their research effort, they are going to hold conferences, they are going to bring in scholars, they are going to bring impossible alternative solutions such as raking up the banks, requiring so much v banks essentially tackingublic utilities, -- attacking leverage, those kinds of things they are going to put pressure on congress to do something further. and there is interest. you have people like elizabeth wore them on the democratic side and many republicans or conservatives all agree that something has got to be done. this is a bill he has
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been sounding through his tenure. very quickly, steve, we will have interest rate discussions and other speeches. are you looking for anything interesting out of the minutes tomorrow? guest: i think what will be interesting is what do the fed participants have to say about turmoil andinancial the march meeting. a lot on wall street were unhappy with janet yellen saying she did not go far enough in terms of reacting to the turmoil. vonnie: steve, thank you so much. steve matthews in atlanta. tomorrow, -- ♪
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i've never felt so alive. make your business phone mobile with voice mobility. comcast business. built for business. vonnie: from bloomberg world headquarters in new york, this is "bloomberg markets." i'm vonnie quinn. let's go to the first word new
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desk with ramy inocencio. hillary clinton and donald trump are leaving in virginia's upcoming primary. clinton leads vermont senator bernie sanders 52% to 48%. donald trump is followed by marco rubio. sanders willernie be a guest on "with all due respect" at 5 p.m. new york time. 11 people died and scores were injured when two commuter train slammed into each other on milesle line track 30 southeast of munich. justice partythe in the maldives found guilty of inciting violence last year, the
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third high-profile leader to be jailed for terrorism in the last year. and the united nations security council says former secretary-general truce boutros-ghali has died. -- boutros boutros-ghali has died. he was also the deputy prime minister for foreign affairs of egypt. he was 93 years old. global news 20 hours a day powered by our 2400 journalists and 150 news bureaus around the world. back to you. vonnie: ramy inocencio, thank you. climbsjuice makers today, and the largest slump in oj futures since january. crude is down, but it had risen earlier today on news that saudi arabia and russia would freeze production and help reduce or try to, the global oil what.
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g.i. is settling under $29 a barrel. let's turn to gold now. goldman sachs says that the price is not justified. they expect the precious metal and three $1100 months. for more, let's bring in our mining analyst ken hoffman. unprecedented to drop to 1100 dollars. we saw gold approached her dollars in october. it has struggled to get up there every time that there is turmoil in global markets. reporter: what i wrote this morning, when i heard that goldman was bearish on goals, i thought, that old -- bearish on thought, that old
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chestnut. they have always been bearish on gold. there being bearish on gold -- that is sort of what they do. if you look at the market, inrything will change january. those who are really bearish on gold, they are going to say, qe have theg, they will price down. they will raise interest rates. you will see it raised four times in 2016. all of a sudden the first week of january, a lot of market turmoil, a lot of doubt about whether the fed will raise rates at all this year, and we go back to what is going on with the gold price? the gold price is going to follow two things. one, china and how china acts. they have been printing money like crazy. vonnie: i think we have a chart we are going to put up. one showing the money
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supply. we go back to 2005, china have half the money supply of the united days. today, china has double the money supply of the united states. that is one thing we will look at in terms of gold. the other is real interest rates. roy and -- i spoke to he is looking at real interest rates and new says that they are come into theey market and that is why they are more bullish. assume that gold investing is rational -- one would assume that gold investing is rational. as a currency. you go on the bloomberg terminal, there is a key called currency. that is were gold is. it does not have a central bank.
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it can't be manipulated. it as a bitle use of an anchor. if you are in russia or zimbabwe, gold is unbelievable. states,re in the united gold has not done as well. it is all perspective. hsbc was pointing out today there's a lot of short covering. would you agree with that? how much more short covering are we going to see? reporter: jim steele noses market cold. economy is that the going to go ahead and you are going to be left behind, you do not want to be in gold. vonnie: what about etf's? there are still in etf's adding to their holdings. why is that? reporter: those are investors who have really become fearful. it was assumed there would be 1,
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2, 3, 4 interest rate hikes this year. all of a sudden you hear people saying that there will not be a interest-rate hike at all. people reading afraid of a recession. the first instinct is to buy gold. "what'd youon miss," they will be discussing gold with jeff curry. the london-based minor is moving away from oak and iron ore to focus more on consumer resources -- diamonds, copper, platinum. the anglo american ceo spoke with guy johnson earlier. have a listen. gone back to the core businesses we think we have
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a competitive advantage in. we have great assets and copper. i think we have drawn the line. we have identified those assets. there are good assets for sale that will help us reset the balance sheet and help us create future.ifferent we are ahead of the curve. tough calls.the we have made significant improvements. cost. i think we're setting the business up for success. give me a sense of the price discovery, the negotiations you are having right now. walk me through the timelines you expect on these key assets and when they will get done. guest: we have been in the market or we have been doing the work, setting up the process for the last four months. we have a short list, and i
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think we have kids coming in as coming in as we speak. we will pend is down in terms of a short list, and the next two or three months i would expect to resolve something there. in nickel, coal, some of the other assets, we have had lots of interest. time to set up the data rooms. we will be actively talking to people putting numbers on the table to buy the assets. so, we also have short list on our south african domestic coal assets. i would expect at least 10 to be somewhere around the half year. guy: ok. once you get through the have here, do you expect your credit
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rating to materially improve? guest: it depends. we forecast the movies downgrade. it's not a surprise. a little bit disappointed they did not take into account that we have bids on the table for some of these assets. anyway, that is how it is. we will demonstrate a continuing improvement off the cost base. i think it will be a case, but you would have to ask our friends at moody's. a year from now do you see this business as being in a much better position -- ucb credit rating materially improved? this is a year-long process you are going through. i am trying to get back to this idea of the timeline. i don't even think it is a year. we will have material improvement by the half year. we have not missed a net debt
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target into half years, despite a 45% reduction in commodity prices. the reason? 25%.ost has dropped we have increased our restructuring by 10%. there are not many people who can talk to the sorts of numbers in the last two years. vonnie: and that was the ceo of anglo american speak in bloomberg today. a quick check of the markets before we had to break. we're going to look at the s&p 500 which is up 1.7% now. coming up in the next 20 minutes all bloomberg markets -- why the death of supreme court judge antonin scalia threatens to ignite a battle for the court's future. amazon and netflix stand in the way of a bull market. look at the major averages. there's the dow and the nasdaq.
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vonnie: welcome back to "bloomberg markets." i'm vonnie quinn. the supreme court is honoring antonin scalia days after his death at the age of 79. the chair he traditionally occupied has been draped in black wool. this as the fight is gearing up for who will replace scalia on that bench. i'll correspondent joins us live from washington, d.c. again, we had a couple days today just to this news and perhaps people have moved on a little bit to the implications of a successor may or may not
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be. one analyst looking at market implications as there are serious market implications depending what comes up for consideration. what do you see as the most important one? marketr: from the standpoint you have to think about obama's clean power plan. there are a lot of steps to go. right now it is on hold. if obama or a democratic president can get a more liberal justice on the court, the chances the clean power plan has a much better chance of surviving supreme court review. vonnie: and the unions case -- tell us about that. reporter: yes, that is a case that they heard arguments in. there was every indication that the court was going to vote 5-4
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to create a president to say that workers do not have to pay fees. with justice scalia gone, there's an excellent chance that split. a 4-4 that means that they will have to go with a lower court decision that favor the union and we will not have this big change and we will have to see if the issue comes back up later. most of theeems decisions have some kind of economic impact. what can wallace says -- basically the court for the past eat of decades has been seen as his miss friendly and -- business friendly. is this something that we need to think about once the fight gets underway and whether we see if someone will be sitting in that chair? reporter: we can start thinking about it now. it's pretty clear, if a democrat gets to replace justice scalia,
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we are going to see a shift. another set of issues are class action lawsuits and whether companies can force disputes into arbitration. those are cases that have divided the court, typically 524. there is a really good chance that those decisions will be very limited and we will have a more consumer friendly set of laws. and the immigration case as well. 5 million people at stake there. a lower court ruled against the obama administration, struck down his plan, and with justice scalia no longer on the court, we have the split.lity of a 4-4 but in that case, since a lower court ruled against the obama
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administration, the effect would be to leave that up place. the court could kick it over to next term. maybe you could get five justices, including another democratic appointee, considering it, with that is very much in flux. much.: thank you very i look for to your stories and i will be kept updated by your wonderful stories. president obama will have a press conference at 4:45 eastern. you can watch on bloomberg television live and also on bloomberg.com. and stay tuned after the address for anh all due respect" interview with bernie sanders. that will get five glock houston. it is time for the bloomberg business flash. at 5:00 eastern. an audacious idea that google's parent should by giant insurer aig and turn it into a lab renovation. called -- compared
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his company to google. u-versephasing out its tv service and is pushing its clients to sign with directv. and the annual meeting for shareholders of berkshire theaway will be webcast for first time this year. it will appear on the finance page of yahoo! let's head to the markets desk where julie hyman has the latest. julie? julie: yeah, today with the sector spider report -- spdr report outperforming tech. a 3.5% gain. there is not a specific catalyst. large cap biotech is coming back.
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this is one of the groups that has done very poorly this year. are leading the gains today. where wenother group see some strength. and we see these smaller biotech doing well also. there was the meeting for the american association for the advancement of science over the weekend. results presented, talking about treatments for engineered t cells to target different kinds and cancer. the companies associated with these treatments have been doing well today. again, these smaller biotech stocks. biotech has done very poorly this year. on the screen that i have of all etf's, thisr spdr one is the worst performer. just as we saw a rocky
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performance last year. the balance we see today looks to initially be just that -- a bounce from the lows where we were last week. right, another hour and a bit to go in the session. coming up on "bloomberg markets are down and netflix more than 20% for the year. should investors be optimistic? we will ask bloomberg west to anchor emily chang. that is next. ♪
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vonnie: welcome back to "bloomberg markets." i'm vonnie quinn. as in the technology companies had a banner year. .etflix doubled its price amazon had a good year. fast-forward to today though, amazon and netflix down over 20% for both of them you're today. should investors stay optimistic?
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for more, we bring in "bloomberg west" anchor emily chang. i guess being down 20% is not as bad as it could possibly be? emily: [laughter] they are among the worst performers this year. amazon and netflix had nothing in common except they were high ying tech growth stocks. netflix started doing original content. amazon started doing original content. they have both lost about a quarter of their value your today. it --ach has challenge they each have challenges of their own. but it seems like they are getting challenged for having such high valuations last year. cohen, heg with terry says we are seeing a massive revaluation in tech where values are coming back down to where they should be. amazon and netflix have their narrative, both
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of them had earnings that were weres great as analysts expecting, but still, quite dramatic and you see both of them falling off a cliff just in the last six weeks. vonnie: well they do have some things in common -- obviously the streaming services -- they are hugely to bring companies. were pushing them higher for different reasons. let's pick amazon. white did investors -- why did investors lose a little bit of the love affair with amazon? amazon, the market cap is several times higher than that of netflix, so that is a start. it started with a not so great earnings report. amazon missed on profit, missed on sales. amazon had started turning a profit a couple quarters ago -- who doesn't care about amazon turning a profit? emily: they got used to it. then they were excited.
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and the expectation was the fourth quarter earnings report would tied up like a bow, and instead it put some things in question. amazon has been investing in smaller, more nascent businesses it with a lot of growth potential, but they are not there. amazon cloud has become a huge theirf the business, but territory is still up for grabs. it's not clear how that game will play out. vonnie: they need to make sure that they hold onto that. what about netflix? does it need another "house of cards" franchise? emily: they need a lot of "house of cards." can they keep going with hit after hit? and also domestic subscribers were not as great as analysts had anticipated. there was potential for international subscriber growth,
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but netflix is trying to rebalance its subscriber base. somethingto get to 50/50, but it's going to take a lot of growing pains. emily chang, anchor of "bloomberg west." course, "bloomberg west is on every day at 6 p.m. on bloomberg television. a reminder that president obama is going to be holding a press eastern.e at 4:35 we will be looking at the markets. iss" coming up in about an hour after the market closes. we will continue with "bloomberg markets." ♪
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david: it is 3 p.m. in new york and 4 a.m. in hong kong. welcome to bloomberg markets.
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here's what we are watching this hour. a provocative idea from citigroup -- should google's parent by aig? we will examine whether this could happen. russia and saudi arabia freeze oil output at january's levels. sign crudeility is a doesn't have much further to fall. despite reports leveraged buyouts are beginning to dry up, apollo acquires abt. more on this $7 billion deal ahead. we are one hour from the close of trading, so we had to the markets desk where julie hyman has the latest. julie: i'm just looking at volume and where we are at the moment. down 16%

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