tv Bloomberg Markets Bloomberg March 10, 2016 12:00pm-2:01pm EST
important for the united states or for canada or for any leading power in the world is to live up to its commitments and to momentum oninuing efforts, even if they did not start under your administration. there are a whole host of initiatives that began under the bush administration, some that i was very enthusiastic about. saving millions of lives and to those vital drugs infected with hiv aids in sub-saharan africa, something president bush deserves enormous credit for. we continued that. there are areas that when i was
outside the government, i questioned how they were approaching it. i might have tweaked it to the extent that it involves foreign policy. i might say to my foreign policy partners that we have a problem of doing it this way, but here is a suggestion for how we can or meet yourhing interests in a slightly different way. you are always concerned about making sure that the credibility of the united states is sustained or the credit ability of canada is sustained. the work that has been done continues. particularly when you have a close friendship and relationship with a partner like canada, it is not as if work we or entry on the arctic s vanishes when the
next president comes in. i intend to make sure the next president who comes and agrees with me on everything, but, just in case that does not happen, the u.s. canadian relationship will be fine. thank you, everybody. mark: the president of the united states and the prime minster of canada concluding a press conference at the rose garden. our white house reporter joins us now with more on this. canada is america's largest trading partner, about $2 billion worth of goods and services crossing the border every day. the president did note that this is the first time that a canadian prime minister has made an official visit since 19 seven. 1997. angela: it has been a long time, 19 years since a canadian prime
minster came to washington for an official state visit. it was a strained relationship when stephen harper was prime minister. the chance for private -- president obama to start a new with prime minster trudeau at the helm of the country. we certainly saw that in the remarks this morning, the opening ceremony and just now at the press conference. mark: talk to me about what trudeau brings to this relationship. he is the new kid on the block. angela: he's only 44 years old. the youth and energy barack obama was when he was first elected. president obama sees a lot of himself in prime minster trudeau and he's made references to that throughout the day and when the pair first met in the philippines last fall. a time when the attention has
shifted to canada. --sident obama is ramping up wrapping up his time in office and prime minster trudeau is just starting and americans are primed about a canadian minister being here. for all the talk of friendship between the two men and the good feelings between the u.s. and canada, the two countries do not agree on every issue. there are many sticking points that cause problems. angela: there are a couple of issues that were discussed that -- discussed in public and private. they did spend some time on the softwood labor -- lumber trade dispute.
it is a decision that prime minster trudeau followed through with an assuredly something they discussed during their time in private in the oval office today. from theela joining us white house. thank you so much. the president of the united states, barack obama and the canadian prime minister justin udeau. president obama asked about domestic politics. he was asked what things could if a donald trump or ted cruz were to in fact become the next president of the united states. avoiding minister waiting into domestic politics here in the u.s.
he did say that he has faith and trust in the american people and in their wisdom and he did say the american people choose to be the next president, canada will be willing to stand by with them. scarlet fu joins us now with today's market day. scarlet: good afternoon. we want to get thing started with a check on the markets. this was the ecb's policy decision day. did and saidaghi has had applications on the financial markets. julie: investors are still confused about what has happened this morning. the ecb deploying a full arsenal of stimulus. benchmark rate zero to expanding the bond buying program and making corporate bonds eligible. 80 billion euros in that arsenal for bond buying. stocks are now lower.
they were bouncing around. investors still trying to figure out not only what this means, ?ut will it work will it help european economy and is at the end as mario draghi says there will not be any further interest rate cuts? if you look at the s&p 500 over the course of the session, you will see the bouncing around that we've done. after and during the comments from mario draghi, we saw stocks gain some steam and losing as we head into the afternoon. the stocks 600, the swings there are very dramatic. you can see the stocks 600 now down 1.5%. earlier, it was up 2%. that it's all perplexed what investors are staying -- still try to figure out here. there are signs of investor exhaustion overall. we've had a long rally.
not substantial, but it marks a continued constructive period after those february lows. julie: we are seeing some reversals there as well. look at the bond market, for example and the 10 year, we are seeing yields there now climb. 1.94%. we see some buying of treasuries. lower.een yields going gold prices have been interesting because they have been strengthening today and were strengthening even when stocks were higher. that gave a little window into some lingering investor excited. decline of nearly 2%. that is also weighing on stocks. you have the ecb digestion, but as always, oil lurking in the background and putting pressure on energy shares today. will continue to
scarlet: welcome back to bloomberg markets. time for the bloomberg business flash. a change at the top of the world's biggest hedge fund. jon rubinstein has been hired as co-ceo of bridgewater associates. this is according to people familiar with the matter. bridgewater manages $154 billion. the current ceo is greg jensen. he will focus more on investing
at bridgewater. first-time applications for unemployment benefits declined to the lowest in five months last week. initial jobless claims drop by 18,000. employers have been holding off on firings and adding staff. yahoo! hitting the ice, streaming four free nhl matches per week. the streaming begins friday. that is your business flash update. let's return our attention back to the world's reaction to the ecb decision. the euro reversed its losses after mario draghi said that the ecb solved no further need for more interest-rate cuts at this time. is a ratenes strategist for bloomberg intelligence and he joins us
now. make sense of what happened here for us when it comes to the euro reaction. what was going through investors minds? richard: it is pretty difficult to come to any firm conclusions just based on a few hours a price reaction. initially, the euro went lower as the ecb outlined, late it's round of monetary easing. the move reversed and we saw the ,ame thing in peripheral bonds we saw spanish and italian yields falling quite sharply and they rose equally as sharply to close higher on the day. the initial knee-jerk reaction the initial response and then after mario draghi added the idea that they would not be able to cut rates anymore, we had a sharp rebound. my take on this would be this is not what the ecb would have
wanted to see. scarlet: there was that knee-jerk reaction and then things took a turn when mario draghi began speaking. when it comes back to mario draghi and his words and how investored to soothe confidence come how long do you expect this messiness to last for, or people to try to make sense of what's going on? will it go into next week as we head into another week of central-bank discussion and rhetoric? we are probably into next week before investors truly digest what the implications of what mario draghi and the governing council do today, what it all means. attention to other central banks. events no shortage of
for investors to look at. it will take a few days before they fully come to any conclusions about what the ecb did today. scarlet: talk about what the ecb did when it comes to forecasts for inflation, for growth. slashed both substantially. i think that is why they reacted so aggressively today. those forecasts were ratcheted quite a bit lower. they wanted to act as proactively as they could. the initial reaction is something they would have -- to see.t have wanted scarlet: i want to play mario draghi's comments now. aghi: taking into account the support of our measures to grow the inflation, we do not anticipate that it will be necessary to reduce rates
further. scarlet: that is the part that got investors and scratching their heads, wondering what it means for future stimulus. a lot of people described this as a kitchen sink stimulus do you agree? richard: it was very broad. the one thing to remember is we've seen this from mario draghi before in terms of interest rates. they lowered rates again and took them further, deeper into negative territory. for the time being, it looks like he is not prepared to lower rates anymore. as circumstances change, i would not be surprised if he did -- thelet: did this get what ecb wants coming getting inflation closer to their target of just below 2% and to get banks to lend to get the real economy going?
richard: it is probably too early to tell on the inflation. that will come with time. in terms of getting banks to lend to the real economy, this will not only be the targeted long-term operations helping that, but lower rates, because of the way they have been enacted today, should be less of an impediment. scarlet: as we get ready to look at another week of central-bank rhetoric, what does this mean for the central banks that have to act next? richard: it is very interesting because we are in the midst of this eu referendum campaign which has another 3.5 months to run. key things for the bank of england will be the performance of the pound. it has been very volatile of late.
scarlet: welcome back to bloomberg markets. barclays has had its share of tough times, pushing the investment bank to find ways to boost capital. erik schatzker sat down with the barclays ceo and post 3 arguments that investors have made against barclays and staying in the investment banking business. barclays is uniquely disadvantaged by u.k. regulators. >> i don't agree with that.
being a u.k. bank is a great place to be. we have a good relationship with u.k. regulators. the u.k. is the fifth-largest economy in the world. we have a great presence and u.k., it gives a foundation and a base for barclays. every multinational has a strong presence in the u.k. we are a corporate banker, helping companies finance and u.k. that gives us a competitive advantage over u.s. banks that don't have the capability. barclays has a great investment bank franchise in new york and london. being one of the few european investment bank's out there is a competitive advantage for barclays. funding costs the imposed on your bank, the u.k. balance sheet tax, bonus caps and the senior management team that putting you -- not putting
you at a disadvantage to jpmorgan, bank of america, citigroup, morgan stanley, the list goes on. jes: there's no one at j.p. morgan saying we have a huge competitive advantage. everyone is facing the regulatory challenge of adjusting to the new reality of the financial market. i fundamentally believe u.k. regulators want to see a british bank within the leading investment bank group. it is, however, only 25% of our risk capital. we are a retail consumer corporate bank. the u.k. would love to see a as a major player. not profitable enough. look at the return on equity or tangible equity. look at the cost to income ratio, the efficiency ratio here. look at your standing in the most profitable, high-margin
businesses in investment banking and you're not where you used to be. jes: we have dramatically had to reduce our risk related assets. we've taken the risks and half. -- down by half. based by that headwind, we've doubled the return on equity, doubled profit. we have to do a lot on managing the costs and our investment bank. we will not rest until we've delivered a return on equity that covers the cost of capital. : that is an industrywide problem. wishing is not going to fix it. jes: we will not wish good we will execute to get there. if we are going to rely on the global capital markets, mutual funds and pension funds, i don't believe the world will feel safe.
investment banks that cannot return to shareholders, it is not a stable platform to fund the world's economy. erik: how long until it course corrects? what is the catalyst? jes: it is happening up it all banks are looking at how to manage these balance sheets. in a way that delivers profitability to our shareholders. : third argument, the culture cannot be fixed. fines come up penalties, other costs. -- fines, penalties, other costs. jes: i do believe will wall street -- i do believe wall street lost its way in the late 1990's. when he became too much of a motivational factor. back tohas to reverse
the time when it was a profession. andg a practitioner professional finance was like being a lawyer or a doctor. we have a lot to atone for, we've made a lot of mistakes, but have no doubt the only exit schedule risk to barclays is if we get it wrong in the future. let's head now to our markets desk where julie hyman has a check on company movers. energy and gas movers. julie: pipelines is where we are focusing on right now. we are watching columbia pipeline. after a big leg up of 15% dow jones reported the company was in talks with transcanada on a takeover in transcanada's acquisition of columbia could exceed $10 billion with debt. a relatively sizable deal. transcanada shares in u.s. trading have turned lower.
let's look at william partners, 's natural gas pipeline will be delayed until the second half of 2017. it was targeted to be complete by the end of this year. the company tries to get more permanent -- permits for things like clearing trees in new york. we have declines in the other oil and gas mainstays as well as we see the price of oil decline. familiar names on this list. scarlet: thank you so much, julie hyman print coming up, we will be speaking with neil from credit suisse to get his take on the ecb kitchen sink stimulus. ♪ . .
with mark crumpton at the news desk. mark: president obama's looking to name a replacement for the late supreme court justice, and to one's glia, as soon as possible. president obama was asked about the vacancy during a news conference with the visiting canadian prime minister. president obama: i think it is important for me to nominate a supreme court nominee quickly because i think it is important for the spring court to have its full complement of justices. i don't feel constrained in terms of the pool to draw from having to take shortcuts in terms of the selection and vetting process. mark: the associated press reports the president may be narrowing his search despite calls for him to look outside the court for a nominee. mr. obama is reportedly zeroing in on a small group of appellate judges with traditional credentials and a history of
bipartisan backing. growing concern about contaminated water in hundreds of u.s. military sites. the possible cause, chemicals from firefighting foam. the navy began sampling water at bases in december. checks are being conducted at 664 crash or training sites. talksresident eitan held with king abdulla today in oman. he told troops training the islamicn military that state troops are on their heels but defeating them will take a long time. warden is the vice president's last stop on a swing that includes the united arab emirates, and the palestinian territories. louisianaofficials in have evacuated 3500 homes in bowsher city as the bayou levy.ches the top of its another three inches of rain fell in the area overnight and the bayou could breach the levy. three people drowned in flooding across oklahoma, texas, and
louisiana. global news 24 hours a day powered by our 2400 journalists in more than 100 50 news bureaus around the world. i'm mark crumpton. back to you. ecb president mario draghi unveiled a dramatic stability package today that cuts the deposit rate further into negative territory and reduces the main refinancing rate to zero. draghi boosted qe purchases to 80 billion euros a month and added multi-year lending operations. he explained what he hopes this aggressive intervention will come -- will accomplish. this comprehensive package will exploit the synergies between the different instruments and has been calibrated to further ease financing conditions, stimulate provisions, and thereby reinforce the momentum of the euro area costs economic recovery and accelerate the
return of inflation to levels of close to 2%. scarlet: we are joined by the chief economist at credit suisse. when mr. draghi talks about exploiting the synergies, what does that mean? there are a number of channels by which monetary policy as best to affect economic activity. one of those is the foreign exchange channel. cut your interest rates, the exchange rate goes down, it makes exports more competitive, so you get some economic use from higher exports and lower imports. that's the traditional approach of the ecb, bank of japan, and others. that is no longer -- scarlet: the ecb is not looking to target the euro and get it lower. guest: exactly. he saying we've done as much for
interest rates as we expected. another channel for cutting interest rates and his more traditional when you are operating in a positive interest rate realm is cut the cost of borrowing. more projects look like they are a good idea. that is harder to bring off when you have negative interest rate power of is where the this program is, where they are going to allow the banks in effect to borrow money from the central bank minus 40% basis points. paid, butoing to get only if their balance sheet expands with a list of suitable activities. includes lending to business and consumers. that is the channel they are aiming at in this one. scarlet: is there a surplus of
those suitable activities banks are dying to lend to? guest: that is always the open question. you can bring the horse to water, but can you make it drink? are there customers who want to borrow? capacity in the banking system which is related to the capital and so forth, part of the previous segment of your show and the credit standards banks want to apply, we are going to find out. the thing about where europe is in the is the cycle, not the long-term structural issues, which are manifold, there are a lot of replacement demands. car sales were low for a very long time. that could be the outlet he's aiming to exploit here. this tell youdoes about how far mario draghi is ready to go with his whatever it takes approach? guest: i think the fear that
exists in some circles is these are stage left. not so much that they won't try something else but the central banks have done what they can. if you want to stimulate the economy, you want some sort of fiscal effort. general proposition cost you something up front. scarlet: what is the cost going to be? that: one of the costs would have been of great concern are is retail deposits pretty much floor to zero. draw for the privilege of leading deposits to you. if you take the whole interest rate structure to very negative
levels in the bank cost of funds or means zero, that's an unprofitable circumstance for the banks, which is part of the fear we had earlier in the year when financial stocks were leading the stock market down. where you cure some of that here is with this ltro. you may have to your retail depositors at zero but the lending for your acquisition of to be at -40ng basis points. we are paying you for the privilege of acquiring assets. scarlet: if everything goes according to plan, at what will we start to see a pickup in lending activity and actually, growth? guest: you would expect it would take a certain amount of time. there is an assurance built into this program that this is
all going to be in place for four years which means you can believe the ecb will be functioning in its current mode. scarlet: are you questioning that? that some people do from time to time. you can start acting on this now and take advantage of that subsidy for a lack of a better word later. we will see how soon this all picks up but i will say the ecb's own forecast for economic are not aggressively optimistic, even with all of this support. scarlet: thank you so much for giving us your perspective. the chief economist at credit suisse. coming up, president obama and the canadian prime minister, justin trudeau, finding common cause on climate change. withn exclusive interview ceo anddian pacific
scarlet: welcome back to bloomberg markets. it's another day of volatility here at the nasdaq in the wake of the ecb policy decision. initially, we have the nasdaq trading higher now and now the index is dragging it lower. the worst performing tech stock is yahoo! -- shares are lower after the company appointed two new board members. the morgan stanley director and a previous cfo at broadcom.
he is perplexed why the timing and takes it as a negative, suggesting a proxy battle could be ahead. have beenyahoo! volatile over the last year and a half as investors continue to wait for a potential turnaround. the best-performing stock today is expedia. shares are higher after piper jaffray upgraded the stock from overweight to neutral. the homeaway acquisition could potentially drive even the upside in 2016. his price tag suggests expedia could climb back to the stock's current record high. i'm abigail doolittle. no more bloomberg markets. you are watching bloomberg. this is your global business
report. ecb president mario draghi cutting borrowing costs to did one comment overshadowed the latest stimulus measures question mark had to state in the u.s. and canada are meeting in washington. what is on the agenda of justin trudeau? and -- first, let's start with the decision out of the european central bank. the european central bank pushed beyond expectation with even more stimulus. mario draghi explained more interest-rate cuts are not on the horizon. mr. draghi: from today's perspective and taking into account the support of our measures to growth and inflation, we don't anticipate it will be necessary to reduce rates further. foreign meanwhile, banks are pushing back against the too big to fail land.
deutsche bank is among those objecting to the proposal, saying they are unfair to the u.s. units of the world's biggest lenders. they want to have extra reserves that could be wiped out in the event of a crisis. in washington, the prime minister of canada is visiting president obama at the white house. ahead of the state dinner, the premise are expressed the similarities and ironies of the two nations. trudeau: the president and i share the same goal -- we want a clean growth economy that continues to provide good jobs and a great opportunities for all of our citizens. i am confident that by working together, we will get there sooner than we think. is takingaudi aramco another step, telling consultants to bid for a role advising on which assets to privatize. they have said some options include a full public offering
or the listing of some of its subsidiaries. david: time now for our bloomberg quick take. today's topic -- china's effort to combat a slowing economy. pointes dropped to three $2 trillion in february. policymakers have been burning through their stock pile of cash to help stabilize the u.n. as economic growth has cooled off. china's economy slowed in december, capping the weakest corner of growth -- quarter of growth since the recession. a rise in the services which accounts for more than half the economy has pushed in the slowdown and underpinned -- underpinned employment. it now accounts for more than 50% of the nation's economic output. if done right, china's leaders may put on a path to surpassing the u.s. as the world's largest economy. consequences could be dire of
china doesn't matter to eliminate overcapacity if it doesn't focus more on the quality of economic growth rather than hitting prescribed annual targets. there are many factions inside china's one-party state. some one reforms while others want the status quote. china showed government leaders continued involvement. intervened, china showed reluctance to turn its back on a soviet style economy. there's danger for the party in doing too much. sense -- we will get a better sense of what china chooses as the year goes on. scarlet: for more stories, due to bloomberg.com or bloomberg.com/quick take. bloomberg news has learned bridgwater hedge fund has hired john rubinstein is co-ceo. the current ceo is said to turn his focus on his investing role. this comes after reports of tension.
erik schatzker asked about these tensions earlier this month. do greg and i disagree on some things? yes. we have a process for working ourselves through that. scarlet: so what gives. was the motive behind this move. disagreements are not unusual. guest: they are not unusual and bridgwater has a huge culture of fighting things out internally and debating having people vote on who is right. it is very weird to anyone outside of bridgwater but within bridgwater, it is the norm. what is more about is having jensen focus on investing as opposed to running the company. it's more of an administrative role at edgewater and a lot of
investment companies. it is emblematic that they want to focus on investing. jensen is known to be a very smart man and that is what they are focused on. rubinstein has an extensive career in technology. could describe bridgwater as a technology company. they utilize model for a lot of their investing goals. they are always adjusting these models. quantitative strategies. letter kathy burton wrote , they discuss that because technology is so important, it does make sense and so he will share the role is co-ceo. jensen will focus on being
co-cio. scarlet: what does it say about the leadership? be determined.to this is part of a ten-year year succession plan they outlined five years ago. they are midway through and if it means they are pushing hands to be more cio eventually down the line, we will see that. you so much.k you can read this story on bloomberg.com. coming up, we will speak with the ceo of canadian pacific railway on its merger of hope. ♪
exclusively with hunter harrison on his farm in ridgefield, connecticut, to discuss what is next for the company. hunter: we have said there's not a favorite there. both the organization in the east would work with our franchise. not a favorite. when has this advantage, when has that advantage. we think we can fit well with either one but neither one think they fit well with us. ife got a selling job to do we are going to make this successful. is the approach a sign you are running out of patience with norfolk southern or at the very least, the prospects for getting a deal done there are deteriorating? so.er: i don't think the initial conversation was with csx. that should clarify something.
it was like we made an offer and were rebuffed. you don't do that in an hour and a half meeting. you have not made an offer? hunter: no. i have a reputation of being fast, but i'm not that fast. this goes back five or six months ago. talks, things did not work out. it didn't look like it would fit for either one of us and we step back at that time and look at other alternatives. and itthe numbers there looked good. there's not a favorite son. but you considered csx first? hunter: it could have been norfolk southern first if there
would have been a phone call. then we had the meeting with norfolk southern and there was an unfortunately. i called to apologize over the weekend for the leak and they so ii knew it 10 days ago, think i was the last to know. erik: how upset has csx been? to be fair,ink neither one of them had been very excited. to the ceoyou talked and chairman? hunter: one of them, yes. i did not have the most recent meeting with him. hunter: it was just another who met with the team. erik: doesn't it help to meet ceo to ceo? hunter: if it is necessary or if i can be hopeful in that process, but it's a little complex and goes back to your story of the girls -- you have
to do it carefully. let's talk about norfolk southern. --re's been little progress you've done your best to make progress. they are not budging. what has surprised you more? the intransigence of management ?r the shareholders you don't hear anything from the norfolk southern shareholders. hunter: i guess that is some of our frustration. trustieved we could get a done but we can't get it done by her selves. if we don't have cooperation from them, it's not going to happen. resolution isnt to try to get the shareholders engage so that they would be able to say talk to me. it's a nonbinding resolution. we don't understand what it
from bloomberg world headquarters in new york, good afternoon. i'm scarlet fu. here is what we are watching this hour -- battle in brazil -- prosecutors filing new charges against the former president and that is shaking the countries anxious put establishment. it is investor day for american express. will ceo say anything about the current -- about the company. and south africa is embarking on a road show to winning back investors as a credit downgrade looms. we will talk to the country's finance ministers. first, we had to the markets desk where julie hyman has a snapshot of the latest. the ecb comes out with this stimulus package where the messages risk on, but we're not seeing that in the market. i want to mention headlines coming out on a kansas utility company.
according to our reporting, they are mulling their options, including a sale. we are seeing a little more decisive action in the markets with the stock sharply spiking. a 5% bump up if we can bring up the bloomberg real quick to take a look at that. this.l keep you posted on halted for volatility because this is what happens when you see a sudden sharp move. to the bigger story and more important story for the markets, the ecb, investors are still trying to figure out what to make of mario draghi's action and comments this morning, the idea that this is the last of interest rate cuts is something investors are focused on. maybe this will not be enough but it's all the ecb is going to do. it is something else investors
have been discussing. all major averages at the lows of the session and we have been focusing on the euro as well. we've got a past look at the euro to show where we were going today. last october was where he said meet and thenould there was that announcement and many investors thought it wasn't enough. that they, he signaled ecb might consider the policy in march and that brings us to today. if you look at the euro in today's session, it has had some wild swings. after thee the drop decision and the climb after the press conference and now up by 2%. it has been a remarkable day with regards to market action. scarlet: those are huge moves for the euro. --
at that weaker dollars giving a boost to underlying commodity prices. julie: some of them, but not all of them. been building on gains as we see stocks fall to the lows of the session, which makes sense. oil prices are not getting a , but stille lows down 1% on the day. the 10 year note, we have seen aelds climb here 1.9%, so reversal of some action we've seen. let's check in on the bloomberg mark: first word news with mark crumpton. welcomed obama canadian prime minister justin trudeau to the white house for a state visit. during the joint news conference, the premise are agreed with president obama that both countries must take the lead in the fight against climate change. trudeau: the president and i
share a common goal. we want a clean growth economy that provides good jobs and great opportunities for all of our citizens. i am confident that by working together, we will get there sooner than we think. mark: the united states and canada issued a chore -- a joint statement agreeing to reduce methane emissions by as much as 45% from 2012 levels by 2025. for the first time, the u.s. is beginning regulatory efforts to limit in missions at existing oil and gas infrastructure. chuck grassley is not budging on the republican's decision to lock a supreme court nomination this year. democratsrassley said are only criticizing the decision to score political points and efforts to change his mind are futile. democrats lamed the gop for deciding not to hold hearings or a vote.
the republican party chairman says he wants tonight's republican presidential debate to be more of a g rated event than recent showdowns. before remaining candidates hold their last -- their latest debate at the university of miami. senator ted cruz is looking for an endorsement from former presidential candidate and ask florida governor jeb bush. the florida primary is next tuesday. in michigan, the city of flint has temporarily suspended water bills. officials are trying to figure out how to apply $30 million from the state. global news 24 hours a day powered by our 2400 journalists in more than 150 news euros around the world. i'm mark crumpton. brazil's political crisis is escorting. prosecutors at qc former president of hiding assets after a separate probe into his role in a corruption scandal.
his oj is fighting off in peach and proceedings. at the same time, the government plans to sell global bonds for the first time since it lost its global investment strategist. is it a good time to buy brazil? treasury filed a statement saying they are looking to offer dollar-denominated notes due in 2026. tapping the global bond market for the first times and losing it global investment rate credit rating. what kind of demand do you see for brazilian that? it seems to be improving for brazil and we have been positive for some time. one of the reasons we have been positive was valuations in a world of close to zero rates in other countries. also, we were looking at a country with strong institutions, significant
backers to help go through this tough time. we've seen some scientists table is asian. -- some signs of stabilization. scarlet: most of the debt is in local currency. it's an internal debt crisis rather than a next her to one that would require an imf a lot. do you solve it by selling more external debt? guest: i would unnecsarily go th far. in priceinted out, action in terms of brazil, the situation is that the sky is falling and some commentators brought out the possibility of imf involvement. we want to underline brazil is experiencing an adjustment, not a crisis. the reason for this is brazil has significant liquidity buffers, two hundred 70 billion in reserves, a significant -- account at the treasury which
allows them to manage interest at local markets and a floating currency regime. i would not necessarily say that to resolve the situation you would need to issue debt. if anything, you need to cut back expenses. another factor limning out there is how commodities trade. oil prices appear to have bottomed for now. how much stabilization to commodity prices give brazil? guest: it certainly helps with respect to maintaining currency stability. one of the reasons why brazil finds itself in the situation it ,s in today's because the past it was able to afford a significant social expenditures because the economy was growing. stabilization and commodity prices helps but it's not the
solution. the key issue for brazil is a playing a fiscal system and stability and longer-term, figuring out a way to rebalance the economy more toward investment and consumption. you have not brought up brazil plus central-bank. does the central bank not have any room to maneuver? there are certainly key roles for the central bank. if we look at the imbalances brazil faces today, the key .alances are the fiscal deficit bankhe role of the central is the target of 6.5%. but i would argue they've done a lot and have raised interest rates by more than 200 basis points.
the rates are quite high in brazil and quite high relative to the amount of contraction in the economy. so i think they are doing their job. how about external factors? one of the big reasons why brazil did so well in the boom years, how much help would a stable china held brazil? china is a key export for markets for brazil. recoverytent we see being more stable and china, we can see commodity prices stabilize and helping the currency and to the extent the currency is table, and allows to control inflation. that would have a key impact but the bulk of the issues or problems brazil is experiencing
are self-inflicted. scarlet: we have seen that in terms of how much assets have fallen, yet we've seen stocks recover and the currency stabilize. this snapback we have seen in the brazilian real, what the potential for further realization from here? it was definitely very clear earlier this year that the market was oversold and we were looking at local rates at 17% and the currency weakening compared to the dollar. it was quite a distressed situation. reality -- the real is the best performance in -- best performing currency and what it has going for itself at the moment is the yields for earning on the currency, so if you get long exposure to the currency, you are earning a yield of 12%.
extent we are seeing foreign direct investment in brazil and improving trade, that could help the currency. near term, we could see some retracement to the extent there would be more political uncertainty. scarlet: thank you very much. coming up in the next 20 minutes, while ron materials every bounded in the past month, they are well below levels of just two years ago. utw long can the commodity ro last? what turnaround plans does american express'ceo have. and south africa is on a mission to win back foreign investors. we will speak with the country's finance minister. ♪
scarlet: you are watching bloomberg markets. it's time for the bloomberg business flash, look at the biggest business stories in the news right now. mark your calendars for march 21. unveil ascheduled to smaller iphone and new ipad. the handset is similar in appearance to the iphone five c. the conference comes amid ongoing legal battles with u.s. justice department over privacy and encryption. florida home prices have seen a almost 40% rebound, but about one in six homeowners there still oh more than their properties are worth. an additional 114,000 ¢ --
114,000 sunshine state homes in the fourth quarter. rental prices for luxury apartments in manhattan are falling. median prices fell to more than 8001 -- $8,000 a month in february. one reason for the decline his buyers are taking possession of their new apartment and leasing them out. that is the bloomberg business flash. julie hyman has a check on some company movers. is time for our daily metal bulletin. i'm sorry. i got confused. let's talk silver today. a metal we haven't talked about in a while. up one and dollar is one third percent and investors may be getting more interested in silver.
almost 12% versus the 20% against the rally. at the price silver and gold and look at the ounces of silver per ounces of gold, it is cheapest versus gold in seven years time. that's one of the things drawing investors back in. this year, there have not been big inflows into silver etf's until recently. inflowsu have the etf and you can bump up see the rate of change -- quite an unusual bump up there as we are starting to begin to see investors get into silver. what is going on here? predictions of a silver
price relative to gold and silver production may drop for the first time in over a decade. demand is set to outstrip supply for a fourth straight year. some of the look at miners. we have seen huge increases for many of these companies and as you can see, the percentage gains outstripping that of silver itself. scarlet: looking at commodity producers overall, they are clearly not out of the woods. many are still grappling to contain that. i want to bring in our metals and mining reporter. give us the back story on how commodity companies got so leveraged that they built that their debt burden like this. guest: it goes back to the peak of the super cycle. these companies were all under tremendous shareholder pressure
taking place against this backdrop of china. expanded aggressively and took on debt to do it and as a result, they're dealing with the aftermath of that now. scarlet: quantify for us just how bad is the debt problem. how bad is it compared to other cycles? the obviousu use that to a compare ratio to earnings, and the last year across commodities sectors, it has more than doubled. some of them have fared a lot worse, some of them have fared that are. the posterld be child for taking aggressive measures for getting that under control. we have a chart we can put up and if you see what happens with fallenio, it has
dramatically. a lot of companies are trying to do that, but with mixed results. keep's a huge incentive to producing every barrel they can to sell it. even if they are shooting themselves in the foot because they are putting this reduction into a market where you really needed some support. like they areour delaying the inevitable to some extent. the question becomes what kind of default rate are we looking at? what kind of bankruptcies are on the horizon? we've already seen some of it happen in the energy sector. miners don't seem as close to the edge. a lot of them renegotiated their debt after the last downturn and were able to push expirations further back. that's lending a little bit of
breathing room. i hadn't realized until i started covering them so closely is the phenomenal cost associated with shuttering operations. it is hundreds of millions of dollars. creditors are reluctant to close mines. default -- moody's is predicting a six-year high led by commodity companies this year. thank you so much for that perspective. the american express annual investor day will be kicking off in a couple of minutes in new york. shareholders want to know why the stock is one of the worst performers on the dow in that time.
investor meeting in just a couple of minutes. the ceo will have to address why the stock has dropped more than 25% over the past year and revealed plans to turn the company around and maintain growth. joining us now is our bloomberg news finance reporter. what are investors looking to hear today? jenny: the first is guidance. able toe said they are achieve 12% to 15% growth year-over-year, long-term. they are hoping to see whether or not that is still possible. the next thing is cost go and jetblue. those have been the big headlines and they lost a lot of market share when they ended those partnerships stop investors are looking to hear how they expect to regain market share. scarlet: so they are looking for big and bold ideas. talk about the management lined up to look forward to these new initiatives. year, they'velast undergone three major
reorganizations in their junior management team. he has debuted a new marketing organization and they say this is what will take american express into the future. tina fey aside -- jenny: it was just last month and since then, the stock has risen 11%, so that's a sign investors think it is a good idea. scarlet: we talked about cosco and jet lou relationships that have fallen by the wayside. how important are these co-branded card relationships to a company like american express? for a long time, they stood on the strength of their american express platinum card. jenny: that's a great question. credit squeeze says these relationships represent about 23% of the business. that came as a shock to a lot of the industry. so they have since focused on saying we have a strong brand.
we going to invest in things that make sense and not during our brand around to anything that doesn't seem worth it. scarlet: thank you so much. american express investor day begins at 1:30 eastern time. still ahead, can south africa turn its struggling economy around and stop movies from downgrading its credit rating? it's finance minister is on a mission to do just that. ♪
change the way you experience tv with x1 from xfinity. hey how's it going, hotcakes? hotcakes. this place has hotcakes. so why aren't they selling like hotcakes? with comcast business internet and wifi pro, they could be. just add a customized message to your wifi pro splash page and you'll reach your customers where their eyes are already - on their devices. order up. it's more than just wifi, it can help grow your business. you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. scarlet: from bloomberg world headquarters in new york, this is bloomberg markets. i'm scarlet fu.
let's start with the headlines. mark crumpton has more from our news desk. mark: president obama says there is little distinction between donald trump and the other republican presidential candidates. mr. obama was asked about the 2016 race during a joint news conference with visiting canadian prime minster trudeau. obama: it is not as if there is a massive difference between mr. trump's position on immigration and mr. cruz's position on immigration. mr. trump might be more provocative in the way he says it. his positions are not that different, despite the fact that mr. cruz and mr. rubio, their own families are the products of immigration. and the openness of our society. mark: president obama called the gop primary a circus. the president said he takes response ability for failing to bridge political divide, and
says he is not contributed to the worsening tone of political rhetoric. two children will speak at their mother's funeral tomorrow in southern california. the former chief of staff, james baker and tom brokaw will also give remarks. havethan 2000 people passed mrs. reagan's casket since it arrived at the presidential library. the u.s. senate overwhelmingly approved legislation to fight heroin and prescription drug abuse. lawmakers approved creating grants to increase state and local programs targeted at growing the deadly problem. diedthan 47,000 americans of drug overdoses in 2014. s foreign minister is coming to the defense of maria sharapova and other using the that was historically approved to increase endurance.
reassure up the admitted earlier this week that she had been taking the drug for at least 10 years to treat a host of medical issues. -- cheryl pope admitted earlier ova admitted sharap earlier this week. scarlet: the debate over a potential brexit is getting uglier by the day. the former bank of france minister says london will not be able to keep its central role in euro trading if it leaves the eu. the former chief economist for the imf weighed in. , whenook at brexit itself you do computations, you do not find an effective brexit. some firms will have more difficulty getting into some markets and so on. the main risk of brexit is the uncertainty that it will create,
especially from the u.k.. which is in the case where the decision is to exit, the process just starts. it is not finished. there are various ways of arranging nonparticipation. that is going to take a long time problem best it is probably going to take years. incredibly reluctant to make decisions to move across the channel. if you're a global ceo, anglo-saxon, the mentality and the flex ability of labor laws come you can find it in the u.s. and u.k. when france lose the most in case of a brexit -- would france lose the most inn the case of a brexit?
will beny and france partly compensated by the fact they can operate their more easily. the main issue is the uncertainty, what we call the option value. i wouldn't be surprised if the initial phase is one in which you see investment come down, you see maybe an appreciation of a pound in that case. issue.that is the main in 1950, we did not have an option value. the rest of them had to combine europe. to advance francine's question, what is the fear that germany and france have of a brexit? does it go back to the tensions of 1950 or is it just a more modern discussion? >> i don't know what is in the mind of policymakers. a number of people think of europe as a big project, just
not an economic union. has is something the u.k. excepted. -- accepted. it as a stepsee backwards. does it go further than that? i don't know. it is an appealing way of thinking and many policymakers still believe that and still want that. scarlet: that was olivier blunt anchard. shifting to the ecb rate decision today, the bloomberg team dug into news from both sides of the atlantic. they began their conversation by noting the ecb's communication in recent weeks. >> i think he overpromised. if you analyze the rhetoric and
the two or three months leading , i think meeting that's where the mistake was in terms of how december was a mistake. jon: just a separate question for you as well. thene that looks into bloomberg right now and judges the potency of this package this afternoon in frankfurt not based on what the market is doing right here, what would you tell them? it has been a pretty successful communication strategy by the ecb. they've been very tightlipped, indeed. i don't think the objective was to drive the euro weaker. the objective was to put in place something that can address the poor earnings number that was just referred to. you said there was a reference as to whether you push -- what is the cost of lending?
the low lending volume coming highstill done at a rate. the funding costs have been pushed higher. that is transmitted straight to the sme. that can potentially be done -- addressed by this measure today. david: it strikes me, the way this is set up, it's giving the incentive to stick to your knitting, focus on those. will it change their behavior? eric: yes come in a sense. at the banking industry, there are investment banks and all sorts of commercial banks. areinvestment banks struggling against american competition.
european banks that lend to the household sector, including our own, have been facing this issue -- you have to borrow off these curves but have steep and because of the regulatory regulations. that has increased the borrowing costs for the sme's in this sector.ousehold it could be the first important step that would help. : a lot of people had a question as to whether they could increase the program because of the rules-based asset purchase program and because they may run out of security to buy. given the moves this morning to go to non-bank corporate debt and raise the issue share limit on qe bonds to 50% come is that argument dead in the water now?
can they take this as high as they want to? eric: it is a very good move indeed. here's the number one problem. so long as you only by the sovereigns, they never took advantage of the fact that the old -- the yield is compressed. have aica, you did direct effect with mortgages. you base the curve of risk which , it is where like the effect lies. can it go further? sure, it can go further. it can even by equities one-day. -- buy equities one-day. i completely disagree that this is running out of firepower. the only restrictions on firepower is the political one. the ecb can do whatever they want within the mandate.
financial minister making stops week, restoring confidence in his country's ailing economy. pravin gordhan joins us with more. good to see you here today in new york. i want to get your thoughts on what the response has been from the investors you've been speaking with. what has been your biggest single concern? pravin gordhan: we speak to many have been have a -- associated with us through the years of democracy and believe that we have a good economy and good institution. some of their concerns will be lower growth, whether we can actually support the physical standards we announced in our budget with 2.4% in the three-year cycle. get the right can
kind of partnership between ourselves and the private sector in particular. with respect to all of these, we've been doing some work which does provide some reassurance. >> you mentioned south africa has good institutions. your own appointment as finance came after a very tumultuous time. one finance minister left, he was replaced by another one who was therefore couple of days and then you. that struck people as a classic example of a government that is not functioning properly. how do you address that concern? pravin gordhan by doing the job i did in the five years between 2009 and 2014 with a very good team at the national treasury, stability,evels of continuing to reinforce the message that the country's finances are in good hands, we will continue to be prudent.
we will try to arrive to the right kind of consensus to focus on growth. denominator, we change everything else. scarlet: that is a long to do list. where do you see the growth coming from in 2016? we have to solve our energy problem. we have plans to bring the private sector in. secondly, getting higher levels of funds in our own economy which will encourage the business sector to participate. billion inost 860 infrastructure investment. in the energy sector, logistic sector, housing and other areas of utilities as well. ensuring we focus on concrete action to deliver upon our plans and take on tough structural
issues. scarlet mentioned there is anxiety about another downgrade coming imminently from moody's. you concerned about that? what is the case that you deserve the current credit rating you have? pravin gordhan: we are to above sub investment grade -- two above sub investment grade. other two agencies are waiting until june. -- iss itself is bidding visiting us later this week to talk to south africans face-to-face. and to establish whether our narrative matches our actions in the short term. i'm hopeful that we are able to actually do that. as a country and as a government that doing the same old things is not going to -- beginswhere this
to energize our own people as well. scarlet: is the government still considering a euro bond sale before the end of march? pravin gordhan: we are out in the market for $1 billion, satisfying our needs. usually, these take place in mealy after -- immediately after -- >> emerging markets around the world have seen their currencies plunge, economies slow down. your space you see being under your control and how much are the macro forces, the slowdown in china and whether the fed will continue tightening, strengthening the dollar? pravin gordhan: global dynamics are a matter of concern. for the first time after the
great recession, we are seeing the two biggest economies in the world moving in different directions. in they, the sentiment sector of emerging markets is taking us back to the taper tantrum of 2013. the emerging markets are once again feeling like the victims of rapid and volatile financial flows in the world as well. regardless of that, we know there are things we have to sort out in our own country and that is what our agenda is about. leading to the best we can in the ability we have in the and the possibility in our own country. scarlet: we were just showing it -- showing a dollar against the rand chart. do you feel the rand is fairly valued? pravin gordhan: we don't comment
on that. the rand is subject to all sorts of horses. -- all sorts of forces. it was close to 15 grand. rand -- whys the hasn't it given exports as much of a boost as it should? pravin gordhan: it has done well in some sectors and we've begun to feel that. companies have huge opportunities within the african continent. scarlet: pravin gordhan and thanks to joe weisenthal. who will we be speaking with? oe: the chief global strategist from deutsche bank. scarlet: a great conversation
scarlet: welcome back to bloomberg markets. two techlet's look at stocks on the move. i chris ault down 2.5% on the news that the company will be offering free database software to oracle customers in an effort to gain market share. -- microsoft down 2.5%. this move lower could in fact be a reflex move to the two-day rally that microsoft had been enjoying earlier this week.
another tech stock trading lower today, apple after the company event to a march 21 debut a smaller iphone. of june consensus estimate $45 billion looks aggressive ofative to his estimate $40 billion. a shortfall could cause apple shares to trade lower. scarlet: he was the face of wall street in the 1980's, personifying the extravagance and aggression of iconic wall street moguls. he died yesterday at the age of 86. he was called the king of wall street and hailed as one of the most brilliant players. joining us on the phone from new jersey is someone who knows him well, his director at capital partners and a member of the eurasiaoundation -- foundation. i'm sorry for your loss. if you could pay some tribute to
him and give us your impressions of him. what do you think is his legacy? >> i knew john in two capacities. a very stern taskmaster at solomon and later, after the treasuries and scandal, as a mentor. in the first case, quite to my opportunityhad an to do some things in the soviet union, an area that john knew little about but new his prestige would help get things done. 1985, he went with us to moscow and met with gorbachev. the thing that sticks in my mind , he got gorby for the first time to try a cigar. scarlet: thank you for sharing that. you were saying, later on? terrance: after the treasuries and scandal, i and several
colleagues informed -- had formed a merchant bank in the russian market and we attempted to launch our first private equity fund. the first private equity fund in that part of the world. we had a lot of naysayers, particularly in solomon. john really championed our cause, even though he was now outside of solomon, giving us all the courage to keep going. in wenitiative resulted are now in our fifth private equity fund in the market. tremendous performance. a business that is stable enough we are able to continue. scarlet: sounds like he was the cheerleader in many ways. freundo you think john gut would say about the state of wall street right now?
terrance: i don't think i could say it on the radio. -- the twoersion things that would disturb him the most, the general overbearing regulation the industry now faces. the second thing is the influence of the federal reserve generally on the world's financial businesses. scarlet: terrance english, thank you for sharing your thoughts with us. bloomberg markets will be right back. ♪
follow every pitch, every play and every win. change the way you experience tv with x1 from xfinity. hey how's it going, hotcakes? hotcakes. this place has hotcakes. so why aren't they selling like hotcakes? with comcast business internet and wifi pro, they could be. just add a customized message to your wifi pro splash page and you'll reach your customers where their eyes are already - on their devices. order up. it's more than just wifi, it can help grow your business. you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. it is 2:00 p.m. in new york and 3:00 a.m. in hong kong. >> welcome to bloomberg markets.
david: from bloomberg will had chris new york, good afternoon. tracy: here's what we are watching at this hour. the european central bank could cut rates further but mario draghi says it is not likely. we will delve leeper -- deeper into the plan. david: a joint press conference between president obama and prime minster trudeau. when oil and gas come please ever let it happen -- >> we examine what matters most to top finance professionals. we will bring you up to speed. first, let's head to the markets desk where julie hyman has the latest. julie: things are not going great. i've been reading