tv Bloomberg Markets Bloomberg April 14, 2016 12:00pm-2:01pm EDT
from bloomberg world headquarters in new york, i am scarlet fu. alix: imf alix steel. stocks are fluctuating today, trading around the highest levels for the year that the big drag is technology shares, they plunge and we will have the latest. scarlet: in europe, bank of england officials are weighing the possibility of brexit. a bloomberg poll gives a 24% chance of the u.k. leaving. alix: plus, dennis lockhart says he will no longer push for a rate increase in april. inflation is still at the top of the mind of hollis -- of policymakers. scarlet: we are halfway through the trading day. let's head to the markets desk where julie hyman has been tracking the moves. when it comes to equities, we are moving to section -- two
session highs. julie: moving north but not much north. not much change in the overall averages. it is indeed a better than it was earlier. it is an individual stock story today. i wanted to look at some of the biggest pushes and pulls that we are seeing. first of all, the stocks that are helping the s&p 500. jpmorgan rising for the second day, bank of america rising despite the fact that earnings missed estimates as the company cut more expenses. is sounds like the ceo willing to cut more costs in order to preserve profits. that appears to be what is driving shares higher. exxon mobil is doing well and citigroup is out tomorrow and is also higher. on the downside today, we do have ca coming out with preliminary earnings. by 19%hares are plunging
and it looks like we have a typo on the last one but intel is declining. they said they are not optimistic about the earnings there and i take it we have breaking news? alix: yes, for microsoft. the company is seeking to avoid a lot that enables secret data words. it wants to tell customers when the u.s. government asks for data. scarlet: it says that this law violates free speech and the customer's right to know when they are being investigated. alix: microsoft is off the highs of the session but nonetheless, an interesting headline. scarlet: and on a different issue, but related, it is intriguing that these big tech companies feel emboldened to come up against the u.s. government on a number of different issues here. it is intriguing. not affecting the shares just as
we didn't see apple moving very much on its battle with the u.s. government. heading back to some stocks, should be get back? i want to look at airlines today. if we can flip to those. delta coming out with numbers and expressing its willingness to cut capacity. we have seen delta growing capacity and number of seats that it offers on both the number of flights it offers and the number of seats on the planes, and that has put pricing pressure on it but it is saying now that it is willing to cut capacity. other airlines are also rising. i should mention the rally that we are seeing in bankshares that started with jpmorgan yesterday and continued with bank of america today. it is spreading to regional banks, they are rising as well. since are getting a lift as well. julie hyman, thank you so much. alix: let's get the first word
news with mark crumpton. mark: the president of the world bank says the state of the global economy is weak. he is warning that the kind of tax evasion exposed in the panama papers investigation is fueling poverty around the world. >> this is a great concern and we would bunch all of these kinds of activities under what might be called illicit financial flows, where corporations don't pay taxes and individuals take profits out of a particular country. for us, it is a fundamental issue of trust. if you are trying to end extreme poverty, avoiding taxes and payments and taking state assets out of a country, these are damaging. mark: he made these statements during the spring meeting of the world bank and the international monetary fund. a powerful earthquake with a pulmonary magnitude of 6.5 knocked over houses in southern
japan. a news agency says one person was killed and seven seriously hurt. the japanese red cross says it admitted 45 people, including five with serious injuries. witnesses say houses collapsed. water supply was cut off. people may be trapped in the rubble. officials say there is no risk of a to nami. japan's meteorological agency said the earthquake was centered in the -- the district, east of the nuclear plant, the only when operating in japan. there are reports from the associated press that donald trump's campaign manager will not be prosecuted for allegedly manhandling a female reporter following an appearance in florida in march. the campaign manager was charged with simple battery, a misdemeanor as the video showed the incident of the reporter as she approached mr. trump to ask them a question.
the prosecutor's office is holding a news conference this afternoon. elevated lead and copper levels have been found in the water in 19 detroit schools. the district says they're working to fix the problem and are providing bottled water. emily's have been notified. lead is a neurotoxin that can damage child's brain development. global news, 24 hours a day. powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. back to you. scarlet: back to equities, nothing seems to be able to shake the s&p 500 out of its range and earnings season looks pretty grim with that income falling 10% in the first quarter. meantime, the s&p trades at the all-time high. alix: here to help us sort this out is julian emanuel, the executive director of derivative strategies at ubs.
what breaks us out of this range? the near term,n we think we do need to take a pause. but over the last couple of days, financials have been trading as well as they are, it is very positive. and it tells you that a lot of sectors, where you have a discounting of very poor news and when you get better than expected commentary, particularly in a place like financials, where you can benefit from a steeper yield curve and healing capital markets and potentially public interest in the equity markets down the line, those are the types of things that encourage us and we eventually will break out of that range. scarlet: one thing i can't figure out is the vix, it is that 13.5 right now. alix: so volatility is low but the credit suisse rominger is
high. so we are not scared but the sentiment is still there. how does that make sense? the gap is wide. julian: on the one hand, the downside protection has remained expensive throughout both the fear and the lack of fear over the last couple of years. that is a function of a new regulatory environment where as involvedot quite in speculation as it once was. but the bigger message in the short-term is that as we february,n the vix in we seem to have undershot now. and the earnings season would normally be a catalyst, given the fact that we are looking for such depressed numbers which we think will be easily beaten. but because we have come so far, so fast, the have priced the risk like the slower economy, like inflation creeping up and
political risks creeping up, we think we will cause here. scarlet: first quarter earnings outimates are pretty low if y compare them to what we have forecast for the second quarter, third quarter or fourth quarter where you see the numbers recover is little bit. and you can see it here as the yellow line or orange line, play at the bottom by $26 a share -- 30 much the trough. is that the trough? julian: we do think it is. the second quarter could be a little soft as well. but the point is, if you can't look at all earnings estimates alike. there are a number of companies ,hose prices have been bid up particularly defensive stocks and cyclical stocks in the first quarter as investors discounted a recession that isn't going to happen and $50 oil, east on a stronger economy, which also is not going to happen. so those companies are going to
report your on your declines. their socks are not going to respond positively, even if they beat during this quarter. , places wheree they are going to grow, they will respond positively. scarlet: you have mentioned a couple of times that we need a pod is. how deep is the pause? nothing like the plunge is that we are used to over the last several months. because, quite honestly, what we call the negativity bubble that burst in february, when there was true panic in the market, that type of residual effects takes a long time to wear off. and investors are relatively defensive. and defensiveness is actually a positive for equities. scarlet: it is a contrarian indicator. where do you see defensiveness in the market? you look atn, if
financials over the last couple of days, they are telling you that people are defensively positioned. and you don't necessarily need good news, you just need less bad news because expectations have been so beaten down. and that is one of the growth areas that we potentially see going forward. alix: take a look at the bloomberg. i have charted the big banks going back to august of last year. the turquoise line is the s&p and that we have jpmorgan and wells fargo. and then you have citigroup and bank of america. yes, we have seen the rally but are these going to close the gap with the s&p? that is a pretty serious rally. julian: it is. but if you look at it, it is
typical latter stages of the market and we think we are approaching the latter market. banks do tend to lead and the fact is, when we look at the fear that gripped markets in january and february, surrounding credit issues with energy exposure and so on, the mere passage of time and oil is going to be very beneficial. scarlet: julian emanuel, thank you for giving us your perspective. alix: coming up, check out the chart that prints a clear picture at how well this stock is done in 2016, doubling in price and shooting to another dimension. scarlet: any guesses? alix: we will reveal the mystery stock. julian: you have stumped me. alix: i'm going to say 3-d printing stock? we will reveal it will make him back. ♪
alix: you are watching bloomberg markets, iem alix steel. scarlet: julie hyman has the answer on the mystery stock. we talked about it clear picture, prints double he in price. convinced it is 3-d printing stock. julie: she is correct. but there are a number of them. d the one that is named, after 3-d printing. analysts say the company has the potential to improve for profitability with revenue
growth. there is a new ceo over there. used to be at hewlett-packard and he is taking them in that new direction. here is this chart and it has already done extremely well your to date. and in today's session, they're getting a lift from a relatively shorted stock. we are also watching to pull play from jpmorgan. sales are set say to sequentially improve from the bottom in the first quarter. and analyst says that in the school 2017, earnings per share will nearly double to close to what they were in 2014, because they have come down. chipotle is a highly meaningful brand. though shares are up i nearly 3%. and i want to get back to the semiconductors.
we talked about intel if you moments ago. a timeline semiconductor is also playing into the chip trade today. it forecast second revenue well below expectations. demand for iphones is waning to some extent. all of that contributed to the declines that we are seeing. we are seeing that across the board. scarlet: julie hyman, they do so much. you be back in the next hour. alix: on the commodities front, oil is enjoying another day of gains ahead of this weekend's talks. that it has been a rough run for commodities and -- said it might that end anytime soon. he said he is pressing on with plans to refinance debt. and spoke earlier on bloomberg television.
>> the markets are difficult. and to sit here with confidence and sebi worst is behind us is not realistic. our job is to come in every day, focus on the business and deliver results and at the end, the market will judge us by those results. >> what priorities do you have for the year? >> we have had three core principles, and they haven't changed for the last year-three years. in civil number one was to refocus the firm back on its core competence. our core competence, what we have done for the last 30 year history is in assets like physical merchants. we manage the market risk and credit risk and operational risk. we do that well. when we don't do as well is a steel company or a mining producer. so the first focus was to focus on that. if you look five years ago, 45% of our acid-base was in mining and agriculture. today, 2%.
the second core principle was to diversify away from industrial to consumer related commodities. >> has said it needs to be smaller and nimble. how does it get there? are you where you want to be? >> i think we are. we have gone back to assets and we are much more focused on our oil and power and gas business, we have a bounce between investor and consumer commodities and we are much more geographic. so if you look at five years ago, 42% of our volume was in china but today, the u.s. is larger than china. so we have a more diversified business. those are the three core strategies. >> you said the oath and in the room is -- where are you on this? >> we have always had a policy that we don't talk about the deals we are working on until they are done. so what i can say is that over the last 13 months, our
shareholders, banks and parties that no us best and interact with us every single day, they understand the balance sheet and the business and continue to be supportive. it is an indication of how the financing is going. still ahead on bloomberg markets, nomura bank is shutting the european trading division. will there be more blood on the streets? ♪
billion in outstanding loans to the gas industry. companies earned almost $10 billion, almost half as high. because of volatility, lawmakers are putting money aside for energy levels. provisions have increased 80% from this time a year ago. the higher provisions help drag profit lower by almost 6%. net income is just under $5.8 billion a year earlier. their focus on basic banking makes it a key metric. as you can see, low interest rates have put pressure on. s the u.s. biggest mortgage lender. the money and made from offering and servicing loans rose to $1.6 billion. we will get more color on how it is conditioned we speak with the cfo today. alix: another dry con revenue
for some banks is trading. nomura security is shutting down in europe after failing to make a profit and mark lees did the same with the asian division. --'s bring in helen nash what is the problem? >> the problem is oversupply and competition. it is a business that looks better than others, because it continues with relatively less capital and it is easy to get into but there are so many actors offering the same kind of service that it is difficult to differentiate yourself from others. unless you get to the cap five, you are really going to have trouble gaining ground. alix: there is a link here to hedge funds, as well? week is all of these different banks are offering different services. >> absolutely.
hedge funds have been the big winners over the past five years. there has been a boom in equities. people are wondering whether right now, when banks are trying to start to get into equities and see if they can make more money, whether they will run into trouble. if the gains from hedge funds will slow down. that is the worry. scarlet: what does this mean when it comes to jobs? do these people move to bigger firms? how do they absorb these losses? >> a good point. research analysts. there just are not that many houses. especially with the regulations coming in in europe. maybe they can try to set up new independent research houses, those are popping up that it will be tough. they may have to go to the buy side. it will be tough. alix: who else might be on the
block for cutting the trading revenue? >> like i said, if you are not in the top five, you will be looking closely. hsbc and others who have said they will look closely and cut jobs over the next few years. we may see cuts there. banks are trying to shrink themselves in some areas. it could be certain areas of the business. it will be a trickle rather than a mass exodus. alix: thank you so much. scarlet: speaking of banks, don't miss today at 4:00 p.m., speaking with the cfo of wells fargo. ♪ . .
isk: the new york primary just days away and hillary clinton and bernie sanders will return to the debate stage once again tonight. the face-off is viewed as a crucial opportunity for both camps. this is clinton is trying to snap a seven state losing streak while senator sanders needs to make up around in the race for delegates. the latest polls have the former secretary of state about 10 points. raging political fight over immigration comes to the u.s. supreme court. the dispute could affect millions in the united states illegally. the court is weighing programs that could shield roughly 4 million people from deportation and grants them the legal right to hold a job. american ships have started conducting joint control -- joint patrols with the philippines in the south china sea. defense secretary ash carter says nearly 300 troops, including air force commandos will remain in the philippines
through the end of the month as part of a military buildup sure to inflame tensions with beijing in the region. in an unforgettable night the nba -- the golden state warriors became the first team in league history to win 73 games in the regular season. the warriors eclipsed the 72 victory plateau set i michael jordan and the chicago bulls two decades ago. 37-year-old kobe bryant playing in his final game turned back time against the utah jazz, scoring 16 points for the lakers . the dramatic offensive showcase marked the finale of his brilliant twenty-year career. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. on u.s. a quick check
stocks -- the index coming off the best of the session, holding near four-month highs but losing some momentum in the last couple of minutes. oil is trading by about 10 or $.15. scarlet: let's go to abigail doolittle live at the nasdaq. abigail: priceline is one of the best boosts of the nasdaq today. saying first-quarter checks are proving positive. one analyst believes a are likely to hit the high end of estimates when they report their first quarter. we see it may support their target of $1550. the stock is bullishly above its 200 day moving average and could be pushing the stock 12% higher than current levels. alix: airlines are higher today with jetblue leading the way.
abigail: jetblue is sharply higher. the stock rose on the news that they companies traffic for the month of march group. today, in sympathy with the first quarter beats, some good things going on with george ferguson telling me out of that call was the idea that the domestic market did not weaken sharply in the first quarter. this couldove up and be something that would pressure the stock, up against its record peak from last year. scarlet: we want to continue our conversation. you have a market perform rating with a $24 price target. the happens next with carrier now that they are going
through with the merger? plan is to grow organically and they have announced a lot of new services using their first class product. aey are taking delivery of 321 and that's one of the best products in the area. fort lauderdale to the west coast -- basically you need to do long haul with this because there is so much demand for this. that means long-haul. is talks that hawaiian airlines might be a partner. is that a possible tie up? hawaiian air flies into jfk.
if you mean are they going to take it further and do some kind of joint venture, that's a possibility. that's definitely a possibility. would it really be enough to offset the consolidation we are seeing? meaning they are going to have to do m&a at some point? is it really going to be enough? guest: the typical analysts answer -- they are going to grow first and foremost and that .akes sense remember they have a pretty big operation internationally to the caribbean, central america and they will use that as well. relevant, they
will have to continue to grow the way they are growing and more rapid growth, which is why we have the market to perform. scarlet: another airline you have an outperform on is delta. it was seen as a smooth consolidation but it is struggling with falling unit revenue. too much capacity means basic bottom line is there's too much capacity right now in the market. we are seeing business traffic kind of not grow and as a result, the airlines are doing what they do best, which is just er to on the leisure travel fuel that demand. lower prices are concluding to lower pricing and we have always said a one quarter lag will move
prices up or down and ticket prices follow. up 40%, you would expect to see fares start to go higher. for 2.5% forecast is or 4%. capacity? guest: it's going to be a continuation of decline. better than wele hoped it would be. bad and we've had negative unit revenue. stock rises rising without having increasing revenue. i think their message this morning is if we don't see
pricing start to improve after may was kind of squishy. i don't think they use the term squishy. june and july were ok. if they didn't see an improvement, capacity would come ,ut and earlier this week americans said they were cutting capacity in the second half of the year. united had never intended to grow and we use that fairly favorably. airlines are talking about that -- it helped them turned back to profitability. are they doing the things now that would put them in position to shrug off oil prices? bell long answer is yes. they were profitable when oil was $100, $110.
profitable up to $110 and an oil came down to $30 and is now at $40. 60y won't have issues until or $65. they shouldn't have any issues. givehey are starting to salary increases to employees and that is going to squeeze margin as field prices go up. there was a one quarter lag in both directions when they can get capacity out and raise ticket prices. a have to do both because right incentive has been no to take capacity out. everyone is making lots and lots of money. once field prices start to go up and stay up sustainably, you
will see marginal flights disappear. is delta going to hedge now? they have no hedges in place right now. in losses$600 million with fuel prices is exactly where they are today. if they stay this way, that is the number. if they change, that number will change. be back withill more bloomberg markets. global business markets, next. ♪
alix: scarlet: this is bloomberg markets. i'm alix steel. i'm scarlet fu. we got insight today from the federal reserve of atlanta president today. exclusive interview, he said while there are enough said meetings for two or three more rate moves, he would not advocate for a hike this month. >> i don't know what the
committee will decide. i know there will be opinions on whether to make a rate adjustment. based on what i have seen, i'm not going to be advocating a move in april. kathleen: are you saying it would be good for inflation to overshoot its targets for a while because it has undershot for so long? the implication seems to be more even longer time before the next interest rate increase. to havei would like us a soft landing around 2% and then sustain something around 2%. that would be the ideal world. overshoot for a limited .ime considering what benefits that might have could be interesting. 2.5%, i woulde
get a little nervous. let me make another point that is nervous -- the committee has reiterated its position that our attitude toward inflation is symmetric. we think the cost to the economy of a shortfall on inflation are equal to the cost to the economy or similar to the cost of the economy of an overshoot. we are not viewing 2% as a someng, and that suggests tolerance of overshooting 2% would be acceptable. kathleen: not to cut it to finally, but remember last year or the year before, the fed but theyggest a target haven't gotten there. you even said in one of your speeches that you wanted to see hard evidence you're hitting the target. is it more important to see inflation up to target before you get the bid and say it's time to raise that rate again?
dennis: i think it's more a matter of tangible evidence or inl evidence we are moving the direction of the target than waiting to hit the target. interestg to normalize rates, whether you are talking about employment or inflation does not require the ultimate achievement of the objective. seecan forecast -- you can in a reasonable time you will get to that objective. answer to your question is i don't think i have to wait for inflation to be achieved. kathleen: back to the possibility of three interest rate increases. if april is off the table, are you less likely or more likely to think you'll be getting to interest-rate increases under your belt this year? is the third one i guess not?
dennis: the committee is making his decisions based on the data. is going to bes based on how the data evolve and what the data tell us about the outlook for the economy. i will make a couple of simple points. i did not say april is off the table. i would not be advocating. i don't know what the committee will decide in a couple of weeks, but i'm not going to advocate for a move under these circumstances. if you look at the calendar, there are enough meetings remaining this year that if the data were to suggest it's the appropriate policy to have three moves -- two moves or three moves, both are possible. it's going to depend a lot on how the economy evolves.
if we see in the second quarter a strong rebound from what appears to be a weak would sayter, then i we are back on the track i anticipated, the first quarter can be to some extent dismissed. kathleen: and if not? dennis: caution in patients. janet yellen has stated that clearly and i lineup with her on that kind of way of thinking about it. scarlet: you are watching bloomberg. alix: this is your global business report. bank of america cost cuts exceed recommendations. expenses dropped in revenue fell faster. alix: wells fargo saw profits fall 5.9% as the firm set aside more money for soured energy
loans and expenses. scarlet: the bank of england keeps its benchmark index rate unchanged. how will it impact monetary policy? alix: bank of america earnings show there is more room for cost cuts at the bank. it cut more than 10,000 jobs in 2015 and the ceo says he will eliminate more as the industry gets squeezed by sluggish trading. brian spoke about the banks future. brian: there's a lot to do here because adjusting the efficiency ratio for the two major adjustments which won't occur until next quarter, you have 66 or 67, and we need to drive that down into the low 60's. expenses at the bank dropped to $14.8 billion.
scarlet: wells fargo's moffett aside $1.7setting billion to cover soured energy loans. revisions for losses increased my 80% field by energy exposure. the ceo has sought to keep expenses in check while extending the banks loan portfolio with acquisitions. shares wells fargo dropped 11% in the first alix: quarter. a brexit fallout is being weighed by the bank of england. the rates were left unchanged, saying the referendum may be impacting growth. the governor and his officials said they would not rush into action. they warned it could increase uncertainty and have consequences for the labor market. scarlet: the central bank of singapore has eased its monetary stance unexpectedly, adopting a 2000y last used during the
crisis. it has moved to a zero appreciation stance and comes as the financial hub feels the effect of the global downturn and china's weakening economy. alix: nestle said first-quarter estimates the expectations with sales rising 3.9 percent. analysts expected a 3.6% rise, but the growth this lowest since 2009. they are struggling to interest consumers in frozen pizza and convenience meals. time now for our bloomberg quick take where we provide background on issues of interest. today, the brexit debate. >> a person in the european union -- britain and the european union may be in for a messy divorce. it would happen if the brits vote to leave in a national
referendum on june 23. polls show the vote could go either way. here is how we got to this situation. theidates who want to leave eu are the so-called eurosceptics and kept the u.k. from adopting the euro when it was launched in 19 99. now they are worried about the surge of immigration. the u.k. gets about 500 people added to its population every day. the system has the freedom to live in any country they choose but to leave the block is the only way to ensure to stem the flow of people. david cameron negotiated new terms for the eu membership, including insurances for the london financial industry and the right to restrict welfare to migrants. he said the breakup would be an economic disaster. europe accounts for nearly half of u.k. exports and says the brexit would create a decade of uncertainty in the financial markets, investments, and the wider economy. the debate is with flashing
market and sent the pound tumbling. here is the argument -- those pushing for a brexit say the eu has morphed from a free-trade zone into a super state eating away at britain's laws national sovereignty. but will come down to two issues -- the economic risk seven exit versus concern about a flow of immigrants that cannot be stopped. whichever way the vote goes, britain's love-hate relationship with the eu will rumble on. that is your global business report. alix: we have breaking news -- president vladimir putin of russia is talking about the panama papers leak and implying that perhaps it was done by goldman sachs as part of a u.s. effort to influence the upcoming russian election. the league consists of more than 11 million documents and revealed how politicians, banks, celebrity's and criminals use offshore companies to hide some
of their wealth over the past four decades. aat is interesting is there's senior fellow at the brookings institution who suggested maybe vladimir putin and russia leaks the panama papers to destabilize western economies. alix: it's interesting because you see all of this rhetoric and find out what politicians have links to these offshore accounts. putin didn't really do anything according to the panama papers. but david cameron and some of these other guys, that is where the real headlines came out. alix: don't miss a special imf show tomorrow on "bloomberg surveillance is quit tomorrow. ♪
from bloomberg world headquarters in your, good afternoon. i'm a scarlet fu. alix: i'm alix steel. financial shares leading the way with wells fargo and blackrock reporting profits. scarlet: if consumer spending is weak, why are retailers hiring? will the strong dollar and that trend? steve: may be raising money from outside investors again. we will look at how it complies with its sbc settlement. scarlet: first, we want to head to the markets desk whe julie hyman has been checking all the market moves. up a whopping .2%, but
stocks are rising across the board. leadcials are helping to the way. if you look at the bloomberg, financials are the best andorming group, up by .5% up for the fifth straight session. they have not had a run like that since last july. the run-up in advance of the earnings we have started to get from j.p. morgan and bank of america. they continue to rise. also helping to support the games we are seeing in the market. gains we are seeing today means the nasdaq is only down about 1% for the year comes so it has shrunk the decline. meant we are getting closer to a unchanged as we see
intoow and s&p slip positive territory. you have tech and financials coming back in a strong fashion. volume not light in corn. it is up like 190% in corn. julie: we are mostly seeing a mirroring of what is happening in equities today. people are waiting for progress out of doha on any kind of reduction freeze. , similarly, if you look at it versus a basket of currency is very little changed. action in gold today, continuing its recent losing streak, down more than 1.5%. it made its lows of the day as stocks made its highs.
and in corn, apparently. alix: crazy volume in corn. scarlet: let's check in on the bloomberg first word news with mark crumpton at the newsroom. mark: the search for survivors is underway in japan following a magnitude 6.5 earthquake. the japanese news agency reports one person is dead, seven others seriously hurt. the japanese red cross says it has treated 45 people. houses and walls collapsed and water supply was cut off. the japanese mineralogical center says it was centered 74 miles northeast of the sendai nuclear plant, the only one operating in the country. officials say there is no threat of a tsunami. donald trump the most unpopular presidential candidate in decades. only former ku klux klan leader david duke was more unpopular.
mr. trump is seen unfavorably by 67% of americans. the unpopularity of senator ted cruz has reached its highest level yet in this election cycle at 53%. kasich'srnor john unpopularity level is at 39%. christine lagarde says the global economy is on alert, but not under alarm. she says there are signs sentiment is improving around the world but recovery remains too slow and fragile, particular for middle-class families and the poor. speaking in washington, she said the imf is pleased u.s. federal reserve policy is dependent on data and the past two more normal rates will be gradual. remaining external fuel tank is headed to california where it will put it -- where it will be put in a museum with the shuttle
endeavor. its new home will be at the california space center. dayal news 24 hours a powered by our tree 400 journalists in more than 150 euros around the world. i'm mark crumpton. 1 wall st banks that helped to back the biggest oil boom in u.s. history is paying the price for the bust. wells fargo first quarter profit declined as the firm set aside money to cover soured energy loans. and now the biggest bear at well far -- at wells fargo is saying i told you so. we see risk to wells fargo revenue growth and credit performance which, coupled with a valuation on the high end, consensus estimates have not come down much. wells fargo shares at risk for underperformance in our view.
brendan: trust me, you don't want to see me dance. wellst: you have said fargo has a diversified business model and likes to tout that as a source of strength. have investors grown too complacent about the business model? brendan: i don't know if i would word it that way. the franchise at wells fargo is a strength. when we came out unfavorably because we thought they were expensive and had some headwinds coming. we had those come up in the results this quarter but the revenue side had someone time tailwinds that allowed them to be on a headline print number and we see shares underperform because investors are starting to realize if they are going to hit these earnings figures that are a little lofty, the quality of those earnings might interior a little bit. alix: part of that comes from the high loan yield loans they
made to production companies. enough money aside to deal with these loans? : the reserve levels seem to be on the high and which is appropriate given the quality. there's nothing wrong with underwriting higher risk credits if you are good at it. most people when they think about wells fargo and buy shares, they don't think about the fact that they will be underwriting to some of these credits that might be a higher risk. scarlet: that is a good point. another point you make is if it stretches beyond the energy patch, wells fargo could be on the hook for auto loans that could go bad. brendan: that is true. have a good deal of commercial loans and if we see the spreading out of credit pain to companies that supply -- like
the energy companies, that was a concern. on the consumer side, which is ,early as big for wells fargo you have auto loans which are prettyessarily huge but risky. there's about 25% of the loan book which is subprime. if you include near prime, a is not in 45% which line with how investors view wells fargo shares. we are looking at how it is allocated in terms of exploration companies and the like. does the scenario that you just outlined happen? : we have not seen deterioration yet. that is what we were worried about when we saw credit spreads widen out. wewas at that point when upgraded the brackets that we were not recommending. our timing looks fortunate at
this point that the thesis was we were discounting a pretty extreme outcome. we have seen credit spreads forten and the expectations the expectations macro economically get walked back and we have seen it in all of the banks. fargo, while they disappointed, the seams were similar. the economy looks to be in decent shape. while there is some distress, it looks like it is remaining contained at this point. it seems ok. fargo trades at a higher price to book value than some of its peers compared to jpmorgan and bank of america and citigroup. where should they be trading? brendan: usually the return to
multiple is a product of the tangible book. just eliminate book out of both sides of the equation. i think wells fargo should get at about 11 times earnings. that would suggest if you can generate a 12% return on tangible, that would be 12 times book. this would be more like 10 times the racketeers. i think right now it is a little too rich for me. alix: thank you very much. known as the wells fargo biggest bear. alix: later today, we will talk to the wells fargo ceo about earnings. don't miss it, later on today. scarlet: turning now to another big bank, we are talking about which a bank who said they found external failures in controls meant to prevent money laundering and financial crime.
conclusion of a report analyzing mirror trades, details of which we can find in the news. iss is complicated, so what a mirror trade? trade is allowed -- particularly if they are done in russia and latin america, mirror trades in and of themselves are done by mutual funds and are perfectly legal. in this case, it allowed investors to buy shares in rubles and exchange them for shares in u.s. dollars in london. tradesically mirror the and it is a way to move money from one country to another through an equity trade. whatssue is whether or not we think is up to $10 billion of mirror trades as well as other bypassf trades
anti-money-laundering controls and was moved out of russia without being properly vetted. the question becomes at what point does deutsche bank catch on to this? a lot of these trades took place between 2012 and 2014. flags were raised internally in 2014 but it took about year for various people within the bank being alerted for them to finally figure it out and shut the process down. story goes through missed warnings and red flags that did not get noticed. flipside, the new ceo has taken responsibility for a lot of this stuff. to revamp these systems and controls brought the bank which are responsible for a lot of the legal issues. deutsche bank is being
investigated by prosecutors and regulators. what is the legal fee in relation to something like this? is an unprecedented issue. usually with a wall street bank, all of them are facing the same violations. basically go through the same process. this is unprecedented. deutsche bank is the only bank being looked at for mirror trading issues, so it is difficult to tell what the punitive actions they will put on the bank. scarlet: can we connect the dots mirror trades and deutsche bank reducing its operations in russia? guest: we cannot definitively do that but after they basically reported that this was happening, they scaled down significantly their russian operations. linked publicly to
that in there is some speculation that because banks a lot of economic hardships because of the economy and oil that it would make sense there ask to wind down well. there were probably multiple factors that led to it. alix: do we know who is at fault? guest: that is the next step. it shows how these traits basically got through without being properly vetted in the next step is figuring out who is responsible and how far up the chain it went. alix: great stuff. thank you very much. scarlet: gold prices are falling for a second day. we will check the metals market when we return. ♪
julie: you are watching bloomberg markets and we are coming back to steal again today because of comments from the ceo of ak steel. he addresses the recent issue of tariffs. maybe import terrorists are not enough to believe the steel market and we could see -- toort tariffs are not enough --bouy the steel market. alex is going to be excited. 30% is u.s. steel rebar up year today. other measures of steel are seeing increases with industrial coil steel has seen an increase
when those tariffs were announced. u.s. steel makers have seen an uptick after declining and we have seen an up to once again over the past year. it has come back up a little bit. but with these comments, we have seen some pressure on steelmakers on concern over this very issue. the commercial metals are all lower. they've been up in a big way year to date. all of those stocks have seen big double-digit gains. still ahead, is the bull market threatened by old age? we will discuss. ♪
momentum. skepticism still prevails in the could be due to old age. the seven-year bull market is just a few weeks away from becoming the second longest in history. is there still room for the bulls to run? let's turn it over to carol mansour -- two carol massar and cory johnson. is the bloomberg advantage on bloomberg radio and mark travis is with us. talk specificu names and where you guys are committing money, but when you look at the overall environment, deals like we get some good news and bad news. where are we, probably speaking? mark: back before the mortgage what nina'searned meant. no income, no asset. acronym tina. there is no alternative to be in
the market. there's a 1% s&p, that's with amazon and facebook and a few other big cap names in the bond market was 45 basis points from a broad barclays index. cash was the best risk-adjusted return, even though it is miniscule. if you go out a quarter later, we have some volatility that scare some people going into february 11. now, janet yellen has been dovish pushing back on how quickly they would raise rates. i feel like the psychology has changed a lot. back, the sentiment was gloom and dam. who knows where we are going to end up? today, it is much different people are concerned -- when i
see private clients who have not made enough money, that endhology is closer to the than the beginning. what have people flocking to my market and hiding under the bed with a flashlight on, there's ample opportunities where there are dislocations between price and value -- this bread is wide and the high-yield debt market where we also participate -- i think we are in an environment where we have some headwinds. disconnect on either end, toward the high and/or low-end of the market -- it sound like you are suggesting a bull market dies of old age. carol: he sounds like the voice of god all the sudden. he is in l.a. i don't know if it's old
age but we have a trailing pe of 22 in the long-term normal is 16. i think the street estimates of 125 knocks on the s&p are 5 -- are probably high. a most businesses are struggling for revenue growth and we continue to have a regulatory over byhat ties up goal the lilliputians. i think the treasury acting -- i admit i have no skin in that game but i think it is a bad policy. i want to talk specific names of. they are not household names or large caps on all. one of them is american science and engineering -- about $205 million. the stock is getting killed 31%. you typically play in some of these smaller cap names but what draws you to this particular one? they do is
interesting to me. they have scanners to scan for bombs.people and whether it's san bernardino or russell's or whatever, i think that's going to be more important. this is a beautiful balance sheet with $80 million or $90 million in cash. i think it's nice for a bigger defense contractor. carol: so they are an acquisition target? mark: absolutely. highthe shares are in the 20's, we can get you into the mid-40's from here. wherever we can find a disconnect, we are interested. but it's definitely on the smaller and and i would tell people to use the limit if you are interested. patterson, you are looking at a company making equipment for drilling horizontal wells. really? natural gas being what it is?
i can remember being back in new york in the summer of 2008 and goldman sachs was talking about oil going to 165. now we have oil at 26 and people are talking about it going to 15. carol: we're going to continue with mark travis on the radio, but in the meantime, i'm going to send it back to bloomberg tv. ahead, we may have stocks retail sales numbers but consumer spending may not be as weak as it looks. we will have the nitty-gritty analysis. ♪
thank you. ordering chinese food is a very predictable experience. i order b14. i get b14. no surprises. buying business internet, on the other hand, can be a roller coaster white knuckle thrill ride. you're promised one speed. but do you consistently get it? you do with comcast business. it's reliable. just like kung pao fish.
>> scarlet, alex, hillary clinton and bernie sanders returned to the debate stage didn't to face off just days before the new york primary. this is clinton's time to snap a losing streak. put clintonolls ahead by about 10 points. there are reports from the associated ess that donald trump's campaign manager will not be prosecuted for allegedly manhandling a female reporter during an appearance last month in jupiter florida. he was charged with simple battery, a misdemeanor after video showed the incident with the breitbart news reporter as she approached mr. trump to ask them a question. the prosecutor's office has scheduled a news conference set to begin in 30 minutes. elevated lead and copper levels have been found in 19 destroyed schools.
to fix therking problems and are providing bottled water to families. is a neurotoxin that can damage child development and sick and adults. say they arecutors there with connection of the attacks in paris and brussels to be held for another month. the man in the hat, seen leaving the airport the morning two suicide bombers detonated an explosive suitcase, killing 16 people. 16 others died that morning when another bomber blew himself up on the subway train. dayal news, 24 hours a powered by our 2400 journalists and 150 news bureaus around the world. back to you. alex: consumer spending has been weak, retail hiring is robust. the labor market is underway. analysis says that
u.s. tourists, or perhaps the lack of them could be to blame. yolanda, this is a theory you come up with. the numbers and they showed us talk to us about whether this could explain sales numbers were weak. >> these are numbers that there are telling us. so, there has been a lot of discrepancy, as you mentioned, between retail spending and retail hiring. that theres show us was a big pickup in sales spending back in 2011. that was when the dollar weakened significantly calling the full of the succession -- recession. the highest products for clothing and shoes. that one was boosted by spending tours coming to the united
states and leaving their money here. wethe year progressed, and got to some global slowing and growth and recent strengthen the dollar, that spending actually show down. it closed down more significantly the total sales. alex: you actually look at personal consumption expenditures when you back out. that is versus of the trade dollar index. they tend to track each other very well. that is not now. >> absolutely. these government agencies, they're very smart people, they're trying to make the best of the data. shows is awhat it trade weighted dollar weakening years,king up in recent the same thing for foreigners. that category is subtracted from total consumer spending.
that statistic seems like it is overstating the dollar in the new country. and thear is weakening spending for this category a strengthening. agencys to me like the that is always estimating the number of dollars spent in this country compared to what the dole is telling us -- alex: basically, you think expenditures and the u.s. of wine on residents is actually lower than that chart indicates which is why retail sales have been stopped, even though we have seen good labor in retail. >> exactly. that is probably why domestic spending is not as weak as we might expect.
scarlet: do we see other data confirming this? i'm wondering if it comes up tracking conditions around the country. >> we received the latest visual yesterday. it shows us that spending by foreigners has weekend. spending on hotels and things like that has weekend. us thatically they told spending by domestic consumers is doing well. and, to back that up, the first goes to proved that point. it was things like furniture sales, things you will not if you're a foreigner coming overseas. appliances are really holding up. critics you can see from the chart that it could -- took quite a long time to pick that up. ,inally, a strong labor market and the improving housing market are hoping to improve these
categories. cracks like you so much for joining us. from bloomberg intelligence. canadians are trying to decide if they should use more of their homegrown oil and gas for domestic purposes. politicians, business leaders and energy companies are making a new push to bring the oil and gas and to western canada. is this a answer to the oil glut. let's talk to pamela ritchie who joins us now from toronto. pamela talk us through this. pamela: thank you. this was a discussion about self sufficiently, and canada produces so much oil and gas, much of it is shipped abroad. that is the idea. as it is piling up, and the western part of the country, the idea is that if energy east, which is the oil pipeline scheduled to go from alberta across the country to the eastern part where there is a refinery into gets exported abroad, perhaps canadians should
siphon off a little bit of that. they can use it for domestic purposes, the same idea with natural gas, and set of waiting for lng infrastructure to be built here, and sitting with natural gas prices were they are, perhaps, canadians can be using some of this. back in the middle part of the country, they typically use slightly cheaper natural gas brought into pipeline systems. that was the discussion ramping up. scarlet: yep cisco to the ceo of a gas company in canada who did not hold back in terms of this conversation. what did he say? pam: i spoke with the ceo jeff dawkins. he made the point, he said they are up about 50% for mid-january. he said he is ready to do well when the natural gas price takes off. happening atnot
this point, he made the point that if cooperation does not happen then eventually, it will be a difficult situation for a lot of gas and oil producers. they'll be more nationally inclusive and not having these bickering discussions. if eastern canada does not go through western canada, it will be some sour grapes. they will have an implied discussion for canadians. alex: thank you so much. bloomberg tv canada anchor jonas from toronto. coming up, we will tell you about steve cohen's new firm that will let him raise money else side. before 2018. scarlet: they are not supposed to do that. ♪
+++ their comments come from the chairman they have a 6% interest in holding according to dow jones, he said it's purely a financial investment. we do not have any intention to acquire glass. now, they are already down with the last from today. headlines came out. it is down by 9%. we also have been watching tivo coming from bloomberg news alex sherman who said that they have differences over evaluation and intellectual property as they continue active merger talks. people familiar with the matter there, apparently contributing about the long-term first evaluations again. you can see what robie was doing. tivo shares are shooting up 2%. now, elsewhere today, we're looking at the beverage market. that will go from cecil downgrading from texaco on structural downgrading from a whole. the flipside is getting upgraded.
they are down gritting some of the agricultural companies today. the move notwithstanding is earlier today. they have many fertilize makers down today. they have dated that we have gotten from the u.s. indicates possible erosion so, it is interesting here. this will go through yesterday. alex: this is the volume we have been seeing. interesting to see the juxtaposition between that and the missed call of the stocks. scarlet: thank you china. well, where there is a well, there's usually a way. steve cohen has found it. the billionaire started a new firm taking outside money.
investors say he is allowed to run the hedge funds under a settlement. was goow did he do it? to our analyst. distinctiona key between what the sec wanted and what they got. part of that distinction, initially, they were looking for a lifetime ban for steve kelly. they did not get that. looking fore initially was not to be associated with this money management firm. in the end, what he agreed to was over two years where he would not be in a supervisory role. so, this come here, his people there. he will not have a supervisory role. that will go through 2018. alex: what connection will he have yet to have? yet to --
>> with this news, they are focusing on a few different things. is a private and liquid security that is not necessarily publicly traded. scarlet: basically, these guys will be raising capital and trading security." -- security? >> that is the idea. complaintshave had about these regulations and why you'd want to start the firm. this is curious. cracks people want to know why he is starting a new hedge fund. with roughly 1000 people at the firm, as of now, he is paying all of them. they wondered why he was doing this, there are certain people
that i speak to. i think he went out in a has thisway, and really successful record in the industry. certainly, you'll want to set the record straight if your steve cohen. jones, doing with some withdrawals from his hedge fund. with these people that you associate with the hedge fund industry, you have the opposite things on the same day. his tutor and vesting core has not done well for a long time. they have done money -- made money in the last few years. i think that you are finally starting to see investors ask why am i paying so much? my fund does not make money. honestly, i think this could signal a shift for the industry.
people reassessing why there with the hedge fund in the first place. alex: thank you so much. a business flash. you look at some of the biggest business stories right now. mcdonald's is a limited and the wraps from the food menu. the fast food company again phasing out large ants wraps last summer at over 14,000 locations. markets are still selling the chicken rancher version of the snack. inmium wraps were introduced 2013, but were not a very big seller. ended its ban on professional mixed martial arts. the governor put the state athletic commission in charge of the competition. the move is potentially very lucrative for madison square garden. the ultimate fighting championship will hold an event there in november. the nba has a record-setting season in the stands.
the league says it broke its attendance mark for the second straight season. drawing 22 million fans. was uprage attendant 17,864 was also a record. thisv has more viewers season as part of a year of growth for and be a digital. thank you steph curry. can now toprgentina of the international credit markets for the first time since 2001. we will talk about why that is so significant, whether it is good or bad news for foreign investors.
the first time since 2001. it has payback editors since the default. this is after a big victory in court. alex: yesterday, we spoke with hans hughes. former cochair of the committee of argentina and a stakeholder through clients and they defaulted argentine debt. he spoke about the significance of yesterday's court ruling and whether it was good or bad for foreign investors. is that it clears the way of a problem that has been holding up argentina since 2014. that is because the judgment against them. so, lifting this injunction allows them to issue enough debt -- the vast majority of the noisiest judgments against them. so, in lifting the injunction, and reintegrate with the national cap market. with doing the
restructuring is that this is the first time we have actually adhered to the payments for the people who litigated it the most. they will get the best treatment . usually, when you do a cleanup exercise, the guys who forced the issue in court may get a quiet deal. it is an open offer. in this case they were explicit that the more you work to the more you got. mark: so, in the future, there could even be more incentive for people to be very aggressive. >> that is my concern. are talking a lot about venezuela maybe hefting to do a restructuring. and come my fear is that given this precedent is that if venezuela goes to the table, people might not want to negotiate. they might go straight to court. we have been trying to avoid that for a long time.
hopefully, the framework with all the people involved in this understand that should not be seen as a precedent. certainly, we will communicate that a new agreement makes more sense. bonds held high through 100 $.22 on the dollar. how long will this last." is never what you expect, given the news. , the overall situation of argentina looks very good, relative to some other latin american economies. but pricented out, rarely came in after mauricio was elected. with his name in the panama papers, what do these impact about his ability to keep economic reform on track? lookw long do we have."
the concern, within been elected, there is a polarization in their society. the complexities in this process is because of the politics. so, it is clearly not just the fact that is in the panama antagonist the between him and the left will create some polarization. that does not help. the enthusiasm that went into this, people made complications. there is ongoing litigation. we lifted one part of the problem. it does not solve everything. alex: that was han humes. with us now is our coanchor joe weisenthal. also what he was saying about a broader sense for opportunity. he was saying that the greek nonperforming loans were not
distressful. heard muche not about greece. i can arm over the last time anyone was having a discussion about interest in greek assets. alex: later on, will talk about neil about the latest inflation numbers and how he sees the u.s. economy position. obviously, we have a fantastic jobs claims report. one of the lowest in decades. on the flipside, it seems as though we had been making progress on the inflation front with resource labor underutilization getting to a point that would will pressure. then, we have act tracking today. the question is about what is going on with the economy. will we have to go back to the drawing board and question our premises?
scarlet: we will talk to doctors the impact forut these bad energy loans. if that contagion will spread to other areas. scarlet: -- alex: i like what brendan was telling us. a lot of people do not think about wells fargo with risky loans. they are kind of risky when you consider the energy components. joe: we have a great show coming up. scarlet: thank you so much. cfo: of course, wells fargo will be on. at 2:15 p.m. we will talk about thefiscal situation with vice president and a former latvian prime minister. that is coming up. ♪
>> from bloomberg goldcorp quarters -- world headquarters, welcome. >> markets bouncing around today but higher in late trading from banks and airlines are helping to boost stocks. lisa: greece is once again struggling on the debt crisis. will be -- will he want to give be talking about a brexit. patrick joyce is a talk about the situation in china and the outlook for the japanese yen. the obama administration at least final rules are offshore oil drilling. this ain't essential to boost the safety of the developing market. mark: