tv Bloomberg Go Bloomberg February 22, 2016 7:00am-10:01am EST
johnson races conservative --nterpart, david cameron, for goes all in on self driving cars, planning to triple its investment. we will hear from the ceo. matt: welcome -- matt: welcome. it is -- stephanie: welcome. -- : he is stephanie: you my friend, are with us in the u.s.. jon: happy to be here. lots going on in the market this morning. first of all, let's cross over
to the city of london with first word news. forhe uber driver blamed the killing of six people in michigan appears in court today are jason dalton will be arraigned for the killing in kalamazoo. police say he may have picked up passengers in between the shootings on saturday night. the shootings appear to be random. thee is trying to resolve dispute over the iphone belonging to a dead terrorist. a federal judge has ordered apple to help the fbi unlock the phone. the company has refused, and today apple suggested congress get involved in privacy issues by forming a commission to discuss the implication. and ted cruz are both casting themselves as the only candidate who can keep donald trump from winning the republican presidential mom and asia. trump -- presidential nomination. saturday's results prompted former florida governor jeb bush to drop out. the next -- global news 24 hours a day,
powered by our 2400 journalists in more than 150 news bureaus around the world. matt: taking a look at futures here in the u.s., we are up across the board, gains of more than 1% with 183 point out of the dow jones. we are taking our cue from europe, so if you take a look at what is going on in the u.k., in paris, in frankfurt, gains across the board. frankfurt showing 2% here. even with -- i know you guys are going to talk about this later, hsbc,en with the loss in take a look at european banks. last week we had a loss at credit agricole, and that dragged down the entire sector. their -- banko send in banko santander. and bnp paribas.
stephanie: you're seeing a change from hsbc and credit agricole, but you have to look at commodities. iron ore being where it is, but 50, that is the game change. ferrodo you know that jon was jumping for joy today with that game change? heading all the way down to 30, that is one of the reasons that mining stops is where it is. matt: stephanie hit the nail on the head here. it is commodities. take a look at brent. there is a high correlation over there just like there is over here. with their benchmark, you can see that up 4%. jon does not have a position, full disclosure. let me all you show -- lamy also show you the pound. boris johnson came out today and onghed in over the weekend the brexit. he is going to go up against his old private school buddy, david
cameron, in this debate. i just thought, wow, one guy changes the debate so much. and pushed the pound down so much. the reason is that volatility is so high. this chart shows you the pound, six month volatility, and the actual pound spot price. when volatility is at its height, one man can make a huge difference. boris johnson has great hair, he is interesting to listen to, but just the fact that him coming out could drive the pound down by so much -- stephanie: one thing to note, it seems to be contained. pushing the brexit seems to be contained to the pound-sterling weakness only. if you look at the global market outside this, we are not seeing any effect. david: also, british stock went up. being cheaper, the pound, we can sell more stuff. it is interesting that
boris johnson pushes this move on the pound. jon: economists i had on the said that morning boris johnson's push is not worth three figures. corresponded who covers hsbc joins us from london. the stock is down 2.5%. the revenue environment -- this is not some exotic derivative, it is just plain vanilla income falling. it is difficult. how is stuart gulliver turning that around? he is relying on the economies he operates in. a lot of the economies are very bad, so he has to keep his fingers crossed and hope there are recoveries in europe, in asia, and cut down some of these
losses on bad loans in the oil and gas industry. stephanie: it is not just that the loans are bad loans, they are competing to try to get in the space and are offering lower terms. time, hsbc is paying more employees above the million bucks we have seen in three years. walk us about this disconnect. the ceo is in a really bad spot. stephen: indeed. with all the talk about cost-cutting with the banks coming through, putting these extra millionaires on the payroll does look bad. the bank is trying to tell us about reclassification of the employees whose million pound earnings have to be disclosed. but ultimately you do have a lot of high paid people at the bank, which is not showing that great of performance. management will be under pressure from investors to explain this over the next few weeks. we have been waiting for
these bad loans to come up. we are starting to see it now. >> i think ultimately if we were to see a rebound and commodities , if we were to see a rebound in oil -- we are not seeing much of that yet -- i think that would go a long way to making people feel better about the entire financial system, even if some of the losses start showing up with a lag like we are seeing today. jon: hsbc is similarly stuck between a rock and a hard place. you wonder which one was a better decision, given what is happening politically. thatere was a whole reason they did not choose to have their headquarters in hong kong because of the situation in china. stephen, when the ceo comes out and says hsbc still has a lot to do to meet targets, that does not seem like a
definitive game plan. if i am a shareholder or an analyst, that is just not enough. stephen co all the -- stephen: all the questions this morning from large investors are what happens with hsbc's dividend. few u.k. bankse able to increase it every year. now with the current revenue outlook and hire impairment and billions of more restructuring and litigation costs coming down, a lot of people will see this drop next year. joe: a very basic function on bloomberg -- what you can do is look at this chart over here in the corner, blow it up and take a look at the share price here in white, coming down. in yellow, analysts are trying to catch up, bringing down there shareprice forecast. but the gap has gotten so why between the share price and the target price. it this wideen
anywhere else in this chart, which goes back to 2013. it is interesting that the share price is so far below what analysts -- analysts just cannot keep up with it. it is interesting to see how the stock -- news' that is bloomberg steve morris joining us. futures are indicating they may be extending gains as the markets open in new york. u.s. stocks posted the best week of the year on friday. what is driving all this optimism? joining us is joe weisenthal, who has been here for a while now. so is this real? is a lasting? joe: i do not know if it is real, but think about where we were two weeks ago -- this complete sense of panic with negative rates and central banks losing control, and the sovereign wealth funds are liquidating their bank holdings, and china is hold -- china is
crumbling and the u.s. is going into a recession. was that real? i don't know. it seems that the underlying conditions have moved much slower than the public's perception. so we got to this extreme pessimism about everything, and we got some data last week that showed that banks were not that bad. retail banks are solid, the fed inflation target, the inflation data -- and people were maybe thinking it was not that bad. i do not know what is real and what is not real. i just think that the pendulum has swung so hard to negativity, and now we are seeing -- stephanie: here is what is real, though. if you pair market reactions to how people are positioned, they are not bull market long. citadel just let go of their team, expected to sell billione along $404 worth of equities.
times have changed three joe: absolutely. that is one of the big stories people are focusing on, and i did not hear anyone really talking about this six months ago, the fact that the oil price crash could cause this huge liquidation. financials, lot of real estate, and a lot of investors are totally caught offsides by this. but for the massive people, the wealth of people who just their money in every month and are not trying to trade in this market, obviously this is a nice rebound. --: one final quick thought you come down from march and you look at forward, six times earnings on the s&p 500, that is not an overshoot. we are down to realistic levels, getting there now. and anyone coming down from mars would not find great value these days. so they would probably turn around. jon: great to have you.
>> this is your bloomberg business flash. yahoo! will approach possible bidders for its core business, according to people familiar with the process. companies such as verizon and at&t are interested. so are buyout firms being capital and pbg. marissa mayer is under pressure after struggling to boost sales. volkswagen may be forced to
clean up the air its diesel cars polluted. environmental groups are pushing the government -- the u.s. government to consider a long list of penalties in the emissions cheating scandal, one of them forcing vw to clean up five times the pollution caused by the dirty engines. that is our bloomberg business flash. stephanie? stephanie: now it is time to take you back for a little global go. sticking with london, the pound is falling this morning after a weekend of political rhetoric that has politicians split over a brexit. it is all over the news. the mayor of london, boris johnson, has backed an exit yesterday, saying he will campaign for britain to leave the european union. take a look. johnson: i did not want to do anything. the last thing i wanted was to go against david cameron or the government. but after a great deal of
consideration, i did not think there was anything else i could do. leave.be advocating to because i want a better deal for the people of this country, to save them money and to take back control. stephanie: this of course is in opposition to the u.k. prime minister and conservative party leader, david cameron. let's bring in simon kennedy, joining us from london, and of course, jon ferro, who has just moved here from london. he has got to weigh in. brexit referendum is going to dominate media debate over the next 124 days. he finds it appalling. what do you think? i think he is commenting so far on the level of discourse, which has to improve now. we have the deal, and now we go forward. hopefully with a high-level debate about the future of britain and the european union,
whether it stays, whether it goes, what it means for trade, security. all of the things are going to be shaping up. we see trends from both sides, but now people will start to focus on the real issues. the u.s.real issue for market is the pound. the question i keep seeing being asked again and again in london this morning -- is boris johnson leaving really worth that much to the fx market? >> in some ways, yes. perhaps the situation before, was it really going to be a campaign, was david cameron going to get his deal, come out and -- politicians,mist and now you have mainstream politicians coming out and saying we do not necessarily want to stay in the european union. you have not just boris johnson,
a former journalist who eloquently talked about -- now perhaps what the market missed, now you have a proper campaign, a proper debate, whether it is high debate or low debate remains to be seen, but there will be a debate. there is questions to be asked and answered by the british be --, and that will perhaps not worst johnson, enough to force the pound up, and now the idea that this will be a real campaign. david: hold on for just a moment. matt has more from bloomberg. stay in the you, to leave eu, compared to votes to stay in the u.k. or leave the u.k. it looks like david cameron's chances are better. can you pull up the other chart? there you go you can see the white line is the u.k. votes to leave the it has actually declined a little bit. the shorter blue line, u.k. votes to stay in the e.u., has
actually risen a little bit. scotland hasendent risen a little bit. yes to independent scotland has fallen down a little bit. so the chance of keeping the u.k. in the e.u. are better than keeping scotland in the u.k. debbie what will the fundamentals of the decision turn on? >> david cameron will's big today and talk about jobs and securities, about how the european union might be a messy formulation but is one that has delivered jobs, delivered investment to britain. that is the case he will make. the economic case against him and from various degrees across the political spectrum. we are going to see a referendum on migration. that is something david cameron was not talking about a couple of years ago, but now it is a big issue and that is perhaps why they want it before this
move of migrants comes in later in the year. people like boris johnson are going to make it about sovereignty, about who controls the rules and regulations of modern-day britain. again, one event -- a terrorist migrants, anyone of those could spark off a result. 's debate onhnson the outside is a kind of event that will shape opinions. thesenie: any and all of geopolitical risks are making global investors more and more concerned. simon kennedy, thank you for joining us from london. as these -- as the smart phone market -- we will head to barcelona where the latest phone and get jets are front and center at the mobile world congress. really, is it all about phones? you are watching "bloomberg
david: it is one of the biggest global tech gatherings for the mobile world congress. but as the biggest phone makers show off their latest gadgets, is the panic in the air? caroline hyde will tell us. so farms it seems business as usual, caroline? there is a delay, or she cannot hear us. i think she cannot hear us. caroline? caroline: i have you now. yes, indeed, we do indeed have
some concerns, some clear concerns in spain being voiced about the slowdown that is going on the high end of the market at the moment. with the of samsung, theater that is going on in terms of their new phone being unveiled. i have never seen such a slick event. on, mark zuckerberg jumps there is rockstar treatment. but underneath the surface there are clear concerns about what as cook described at apple extreme conditions. have a listen to what the vice president of samsung in europe has to say about the slowdown. >> the market for the smartphone is slowing down a bit. still growing, but there is much more than just a phone now that you are holding in your hands. when you are using one of these , it is more than a phone. this is your camera, your mp3 player, this is your tv, your recorder. this is everything and more and
more, and more is coming. caroline: this is why you are seeing not just a smartphone being unveiled by samsung, but a camera, virtual reality. they are desperate to sell more items. the highest tier of a smartphone is slowing down. this is why we are seeing more tablets being unveiled. the problem is, scratch beneath the surface -- people are worried about a slowdown. david: they are also worried about cars over there. we are a leader in what we call cenotaph thomas -- we are a leader in what we call semi-autonomous features. your speed on the highway. we are a leader there. one of the announcements we are making here is we are tripling our engineering investment in those semi-autonomous features. david: that is mark fields,
talking with caroline hyde in barcelona. stephanie: a few weeks ago i was in las vegas for the consumer electronics show. remember, it was about driverless cars. it was about connected health and fitness. we are getting away from that traditional space because we need to sell more products. you need diversity in these countries. david: remember the major investment in lyft? this is really the future for automobiles. stephanie: when you think of how much money they have put into lyft, it is extraordinary. guess who loves at? matt miller. when we come back, all eyes are on insurance with global growth. a little econ recon when we come back. ♪
i'm a poor englishman in new york. that's the biggest move since march 2009. with us is tome keene and carl riccadonna. the first word is with nejra cehic. john kerry is optimistic that a limited cease-fire may be within reach. suicidee as soon as to bomb attacks clothes for people to desk killed four people. have agreed russia to a cease-fire that would not kill russian troops. both countries have signed a treaty allowing observations to foster transparency about military activity. u.s. officials worried that the
collectmake help russia intelligence about the u.s. military. denny hamlin beat martin truex by one 100th of a second. daytona 500closest finish ever in the first toyota to win a race. love auto, but you have to love a finish like that. unless you came in second. david: tom keene is here with our morning must-read. this strikes me as one of the most important issues around the world today. tom: i put this out as my first weekend read. fired up about asset bubbles and sucks, drawing false comfort from low inflation over accommodative-
monetary policies have led to massive bubbles and asset in credit markets, resulting in major distortions in real economies. this is the functional equivalent of promoting another search of zombie letting. -- lending. we know the angle. his point has to be tangible. look at the past six months or so, there have been not been impacts. i was the camp saying it was effective. carl: but it has not worked to the same degree. hold a gun to banks heads and force them to lend. you have to create an economic environment. stephanie: they are making nothing. carl: this does not encourage them to lend. david: it works in terms of currency. carl: qe has been more effective
on currency. look at what happened with japan over the last two or three weeks with the adoption of negative rates. that are factors that it is not having the same benefits as qe. i think the fed is sensitive to this. itshe set of value additional tools, they're looking a lot more i qe the negative rates. jonathan: we don't know what the counterfactual is if we do not know as they did this. we do know that it has boosted volatility. pimco is done a lot of work on this. the idea that you have made safe havens riskier, it becomes risky and they forced them to do risk more elsewhere. does that resonate with you that it's boosting volatility? carl: i do think it's leading to volatility. and thethe factual factual is that in japan and did not work. it is not been too successful in the european economies that
tried it as well. with qb, there has been positive impact. plus.ts a you seen research have with smaller economies in europe like denmark or sweden will get to a point where negative rates "work?" how far does denmark have to go to get to a real effect? jonathan: i spoke to the governor of the bank of sweden and i said where's the floor? we do not know where the effect of lower bound is anymore. to david's point, it has worked in the nordic countries, but that takes her getting crushed. i spoke to a cfo and number of weeks ago at nordic bank and he is absorbing losses. he is not passing negative rates to consumers. carl: it creates an environment where banks want to lend. david: the fundamental problem is people don't want to borrow. it's not that they do not want
to lend. people are very skittish and they are saving. tom: first of all, it's extremely important the idea that you have of the micro economics loan supply and loan demand. , and within that davids observation, is the idea of setting up nominal gdp and animal spirits where they are. who thinks negative rates will help? where is the theory? carl: the folks that have tried it think it works in the banks are not willing to lend. this hurts the banking sector. it is not have that monetary policy transmission mechanism. tom, you are interviewing stanley fischer when he said negative rates were working much better than he expected back in 2012. i render watching the interview . investors should be where the snap backs. it are piling into debt, but look at what happened in june. they are doing that because
inflation expectations are so low. inflationne, expectations jumped up a second and we had a gain of 100 basis points on the german 10 year and that led to a $13 billion loss for investors in that quarter. so you should watch out. as john said, it increases volatility. just here carl is not to weigh in on negative rates. data. little econ i want to look at the week ahead and what matters most to investors. as you look ahead, what matters most? joe, i need to know from you -- does any of this even matter to you? carl: the two teams this week are first of all most importantly the consumer. the consumer will drive the next leg of the economic cycle. that means on tuesday morning, we have consumer confidence. on friday, the main event will be the income and spending
report. that is the, hence a version of retail sales. in january, we saw decent retail sales if you looked below the surface. on friday, we have the income and spending report which has been record tc fo inflated. we will also hear from the fed vice chair fisher. he is speaking on monetary policies and he may try to job own market expectations. stephanie: giving a clear picture, we have 56 sec companies that have not reported. 52 of them are in the retail sector. clearly they know what consumers are doing. joe, i turn to you. from your vantage point, what does the consumer think right now? joe: they are worried about the future. they are not sure what's going on. has created aycle lot of uncertainty in the marketplace right now and people are looking and saying, what's going to happen?
is it going to be trumped or sanders? we have not had an election cycle like this. we have candidates talking about issues so different than they had before. it's like we're not talking about issues but personalities these days. from our perspective, the consumer is worried about the future, but they are still excited about the future, too. carl: that's an important distinction to draw us from what they are saying versus what they are doing. consumer comments has been wavering, but we see motor vehicle sales very strong and housing sales continue to recover. there is a bifurcation that we have to play close attention to to see how it results. tom: the bifurcation of a consumer speaks to me of two americas could i used to sit in history class right back after the quilt was stopped using. you would open your history textbook with your boring teacher and you would have a " time" magazine. it was a foundational one
magazinehat "time" invented. americas?owo carl: economic cycles are not supposed to be fair. we have seen a much stronger improvement in overall economic conditions are well-educated, wealthier households. that has not trickled down to the lower echelons. later on inhappens economic cycles and that is where we are now. david: we talk a lot here about inequality. does it affect your business? joe: it does not affect our business. we reached 150 million american consumers. the reality is for us that we look at what is going on in the marketplace and advertising side of the business and cmo's are spending money these days. they are trying to figure out how to get their message through the clutter that has become today's media. we have been bombarded today with more advertising messages ever before than the history of
man. cmo's have a shorter shelf life than cfos these days because they're trying to figure how to break through, how do i measure that, how do i get my message to consumers so they are able to buy? stephanie: some make the argument that zero interest rates have been the cost of exaggerating it even more. asset managers have only gotten richer and those below the line have only gotten paul rhoads come is tapping out the middle market. -- gotten poorer, zapping out the middle market. so absolutely, it has had an uneven effect, but most importantly, it nudged the economy forward. gdp growth has been positive for six plus years now running. that is jumpstarting the recovery and expansion that will eventually be the rising tide to lift all boats. david: carl riccadonna, thanks for joining us. tom keene, thanks for joining us. joe ripped is staying with us. over the past decade, the print
28% since 2000 and 10, according to the british research front coalition development. yet he is selling off a swiss bank. yet she is based in zurich. pac-12 has been selling assets after the former ceo was arrested in november and a corruption scandal. yes tonight any wrongdoing. just before the oscars, a new study slams hollywood for a lack of diversity. according to the associated press, the report finds that films and tv shows progress by major studios are "whitewashed." runsidemic of visibility to the industry for women, minorities, and lgbt people. the report comes from the university of southern california. that is your bloomberg business flash. is still: joe ripp with us. is this a critical time in the print industry? companies are left with two
options -- cell, adapt, or go digital. you're going through a transformation, but your stock is down 42% while the additional ad revenue is up. our investors not listening? all media stock is down the board and we are pacing along the risk of that. what i'm pretty proud to talk about is i can back two years ago to take "time" public. andm not grown its audience time warner had taken $6 billion of cash out of it and had it and vested back in because time warner to find it as a magazine company. when the first things i said when we came back is that we are not a magazine company, we are content company could we do not care -- and we do not care what content that takes good we are trying to find a real strengthen the organization by being able to say that we are branded content company and a premium content company.
capital $4 billion of in the market place and we took the company public. we are forecasting revenue growth again. time inc. hadn't grown and 10. these are brands that have legs that can do lots of things. they are's no question great brands, but it's great that your forecasting growth. you are clearly growing in digital and making money on it, but you are losing money on the print side faster than your making money in digital. at some point, that has to cross over. joe: we're looking at revenue point growth for 2016 and beyond. we are investing in digital content and our digital audiences are up to 190 million and social. our digital audience over the last two years has grown dramatically. last or, we produce 23,000 videos. short form video is a new opportunity for us and there is a new opportunity for native video could it is supposed to
become a 30th billion dollar industry. -- and it is supposed to become a $38 billion industry. stephanie: where does the revenue come from -- advertising or subscription? if it's advertising, what does that mean to the integrity of editorial? joe: a comes from advertising as it has all along. we have always been an advertising company and a consumer company. it comes from native videos that comes from any number of ways that we can interact with our customers. in the u k, we sell horse insurance and settles. there are any number of ways that we can really reach out to our consumers and say that we would like to sell you more things. we like to work with you and give you more products and services available from time inc.. stephanie: i want to know who matters most. i point to "sports illustrated" because you are everywhere now with this once-in-a-lifetime cover, going in a different direction with a plus supplies model.
model. size my husband will read this issue no matter what, but from an advertising perspective, what direction is this? joe: people i reckon i think there are different body types and you can reckon eyes you are beautiful. stephanie: who are you doing this for -- subscribers are advertisers? joe: both. we are doing it for subscribers or advertisers. quite rightly, that woman is gorgeous. she has done quite well on the cover. david: that seems to be more and more dependent on advertising. your traditional businesses split. you got money from advertisers but subscriptions understands. have you become more advertising dependent? so quite a few subscriptions every year. that will continue to go into the future. we are going to find ways to work with advertisers and work with consumers. i would like to extract more funds from the advertisers and
consumers by creating really good content. time inc. is noted and has been for the last hundred years for incredible high quality content. the great opportunity we have right now is we are laboring data on top of that. right now, if you look at what is going on in the market place, facebook is observing a lot of the mobile advertising revenues because they have first party data they can use. we just finance. stephanie: the parent company of myspace. give us a data targeting capability that we have not had before. stephanie: can you speak about that? when we read the parent of myspace, people left it for that. where's the value? joe: the value is in the data. if you're looking at advertising in the marketplace and digital, it is probabilistic. upscalean female living in new york. with the myspace platform, we
can determine who you are, exactly where you live. we can link that data back to purchase intent and purchase behaviors in the stores for advertisers and say, if you advertise with us, we can show that these products will be sold going forward for you. that takes us to a holding place. there is no coupling that i know that has the quality content we have and the way that we have. we're going to deepen the targeting and the great content. david: can you deliver maximum value to shareholders and remain independent? if you look at meredith, they have both magazines and tv assets. we don't want tv assets because we would have to buy more tv assets. the opportunity is to continue to grow this business. we are the player of scale in the industry. of thet is cheap because size and skill. hearst and conde nast are getting back together. they are trying to redefine
scale and get back to the scale we argue have good -- the scale we argue have. stephanie: i know we are out of time, but i want to ask you coul. given how tight your to advertising and the election, if you look at the election and donald trump, advertisers love him. does it run the risk that hurt to editorial integrity? joe: i said from day one that we would never, ever violate the integrity of our editorial shops. we have editors really investing in our content and creating even more content so the quality of our editorial is never going to change. it has been the hallmark of who we are at time inc. and will continue for the next 100 years. david: that is time inc. chairman and ceo joe ripp. traders would rather get nothing in bonds and we discussed that in our next segment on off the charts on "bloomberg ." ♪
welcome back. futures positive. the pounds of 19 is that session lows this morning, the most since 2009. it is time for off the charts. joe ripp is still with us. the cash for european stocks is seven times larger than bond. we discuss this further with matt miller. stephanie: we've gone long with this european stocks with jonathan ferro. nejra matt: one of the most interesting stories on the bloomberg terminal wanted out the yield on european stocks is literally seven times the yield on european debt. if you look at my bloomberg, iva
screen appear that shows you inflows in light blue to bonds with outflows in gray from equities. by the way, here in white, i've got the german five-year. right here is the zero bound, right? as the german five year goes negative, it is interesting that people continue to buy and accelerate their bond purchases while they selloff equities and pull money out of european equity fund. , ayou look at ecbb function on the bloomberg, i'm sure that jonathan has used it more than anyone else in this room in the past couple of months. you can see that the demand of german bunds is higher than france and italy. is just shocking to me, but the reason is -- stephanie a shaking your head no. stephanie: it's about capital
preservation. you want to be as high on the capital structure as you can be. jonathan: you said this to me this morning. the first thing i said is where my getting that yield on the fuzzy? tse? matt: what stock did you pull up? jonathan: bp. to thee not adjusted reality of what is happening and commodities. matt: 8%. the price is not been that low since 1996. chairman: joe ripp, and ceo of time inc., thanks so much for joining us. we will be back with more. when we return, we are talking about last week's market slump. ♪
coaster ride is starting to burst the momentum bubble. some say 2016 will be the year of the momentum stock. getting rid of the oil glut. shrinking the big surpluses another because opec cares more about market share than it does about price. ♪ david: welcome to the second hour of "bloomberg ." i'm david westin. jonathan: i'm jonathan ferro alongside stephanie ruhle. alongside of us is richard claire to and henry chung area chung. we have a lot to talk about this morning. before we do that, let's toss it over to julie hyman. wants congress to get involved. website today, the
company should withdraw the court order and that congress should form a commission to discuss privacy and personal freedom. apple says helping the fbi would precedent.ous the overdrive are blamed for the killing of six people in michigan appears in court today. jason dalton will be arraigned for the killing and kalamazoo. police say he may have picked up passengers in between the shootings on saturday night. the shootings appear to be random. frontatic presence of runner hillary clinton is hoping to build her edge over bernie sanders. clinton scored a solid victory over sanders in saturday's caucuses in nevada. she is favored to win big this saturday in the south carolina primary. the bigger prizes will be at stake starting a week from tomorrow when 12 states and one territory hold primaries and caucuses. for hours a day powered by a 2400 journalists and more than 150 news bureaus around the world, i am julie hyman. quick look at futures
and we will see that gains across the board as jonathan mentioned. we have seen gains in oil and european stocks. i will take you to that right now. what's look at wti. -- we use west texas intermediate over here. jonathan: on the rest of the world, brent. matt: the nets it's of america uses -- united states of america uses west texas intermediate. one of the reasons that we are gaining today. another reason is sympathy with european markets. even with the surprise loss from coupleomething the last of weeks would have drag us down across the board, we see gains in european markets. could let'sgold look at the european markets gains on you we'll see the ftse, the dax as well.
trust me -- they are gaining in paris as well. the interesting news is the pound. have been talking about this all morning. brexit,is backing the the british exit from the european union. a dollar, trading at 41 -- $1.41. i want to show you glencore all gaining on the drop in the pound and again in the commodities. up 8%. see it it has been an incredibly volatile story here and bouncing around big-time. i finally want to show you a gold price and oil. it is interesting to see when gold is going down and oil is coming up. this is almost a hockey stick barrels of oil to buy an ounce of gold. a very interesting look at commodities. stephanie: i want to stay on
markets. mohamedur favorites el-erian writing this piece today titled market, may be short-lived. : investors got a much-needed reprieve from volatile loss inflicting markets. rather than signaling a start of a common market days, this may be a prelude for the new volatility in the week ahead. what do you make of mohamed el-erian's thesis here? becausee comfortable volatility is not going away anytime soon. >> we are in an era of diminishing returns from others-bank activism as have pointed out. i do not think there are negative returns yet. i'm eager to hear from our expert on the oil markets. i think a lot of what is going on with risk appetite here today is that there are central banks concern, but where's the bottom in the oil market? the correlation between markets and oil is at an all-time high.
a lot of that is not so much the level of oil prices but are they keep falling? if we had a bottom, we could see the risk assets high should pretty markedly. jonathan: you point out what is happening with crude, but what about hsbc earnings. ? we talk about the correlation between crude and stocks and people scratch their heads. why is that happening? look at what is happening with the bank earnings. it is having a real negative impact on some of these bank stocks. >> in terms of volatility, i think there are number of what mr.s and perhaps mohamed has alluded to is a divergence in central banks policies. when we look at the fed asking itself questions as to whether or not it will raise rates, that is going to cause another issue and that will cause the dollar strengthening. that will cause issues around asian currency. going tocentral banks do and what is it going to have
in terms of impacts across different asset classes? david: what are the things that mohamed el-erian pointed to a central banks. we talked about the perfect storm and its earnings, which are disappointing, as well as central banks and the reduction of patient capital. or maybe the growing impatience of capital. you take those three things together and they really bode bill for equity markets. richard: do we extrapolate for the next 10 months? i think it is too soon to tell. mohammed is actually right. we have policy diversions. has been low rates supporting multiple expansions. i do not think we are in that world anymore and earnings will be driving equity returns we are in a siegel digit world for earnings. i think that's clear. stephanie: given the impact that oil prices have had on sovereign wealth funds, countries that are dependent on commodities, what does that do to the global markets? when we think that there is
potentially $400 billion in equities that could be sold off by sovereign wealth funds, that has a global impact. harry: if you're talking about redemptions, clearly a number of people were looking into where they're putting their money next. that is really the key issue. what asset class do you go into? do you go longer short or try alternative solutions like a volatility place, etc.? richard: there's a lot more uncertainty this year that we saw last year about the situation for big global banks. you have the concern in europe over regulatory and resolution authority. it is obviously negative rates in the case of japan and some other countries. or so ago news a week that in the fed stress tests exercise this year they are doing a scenario for negative rates. obviously that it has also been a factor, getting back equities in particular. david: i also wonder about oil under default. we keep hearing there are going to be more more defaults.
are going to start looking at these lines of credit and that could be a real headwinds. richard: that is exactly to my point a moment ago. i think finding the bottom for oil is keep your stanley fischer gave a talk in new york and he said eventually zero could be a bottom. i hope we don't get there, but once we hit a bottom, i think the determinations and the uncertainty will be lifted a little bit from the energy sector. stephanie: are we too skittish? as the market too fearful right now? every day we get a data point and the market jumps. it seems that there is a lack of conviction. there seems to be a wall of worry across the world. so many different issues are plaguing the market right now. is there a catalyst that will truly turn things around in a bold way? richard: if there will be a catalyst, and it's a complex role, but it may very well be in beijing not in london or washington. there a lot of uncertainty about the chinese leadership. they just replace the head of andr securities commission,
obviously changing the chairs does not solve the problem, but china has said issues in discussing and communicating the transition. is a lot of uncertainty about their currency policy. a positive that has often emphasizes their leading the g-20 this year and they are under a lot of pressure to pursue and explain a plausible and physical policy. that could be a cloud lifted for markets. jonathan: let's talk trade and investment. we talked about fed holding of rate hikes. major was locked out of the room with calls a 4.5%, but we kissed that already. what is your policy now? rallyd: we understand the in treasuries, but we do think that treasury yields will move higher this year. we did think it reflects the risk that it talked about. we think it overshoots a pendulum and we think that sentiment has gone too far to
negative and you will see a move up in treasuries. it's not to very elevated levels, but higher than the current rates. jonathan: what is higher? give me a number. richard: you have not normal gdp in the u.s. probably in the 4% this 3.5% to fou year. treasury yields would rise to the 2.5% range. last year we began at 170 so they could move up and down. jonathan: richard and harry are boasting with us. we will talk crude and russia. the impact on supply and prices ahead. brent crude this morning 74.49 and wti 30.84. ♪
julie: this is the bloomberg business flash. the european union is reviving an investigation into google's advertising practices. according to people familiar with the matter, the eu has been quizzing companies involved in online advertising about google's behavior. investigators maybe trying to build an antitrust case. yahoo! will start approaching possible bidders for its core business to naked that is according to people familiar with the process coul. s. comcast and verizon are interested. mayer is under pressure
from activist shareholders after struggling to this sale boost s. volkswagen may be forced to clean up the air. a long list of penalties in the omissions cheating scandal, one of them forcing vw to clean up five times the amount of pollution released by its 30 engines. the government is not commenting. that is your business flash. jonathan: big moves in the oil market this morning. brent crude at 34.41. thisove to freeze output seemingly doing something to the oil market. larida andarca harry is with us. this is not seem to be much of a move and all. harry: if they do freeze, production is at a high wire -- ishis watermark could
at a high wir watermark. we get a pick only to see that driven down right after. david: explain that to me because it seems to be more than a rumor at this time. saudi arabia says they will agree with russia on a freeze. it is not cutting it back, but itu have the start of th before cutting back could there's a little more than just rumor. harry: talk is cheap. here's usual opec rhetoric in terms of cooperation. and the end, the bottom line is that you freeze output at historically high levels that you entrench a surplus in the market. if the surpluses there, oil prices will fail to rally could we'll be stuck in the low 30's and maybe trade below that on a wti basis for probably the next two quarters. david: demand is growing, so at
some point you will catch up. harry: i think some point is more like 2017 rather than 2016. is excesswhat we have oil inventories. dr. get that for the previous a quarters of this one, we have had global implied stock bill. we have accumulated a lot of oil. imagine a producers freeze or even cut production. it will take a lot of time to cut that out of the system. jonathan: we are seeing production cuts just not from the middle east. we have seen in the u.s. down half a million barrels. at bp's ownu look assumptions on how much extra oil opec will produce this year, mainly from iran and iraq, the would-be probably an extra 500 to 600,000 barrels a day. be. is contracting may 700,000 barrels a day in the difference is actually small. matt: so we are seeing a little bit of a contraction in u.s. production. here i've graphed u.s. production in red versus russia and blue and saudi and white.
this is the growth since 2010. we have grown much faster than they have. that is because of shale. we have added 4.5 million barrels a day in shale production to bring our total of eight, which may be now 7.5. those extra 4.5 million barrels a day -- they were not really expected and they were not expected to stick around where as they are. stephanie: volatile oil prices clearly affect the market. if you look at iron ore today, glencore surgeon, rich clarida, these depressed prices -- when are they going to affect on the positive side of other industries? allear day in and day out these industries that people are going to put more money in their pocket and they will spend, but they haven't. richard: that has thus far been mmistreated -- a ystery. the big reason we have not seen
is there been too big prices. low butes have been they have been falling. firms cut back but they are worried they may cut somewhere. consumers are only spending that they actually see. a real key for the global outlook is a stable oil price, a bottom. i will defer to a commodity expert when we see that, but that's one day will start to a crew. i totally agree. i think there one extra dimension that needs to be added in and that is risk aversion. last august inat 2015 when china's equity markets took a tumble. everything else followed. china's equity markets tumbled. risk aversion possibly outweighing the benefits of a lower energy built because of lower prices in general -- i think that element needs to be taken into account in terms of how equity markets move and other asset markets move.
jonathan: volatility and commodity is also a function of consequence of storage capacity in the short move to the downside and crude that we have been seeing is evidence that we are starting to hit against the ceiling of storage capacity. does that resonate with you? sound, butlogic is if you saturate storage capacity, that excess surges and that promise more volatility, but the futures curve does not exactly show that we are showing constraints and shortage. we are going to be developing storage this year with maybe two and 50 million barrels of storage capacity. i think the futures curve is not deep enough yet to actually reflect constraint on the ability to store extra oil -- not yet at least. stephanie: people get some prize when we say contango here. margarita.al harry, thank you for joining us.
rich, we're not letting you go anywhere coul. matt miller, no mash in a margarita day for you. -- national margarita day for you. --t: he discussed wells next oil's next move is bob i chino. you say that oil has essentially hit a bottom for now. bet?you making that that can you timestamp that? bob: you can timestamp that. that is me, not the firm. i was listening to a conversation before you brought me on and i can appreciate that from a longer-term perspective. iea is talking about the u.s. doubling its production. the u.s. is not a marginal producer. russia and opec -- they do not
have the flexibility the u.s. does in terms of increasing with the shale technology that you spoke of. when you look at two thirds of u.s. oil rigs either shut down idle since late 2014, we've only seen 700,000 barrels a day come off-line. that is going to accelerate. stabilizing and china makes an effort and the u.s. is not going into recession, the only extra barrels that will come will be from iran. there's a lot of talk and industry the iran will not be able to ramp up. it is wishful thinking that they get up to 600,000 barrels a day the at all. you'll see a 30% higher at $40 a barrel. matt: you think of possible the fed will blink here and thus weaken the dollar and help avoid that? bob: i do. i think that's one of the factors involved and potentially a slight surge in oil prices. i'm calling it a medium-term bottom. into 2016 late in 2017
early and that production increases with a 30% increase in prices per if th. if the fed blanks, it seems to be trying to tell the market what they're willing to do and that will weaken the dollar overall and that will give a bump to crew prices globally. matt: volatility has been off the charts. do you expect it to stay that way? we could potentially go much lower one day and much higher the next, right? could from the thing a trader's perspective, the risk reward is no longer lower, opecially if russia and are generally agreeing to a floor. saudi arabia does not have that much more scale capacity and neither does russia. if the u.s. titans a little bit longer torisk is no the downside. from a traders perspective, you have to start looking for places for long crude here. matt: bob, thank you for joining
us from chicago. david: let's look at the top trending stories on bloomberg. we have put them up on your screen. stephanie: surprise, sinc surprise. banks keep cutting currency traders. shocker. david: the one that i'm interested is fbi and apple. james comey wrote a letter posted on a law block and he said "the relief we seek is limited and its value increasingly obsolete because technology continues to e volve. we simply want a search warrant to guess the phone terrorist pass code without the phone destruction." lawyer was on the air yesterday and he was saying, let's assume the fbi came to
you, abc. we would like you to produce a program to try to discourage terrorists. how would you feel about that? it is not just that they're are asking for something apple has. they're asking apple to go out and write code that allows them to do it. i thought ted olson had a very good point. stephanie: last week, howard marks of oak tree said we are not realizing putting in a broader sense what this means. do you have any ideas? richard: this is not my domain, but we are in an age where technology advances, but we still have search warrant and due process. i would tend to be on the side of the fbi on this one, but obviously in a new world here. david: i must say there is a problem. at a lowall, this is level. they have a long way to go. has happened today is apple said let us not have the courts decided at all. let's take it to congress.
think congress should resolve this for all of us. there is a problem in general in law of ordering people to do it firmly. traditional law does not like to make you do something. stephanie: there's a problem in law and regulation. up withcan keep technology, especially at the pace in which technology is skyrocketing forward. jonathan: you look at the situation and is it about morals and ethics or is a real business question on the line here? david: both ways i would say. on one hand, apple is saying that they have to depend -- defend their brand. they made a pledge to customers around the world that they will protect their kin privacy. if we go off on that, we break that promise. on the other hand, we have a murderer on her hand. stephanie: some are making the argument that tim cook is putting on a show and he needs
to represent first customers. do you really think he can go up against the government? possibly not, but he needs to be making a statement like that. jonathan: stay with us. we are 64 minutes away from the futures positive across the board. let me get it up there for you because i'm not sure it is. futures are indeed higher. dow futures up 179. stephanie: for those investors that want to quiet the noise, forget the momentum and get back to fundamentals, we will talk about value investing making comeback in 2016. you are watching "bloomberg ." stay with us. ♪
let's go over to julie hyman for your first word news. julie: there may be a limited cease-fire in serious year-long civil war. two suicide bombings over the weekend underscored the poems of having a truce holds in syria. peace talks in north korea after dst.missile test pro-independence group in hong kong has been arrested. the chinese government calls the group radical separatist. google news 24 hours a day
powered by our 2400 journalists in more than 150 news bureaus around the world. now to matt for markets. att: i want to take a look the individual stocks that are moving here in the premarket. lumber liquidators holdings absolutely crushed in the premarket. this after regulators came back and tested the flooring that the company sold. they found three times the thenr-causing material lumber liquidators holdings shall he was publishing itself. that is a problem. stephanie: 60 minutes did a piece on it, we saw the stuff on it. there is no direct tie at this point, but just this last week, the ceo was diagnosed with cancer. matt: but it is definitely not
good for the retail operation for the flooring to be shown to be causing cancer more than they had put out. yahoos out also moving this morning. that isendent committee assessing strategic options, and that it will reach out to possible fires or partners -- buyers or partners as early as today. asoos of 3% right now investors speculate if they could get partnered with at&t, verizon, a private equity firm like tbg. this is a story we continue to follow. qualcomm is a good story today. , itung, the s seven phone will use a qualcomm chip. but have longer partners, investors see this as a positive and the shares are up in the premarket.
todayan actually gaining street estimates because of better than expected sales of botox. thee is a round of of stocks we are watching for you this morning. let's get to this morning's morning meeting. as investors retreat from capital markets and u.s. economic data disappoints, the fed might ease monetary policy. we spoke to bank of america senior economist. thank you for joining us. do you expect an actual easing of monetary policy, or rather that we are not going to see four fed hikes this year? not think the fed will be easing anytime soon. our baseline is that we're going to see a slower pace to the hikes. we may see to hikes this year, given a -- may see two hikes this year, given the economic profile.
we do not think that we are there yet. look at the chicago fed's national activity index, which not a lot of people follow. the inflationary pressures. it is better than the street was looking for. we have seen a few indicators lately on inflation that are better. last week it was 2.2% in the core. do you think that the narrative in the markets right now, that we have no inflation, is a little misplaced? >> it is low, definitely given where we are in the cycle. that is a little troubling. we are still below target. but i think the encouraging sign , is we have seen lately that they are picking up a little bit. indicators listed just after a time of low inflation we might we gradually edging higher. make sure that this stabilizes,
but the story that we see so far , there consisted with the view that we have inflationary pressure. the market is also giving us that signaled a tighter labor market. to be clear, you do not expect a recession. -- expect unemployment to come down from here. what about wage inflation, wage growth? do you expect that to continue? >> we can see wages continue to pick up. you can get a 3% for a little bit about that. this is not the kind of environment where you see a recession taking hold. where inflation is picking up, and manufacturing activity stabilizing a little bit. if you take a look at the last industrial production figure, we are seeing supplementary signs that manufacturing is starting to stabilize. in this environment would think we can start to see wages pick
up to support that. matt: you do expect a couple of great he -- rate hike this year. >> that is right in the baseline is that we assume that the market prevails. then head will not hike into the area where the markets are panicking. the economic data continues to point to a gradual move toward full employment and beyond that. we think that the fed will have enough justification to hike in june and in december. matt: thank you for joining us. we will toss it back to you. we are now joined by danny berger, bloomberg news reporter. he wrote a story about how value stocks are the new eye candy for investors. why might the stocks not be the golden ticket? this is the year we are getting back to fundamentals and those who do the homework will reap the rewards.
>> momentum stocks have taken a big hit this year, so that is getting value managers hope that that will be in favor. if we look at how the to perform, there has not been too much of a difference. with the route so far this year, momentum shares and growth shares are down. if you the s&p growth chairs they are down about 6.8%. when we turn to value they are down as well. they are down over 5%. stephanie: is it not too early? we are only a few weeks into the year. jpmorgan has made the argument that we will get back to fundamentals. we are only in february, and have had such a shop. this could play out over the next 12 months. >> you need to differentiate between value and growth. i put that question to you, danny. this is the growth of the value
stock. tell me what that actually is. >> that stock is actually pretty cheap at this point. the reason we are looking at value is if we turn to jpmorgan, their analysts have been saying that we have a bubble in momentum stocks, especially with s&pive investing since the is weighted toward momentum names. that we have had this bubble. at this point, that is going to change. we're going to have value stocks starting to outperform. >> when you listen to this argument, comparing equity yields versus sovereign debt, and looking at the difference, you wonder how much of a trap that actually is, because as prices come down, they pay dividends. yields are pushed up. do you consider that a trap?
what do you say to them? >> i think we're in a world where the value proposition has to be related to how robust is the game plan, the business model and uncertain environment? if you're going three or 4% normally, a lot of them are growing to sustain. to look spot would be for companies that are weak on -- value but could be robust. you are gambling on a quicker rate of growth. even if momentum is out of the system, given all the geopolitical risks around the world, can we really become value investors again? you could know everything about a tech company in texas, but if you did not know where portugal was or pay attention to the fact that subprime was falling out of bed, you were dead in the water. >> absolutely right.
scenariobal downturn there is no place to hide other than the treasury market. but i am talking about a market where you avoid that outcome. stephanie: the reason we're not gone back to fundamentals yet, could that be because more and more investors like carl icahn and others who says we are heading for a recession by the end of the year? >> i think that is overstated. it got headlines for a couple of weeks, but the data has been coming in on a positive side in the u.s.. i would bet against a u.s. recession this year. >> it is interesting because a lot of the investors i have talked to, they are still not buying stocks. they do not think that fundamentals have contacted even the valuations are falling to that is certainly true to what richard is saying here. there,ntal still are not and people are trying to find companies that they like it they look cheaper, but a lot of these
names are energy names which are really beaten down. financials has taken a hit so far this year. i think that there is this such a cautious optimism. stephanie: over the last few years, when investors with long and strong in a momentum play, choosing the s&p, that side of the market, we are seeing people get back to fundamental analysis if not asset acquisition. >> i think there is a sense that we will get there, but so far it has been premature. so far we have seen those volume names take a hit. again, it is this moment where investors have been telling me to have more names on their screen that they're looking at >> but they are not ready to jump back in. >> here's what the pushback will be. yield is not real for anyone. this is a normal market. we are nowhere near a normal
market, particularly in the fixed income arena. but we're never going to get back to fundamentals because we're addicted to central bank intervention. old-line, cannot live without it, and that is the world of 2016 right now. have not gone into the negative domain yet, but if the markets arrived to see the ability of central-bank unconventional policy to keep things going at a robust pace is limited. great to have you with us this morning. stephanie: you have done so well. trump, ted cruz, they are winning the money race. we breakdown the candidate's finances, that is next. sterling and cable giving
stephanie: i am here in the hpe angry arm at the top of the hour. -- green room at the top of the hour. julie: this is the bloomberg business brief. honda is preparing a recall for one of its best selling models in the u.s., the civic. some versions of the car have recalled, citing possible e failure.
the galaxy s seven phones go on sale next month, and they look sx,st identical to the which did not do well. but they have added a memory card slot and longer battery life. arefilm said tv shows whitewashed, ed heineken open showing people of color and minorities. weekend donald , and jeb the primary bush suspended his campaign. megan murphy joins us now.
--lor wimpey first of all tell me first of all, who needs the money the most? >> it is a tossup. marco rubio could really use the money. he has struggled with getting the big fundraisers that have supported ted cruz to some extent. donald trump is self funding his campaign as a billionaire. john kasich, if he has any hope in staying in, he needs a big injection of cash very quickly as well. david: it gets a lot more expensive from here out. 10 different primaries coming up on march 1? gets expensive, and down to organization and how you are spending that money. when you're looking at these tables, they have a big lead for donald trump, but things that others will be looking at is gets where they can delegates and try to eat into trumps lead. it is a lot of money on advertising, and lot on
organization, getting people out there. david: do you have a sense that the people on wall street who were big educators to jump bush and chris christie and john kasich are saying did we spend the money wisely? >> it is pretty unbelievable when you look at jeb bush with $118 million race, and note top three finish in any of the states. not the looking at amount of money race, but are we in a total different model of politics? donald trump has been able to successful because he is on tv all the time. we talk about him all the time and that is free. nobody anticipated how that would factor into this cycle, where money, the biggest thing that has been dominant, was really neutralized. the voters come to terms with what a donald trump presidency would mean a because it is something you have to
take seriously. >> i do not think they had come to terms at all with the policies he makes up on the fly. start really need to thinking about what his policies could be, how it could affect the business community, and get very real about trying to shape his policy and to shape what he says. david: looking forward to march 1, super tuesday, is texas the big question with cruz? performance in the reallyn states, we will be looking at that. i think that texas will be very tight. he underperformed in south carolina this weekend which led to the wickmayer. out thosenot turn evangelical voters, if he cannot get his base, who races over. david: now get a quick check on
the markets. john: about 40 minutes away from the open. futures up 180 points. i want to have a look at sterling for you. the pound taking an absolute beating. equity markets higher. the data out of europe is not great at all. pmi, the lowest in about a year. you, is the trade for --le at one dollar 4076 1.4076.
we're going to have a judge. what do you have? matt: i have the pharaohs spread. faro spread. here in white we have the euro stocks dividend yield. we are climbing up to five. in blue we have the sovereign bond index yield. we are coming down to about half a percent. right now stocks in europe are yielding eight times what bonds are yielding. here you can see the spread climbing ever higher. this morning i was expressing surprise at this, and jeong said the reason you are seeing these yield in stock is because of the commodities producers. bp, yielding a percent. but i noticed that bp is at a low we have not seen since john's fifth birthday.
1996. if he is a long-term holder, and except -- and will accept volatility between now and when he turns 30, he can make a percent for the next 10 years. stephanie: have to let mark talk. jonathan ferro waltzed into bloomberg aussie on whippersnapper in 2011. on this first day of bloomberg rro>, i have created the fe index from 2011 to 2016. indexes, up by 385%. , up bycurrencies 164%.
coco is the best-performing commodity. before bloomberg , he gets into bed with a hot cup of cocoa to send him to sleep. coco is up by 37% in that timeframe. i have taken the italian bond market, because john is italian. the month before he arrived at bloomberg, it is a record 7.6%. his arrival preempt this massive decline in the yield to 1.53%. sinceerything has risen john has been here, because his beloved football club has not 2010.e title since up.rything else has gone matt: when mark says football, he means soccer.
it, and thatn had he brought up ac milan. i think the joys of bottom fishing are so wonderful when you win. you are one and one. i'm going with mark barton. i love the entertainment sector. you're all disqualified. he cannot use the name of an anchor in a chart. stephanie: thank you for joining us. miller, nicematt work. we have more to cover. ♪
approaching potential bidders as soon as today. risk, or is this an opportunity to buy? ♪ >> we are 30 minutes from the opening bell here in new york city. andured is that futures positive territory -- futures in positive territory. stephanie: watching the markets in the green. founder ofrtner and metadata will management joins us as our guest for the hour. but first, a quick check on the market. matt: of across the board, with futures all gaming more than 1%.
i want to take a look at oil. this is why we are seeing strong gains today. oil and strong commodities gaining today. the correlation, 6% on nymex crude. in the last half hour. we have had a gain of over a dollar a barrel. i was looking at my bloomberg screen to show you the correlation between stocks and oil and you can see it is strong. right now, 0.75 correlation. to 0.96, but we are still very strong. when oil goes higher, stocks go higher. we do see gains in most commodities, except for gold, platinum, silver. oil shares in europe, up across the board 3.5%, some of the
miners gaining 6.7%. at some of those commodities, you with the we have strength across the complex , with the exception of the precious metals. soaring.: when you see iron or above 50, you see a reaction. matt: that is right. another thing that is ,nteresting in today's trade hsbc had a surprise loss of 800 million euros. wheneverst few weeks we have had a surprise you have seen markets absolutely collapsed. that is not the case. finally, want to touch on currencies because we have incredible pound weakness today. 40 -- $1.40 a pound.
time for us to take a vacation. let's go to first word news. julie: let's talk apple. to getnt congress involved in the dispute over unlocking the terrorists iphone. the company said the government should withdraw the court order, and congress should form a commission to discuss privacy of personal freedoms. help me guy would create a -- helpingrecedent the fbi would create a dangerous precedent. a lot ofr who killed people in michigan will be arraigned today. of theviving members
course will be back at work for the first time since antonin scalia's death. his chair will remain as a tribute. i am julie hyman. stephanie: it is time for the three stories that matter most to markets. number one.you we have been talking about it all morning long. bc rolling back losses. problemy a global the for energy and provision. hsbc also under investigation by the sec for hiring practices in asia. i want to bring in stephen morris in london for more. thinking about deeper cost cuts. are the inevitable at this point? they say they would have a hiring freeze, and then a pay freeze, and then they reversed
that after employees said they would not have it. cuts is looking like cost are all but inevitable now. the real story behind this is that the shifts to asia is really looking like it is under threat at the moment. he'll has made $100 million gamble, shifting the region. trying to take out 25,000 staff worldwide. it is named the entire strategy to question at the moment. think deeper cost cuts are inevitable. it is how far along the line they come. stephanie: making a bet on asia. we see the same thing i've ubs and credit suisse. are you concerned? >> the market has been concerned for a wild. hile.r a w
hsbc has been different in the way they are focused in different areas. but the european banks have been under siege, no doubt in]. david: one thing that strikes me is that they are trading substantially below their book value. what is the market trying to tell us? do they not believe it is worth as much as the books? is the u.s..he key i think you can see banks trading below book value. have worriesets about where some of the assets are valued. what their valuations might be, certainly issues around growth.
that is the other issue that you have to deal with. you cannot to an unwanted and realize value just like that it is an ongoing process that has to generate profits. regulation has been a backstop. grizzlies, deutsche bank, and then this morning hsbc posting quarterly losses. still posting those kind of numbers for european banks? where does the prophet come from for these guys? every single division is down. where did this come from? >> i do not have a good answer. -- it is not working. you have to ramp differently.
i just clued in on .omething you said we are getting down to the price of the book. european banks are trading much cheaper. why are we coming down in u.s. banks as well? do you think we're further to go? >> it is an earnings issue. it is not that the banks have assets on their books -- bad assets on their books. relatively, that would be small. the bigger question, what is the earnings model going forward? they've basically been forced to exit this. as much as hsbc has gotten hit today, we have seen a comeback somewhat. i'm looking at a research piece
out of jpmorgan that is simply saying banks are in a significantly stronger position in terms of balance sheet and they were in 2008. are we forgetting that? saying hold on, the picture is not as bad as it seems. hsbc is traditionally seen as one of the more conservative bets in the banking it did manage to add 80 basis lights to his level, a measure of the highest quality capital the bank has. after the vagueness and the results, people are looking deeper at this and thinking that the problems are not as bad as they initially expected. >> thank you very much for joining us. the fx market.o sterling getting absolutely pounded. at $1.40.will play since februaryp 2009.
the london mayor goes against david cameron, campaigning for oming referendum. you viewnson, how do this scenario? u.s.'re focused mainly on centric investments. ittain is not as big a deal was in the past. politicians are trying to muddle through. which way do they want to go? myphanie: i'm looking at terminal. it is less impact of who boris is, and just uncertainty. investors across the board are desperate for conviction. the fact that this debate seems like it will get bigger, debate is the issue, not for us -- not boris, >> i think many people will
agree with that. to that point, absolutely. i wonder if it is not boris johnson as such, but it is reflecting a deeper seated uncertainty whether britain will stay in the euro. y indication that they will rush to the exit. >> boris johnson would like his hat in the ring to the next prime minister, and he is in the headlines. the campaign is incredibly campaign. for stressant has already said he will not campaign against his other members in the party. and he will not share a stage with nigel. you wonder if this campaign can get together and deliver a coherent message. what they are afraid now against is the status quo. thes very hard to get electric to vote against the status quo in a referendum like this. does that mean that you
can start asking cameron about this? >> it does. number three story, brent crude recovering from friday's losses after russia's the talks will be done by march 1. meanwhile, nigeria says expect the plan, but that iran and run should be allowed to recover lost market share. not an expert on oil, but what is your reaction that you watch this public attempt to get a cartel together? >> i think it is tough in this market to have an effective cartel. , and are so many parties many that have such desperate need for revenue, and they will cheat. more interesting is the fact that when oil prices decline as much as they do, projected cost will cut off. for the cartel to make it happen, i would sure that.
companies involved in online advertising about google's behavior. investigators maybe trying to build an antitrust case. environmental groups are pushing the u.s. government to consider a list of penalties in the cheating scandal. the government is not commenting. slammingdy is hollywood for lack of diversity. the university of southern california find the tv shows are whitewashed, and there is an epidemic of invisibility through the industry for women, minorities, and others. we want to take a look at the stocks in the premarket. just about 15 minutes until the open. exxon mobil, chevron, conoco, all doing well. these are heavy stocks because of the incredible surge we have seen in wti today. of about 6%, last we checked.
watch this sector for gains. also watch the transport. we had an analyst downgrade six different stocks, half of rail and truck stocks under coverage in the stabilization in real carloads. and because evaluation, you have sincehese up about 10% june 20. he gives that as a reason to be bullish. all of this putting up big gains in the premarket. story, we spent a lot of time talking about it on friday. the board has put together an to look at committee strategic alternatives. now they are going to start meeting with possible interested verizon,that include
at&t, to medications companies to private equity. finally, we want to take a look at allergan. this company out with earnings that beat the estimate because it is selling more botox. it is up 1% in the premarket. coming up next, credit markets may not be as distressed as they seem. areas where opportunities may exist. ♪
matt: you are watching bloomberg . with the: we're back founder capital management. we need to talk about credit market. at the end of 2015 we thought credit markets were a window into the volatile 2016 we would be facing. here we are, at something in the market has turned around. talk to us about where you the
credit markets are today. spread,cials have widening this year. they are widening in different sectors, it has been quite incredible. hundreds of basis points, depending on the sector you focus on. it is important to distinguish between the fundamental factors that are causing the widening. there is corporate credit risk, and when you have declining energy prices, you have to going commodity-- declining prices, it is not the reason to not unreasonable to see his widening. stephanie: can we actually isolate energy and yet other sectors actually move forward? this year a are all depressed. >> it is possible, but it is also possible that we go the other way. but that we top out at a spread widening,
because looking at the stock market is telling you. the two are definitely connected. if you look at corporate credit, there are financial reasons why they are widening. where oil prices are today given where valuations are today for spread widening in the high-yield market, i would say it should widen even further. relative to what is happening in other markets. his oneet we focus on where you look at credit those affected by valuations. the decline in oil prices is actually a boon to the homeowner. that is obvious. you pay less of the pump. investors reason why do not own natural gas exploration. impacte effect should
conventional real estate. in the end of everything is connected. when the equity markets go down, you have to respect that. average, it should widen. but the fundamental drivers for the widening are very different than corporate credit. if you look at commercial mortgage-backed securities, the , lowerwidening their rated securities in the past few months are down 20 points. when youhere is risk have equity markets falling 10%. there is risk that you have to respect. look at the season securities for example. on average, commercial real estate prices are up almost 50% since 2012. these loans have a ton of cushion under them. but if you look at the aaa level, there has been significant widening. if you go lower, it is as much as 20 points.
elephant in the room is the reason they were tightening to begin with. .he federal reserve how much does that have to do with that? >> to the extent that the markets have been raised on easy money, zero rates, qe, and you're going to pull some of that back of a does not look like to he is getting pulled back anytime soon, but short rates going up. "what we're talking about. the fed raised rates by 25 basis arets, and we chatter about the going to stop or are they going to cut rates? if you think about what the fed tightening has been historically, this is going to be one of the more benign episodes we have ever seen. david: help us make some money here. you mentioned see mbs. where is the market? >> you need to focus on sectors
that have widespread sympathy with the do mental issues. -- the fundamental issues. one of them i mentioned is commercial mortgage-backed securities. if you think about that market, and basically shut down during the crisis. getting everything going it was very high. it really think the momentum in 2012 -- picked up momentum in 2012. traffic, youhat we look at for customer of its agency credit behind them. you're not talking about credit risk when you're talking about fannie mae and freddie mac. stephanie: you are an expert in this asset class. as we are in a zero rate environment we have seen nonpoor investors play in the high-yield and distress.
the market has taken a leg down. wiped outstors get because they are swimming in it will where they don't know how to swim? >> is a little extreme, but certainly you can see some of tourists get pushed out. we have seen high-profile sales in the last month or so. it is not the core strategy. be a sureu would bearish on the economy, and bearish on stocks. you look to the solution. that great opportunity. >>. just four minutes away from the open. ♪
the official talk that yahoo! could be pursuing a potential reader and as the prices dropped so significantly it could he more attractive. after liquidators sinking the cdc reversed its own findings earlier this month. the company has a higher cancer risk. all of this news around lumber liquidators, it can't be a reason why people are saying, of il the choices for flooring, am going to go for someone who could or could not potentially cause cancer. the bell just rang. let's bring in erik knutzen. and also, deepak narula is still with us. came into this year with a conflict between what we're seeing about economic impactors, in the developing market we are still looking reasonably good and what we were starting to see
from markets was spread widening and earnings. perhaps the secular piece. and then with the movement in equities later in the year, we are starting to get some lights flashing red from markets. in this conflict between economics and market we decided to enter the year with a more cautious view. lasthan: looking back to week, the biggest move since november, they are asking whether this is the beginning of a turn? what do you think? erik: it was a nice bounce. ourctually increased underway to u.s. equities on very first and we began taking that off about 1.5 weeks ago and we finish taking off the underweight and went to market a week ago. we are now cautious again and we will walk key indicators over the next several months before we look at risk in our global allocation fund portfolio. toid: when you switched
neutral, it was 18 times. it is now 16. how low does it have to get before it is attractive? erik: we think the market is fairly valued right now. what we are looking at is the earning side of the equation. we need to see more evidence that we will see followthrough from earnings this year. fourth quarter earnings were not as bad. david: if you take all the earnings including energy, they are not good but if you take out energy, they have grown. erik: not as bad as could have been expected. we don't see a lot more of an increase in the dollar. and energy stabilizes which we are seeing now with energy being for the past couple of weeks, you could see some surprise earnings in the corporate sector. jonathan: you bring up the dollar. deepak narula, china and. story is everyone saying
divergence, monetary policy is coming. it's not happening, is it? deepak: no. at the end of the day, central-bank policies can only restore divergence. as simple as that. is that what you see the dollar softening? erik: we think the dollar appreciated in the cycle in anticipation of the significant rate rise from the fed. we do think that the fed will raise perhaps one more time this year. so more than what the market is pricing in but we think that is fairly well priced into to the dollar. david: when you think about currency, you have to think about the yuan and china. they have had a little bit of uncertainty in the way they regulate themselves. risk wee biggest single see in markets is the move of chinese currency. is consistentn
with what the chinese authorities are saying they are going to do. they're going to let a devalue in a somewhat managed manner. , ithey make a big step could certainly happen and it would be a major risk off signal for us. they are not signaling that at this point? erik: absolutely not. they are saying, all is calm. the single biggest risk we are looking at his overall growth in china and how it gets translated through the currency exchange. stephanie: is this not the right opportunity to no longer be risk on and risk off? is it the right time to go back to fundamentals? if you look at individual companies, they looked cheap. you know what -- i said it and i want to take my words back. surgeon companies. erik: we have seen a significant divergence between the broad market.
and we are fundamental investors across the equity platform. our belief is that there is value that can be realized across broad categories of equities right now, away from the few, very high momentum names. maybe you are starting to see some of that with the selloff of the big names. jonathan: reflecting on last year, how surprised people were by the connection of the turn of the year. volatility was already there. five stocks leading the whole industry higher? what makes you think that things are going to firm up in a year ahead? erik: we are looking out on a 12 month horizon. if you can look past the next few months, 12 months forward, we think the economic case is very strong that the u.s. 2.5%-3%.ill have grown there will be positive growth in europe and japan. in this low growth, low interest rate environment, you
should get compensated, as an investor, or owning good equities that pay out their earnings with a decent healed and a good investment grade and high-quality yield bonds. jonathan: if you hold treasuries, you should get a return. you do. you don't get one in european bonds right now. when you assume risk, you should be paid but that is not happening. the key question is, our negative interest rates in europe in reflection of the central banks with the thumb on the scales or is that an active forecast of economic activity? if it is a forecast, we all have trouble. the technical outcome of policy,tional monetary we are being in scented -- we
are being incentives to invest. stephanie: that has caused many assets to get spit up over the past couple of years. erik: yes. -- deepak: yes. are five years into a recovery, it is inevitable. you need to separate, where are the fundamentals and what is it that you have appreciation in because the expectation is the price leveling up has momentum is good and because you can get some carry. that is what the market is doing right now. it is separating different sectors. it will be a process and it takes several months. but there will be separation in between sectors that have fundamental issues and those that don't. david: i want to come back to what you said. 2.5 percent-3% growth in the united states. growth in europe and japan -- that is rather to the bush side. watch drive said growth?
what drives that growth? erik: you have a strong housing sector. get ae point we will boost to the consumer from the price of oil dropping. a trillionthan dollar transfer from oil producers to consumers and manufacturers globally and we believe that will play through and support economic growth by the second half of this year. said thatry summers people are scared, and as long as they are scared, they are going to save. erik: that is why we need to get through the next few months where we work through these challenges where the market is telling is one thing even though we are hearing something else. the markets can become -- stephanie: does that not put janet yellen in a quandary?
she says she is dated a pendant, can she ignore the market? erik: traditionally, i would say yes but now she has added that to the list along with solving the world's problems. that puts her in a challenging position. about healedtalked in europe and whether that is a reflection of central banks, whether they are pushing down on yields or more confident? on the front end, sure. yield on a german -- right now, 88 basis points. market casting a vote and saying no growth for a long time. erik: the 10 year tips break even at ridiculously low, wherever it is today. i take the other side of that bet. expectation versus reality on a ten-year horizon. erik knutzen, great to
have you. deepak narula, you are going to stay with us. up across the board we are seeing gains of 1% and more. 200 pointsup almost right now and the nasdaq is up 54 points. if you take a look at my bloomberg, do you remember how bad this year started off? we are getting back to a level that we haven't seen since january 7 he on the s&p where we 1940-1941.g above so it isn't as bad as it has been. if you take a look at the imap function, you can take a look at which interest groups are doing best and worst. we have gains across the board. asset classes and industry groups have been highly correlated this year. materials and energy are the leaders here.
financials bring up the rear among the top three. it is really a materials and energy story. that is interesting considering that is what has dragged on us year to date. lumbar liquidators is having its problems. is freeportis mcnamara. she marrieddators, and intel stocks are down across the board. lumber liquidators has a problem with regulators coming out and saying that the flooring they are selling is three times more cancerous than originally shown. we will continue to talk about that throughout the day. as far as the stock you see here, freeport mcnamara is gaining because of other commodities that are up right now. himerix has's -- c
sustained and. that hurt them. intel is down because the revenue outlook for 2016 was not as good as they were looking for. if you look at the gainers the here -- gainers here, you will see -- actually, free food cannot with a first order outlook that was better than what the market was looking for. a penny stock is up 14%. injectable drugs, that is a positive for them. let's take a look at some of the big commodities that are pushing the markets. look at gold. this is a year to date chart. it is up 14%. today it is down but year to date it has put up strong gains. what i thought was interesting , put in groupex rank return, you can see what the industry groups have done year to date.
here you see that the gold index is up 36% year to date. done betterhave than the underlying stock which i thought was an interesting taken away -- interesting take away. let's go live to abigail doolittle. yes, expedia and trip advisor shares are trading lower after the online travel companies were downgraded to sell by an analyst on macro concerns. they say that these companies are exposed to potential downturn in travel less increasing competition from hotels. interestingly, they left priceline at a hold. thesenow the only one of travel companies that is not trading down sharply on the year. thank you, abigail doolittle. to buy theant
best-selling automobiles in the u.s.. the civic. involves possible engine failure. samsung is opening a new front in the battle with apple. they are unveiling the new galaxy s seven model which goes on sale next month. it is almost identical to the s six. whose sales were not as good as expected. euro area is feeling the effects of a global slowdown. according to the market of global economics, the eurozone confidence has fallen to the lowest level in a year. that increases the odds that the ecb will increase stimulus. david: thank you. yahoo! shares are up this morning as the company is expected to approach potential buyers as soon as today. -- of the potential buyers bloombergan covers
news and joins us now. alex, tell us about this sale. alex: there is no surprise at this point for anyone who has been following it. we learned it over the weekend. who are the a list buyers? goldman, jpmorgan, and a .outique firm who are they targeting? have verizon, comcast, who may be interesting to some people because they are a regional cable player. not a national player. yet they would be going after a large global company. interest.is moderate at&t may be interested because verizon is interested. and then maybe there are three or four private equity firms. kkr, maybe silver lake's. verizon, tim armstrong is
there and has wanted this forever. interesting because they have a digital product and they could feed all of those seven at a million people through yahoo!. alex: i think they are ahead of the game at looking at what is next. they have more or less had their come to jesus moment that says ok, traditional cable is not the future. we need to do something else. many people have told me that there are people at comcast to a relieved that the time warner cable deal did not go through because it allows them to channel energy on wireless, digital or something other than traditional cable. they can focus the company on the future. stephanie: there we have it. yahoo! may be having a bright day. across covered a lot
securitized markets. what are we missing? alex: -- should one sector that be attractive to your viewers is mortgage rates. there has been spread widening. similarbasically access risk through a rate format that has better leverage at discounts of 20% or larger. yield, ifairly high would say it is probably too high, they have yields that are double digits in this marketplace with a 10 year yield less than 2% but fundamentally, the underlying assets are sound and cheap. you are getting leverage on cheap assets. i think that should be a solid investment. we talked about high-yield. do you want to return investments getting that kind of high-yield in that market? deepak: it is a retail market. i think they manage the risk fairly well.
stephanie: we have breaking news for you here on bloomberg. stan druckenmiller has come out publicly and throughout the last hour i have been speaking to him and he has given me and on the record statement regarding the campaign. he has now publicly backing john kasich, similar to what we heard from the cofounder of home depot a wiki go. bear with me, his statement. "john kasich has been my
favorite all along, i've decided to commit to him public. the delta between him and the other three is too big. york,an, ohio, new pennsylvania -- they could provide a path to the nomination. leads hillary clinton in the polls by more than marco rubio. marco rubio is the most electable republican, this is misguided." to know thatnt this is the first official backing. stan druckenmiller is not giving money to chris christie. say it here -- follow the money. he has given four times that amount of money to john kasich. john kasich is a serious candidate with serious credentials. i have known him for 21 years. he and newt gingrich moved bill clinton to the center on federal budget issues. " this guy brings people together.
about john kasich is just out of money. he has a little over $1 million. he needs to get through to michigan, on the eighth of march and he needs to get to ohio. the notion that he will get the money because stan druckenmiller has given this endorsement, it may give him a shot to make it. stephanie: if you think about the overall candidates, if ted cruz, if he loses, things get unstable. things are always unstable around the donald. so again, this is anyone's race. david: and it is important to money hasall street not made a difference in this race. raised $118 million and it went for nothing. stephanie: wall street is frustrated. they say my jeb bush money went nowhere, my chris christie money
went nowhere. except when you see someone like stan drucker come out publicly -- like stan druckenmiller come out publicly. he says he has decided to commit to him publicly. i will jump ahead to where he -- serious candidate with serious credentials. i have known him for 21 years. when he and newt gingrich moved bill clinton to the central on federal budget issues, that is what so many people want to hear. jonathan: stan druckenmiller says this is not a three-man race were the republicans. 26 minutes into the session. the s&p is higher. ♪
from bloomberg world headquarters, i am vonnie quinn. here is what we're watching. stocks stay on a roll, climbing. can equities continue after the best weekly performance by major averages this year? another --p faces tomorrow. how will jeb bush's departure impact the race? hillary clinton is the big favorite in the next primary. is the clear path insight for her nomination? apple takes the battle over privacy to congress. calling on the lawmakers to study the issues raised rather than open up pandora's box. 30 minutes into the session, let's head to the markets desk where julie hyman have the latest. julie: