tv Whatd You Miss Bloomberg April 11, 2016 4:00pm-5:01pm EDT
u.s. stocks closing lower this afternoon. the dollar tumbling to a six-month low. breakingdo have some news concerning italian banks. financial institutions have agreed to set up a fund for banks launched by an asset manager. this is a big deal for banks for the italian banks. they have a lot of bad performing loans on their books. they're coming together to try to find a way to take these nonperforming loans off the books and support them in some capacity. institutions agreeing to set up a fund. is some there anticipation that some kind of deal would come together because before european markets close, at least 7% leading
gains in the banks index. there was some build up there already. this chart shows the stress these banks have been under. years for the main banks in italy. that purple line was the elephant in the room. it is a police third-largest bank. the credit default swaps and really spiked in the beginning of the year. they were up by about 100% this year. the orange line is unicredit, under stressnks and trying to come up with a fund to save the banks. are 360 billion. it has put a lot of stress on the banks. nonetheless a huge stress and the lending.
criticisms the big in europe is they have not done enough to clean up these bad loans on the books. perhaps we are starting to see some progress on this. causing a lot of anxiety. alix: the other countries really got it under control many years ago and they are late in doing this. the impact to see u.s. stocks. we begin with market minutes. major indexes closing at their session lows. a study dissent over the last hour of trading. felt very much like last week. overall, still fairly quiet. best performing stocks within the snp, chesapeake. a big rally in oil and gold. chesapeake now has a lifeline. it extended its credit line,
taking a huge debt load off the chesapeake back and buying this company some time to get their house in order. aboutt was talking italian banks. surged, european banks today within the european market led by italian banks. on the hoped there would be some sort of fund to help these nonperforming lows. and speaking of europe, let's check out what is going on with the two-year yield on the german bund. if you look to that field as some sort of risk appetite or inflation, we are still much seeing much lift at all at that. scarlet: currencies the
marketwatch last week continuing today. the dy x dollar index trading at its lowest in three months. it has fallen in eight of the last 11 trading days. in terms of currencies, commodity concerns and the japanese yen. if you were to look at a five day chart of the dollar versus the yen, the pace of gains has moderated. mr. yen, the former finance minister in charge of intervention at the central banks told us that he says the yen may strengthen to 100 per dollar by year end. alix: in commodities, the story 200rent closing in on that a moving average. on sundayhe meeting with producers coming into talk about a production freeze.
he also have a lot of north sea maintenance. all of that adding to a much mucher and potentially and tighter market for brent. scarlet: ellis take a deep diving to the bloomberg. you can find all of the following charts at the function at the bottom of the screen. alix: chesapeake one of the biggest movers. how their debt is trading right now. on average, there debt rallied i 10%. these are the unsecured loans. they really bottomed here in february. you had a nice rally in bennett kind of a off of it. they all had a big spike today on the news they get this credit release. they pledged the real estate.
everything they had is no collateral to protect against these last. they also have an option for $2.5 billion. they had some wiggle room until september 2017 and the debt is reflecting that. >> they paid up to yearly but they are buying time. talk about this year's peruvian elections. the daughter of the former leader came in big. it's just the first round. she had a solid performance. ats is a chart looking peruvian assets. that's one of the biggest rallies in a long time. pair with thency sole having a big day. electioniking that result. fujimori is the big favorite. more to come but she is seen as
being the pro-reform, pro-business candidate. >> not all japanese stocks are feeling the pain. a look at that orange line. that is a small-cap index less vulnerable. has really taken off since mid february. valuation is clearly not the driver here because this index trades at eight times earnings. those are our charts. be concealed of them in more on twitter. alix: joining us now is oliver renick. scarlet: great to see you again.
investors bracing for the worst quarter earnings the financial crisis. i feel it we have been saying the worst earning season since the financial crisis yet. stock prices in the u.s. are still near their 2016 highs. guest: there are a couple ways we can look to gauge. the s&p is generally pretty flat. we try and assess what people are really preparing for, whether or not earnings will be a big part of this. i wanted to bring up a couple measurements here. you have the mix. -- the brakes. there is also another one that really had a big move today. it's important to keep in mind while they gauge sentiment, is in different ways. cks is based in option
prices. essentially right now, you see this big divergence between the likelihood that people see upside moves in the s&p 500 to the degree to which they see a downside move happening. we have this big move in the index. there are these three-month options. it's showing you may be there is some sentiment not great looking in the next three-month's. you have to also keep in mind that you basically have something that is affected overall by the price to buy put options. if you take that chart out, i think we have them back to 10 years. that index is actually just been slowly drifting up since 2007. that is the orange bar there.
onot of people are fearful 2009 because you have to realize that index has been moving up because of the price of put options getting more expensive. thing tonteresting look at. does it tell us a bit of a different story question sure. the things that people are talking about will be a bad earnings season. we know energy earnings will be dismal for that we also note the strong dollar will once again become a factor. what else should we be looking forward to? guest: you have dollar and oil. these are the two big factors. that has been a driver of the weakness we have seen. the question is whether or not those will turn from headwinds to tailwinds and touching by expected earnings, it's not looking so hot.
as we point out, the s&p is basically flat. you can see the valuations have actually risen a bit. valuations divided by earnings here, generally flat but earnings come down a bit. now you have an ultrasensitive market where people are paying and i think that might lend itself to the volatility we are used to seeing around earnings season. alix: bank of america had a commentary saying investors -- many earnings expectations are so bad because they will be better in u.s. than anywhere else. guest: it's a pretty easy hurdle to make. history has shown owning stocks enduring earning season is actually a reward. you are rewarded for the money and you get a decent return because most of those companies
will beat. i don't think there's any expectations negative nine will come down to negative five. it will probably be better than estimated. go figure. great to have you. thank you very much. up, the bondng market is becoming a believer in the federal reserve. and we are still waiting for all keller to report first-quarter results. it will be the unofficial kickoff to first-quarter earnings report season. when we come back. ♪
in upstate new york, criticizing record oninton's fracking. he said mrs. clinton has not led the opposition against fossil fuels but rather came on board at the end. ted cruz campaigning in southern california. the state holds primaries on june 7, the last day of primary voting. ted cruz was scheduled to appear in orange county before an evening appearance in san diego. the less naval officer charged with spying for china and taiwan. the suspect identified as lieutenant commander edward lim. u.s.ter became a natural citizen. he is charged with five counts of espionage and attempted espionage. -- anada, you are more remote aboriginal community declared a state of emergency after 11 people attempted suicide over the weekend.
the town has a population of 2000. prime minister justin trudeau said the news was heartbreaking. he made improve living conditions for canada's population. the health minister said "we must focus our efforts on improving the socioeconomic conditions faced by the country's indigenous peoples." the do gender just -- it's their second day of the week long royal tour of india. prince william and his wife placed a wreath and bowed their heads as they stood in front of a memorial for gandhi. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureau's
around the world. alix: the bond market is starting to believe the fed, inflation can bounce back. expectations rose 23% in march, the biggest monthly rally since 2011. still less than the target of 2% but a huge improvement. manages $3.8 million. she joins us now from boston. kathleen, does this rise in inflation expectations last? guest: i think it does and i think it's important that it keep going. the fed did a great job anchoring expectations about the time has come to let go. joe: how much of an increase in inflation expectations simply reflect that we have seen this huge rally since late february, early march, a rally in
commodities. has been, the outlook lifted for everything. how do we isolate the inflation component of people not taking the world is going to end? guest: it is in response to the movie commodity prices. in the middle of february, we at $26 aing at oil barrel. what the market was pricing in was a global recession and the market beginning to think inflation or commodities are on the rise gives growth expectation much better chance of moving higher in the markets moving with them. alix: your fund was one of the best-performing and the first quarter. how do you want to be positioned going into the second quarter? well, in our multisector portfolio, we don't own tips and core plus strategy,
we do. that is a good way to take advantage of rising inflation expectation. one of the best ways to take advantage is in securities that are leveraged to commodity prices. have a been al great place to be in the first quarter. there has been a lot of evidence that inflation pressure is starting to build. i think that will be one of the highlights this week. alix: it will but nevertheless, it feels like traders are complacent when it comes to the risk inflation may pose. when you look at the premiums, how much compensation traders want to own, it's negative. is that a risk? guest: it is a risk. the biggest risk i think is for the fed. they do want to let interest rates move up but they have got to do it gradually and they did such a good job at anchoring
expectations at the zero bound that no one believes inflation could rise again. that is why i think that you look through some of janet yellen's comments and she talks about the asymmetric balance with interest rates. that if they were to lack it, they have a plenty of room to raise rates but if they were to air on the other side, they don't have as much room. i think they want to be very patient and let inflation expectations continue to build. scarlet: one of the narratives is that if inflation does pick up, it might pick up quickly and leave the fed flat-footed. do you believe the fed has more control over slowing down inflation or preventing deflation? they clearly believe they have more room to get a handle ramps upion as it quickly. that is a risk they are willing to take right now yet the
markets don't believe it yet but i think the fed will continue to do just the right thing to get the markets moving. joe: i have two follow-up questions. how hot do you think the fed will be willing to let it run and is there something you think the fed could do communication-wise to convince the market that 2% is a symmetrical target and not a ceiling? i think there's not a lot they can say to get the market cannot believe it. i think it will be actions speak louder than words. we will have to see. that is -- the market has been so anchored, it needs a big push to get it going and i think that is what is coming down the pike soon. alix: thank you for joining us. scarlet: some new developments regarding the ipo of bass global.
one cent to six cents a share. the stock is quickly erasing its post market again despite being on earnings. we're still waiting for more numbers to come through. outlet: another statement from the company's operating between downstream and upstream. the downstream business less profitable and all business. the upstream business is where all colors really looking to make its money. alix: first-quarter revenue coming in at $4.95 billion. estimates were for $5.2 billion. definitely a miss on the revenue side. the revenue coming in like to but earnings coming in better than expected. it it tale of two companies. movingoa stock has been with the minor etf, trying to shine their light on the downstream operations. this headline.
alcoa says it's on track to meet its 2016 "cost curve goals." companies in the resource sector, trying to cut cost dramatically as the commodity complex shrivels. helps keepost curve many companies alive when they maybe shouldn't have been because their cost came down so quickly. it's interesting they want to see even more. a beat on the earnings aside but not on the revenue. $5.9ue coming in at billion. scarlet: we see the shares falling in after-hours trading. it was gaining as we awaited the report but now the stock has fallen in the wake of this miss on the earnings line. really comes down to the commentary the company will give regarding the separation of the businesses. one particularly bright
spot for the company there. alix: if you want to get a good read on the global aluminum market, it is no longer in the u.s. it is in china. it's hard to get a good read on the global gdp from alcoa, which is what we used to do. scarlet: we will continue to monitor the stock. right now, lower in after-hours trading following the earnings beat but sales missed. his time tor says revamp the central bank and why the fed should be open to regular government audits. what would janet yellen say to that? ♪
alix: we have new headlines. 2016 aluminum demand growth will be 5%. a previously saw 6%. the company beat the top line. the revenue coming in like at 4.95%. justifying but they are doing by splitting themselves. the aluminum segment of the world which was terrible for them. that part of the business dropped 40%. on the flipside, it really helps them make sales.
airplane manufacturers, that is what the you're doing by doing this. scarlet: they want to load the old companies up with debt and have a new company. the globalrgets, sales targeted to be up 7%. 2016 global production charges, that would be up 1% to 4%. but: we will keep watching we will look at the stocks after hours. give me a second. the stock looks to be bouncing around, yes, lower. nonetheless, getting rid of the overhang to see aluminum and demand. scarlet: time now for first word. mark: the national institutes of
health says the decision group move funds from battling ebola to battle zika virus will not be enough. that is word from the director anthony fauci. today, the cdc says mosquitoes that carry the zika virus are pregnant in 30 states versus the 12 previously thought. nih is on track to begin early human testing this summer. finds bernie sanders has one advantage over the front runners. people actually like an by 48% to 39%. more americans have a favorable than unfavorable view of him. net positivet rating in the field according to a new associated press poll. poll iss unfavorable 55% and donald trump is 70%.
another 38 people were wounded and most of them in critical condition. all were new army recruits, and this. recruits says the attacker was on a motorcycle when he rammed the bus, detonating the explosive. kerry visited the memorial for hiroshima's each atomic bombing. 140,000 japanese were killed. secretary carries the most senior official u.s. official to visit hiroshima. global news 24 hours a day, powered by our 2400 journalists around the world. back to you. scarlet: for more breaking news,
sales makes for the first quarter. cuttingluminum maker is jobs and plans to cut 600 jobs in the first quarter. a severed headlines shows 400 jobs will be cut with the 600 jobs. nevertheless, they are reducing expenses further. would you miss? janet yellen is breaking rank with the central bank. dartmouth college professor is targeting for areas of change. make the fed a fully public institution, more transparency and processes of breaking -- picking a president and setting a term limit for president or board of governors. making entire subjects for review. here to delve in is andrew levin. >> you have unveiled this
four-point plan for federal reserve reform. why the need? why does the need did this? >> the federal reserve is 100 years old. it is not surprising that once every 100 years, there is a time to make reforms. and thism i presented is developed with a lot of consultation that was very helpful, it is supposed be sensible, pragmatic and none sensible. trying to be careful not to throw the baby out with the bathwater. focus on specific reforms that are needed. number one, the federal reserve is the only central bank in the world that is not equally a public agency. the regional federal reserve banks are literally owned, they
are owned by commercial banks in each district. the boards of directors of each ninenal fence, six out of are chosen by the number of commercial banks. joe: what is the practical effect of this unique structure? >> i would say the number one problem is the federal reserve needs to have full public confidence in order to be sufficiently independent from political pressure and extent to which the political reserve is opaque. it is hard for the public to understand, it undermines the public confidence and overtime hurts the fed's ability to be effective. alix: let's talk about what the current share has talked about. >> of course, reconsider the
appropriate structure and i simply need to say i do not require the structure as broken in the sense that it is. it is failing to put into place good monetary policy, failing to collect the information we need about would is happening to crafted policies. joe: you describe your proposals as being pragmatic and not partisan witch seems d.o.a.. is the basic gist is you think the fed should open up a little to avoid a much more radical form of loss entrance errors he. music critics halfway and opening up to prevent some of the arches critics from really politicizing with the feds does? >> another way to explain this is my proposal is about good governance, transparency and
account ability. ability. in many other aspects, over the years, both parties have come together to integer reforms that promote good governance, accountability and transparency. the gao is highly independent. the head of the gao is the comptroller general. he has a 15 year term. he is appointed by a very careful process that involves key members of congress from both parties and the gao has an impeccable reputation for its analysis part of my proposal will be to bring it to bear and looking at all aspects of the federal reserve, including management of operations, policies and procedures. you think the fed
would be different in the financial crisis if it implements of these proposals you are outlining now? can greatestion -- question. acknowledging the banking supervision and regulations department at the federal reserve was not adequate, not well-managed and not achieving its goals and objectives. well known that was at the time. wasuld hope if the gao generateiews, naked that operational management issue and try to do something about it. would have prevented the crisis but it might have mitigated the risk. alix: are there any central bank that does it right? >> ok, great question. i would not say any central bank
is perfect. all of these things are things that involve overtime. external reviews. the bank of england has a quarter of directors that are outsiders that have the ability to examine all aspects of the bank of england's operations and procedures and policies. that court of directors has an independent evaluation office that works independently. it is a different country with a different government cut -- structure. the gao could play in some ways the kind of role that the court of directors ideally plays as a bank of england. likewise, the blank of norway, sweden. again, that works well for them that the united states might follow a different example but a
linethey missed on the top on revenue. shares are falling in late u.s. trading. earnings release were delayed a bit as the business wire, the press release from warren buffett berkshire hathaway, says it was temporarily halted. nigeria is considering selling tandem bonds. alix: they will cut barring costs while cutting deficits. they want to raise as much as $1 billion in national capital which is forecasted to be over $11 billion this year. the economy is reeling from the crash of the cost of oil a. south korea is the only country to have issues. tesla motors is recalling several hundred of cars. test revealed issues of the third row seats. they are devising drivers not to have anyone in the seat. it covers vehicles made before march 26. it will b
that is your bloomberg news/. . alix: britain's daily mail newspaper is interest in buying a pioneer. neining us to discuss is dway morriws. s. s. nennette, what is the difficulty be of a foreign company? >> it is getting through the regulatory regime and encompassing the purchase buying, daily mail. the bigger challenges will be what is the combined companies looking like. you can get through the regulatory hurdles which might be easier for some unlike the daily mail to get through. this respect, you have to ask yourself does it make sense? joe: does it?
>> no, i don't think so. first, financing. second is financing. first, the daily mail cannot afford to be this on its own. it has to look for partners or partners. the second problem is the monetization. yahoo! has failed to have digital advertising revenue. together andwo what resources would you put behind it to make it happen? scale would not make things better. >> no, it would not. it is only content. they have their fabulous celebrity pages. and then yahoo! has good content.
it is an intimate branded company more so than another company. it has been making content acquisitions. the last problem is product. what can they offer? joe: it sounds like the problem is everything. are there any deals that can be an night was to these -- these?isagolous to you have this company partnering backer.e what are good some backers? yahoo!. look at got it has value behind it and they are straining because melissa mayer has not brought value
back. when you have these transactions, there are a returnons to see over a certain. of timn period of time. they want to put in more money to help the company grow. will see a fair amount of money to make the acquisition but then when that happens, where does it come from to grow the entity? what do you think is the best mashup? >> yahoo! if they can pull it off. what if verizon does not go for the deal? what if softbank says they are not interested? it can be very expensive. maybe they are being smart to give themselves the opportunity to be the last man standing and
looking at loan cuts as banks lower the amount they will lend companies based on the oil price. the idea -- less capital, more default, more production and oil markets can rebalance. joining us now is the cohead of yield investments and senior precordial benefits. banks will do whatever it takes to save energy companies. how many defaults do you expect? >> i think there is a happy medium. companies will do whatever they can to stay away from defaulting under debt. the examples are very timely. just to become a assets. there are too many companies with too much debt the do not have the same options that chesapeake did. in our view, the faults are higher this year in oil mining and all will and gas. scarlet: what is the estimate? >> 5% to 6% for the market.
we think about 3.5% from oil and gas and metals. that is with the danger is. scarlet: we are looking at high yields spread versus the high-yield default rate. the default rate has not matched it. what will be the trigger? is overallrtunity spreads are pricing into the default rate above 7%. we think that is to live. think thatarea, we is the ever center of the problem of there are companies that own and that can get through this. alix: what recovery rate do you expect? we have seen that trail off recently. >> i think this cycle will open a lot of eyes. there are very poor companies with capital structures and bad assets. i think those companies will have very low recovery rates, below the longer turn average. alix: the other issue has been, we have seen a lot of investors willing to pu for phil money
fufillce -- companies in the space. high-yield companies that are off the cliff. who is right? >> it is funny, we are into markets. they have a good business, low to moderate sheets. earnings were growing, maybe single digits, a shrunk profitability ratio. there are companies where there is very little hope. the markets opened for the companies who have that clean balance sheet and are not open for those that are challenged. scarlet: you don't find any concern that tension low? >> i guess a couple of points. number one, we are late and the business cycle and the credit cycle. that by itself means we have to take extra caution.
new issuances for a variety of reasons. one of which we don't have this huge capital expens expenditure boom. we don't have a lot of activity in the market. . alix: what sectors are you looking to take advantage of that provide opportunity? >> one of the themes we have identified -- we want to take advantage of sectors facing strong u.s. consumers. u.s. growth continues to do well. we add jobs in a monthly basis. auto sales are up. we are looking at wireless, homebuilding, consumer products -- a sector is facing strong u.s. consumer. alix: definitely not energy. scott, nice to see you. coming up, what you need to gear up for tomorrow's training day. ♪
-- 2et: don't miss this a.m. eastern time, it is expected to increase 8/10 of 1%. year-over-year, excuse me. it has a lot to do with truman travel packages. and increases volatility. joe:year-over-year, excuse me. i will look at small business surveys coming out tomorrow at th 6:00 a.m.. definitely want to watch. scarlet: csx earnings tomorrow. alix: obviously, rails haven't hit by this. they are losing in the coal business but have been much more expensive by rail. are they losing all the oil business as well, especially production. joe: lots of good stuff to watch