tv Bloomberg Markets European Close Bloomberg March 14, 2016 11:00am-12:01pm EDT
markets. mark: we are going to take you from london to new york to brazil in the next hour. here is what we are watching today following last week's stimulus, theost fed and bank of japan have major announcements this week. what it could mean for the global economy. matt: what the fed could do to improve its accountability as it precious -- faces pressure for more oversight. mark: thousands take to the street in brazil, calling for the impeachment of the president. what it could mean for brazil's economy. are 90 minutes into the trading day in the united states, let's get over to the markets desk.
julie hyman is here. julie: we are getting headlines from opec, its latest report on production, and opec is saying it is retaining its growth forecast. in the meantime, total february output from opec fell 175,000 barrels a day on iraq, nigeria, and uae. , theboosting its output biggest gain since 1997. all of this from this opec report. this comes on the heels of a report earlier today saying that interested in freezing production until it raises production more in line with its historical output. , couple of other things producers opting to pump with losses rather than stopping
output contributed to that 2016 non-opec supply forecast becoming more uncertain. this is a monthly report that comes out from opec. there's outputt will fall in 2016, and we are watching oil on the back of all of these headlines. it already was lower for the day because of the iran news, continuing to fall. here you have it, the latest trades and it is bouncing around the bottom and not seeing a lot of reaction. it is not anything very different from what we have been hearing from other sources in terms of the iea make a forecast, and others. the iea recently called for a bottom in oil prices. i am not sure if matt showed this chart earlier today. we have had calls for oil to bottom along the way. from andyd everybody
hall to jpmorgan to cut her and finally the iea most recently calling for a bottom in oil. the iea looks the most pressured because we saw the short-term low for oil on february 11, we will see if that was the low for oil prices. stocks also, since stocks have been moving kind of in tandem with oil, they are both kind of coming up off the lows a very little bit. it was positive very briefly. not show that chart today, but the beauty of our system is all client can just type in and see all of the charts in our library. let's take a look at where european equities are trading. mark: stoxx 600, we are up for the second day to the highest level since january 7, up by 7/10 of 1%.
the longest winning stretch since march. chart,llar three-day draghi cannot seem to get a break when it comes to weakening the euro. he weakened it on thursday by 1.6% and by the end of the day it was up 1.8% -- 1.6%. many will say it does not matter, he was focusing on the credit channel not on the fx channel. where he has managed to make a big influence is in the bond market, particularly that periphery bond market, the yields on february 11 fell to a two and a half year low. the yield difference was roughly about .6% and now we are down 2.2%. we have had three consecutive declines. , anden spain and germany
quickly, i want to talk about campari, the italian distiller is set to buy the global distribution business of the grand marnier group to streamline its sales and hasten its expansion. that is according to a person familiar. gm shares suspending ahead of an announcement. come party is up by 4.3%. matt: not quite as popular here as in southern europe. mark: it is an acquired taste. editorialize, with a little bit of orange juice. courtney donohoe has more from our news desk. couldey: president obama nominate someone to the supreme andt as early as this week, the republican party is launching a campaign to derail anyone the president picks. the rnc will also target democrats on the senate judiciary committee.
a dog fight in ohio were governor john kasich and donald trump are virtually tied one day before the primary. trump moved a schedule rally from florida to ohio and he has roughly a 20 point lead in florida over marco rubio. federal safety investigators are on the way to the scene of a .rain derailment in kansas 29 passengers were taken to a hospital in dodge city. turkey has made it clear who is to blame for the suicide car bombing in and kara. ankar. hit turkishrplanes rebel camp's. german chancellor angela merkel says the refugee crisis led to disappointing election losses for her christian democratic party. the anti-immigration alternative for germany party had its best
showing yet in three state elections. the showing here has no satisfying resolution to the crisis. global news 24 hours a day, powered by our 2400 journalists and over 150 news bureaus around the world. matt: investors are eagerly awaiting decisions from the fed. the announcement coming after ecb president mario draghi announced new stimulus measures for europe last week, which helped send european equities to two month highs. council on foreign relations president richard haass warns the company -- country cannot one -- rely on central banks alone. ofwhat strikes me is how out balance it is that we are looking to central banks as our politics will not let us do anything on basic structure reform.
that is something the united states and japan and europe and india all have in common, and that is what worries me so much. wereif central bankers geniuses, at times they will make the stakes. matt: more with what to expect, joining us is pimco manager. let me ask first about your level of surprise at mario qeghi's decision to expand into non-bank corporate debt. do think it is going to be an effective plan? >> i think this was a new chapter in the ecb's easing stance. there is less focus on pushing rates more negative. the ecb and other banks discovered the dark side of negative rates. i think they have opened a new chapter. this is now very much about
credit easing than buying corporate bonds, and repairing the bank lending channels. this means we will get more support for the banks and i would expect the bank of japan to follow through to deemphasize negative interest rates and potentially also announce more credit easing. matt: when is the coolest things draghi announced was the ratio of assistance to banks that do more lending. , is my first tool question, and is this something japan may be able to try out? joachim: yes, it is a new tool. targeted long-term refinancing operations before, but what is new is that banks may now be receiving an interest rate for lending. rate for banks is likely to become negative on that part of the bank loan book that is new, that consists of
fresh loans for the public. i think that is a big step. negative rates were attacks for the banking system. now for the first time banks will be able to lend and borrow from the ecb and negative interest rates. mark: is it going to get money flowing to the people who want it or need it? is there demand for loans within the euro area? joachim: demand for loans is very subdued. we are in what we call a new neutral environment or low nominal growth. we have excess savings in europe so there is not that much demand for new loans. i think what the ecb is targeting here, they are trying to help banks to restore their profitability by avoiding a further shrinkage of net interest margins. the hope is that this will help banks to grow equity organically and thereby eventually be
willing to lend more. said, theas you problem is demand, not so much supply. mark: you said the boj will deemphasize focus on negative rates. just implemented on january 29 a negative interest rate policy. are they done when it comes to negative interest rates? tomorrow is the end of the boj meeting. joachim: we do not think they are done on negative rates but i would say they are done for now. central banks are constantly learning and trying new things all the time because they are the only game in town. fiscal policy is not helping, structural policy is not helping, so they have to try news thing. they have discovered negative interest rates are probably not the holy grail so this is why the emphasis is shifting. , moreay buy more equities
real estate investment trusts, and they may even start to buy corporate bonds, that i do not think that negative interest rates or further negative interest rates are on the agenda. mark: sick around, we will talk about the fed, the bank of england, the swiss national is the big one. , we will television have special coverage of the fed decision starting at 1:00 p.m. eastern. we will bring you janet yellen's news conference starting to: 30 eastern time. ♪
york, i am matt miller live from midtown manhattan. mark: i am mark barton, live in london. joachim, does the fed need to guide the market to more interest rate increases that traders and investors have priced in this year? joachim: i think the fed will tread very cautiously. they learned last year in very early this year that the rest of the world, debtors in emerging markets and in particular china, are not ready for higher rates. the rate hike has come back to through aned accelerated cny depreciation and a tightening of financial conditions. i think they will have to treat very cautiously. takenot think they will
any rate hikes off the table for the remainder of this year. they will probably show one rate hike mice -- rate hike less than that december projection but i think janet yellen will have to be balanced in the press conference. what happened last september when she talked very devilishly when the-- dovishly fed raise the rate. if she talks to hawkish late, i think you are raising -- risking further depreciation in china and further tightening of financial conditions. i think she would say risks to the outlook are nearly balanced. there will probably be another one or two rate hikes later this year but that is about all i would expect. matt: i want to point out that the fed, the moves we have seen has allowed the a one -- you want to depreciate against a basket of currencies -- yuan to
depreciate against a basket of currencies. s go onortantly, d.o.t. the bloomberg shows us the fed clock so you can see them graphed out, and the market is still expecting a lot less than the. plots would imply. his the fed going to move closer -- is the fed going to move closer to the market expectations? in terms of the plotsdot , the fed showed a median of rate hikes. we think this will come down to three rate hikes from the fed. more importantly, we think the leadership. only showed three -- leadership dots only showed three hikes this year.
pricing in a little bit more than one rate hike, so as of this morning there are 35 basis points of hikes priced into the curve for this year. i think what is happening as the market will ratchet a little higher toward the fed but the fed will come down to meet the market. matt: i wonder what you think about the morgan stanley call today at 10 year rates are going to come down to 1.45% by the end of december. i gets very close to an all-time low, at least in my lifetime. doesn't make sense that we would go that low, the demand for treasuries would soar because of negative rates around the world and nobody wants to sell what they have got? joachim: i think traders are more likely to be in a range, my guess is the broad range is somewhere between 170 and 220, 230.
it makes sense to trade the range. we are roughly in the middle of that range. i think central banks are not keen any longer to push rates that negative and i think that limits the downside for treasury yields. mark: does it signal and ultra-loose policy elsewhere has the potential to undermine the fed us push to tighten -- fed's push to tighten, especially if the dollar rises once again? do ultra-loose policies, could they have a big impact on the parts of rates if the dollar strengthens? joachim: they could. i think central banks have learned they all sit in the same boat. the fed has learned there are certain limits to monetary policy diversion. whenever they become too hawkish
it put upward pressure on the dollar. i think this learning process has now produced a new equilibrium, it may be an unstable one, but i think there is an equilibrium or central bankers around the world realize that too strong a dollar is not good for anybody. this is why i think there is kind of an implicit or tacit agreement to roughly stabilize the dollar in broad ranges. not getns the fed will too hawkish and the boj and ecb will not cut rates to negative, and probably also means the chinese will try to roughly stabilize their currency against the basket. if that is the case, and i think that is a good description, that should be positive for risk assets in the near term. matt: pimco managing director joining us from california. still ahead, angela merkel's party suffered big losses on
bloombergare watching markets, i am mark barton in london with matt miller in new york. angela merkel says she will stick to her course on europe's refugee crisis despite her party's poor showing. candidates in her union party failed to capture two western states, the anti-immigration alternative one nearly one quarter of the vote. anxiety of europe's migrant crisis and merkel's response to it. tony, how much of a blow was this for merkel?
tony: the event of the day was waiting for merkel to come out of her party huddle and go before the press in berlin. germans kind of like politics ground zero today. she came out fighting and said there will not be a confidence vote in parliament. i do not see an existential problem in these three elections that happen yesterday. yes, i recognize that voters need to be one back and there is a lot of anxiety out there, and the solution to this refugee crisis is not at hand yet, but it fundamentally, there will not be a change in my approach. mark: give us the sense of the importance of the afd, the anti-immigration alternative for germany. what is the symbolism of their good showing in these three state elections? tony: i think it is twofold. it is certainly a warning to the
established parties in germany, which even merkel sort of hinted that acknowledging. secondly, it shows that germany is not immune to this kind of nationalistic or populist wave that has been gaining ground in europe in a variety of countries . in neighboring austria, a party like this has been polling about one third of the vote for years. is one way of germany coming to terms with something that is already happening elsewhere in europe, and yes, it is a problem for merkel especially if she cannot win these voters back. matt: in france they have the problem of these ghettos that are not at all integrated. you had the terrorist attacks in cologne oround duesseldorf, a round of sexual assaults. has it been anything more than that that we are not hearing,
that would speak against opening the doors? i think everyone agrees across the political spectrum in germany, including the cdu and merkel herself, but these new year's eve assaults in cologne and other cities were outrageous , and the sort of thing you cannot have happened. how much of that was due to this latest influx of refugees, that is another question. they will have to drill down into the details. mainly, last year one million refugees arrived in germany, and that is a large number for germans to handle. .att: thank you so much we will be back in a quick moment. ♪
courtney donohoe has more. courtney: peace talks resuming in geneva. they are aimed at ending five years in civil war. the united nations is hoping the negotiations will lead to an agreement within six months. followed by elections one year later. today's talks were described as positive and constructive. 300 refugees have left the camp at the corner of greece and macedonia. they are headed towards the thetier fence dividing countries. 14,000 people are stranded on the greek side. conditions have deteriorated following days of torrential rainfall. dr. should report if a pilot's mental health will endanger him public safety following a year-long probe into the germanwings plane crash. the copilot of the plane reportedly deliberately crashed into the french alps, killing everyone on board. he had consulted with dozens of
doctors weeks before the crash. in mozambique pieces will be sent to determine if they belong to play 370. the search is ongoing for the people on board in the southern indian ocean. global news, powered by your 2400 mobile journalists and 150 news bureaus around the world. matt? matt: all eyes are on janet yellen has the fed releases its rate decision on wednesday. speculation, of but who holds them accountable for these decisions? let's bring david in from the brookings institution. let's start off with what you are expecting. no one expects an increase in race, but -- in rates, but we
will hear from janet yellen shortly after? david: i think you're right, no one expects an increase and i see no reason to take it differently from the consensus. there will be a lot of focused on what she says. markets currently expect a rate increase in june. she does that. will she try to steal away or not? when we talk about fed accountability i know the people are concerned that the fed pays too much attention to markets and what's going on in overseas markets. what kind of accountability do you think congress is mostly focused on? david: that's a really good question. we the central bank and the fed a lot of leeway. like other democracies we theded that you cannot let politicians handle the interest
rates. you will get too much inflation. the fed became the big target of crisis.ngry about the a number of members of congress, most of them republicans, not exclusively, are taking advantage of that to beat up on the fed. what they mean by accountability is a much more complicated question and i don't think that they are very clear on it. amewhat the fed to follow rule so that everyone knows how they make their interest rates. others are worried about leaks area others just seem to care more about what they do then how they mark: explain it or if they are accountable. we are suggesting we -- that need more janet yellen more fed. forget half year, what about quarterly monetary policy reports? a better go towards overseeing process in fed accountability? there are people in congress not looking for
accountability, they are just heating up on the fed. sharing more information with congress will not influence those people. but i think there are people in the middle who are not comfortable with the view of the fed as -- don't change anything and the rather extreme view of -- let's really change a lot. what i have been looking for is that middle ground that would allow elected representatives of the people to get a better handle on the fed them for the fed to find ways to communicate with congress without surrendering their independent to make monetary policy decisions, which i think is important. what about establishing a process to obtain and publish the views of outside experts about key policies before each set of hearings? as you know, don cohen, a former vice chair of the fed and one of my colleagues, has suggested just that. we think they have a right to get some other perspectives and the current system doesn't seem to allow for that very well.
it wouldn't require a change in the law, but it would be useful if there was a group of ofnomists with a wide view respected ideological views the brief congress in anticipation of everyone of janet yellen's hearings so that at least those people who are serious would be better informed. we also think the fed would be well served by encouraging at their own initiative some outside evaluation of their and communication processes. it's very ironic that former fed officials are recruited to advise the european central bank, the central bank of england, and others about what they do, but the fed has always refused to do that, as though they are too important to have outsiders tell them better. david, let me ask what you measure of some consistency. if they say that they are data dependent, should they stick to that? should they choose a rule-based model?
it seems to bounce back and forth, occasionally, between the reasons to raise or lower interest rates. you mentioned stand fisher. when he was at the bank of , he brought people into evaluate the research department and stuff like that. what's good for them might be good for the fed. look, there's always been a big argument about how much discretion the fed should have and how much they should rely on a rule. there continues to be a debate about that. it seems to me that it's unrealistic to expect the fed to spit -- sticky to some rule given the uncertainty in the economy and we want them to have flexibility. the challenge is, can they do a better way of explaining what a compliment -- what economists call the reaction function and changes in information? what they see as the most likely scenario and what they would do if we got some other scenario.
i think the fed is struggling with that. it's particularly hard, when you have a full complement of officials on the open market committee, sometimes it's hard for them to express a single view because they don't really agree, making it even more complicated. i'm looking at a bloomberg terminal chart. probably the most requested chart i have ever had on this program. it shows the different times of quantitative easing graphed against the s&p 500. a lot of people are concerned that the fed is more concerned with markets that anything else. that they have used qe2 drive up the value of assets like stock in which only the wealthy are really invested. is this the kind of concern that congress has? i don't biggest their main concern, but it is a concern. look, when they got to zero, the fed had to do something else.
they spent trillions to buy bonds. it was a game to get people to take more risk and they wanted the stock market to go up. the question now is that now they are trying to build a -- now that they are trying to pull back, how hard will it be to calibrate? it's uncharted water. it's hard for them to say -- ok, we are ready for you to take a little less risk with interest rates as the standard policy. they are doing a lot of trial and error, but i'm not sure what choice there is. when you are at zero interest rates you either accept failure in the hope that the fiscal authorities will do something -- that's what janet yellen decided not to do. or you experiment and when you do that you are bound to have some mistakes. we are watching the painful part -- process of them trying to calibrate monetary policy at this unusual time of history. mark: our negative interest rates a mistake? david: i don't know, it's kind
of amazing to think about negative interest rates. inc. about it, the bank will pay you if you borrow money? what we have learned is that zero is not as low as the interest rates can go , but we have yet to learn from japan or europe that they actually work. certainly they backfired in japan and we haven't seen much about what they can do in europe. the fed seems a bit sketch -- skittish of negative rates, they shouldn't have to resort to those measures in the near future. if the fed once interest, raising rates is not feeling with a can do it. you can see him on the bloomberg at their holding of treasuries climbed, obviously, and continued to climb through qe3, peaking at a high level and remaining constant. it doesn't come down. why can they not tighten by
reducing treasury holdings? could, but it has decided not to and i think the reason is twofold. one, as i said, it's really hard to calibrate what qe does, going up are going down. they are not quite sure how the economy would respond. they are more comfortable with traditional interest rate tools. says they have ways to raise interest rates, they have made it their first tool. second, i think they would like to have interest rates a big margin of a zero in case there is another recession so that they can cut them. given these alternatives, one of them tested, one of them not, they have chosen the interest-rate path. is it the only one? no, but i can understand why they did it. david, good to see you today. thanks for joining us. helping us to continue the countdown to the european close,
are watching bloomberg. i'm matt miller. the global market remains concerned about the outlook for the chinese economy. the country's central bank is telling everyone to chillout. that the chinese economy will meet its goals. marriott's ambition to become the world's largest hotel chain is in danger.
a chinese group takes a rival bid for starwood, which marriott thought it had locked up. the careful what you say. astrazeneca promised a 70% jump in sales. investors may be holding that companies ceo to it. we begin with china, where pressure is mounting to meet this year's gdp target of 6.5%. the central bank governor is trying to soothe anxieties, saying that he can hit his targets. the remarks come despite recent data pointing to a slowing economy. the chinese industrial output and retail sales slowed in january and february. economic growth has declined steadily. beijing has carried nurturing efforts for additional demand. >> they are trying to execute additional -- a very difficult
transformation that they put under the general rubric of supply-side reforms. from the standpoint of the central bank that means being dealt a hard hand to play. there are forces at work, like the need to recapitalize or get bad assets off of bank balance sheets that will make the monetary transition mechanism have less traction. starwood hotels says that it has received an unsolicited .akeover the bid is $76 per share. valuing them at $13 billion. they had already agreed to merge with marriott. maserati is recalling 28,000 cars sold in north america. the problem is the driver side format can get stuck in the accelerator leading to high speed.
astrazeneca is looking at ways to tie executive pay closer to its sales target. investors want to provide an incentive plan for the drugmaker to include as revenue goal of $.5 billion by 2023. pfizer,er attempt by promising a 70% jump in sales within a decade. brazilian stocks have gained on speculation that the president will be of use in congress and her workers party will be forced out of power. here's the situation. in 2009 brazil's beloved president proclaimed the nation's biggest oil discovery, the passport to the future. rio de janeiro is order the 2016
olympics on top of the 2014 world cup. it's got the fattest budget deficit in at least two decades. accusations that he doctored accounts to minimize the size of the deficit on the deficit on a basis for impeachment proceedings against her. graaf, the, petra state-run oil colossus is embroiled in a scandal that have ensnared members of the business and political elite. prosecutors have even charged lula with hiding assets from authorities. the background is this -- brazil's offshore oil reserves include the western hemisphere's biggest discovery since 1976. it has the second-largest iron and or reserves. it is the second largest producer of soybeans. with such goods dropping in value, the commodity-based prosperity appears to have run its course. their wealth distribution also remains among the most unequal.
here is the argument. in their first term she blamed brazil's modest economic slow economic growth. at the start of her second she endorsed austerity and promised it would not impair social games. those measures have yet to reverse the ballooning budget deficit. should say that brazil ignite the next stage of growth by reducing the tax burden and bureaucracy. these measures would boost investment, they say. more flexible labor laws would improve productivity. to shift brazil alliance away from consumption, which along with government spending still accounts for 80% of gross to master product. that is your quick take. on more fromn now midtown, manhattan and abigail doolittle.
abigail: the nasdaq is trying to trade higher after opening. two of the top stocks, let's take a look at them. shares are surging on takeover speculation in particular. they say they are hearing takeover chatter and that priceline is mentioned as the other accountswo met having similar reports. i've been on twitter for quite some time. i know that you too checked around a bit. no one news -- knows who the open outcry or is. it's important to remember that there is some anonymity there. it is surely speculation. one of the top two stocks in the nasdaq today. speculation moving the markets, we like to tell people what it is. any others going higher? tesla is up on a report
analysts,l-known suggesting that the model x production is likely to excel a rate this year. he recently visited a factory and he is pretty bullish. all of this is in contrast to the short interest. a well-known short seller of citroen research recently put out negative comment thing the clock should -- it should be tracing -- trading closer to $100 by the end of the year. more on brazil, ahead. huge protests over the weekend. live from sao paulo, next. ♪
millions of resilience to to the streets to protest lyrical corruption and a lagging economy. chief joinso bureau us now. julie, just give us a sense of the scale of the protesting that took place over the weekend. >> the protests were massive. much larger than the biggest ones we had on march of 2015. some have about 3 million people. much larger than even the government itself was expecting. is the future of the president seriously being called >> that isnow? definitely one of the takeaways from the process. we were waiting to see how many would turn up in protest on the street. with these numbers it's hard to think that lawmakers won't be
sort of pushed to go into action and do something different than what they are been doing so far. what about economic reforms to pull the country out of the recession -- out of the session it's in? action? he put into what do the opponents offer? >> this is a hard time to pass reform. with support dwindling in sheress, it's hard to think will be able to push through reforms needed to get the economy back on track. matt: i have heard people calling for tax cuts and more lacks labor laws. these are the obvious go to's?
>> it is with the finance minister has proposed, but it is what's needed to get out of this recession. mark: is it likely he will be jailed? >> it's anybody's guess at this point. the arrest warrant requested for is being analyzed by a judge here. it is being called into question -- to question here.
one of the most important political leaders who had an brazil in recent history. mark: we are 30 minutes away from the european close. rising for a second day, at the highest level since january the seventh. matt: england is four hours ahead of us now instead of five for the next couple of. tomorrow, 10: 30 a.m., tune in for a special interview with marvin allison.
the european close. ♪ market: we are taking you from new york to london to tokyo in the next hour. here's a we are watching today. today.bankapalooza there could be surprises. we are going to point them out to you. alix: angela merkel suffering from a rebuke. alix: mark: and i was -- alix: i will show you why european central bank have more control than the fed does over long-term interest rates in the u.s.. scarlet: let's head over to the market