tv Bloomberg Markets Bloomberg March 18, 2016 1:00pm-2:01pm EDT
>> from bloomberg headquarters, good afternoon. i'm scarlet fu. >> and i'm alix steel. rick reeder says companies are behaving like it is. withnum prices have soared other commodities. higher prices come with a cost. surges saying the worst could be over. >> we want to head over to the markets desk with julie hyman. julie: we have a gain in emerging markets. we had a mixed session in asia. stocks in the u.s. are rising the highs of the session.
we have seen strengthened financials and a rebound in health care. i want to talk about the m&a activity. --st of all, yet the group we had the group in china with an agreed-upon good. saying no thank you, we've all take the other offer instead. what would be a higher price? what is the likelihood that marriott will come forth with this higher offer? jpmorgan says there is a 40% chance that marriott raises it did. -- it's bid. the deadline is march 28. at bid from an bank stands $13.2 billion.
there is a done deal in the natural gas pipeline industry. companyada acquiring a share. 50 a broke inthe deal that the last our for all for metrics. there is a bidding war for this company as well. not quite rising to the offered .rice it is 15% higher than thermo fisher scientific. >> we have a call out which is recommendation on
the gaming sector. genting from vip gaming growth. to 6.2%. some of the other casinos are on the rise. quickly, year-over-year change, these are all declines. the latest change with 0.1%. the new forecast is for a decline of 6% this year. the previous forecast was a decline of 14%. it is all about less worse. [laughter] >> let's check in with mark crumpton. mark: we have a developing story at this our -- hour in belgium were police are searching for a
suspect. you are looking at live pictures. local media report gunshots have been fired. reports indicate two people have been wounded. multiple reports says the me fugitive from the paris attacks is one of those wounded and is being held by police. authorities say fingerprints found in an apartment rated earlier this week in another brussels neighborhood along to abdul salem. says thatf the u.s. donald trump -- an interview with david wesson, don -- donahue said that politicians that support trade officials are shortsighted. >> it would mean they would impeach donald trump when they figured out what that really meant. is an overstatement.
imed just trying to make it very price if you double the of something you are buying from china, the citizens i go to walmart and target and go to buyr stores and people who components, they are going to pay for this. said exporters and consumers benefit from international trade. he says shoppers will pay higher -- sellingerror their goods in global markets. bernie sanders says he still maintains a path toward a victory in his presidential bid against hillary clinton. shes rejecting suggestions has sewn up the party's nominations. in an interview, sen. sanders predicted the upcoming calendar of races in several western states including arizona.
russia wants the united states position towards compromise. negotiations are going on in geneva, switzerland. they said that the u.s. should to encourageence opposition leaders to be more flexible. i am mark crumpton. back to you. the fed surprised to scale back its rate rise is having a positive effect. ceo of blackrock weighed in on the decision on bloomberg . jobs -- to keep
the unemployment rate constant, it takes 80,000 jobs. pretty big numbers. at inflation, cpi is up 3.2%. why is it such a big statement? when they put in concern about financial markets, that was a big statement in terms of the dollar. a big statement in terms of they are going to be patient in a there is easy policy. the fed was very sensitive to dollar acceleration. meeting, itthe g-20 may be a big deal for emerging markets. that is a powerful statement, or lack of action. i still think they are going in june. period.it is a harder
china is risky. commodities near-term are better. to be like, yes, she should have done it, shouldn't have done it. are notcial conditions just china, but worldwide. the rate of corporate earnings are coming down. they may have implications for wages and unemployment. >> i think you touched on the biggest thing. metrics, what they can invest in and what it cost them to fund it. those are converging. what that means is forward growth. forward growth has to moderate. there is a lack to it. lag to it.a i do think we have seen the best of the acceleration of the u.s. economy. i do think we are moderating
from where we were because of what you said. up. want to tie that what is at me for the treasury? there was an argument at the fed meeting that the federal reserve was going to run things hot and allow inflation to rubber shoe. >> i think your statement is 100% right. the fed made a decision that will let inflation run hotter, let unemployment run hotter. you have so many tools at your disposal to break them and you have tools to break a deflationary cycle. end?about the back the backend of the yield curve is very dynamic. are seeing inflation
expectations that are trending higher, as they should. however, you take japanese long rates,tes -- long-term 10 year treasury at 2% is a steel compared to negative rates. we don't think you will see a depreciation. in terms of being around these levels, it could trend a bit lower given that demand function. signals they used to send is over? >> you say -- you see a lot of economic data. that is not relevant because we live in a world of balance sheet expansion. you should have inflation that is accelerating. you should be changing the shape
>> a belgium government member has confirmed that abdul was caught. he was suspected of taking a part of planning the paris terrorist attacks last year. the belgium prime minister is p.m.uled to speak at 7:00 central european time. we have heard that the people were arrested in this police operation in belgium.
we have a confirmation from the government member of the suspect was caught. he is caught alive, so we will get more information as it continues. the prime minister reportedly scheduled to speak. >> we are going to head back to the markets desk or julie hyman is taking a look at metals. julie: getting a little more esoteric with my metals scorecard. tin.ve seen a demand for doing well. indonesia have been shipping less because prices have been coming down over the past two years. we have seen actually a discouragement of investment in mines. 2016 will be small relative to demand an almost two decades. tinas caused an upsurge in
of 16%. in terms of supply, you can look supply as the inverse of that. supply coming down 29%. indonesia has been cutting down on exports. we are still seeing cuts in places like indonesia and china. if you look at the index year to date, tin is one of the six metals. supply/demand fundamentals driving a metals market. ?magine that >> a recent rally could be a good thing. this is visible in aluminum.
julie: this chart is showing production. capacity.ply colin, walk us through the charge. -- walk us through the chart. down,h the cost of coming who is going to cut capacity? that decision has been reversed. that is not what we need at the current time. does this mean the alumina market is balanced? does that make it an exception? the deficit is across a
number of markets. we have negative supply growth. newave seen a lack of products coming through. the price levels have been cut at investment capacities. the balanced market is just the second derivative. well, we derivative, still have tons of aluminum energy out there. that is the cap on the outside of a rally. helped the market. with this rally, are we going to see the production come back online cap in a future rally? >> i believe so. i believe the rally we have seen has started to encourage some of these chinese participants. smelters are preparing themselves to restart capacity. the nancy it overnight.
given what these price levels are, the temptation has to be there. market, it is relative to economics. it is an opportunity to make some money. i say we bring the capacity back. the losses have been a big part of the relative strength. feel that will be reversed. >>: hamilton, thank you so much for joining us. >> still ahead, location, location, location. we are talking real estate, next. ♪
location, location, location. investors around the world are viewing u.s. real estate is a necessary investment according to a recent survey. for more on this, we turn to carol massar and cory johnson. >> good morning. this is bloomberg advantage on bloomberg radio. mitch is a partner at price waterhouse coopers talking about what is going on in the real estate market. rates were up 4% so far this year. when you look at what is going on in real estate, what are the trends that are going to be longer-term trends that may be around for a few years. >> this is a global capital story. when you think about it, people for generations, if not thousands of years, allocated well to real estate as a place for a safe bet. with all the instability, that
is why people are running to real estate. >> when you say running, has the race been run? i have been listening very carefully about slowdown in san francisco. i wonder what we are seeing? ansan francisco is interesting story. it is the number one hot market. san francisco has been the top five market. this year, we saw it drop out of the top 10. in fact, next year, it will be out of the top 10. even of the fundamentals are strong, the prices have gotten out of control. this oneooking at block in san francisco where you got four luxury apartment atldings going up right now least 20 stories tall. that is a lot of housing. >> are those rentals are for sale? >> they are rentals. >> the interesting thing for
rentals is we have more demand than supply. some of these luxury products are pricing people out of the market altogether. affordability is the biggest issue in housing. san francisco is adding supply at a rate greater than any other city. investors aren't running away from it. they are not as bullish on it. where are the cities you see more favorable for real estate investors? >> some of the cities like nashville. is an interesting story. austin, texas remains an interesting story. you have young people who go to school and gravitate towards those. if it is an affordable place to live, you get into this virtuous cycle, which becomes demand for commercial real estate. >> how does that traffic to commercial? >> you have office space, you , you got apartments.
all of those are working together because you have a growing workforce in the city and creating demand. young people are opting to rent as opposing -- opposing to buy. the cities that have booming economies and employment gains become the places people want to live and real estate investors want to invest. >> we have this debate about the millennials that they don't want to buy. there are some stories trying to trickle down where millennials are in much better financial shape and they are buying. you have to look at the older millennials versus the younger millennials. the older millennials are starting families. what they are starting to realize is that they are finding it very hard to deal with education challenges and urban settings. they are doing exactly what the baby boomers did.
they moved to the suburbs. the leading edge of the millennials are starting to do that. millennials are having children five years later than other generations. it is a little delayed. the millennial cohort of 87 million people is 20 years in length. we are just trying to see that now. >> what is the biggest issue? student debt? family formation? >> how about all of the above [laughter] . [laughter] fan anda big game show i always wanted the trifecta. the fact of the matter is that down payment is a big obstacle because you need a down payment to buy a home. the way underwriting standards work today is that you need a down payment. >> no more 5% down. >> no 5% of purchase price loans. student at remains a factor. but wages growing, implement
stats are growing. you are going to see the housing market recover at a slow place -- at a slow pace. >> got a favorite city? >> detroit. >> detroit? [laughter] >> i will send it back to you scarlet. scarlet: thank you so much. still ahead, oil has been rallying, but we will show you three charts that may dampen some of that oil animal spirit. ♪\
police operation in which the suspected attacker was caught during raids in this area and the operation is still continuing with one suspect in the building according to one report. he was wounded and detained in this operation. >> you can see the police guarding the street. in terms of official reaction, the there will be's thinking at 7:00 p.m. central time. president hollande will be meeting with the belgian prime minister and we have the white house press six terry saying obama has in briefed today, or he will be and he has been in touch with france as well as belgium. >> we will keep monitoring these developments and give you updates as warranted. the other big news of the day
with mark crumpton. brazilianhe president's support system strength, unable to defend her, this man, the former president who is dealing with his own court battle. our bureau chief joins me now with the latest. thank you for your time. where does he stand at this moment? has been able to take office? >> he has not. yesterday the attorney general said he is no a minister, but not able to perform his functions. we had 10 filed with the supreme court. to join thesed pro-government demonstrations we are expect any time now and
throughout the day. where is congress on the impeachment progress? they finally formed and appeasement committees of a have the numbers that will analyze whether the case can move forward into this than it. that was done yesterday and today the president of the lower has said they can vote if they meet. they can actually vote on the impeachment in april so a bit earlier than the main timeline we were working with. mark: what our president rou seff's chances of survival? >> it is not looking great. there are chance she could be impeached again. they see 75% chance of her being out did and her vice president
taking over by may. with theia leite latest. global news 24 hours a day powered by our journalists in 150 news bureaus around the world. >> thanks so much. the recent oil price rally has the worst may be over when it comes to the oil slum. some fundamentals are bearish. andrew has a note that takes a look at the cracks in the oil market. and made about the u.s. production rolling over which is key to balance in the oil market. if you take a look, as you point out, production is set to grow and that will offset cut elsewhere. >> yes, thanks for having me. the oil market has a lot of work to do. can't belear flag
waived yet. we had a collision of oversold markets with fundamental factors , which pushed us up, bringing the out which growth back into focus. you are still going to have that cap between supply and demand. kuwait expects to increase output. and still that elevated base effect from the other opec nations, and now with the rally crude,r the i've for u.s. production is more of a wildcard. diff isring up the between supply and demand. demand is not exceed demand. it takes a long time for the market to rebalance. see it is steadily increasing, but not above the orange line. what flips it, demand or supply? >> i think it is supply growth
is curtailing. somewhere in the neighborhood of 500,000 barrels. demand is also downshifting. if youf that growth think about china, they grew last year, 60 percent of that driven vice dock piling. so organically they only grew by 200,000 barrels per day. there are a lot of wildcards on the demand side and with the economy weakening, that is not a death in it. scarlet: it seems like everyone it iss on demand because where people see global economic growth. we are oversupplied. alix: that is why oil and stocks go together, which is weird. the historicalt perspective of inventories versus the oil price.
we have a chart that shows the stock change. as you see a peak in stock build, which is the green triangle, you tend to see a bottom in oil price months later. do you see something similar playing out this time around? could be different. it could be the same. if you think about the level of and been toys we are going to ared -- of inventories we going to build, that playbook could play out. i will remind you that there was only one more quarter of stock build that preceded the peak. if we may be hit peak stock stillin 2015, we are going to build, albeit at lower levels and even into the first half of 2017. once we get there, the market is going to be like, so what?
that is overhang underappreciated after this risk it brings dollar, so things back into perspective. >> you still have to go through those inventories. it is not a given we are off to the race is. we?oil, how overvalued are short-term, if we get some more dollar downside, not out of the question from a technical standpoint. it could happen. fundamentally, a lot of producer hedging, taking this opportunity to layer on some more and the market should discount that is a bearish factor at the moment right now. >> andrew, thanks so much. i had multimedia.
yes, it is fascinating. we've been talking about the political turmoil going on in brazil with a lot of allegations of corruption against the former president and current president dilma rousseff. challenges,gal there are protesters in the streets and stocks had been rallying until today. still higher, but a little bit lower today. l continueen the rea to lower. the question is, how long will it last? 43, whichok at the 6 looks at implied volatility. usually when you see it like, you see spike -- you see stocks move lower. this time they are going higher at this name time. that might be one indicator
there are some invest your doubt about how prolonged the rally can be. i want to look at emerging markets generally. this index continues to climb today. obviously brazil is not the driver of that. let's take a look at some of the best-performing indices. gains pared by the end of the session. the philippine stocks rising on the day and chinese stocks also rising in the wake of some real estate dowata. and finally what this means for emerging markets is we have seen lately as recently as january. emerging market index was at its lowest since may of 2009. it has roared back i-20 percent. entering a bull market and it has gone above its moving average. i have been a lot of investors who want to get into emerging markets stocks and they have been doing so. >> thank you, dollars slowdown.
deal, itst ever transcanada buying columbia pipeline. it expands transcanada's reach in the natural gas market. >> standard & poor's cut its outlook unstable to negative. joining us now is pamela, how did this deal unfold? the cat was out of the bag on monday. we saw shares bouncing up 8% as they said yes, we have been in talks for a takeover. they seem to be not working out and we saw this announcement yesterday that the deal had gone through and so a premium was paid to columbia pipeline of 11% to close on wednesday. if you go back to the discussions on march 9, it is a 29% premium. an embark mint into
the gas side of transcanada after being spurned on the keystone xl, being caught up in red tape for the energy east pipeline, moving further into the gas side of the business, which is responsible for the of its revenue. to pay for the deal they have of $3.2a situation billion and they have some planned asset sales. thend of course separately government of quebec has delivered a balanced budget. i understand you will be speaking with the finance minister. that is right. in a couple of minutes. down to good leadership and the other pieces projectedhelped our second balanced budget, cheaper gas prices has helped the central part of canada, quebec and ontario, with their manufacturing.
they've had a bit of growth on that side. consumers having more money and really tight spending controls and they have committed $1.3 billion. and they have put much of what they are making in surplus into a generation fund which will be managed by the big pension fund in quebec to create surplus to pay down the debt. scarlet: thank you so much. delayed earnings filings is coming back to haunt valeant. they have been approaching lenders to gauge what they will want in return for waving a default clause. scarlet: will they be able to stave off default? let's speak to our reporter who helped break the story. is this a big deal or in incremental move? valeant had a rough weekend. they are trying to reach out to
these lenders. they have until march 30 to file and then after that, they have 30 days to kill that. they don't want to get into that situation and they are trying to reach out to lenders and get some wiggle room. it is important for them. alix: what kind of concessions might they have to deliver? >> the company probably has a list of items in mind the lenders wind and they will have to find a middle ground. this could be higher interest rates on the loan, faster paydown of the loans, they would demand a waiver. right now the banks are taking the temperature to see what would be the most plausible thing, the most this site -- acceptable thing and then they will draw up a list of items and say this is what we want to offer. >> so a big to do list. let's give you some of the
numbers we are dealing with, this is using the equities go function which gives you the capital structure. coment has $31 billion blind in debt. that is quite a bit. when you look at the market cap, small by comparison. that is on the heels of this big lunch in the stock price. alix: we have seen a lot of debt and bankers willing to work with energy companies. they don't want a loan default. do you feel like the same niceties will be granted to valeant? don't lenders definitely want to push this company to default. they will try to expand -- extracted their pound of flesh. on the built themselves back of the debt market. in recent weeks, these investors have seen that equity cushion get wiped away. they are confused and a greedy and they are not sure what could
happen. they want to safeguard themselves to whatever extent possible. >> what is the biggest issue right now? originally it was with pharmacy benefits, and then it has snowballed into what is the company's business model? is it something it needs to change? trying to read the tea leaves and no one really knows. the debt investors don't know. last year they were lending money to this company. no one really expected this kind of thing to happen. everyone is in the dark trying to figure out how they can save themselves. is down almost 12%. it's weird when you say only 12%. for as not too bad valeant considering 50% of the other day. scarlet: thank you so much. up, a former fred
>> "bloomberg markets will come back to "bloomberg markets." scarlet: we turn our fake is -- our focus to a new era for the world central banks. narayana kocherlakota spoke about the impact of negative rates on the economy. >> one of the reasons the is aery has been slow level of uncertainty out to their about the future course of the economy and one part of the uncertainty is a concern that a central bank will not be able to
provide appropriate support to the economy if there were negative shocks to the economy. interest rates as low as they are, what is the fed or the ecb or the bank of england going to do if there are shocks to the economy. if you are able to convince a market participant and the public that you have a tool that can be effective in providing support if a shock comes, then they don't have to be, the level of uncertainty will be diminished. they will be more willing to buy goods and invest because they have more confidence in the future course of the economy. we have a function on bloomberg that allows you to see what policymakers to leave the target rate should be. the blue, excuse me, the yellow dots represent the different views. the red line is where the market
sees it. this is the last time policymakers came out with their estimates and of course this is december. we are going to go back to september where there is a dot below zero. spent months on our web team coming up with an interactive graphic on which the terminal function is based. ehold the statement came out and someone had put negative dots and it broke our chart. professor, did you break the chart? >> you will have to wait 10 years to find out who is responsible for that. , there is a serious negative that story, interest rates will take us into uncharted territory. this would be one of the more
minor ones. it behooves the fed to start talking openly now about the possibility of using rates, partly for the reason i described, to support the economy and allow financial institutions and other members of the public who rely on the idea interest rates will be positive to prepare for the eventuality they might turn naked if. -- turned negative. yesterday the chair made some zero interest rates aren't on the table. that works against what the fed is trying to accomplish in terms of the economy and also you really want people to be ready for that possibility as opposed to being surprised. swedenark was the first, in 2015. is four years enough time to
determine whether the experiment is a success? >> people want to see a clean piece of evidence to say it has worked. you are always using it in the context of that things happening. if you are lowering interest rates, things have happened to the economy better not great. it is challenging to sort out, how bad would things have been had they not gone negative? ofee the same mechanisms easy money, monetary policy working in these countries. the one caveat is a lot of financial institutions have found it more challenging to lower their deposit rates to their customers than they would with a standard interest rate cut. >> narayana kocherlakota, former minneapolis fed president. fedas interesting, if the comes out and says negative rates are on the table, they
might be able to raise rates faster, which is kind of counterintuitive. >> there is a lot of psychology involved. "what you, tune into missed" today. we will discuss brazil. at 4:00is coming up p.m. and on monday special coverage of apple including an all-star lineup of guests. do not miss are one hour report at 1:00 p.m. eastern on monday. ♪
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11:00 a.m. in san francisco. welcome to "bloomberg markets." ♪ bloomberg's world headquarters in new york, good afternoon. i am david gura. the s&p 500 and races its gains and crude oil is fluctuating today in less than a three month high. has put chesapeake ceo his biggest backer in tough financial straits. and lawmakers can vote on whether to remove the embattled brazil within the month. and right now, stocks are continuing their upward trend that we have been seen for the past day or two. right now, the