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tv   Bloomberg Markets  Bloomberg  April 21, 2016 12:00pm-2:01pm EDT

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scarlet: from bloomberg world headquarters in new york, i am scarlet fu. >> i am tracy alloway. it is the ecb decision day. the central bank is watching carefully for any inflation drag. under armour is running circles around critics today. they talked analyst estimates and raised the forecast. and carson block revealing the latest short in an exclusive interview with bloomberg. why did a german advertising firm capture his attention? scarlet: we are halfway through the u.s. trading day so let's head over to julie hyman. what is moving and what's not? julie: a busy day for earnings, that is true. there is a lot to sift through. you are seeing a more negative tone now but stocks have been
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bouncing around throughout the session. each stock is down about a quarter percent. earnings.just about we have energy stocks gaining as oil falls, curiously enough. you can look and see energy and materials are the two best performing materials. consumer staples are on the downside today. that is shaking up. verizon is what is pulling down the telecom shares. wireless subscriber growth beat estimates but because of negotiations with labor unions, that is going to weigh on second-quarter earnings. apple, which has delayed the earnings report by one-day is coming out with a shares falling about 1.25% today. a lot of divergent views on apple. and coca-cola is down for the second day after its report, even as analysts report weather yesterday's drop was justified.
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tracy: let's give you a break from the earnings. tell us what else is moving? julie: oil, we are watching that today. it has had a drop as we have seen the dollar bounce around. thes up off the lows of session. speaking of the dollar or the euro, that is in focus today after we got no change from the ecb and a lot of commentary from mario draghi, where he essentially said, give us more time. initially, a big upward move in the euro and then it faded away and now it is bouncing around. there is a movement to note in interest rates in the united states. the 10-year note is falling for the fourth straight session, yields are going higher, 1.8 cent -- 1.8%. that is weighing on groups like utilities going back to stocks. so this is something we should keep an eye on.
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scarlet: so even though equity indexes aren't doing a whole lot, keep an eye on them. julie will be back in a little bit with the mystery stock. tracy: let's check in with the first word news with mark crumpton. mark: president obama is trying to persuade saudi arabia and gulf states to contribute more to the fight against the islamic state. the president met with the gulf operation cancel -- operation council to strengthen the war against isil. >> we remain united in our fight , a threat to all of us. the united states will help our partners to ensure their special operations forces are operable and gcc nations will continue to increase their country should's to the fight against isil and the coalition that we have formed. mark: the president also said the u.s. is committed to helping contain iran. a former ambassador and
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congressmen who sat on the 9/11 commission is urging the release of 28 pages that have been kept secret. tim roemer says the public should be allowed access to the material, which reportedly focuses on saudi arabia's possible role in the attacks that killed thousands. rumors say -- they did not discover any role by senior, high-level government officials. hillary clinton shortlisted vice president joe candidates will include women, according to a report by the boston globe. some's adjusting elizabeth warren, because the liberal senator from massachusetts could help bridge the gap between clinton and supporters of bernie sanders. big-money political donors are no match for donald trump. super pacs and other outside groups have spent $40 billion on ads to stop him from winning the republican presidential nomination but he is still the front runner. some of the party's biggest
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donors are behind the donald trump effort, among them td ameritrade founder. global news, 24 hours a day, powered by our 2400 journalists and 150 news bureaus around the world. back to you. tocy: to marissa is set arrive in new york for a united nations summit after brazil's lower house voted for her impeachment. she leaves behind a struggling economy and a booming stock market. -- up just 28% since january. scarlet: our next guest says brazil is still deteriorating. is alejo czerwonko. are these assets rallying? commodity prices have been rising. alejo: i think we need to
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understand what is happening in brazil in the context of broader trends in latin america. what we have been seeing is that politically, the whole region is shifting towards the center right after a decade of populace government being in place. this happened in argentina, peru chile. .razil is just another we think that the president will not finish her term. ities one opportun credit, more opportunities in --ities and the bureau within the next 12 months. tracy: what do you see in credit? you are bearish on the asset class? alejo: we like credit. we think sovereign credit can perform well in the next few months.
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we see opportunity. scarlet: you mention argentina, to what extent after their bond sale, brazil might follow? alejo: we can't rule that out. brazil doesn't really need to come into the market as much as argentina needed. so we don't think brazil will come up until the market in massive amounts in 2016. scarlet: but there was a lot of demand for argentina's bonds. maybe those guys will come out again. tracy: you never know, copycats in the capital market. going back to the brazil rally, there has been a lot of talk about the emerging markets moving as one. and investors not focused on idiosyncratic characteristics of individual markets. is that the case in brazil? alejo: yes, i think that is the case. the improved sentiment towards emerging markets is lifting but you need to pay attention to fundamentals in each country and
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you need to pick winners and losers. we think the opportunity in emerging markets will be an out for. shift over tont to china a little bit because there was a story on the bloomberg today that was one of the most read stories about how george soros was comparing the debt fueled growth to united states in 2007. and the latest data point on china credit is stunning. 3.2 trillion, 67% higher than the average consensus estimate. ures thatd the gdp fig everyone was excited about were actually fueled in part by the increase in credit. so it does seem that we have a credit fueled economy which is what people have been worried about when it comes to china for years. alejo: absolutely. we don't disagree. we think that china is experiencing a cyclical out turn as a result of being eased up.
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this can create short-term gain but it increases the risk of long-term pain. we don't see a crisis being imminent but we monitor it closely. tracy: it seems like the chinese government is willing to build up that credit for at least some further time. what will be the catalyst when that music stops for them? alejo: the important thing is the credit for the chinese market. it is domestic credit he held by state owned enterprises. so authorities believe they have the capacity at the time being growth could be raining in the credit expansion. scarlet: how confident are you in china's commitment to structural reform? alejo: we are fairly confident in the long run but of course, the movement in the last few
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weeks, make us a little bit less confident than we used to be. , thank: alejo czerwonko you so much for joining us. coming up, check out this chart. tracy: what is it? scarlet: today's mystery stock and how major hedge funds have gotten burned in the process. dusk, lights? tracy: i know what it is. con edison. scarlet: we will find out. ♪
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tracy: you are watching bloomberg markets. i am tracy alloway. it is time for the bloomberg business flash.
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the biggest stories in the news now. dish network and viacom have reached an agreement on payment terms that will keep the viacom channels on the satellite service. the agreement picks up where the last seven-year contract picks off and avoid they blackout on the dish network which has 14 million u.s. subscribers. scarlet: consumer confidence fell last week. it decreased to 42.9 and it was at 42.6 a week ago. tracy: attitudes about the current economy led the drop. household improvements led the futures for a three month high. a federal judge says there is an agreement involving volkswagen and u.s. claims over the pollution crisis. there are options including one in which the w would buy back their cars. volkswagen would spend at least $10 million on the settlement. the justice is giving the two parties until june to agree.
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that is your business flash update. scarlet: let's head over to the markets desk where julie hyman will unveil the mystery stock. julie: a mystery no longer. she didn't even need the clues. the major lights of the hedge fund world are getting burned -- it is con edison which filed for bankruptcy today. shares have collapsed. result of the acquisition binge that con edison has been on the past several years and the straw that broke the camel's back was the proposed acquisition of solar last month for a 52% premium and then it ended up canceling the acquisition under scrutiny from investors as well as regulators. so that is the here today chart.
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if you look at the past five years, con edison was actually doing well for a while. concern plunged on the about the latest concern. when we talk about the lights of the hedge fund world we talk about people like david einhorn. he held 5.7% of this company. steve cohen's company had one point 5 million shares as of the end of last year. this doesn't appear to be an issue with the solar issue, it appears to be a con edison the specific issue. here's the capacity in the u.s. which has been exploding over the past few years. one of the issues with the acquisition is that it is a rooftop solar and it doesn't have utility plans which is con edison's bread-and-butter business. so these deals that the company has done has caused the company to soar and it ended up with a
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16 $.1 billion in debt. scarlet: wow, thank you. putting it into perspective. another mover that we are watching today is under armour. shares are popping after the company reported better-than-expected quarter results and raised the outlook. yracy: sales jumped 64% and the showed strong international growth, particularly in china. chen grazutis joins us now. under armour results -- did they surprise you? chen: i wasn't surprised about the results, i was surprised about the magnitude. a lot of people went into the corridor worried about the domestic market, especially apparel. i was in the opinion of the fact that there was enough sportswear outside of the u.s. scarlet: footwear was a big winner here and a lot of it has to do with steph curry and how well he has done area and his exclusive adornment and agreement that they have signed
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with him. talk about that. is that just a one-off? they get that sneaker and then next you will see a decline? chen: basketball is a big story and steph curry has been a big story. it is in just one shoe. there are different styles and they keep coming with new versions. the nice thing about it is that every new version has a higher price point. that this is only part of the story. if you look at the running category, which last year had four styles, this year it has eight and next year, 14. so the sheer size of their operating has increased the revenue. that is definitely a complementary story. tracy: the other thing that drove these results were international sales. will that be the case in the future? can they maintain that in the future? chen: definitely. this has been more of a u.s. story. two years ago it was less than 10% of revenue and this year it is up to 15%.
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they want 20% by 2018. international has been a big story for them. if you look a few months ahead, we have the olympics with the u.s. women's gymnastics team, they are sponsoring and also the swimmer -- i forget his name. but it is going to be a big story. it puts them on a global stage. with a lot of viewership and it should help them. sponsor thedn't they speedskating team in the winter olympics? and their uniforms did not do well? none of them won medals. there is controversy over that. chen: i think the jury is still out. scarlet: the idea is that it can work against you. chen: that is true. in the summer awareness, there is more of a brand awareness. the idea that it should help the gymnasts win a medal. so i think it will be a reward in that case. because it will increase by viewership. scarlet: i guess that's true.
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how many people by speedskating suits? tracy: speak for yourself. -- chen grazutis , thank you for joining us. mario draghi is going on the defense of ecb policies. our investors running out of patience? ♪
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tracy: you are watching bloomberg markets. scarlet: back to the big story of the day -- the european central bank making a decision on interest rate and leaving them at record lows. the program is unchanged and that has drawn further criticism from politicians. tracy: ecb inflation has been lagging below target. you can actually see exactly how far below just on this chart. here is the ecb target rate and
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here is the actual inflation rate. we did see mario draghi talking about this today and he actually said that inflation rates could turn negative in the second half of the year and it will probably be some time until they go up again. scarlet: so clearly there is a lot of work to be done on the inflation front. they have to get lending going. hopefully they will build on the aggregate demand. tracy: the centerpiece of the recent stimulus measures is the print bond buying program. you have to wonder whether asset purchases will have an effect on inflation this time around. scarlet: and the signal that interest rates are probably not going to get lower for now, the question becomes, how long before the ecb does anything? -- thinks thinks the it will be 3.5 years. raising is at the other end of the spectrum. this is our chart.
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this is the morgan stanley index that tracks the number of months to the first rate hike. right now sitting at 44 months. mario draghi made no mention -- as recently as december it was below 106. tracy: this is the other thing that i imagine must be keeping him up. the strength of the euro and what is driving it and what more the ecb can do to decrease the pressure. scarlet: they have already indicated that they won't go further with interest rate cuts. tracy: it is a really interesting dynamic playing out. scarlet: and it has caused plenty of people too, to on what happens next. following mario draghi's remarks. take a listen. ed: we do have to be patient, as he said. the latest shot of the zoo got
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only occurred in march. and to imagine that something would have to happen at this particular meeting was unrealistic. so as i said, i couldn't help be reminded of seinfeld -- it is like a seinfeld episode. nothing happened but i don't think anyone should have expected anything to happen. david co. nothing happened but we were all riveted. vonnie: you use the exact same word -- defensive. a defensive mario draghi. thehe is being attacked by politicians, savers were mad that they have negative interest rates and by the pension industry and others who depend on long-term investments. so he had to be defensive. and he had to basically say that he sees signs that it is working and we have to wait. but the problem is, we have been waiting for a long time. march was not the first time that the ecb has done something
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radical. they gave us negative interest rates a while ago and this is an extension of quantitative easing. so i think people have been patient and they are losing their patients. jonathan ferro: we talked about the impatience, about whether the ecb can afford to be patient given by how low target inflation has been for so long. >> unit to apply a bit of a separation principle. yes, on the one hand they want inflation back up to target, ultimately and it is important for them to have comfortably low , but not too low, ultimately at for them to have comfortably low , but not too low, levels of inflation. but they're are also trying to support domestic growth. they are trying to support fiscal stimulus and structural reforms. trying to focus on getting organic, domestic growth going. as it inflation, as long is not deflation, is not a bad
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thing in an environment where you are trying to stimulate domestic demand. obviously, if you have persistent deflation then you have to be more worried. so i think you need to separate the two. it may be more important in the new term to trigger things like increased lending and confidence in the real economy. tracy: dallas ed yardeni and stephen galli -- stephen gallo. coming up, highlights from an exclusive interview with carson block. ♪
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tracy: you are watching bloomberg markets. scarlet: mark crumpton has more. mark: the underdog presidential
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candidates are still in the money. bernie sanders outpaced hillary and fundraising and spending last month. the federal election commission filing shows bernie sanders with a record hall of almost six -- $46 million. ted cruz took in $12.5 million in march and john kasich raised $4.5 million. donald trump says transgender people should be able to use whichever after him they choose. he was asked about north carolina's so-called after law which requires transgender people to use bathrooms corresponding to the gender on the birth their certificate. he said the law had caused unnecessary strife for the state which he said had paid a big price economically. he continued that there have been few complaints the way it is. people go and use the bathroom that they feel is appropriate. there has been so little trouble. republicans will give in on part of president obama's emergency request for spending on the zika virus
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according to a republican familiar with the matter. they are drafting their own plan to spend more than $1.4 billion and the president has asked for twice that much to keep the virus from spreading. has been litlame in greece, the birthplace of the ancient games and the ceremony voiced confidence that brazil would overcome its political and stageic problems to successful games in south america. the opening ceremonies april 5 in rio. global news, 24 hours a day, powered by a 2400 journalists, in more than 150 news bureaus around the world. accounting questions are at the center of short seller carson blocks short which is a german advertising company. tumbled inhe firm germany after his position was
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posted on the muddy waters website. tracy: he laid out his newest research. >> we have been looking at a german advertising company called stroeer. this is a company that had then a billboard out of home advertising company until 2013 when it announced this digital strategy. since then, it has bought a lot of different businesses, a patchwork, in the online and digital industries. david: i took a look at their website quickly. it appears they have rather dramatic growth. that 100%.wth is >> it's interesting because one of the things we point out is the way they calculate organic growth. we cannot get the numbers to tie. they announced in 2014 that organic growth in digital was 34%.
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using their methodologies, their numbers, we get 2.2%. david: that's because of acquisitions? 2014, they changed the formula in 2015 for changing the calculation so they began including organic growth from acquisitions which is very counterintuitive. when we calculate these numbers, we use their formula and their numbers and it just doesn't add up. david: who cares? if there earnings-per-share looks like there going up, it does not appear to be diluting their good acquisitions. -- matter mather whether it's organic or not? >> how do we know they are making good acquisitions and how much are they paying? they paid over 100 million euro in cash the first few years and they have increased the share count by about 1/3. there is a lot of dilution
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there. what's falling to the bottom line, it's not really clear the quality of that. we have a lot of concerns about the accounting. for example, we think there are certain things they are putting on the balance sheet that should be running through the p&l and decreasing ibid. a. we think there is a lot under the surface. david: this is a publicly traded company. these are publicly reported numbers. do you believe that they are misreporting their numbers? wouldn't that be a securities violation? >> it's not my place to judge whether there are violations. there are certainly a lot of questions we have about these numbers. we did catch what we believe is their auditor making a clear error in the cash flow statement. david: how big was it?
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>> it's an important error. it has to do with the borrowings. year and cash the flow statement, it does not look like the company borrows at all but when you look at it intro quarter, they are drawing down real amounts of money which indicates that the cash flow of the business is not necessarily that consistent or maybe that strong. when the auditor prepared it showing zero borrowings at the end of the year, in our opinion, that is a complete misapplication of international accounting standards and is very misleading to investors. david: you are a researcher. you come up with a 2.5% growth rate? as opposed to the 14% they are reporting. what does that mean in terms of overvaluation of the capital? >> it's substantial because this a real premium
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multiple especially for europe because of the blue sky story where the market believes they are good at executing this digital strategy and almost everything they buy turns to gold. when we look at the numbers, we see it is definitely not the case. if you have a company that is kind of running around and possibly willy-nilly throwing companies,quiring does that get a premium multiple? i don't think so. scarlet: that was carson block in an exclusive interview. we reached out to stroeer and here is their response --
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the company ended its initial statement by adding that it will make sure to protect the rights of its shareholders. coming up in the next 20 minutes, years have passed since the financial crisis but regulators are still working on how to prevent a too big to fail situation. season continues to roll through. the focus is back to where all started, the google search engine. can the company deliver? the amazon echo is becoming a must-have addition to some households. we will find out what went into that product. ♪
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scarlet: you are watching bloomberg. tracy: this is your global
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business report. scarlet: the european central bank stays the course as mario draghi defenses stands urging critics to maintain patience. sab miller is tapping markets for growth and where they saw higher shipment in the fourth quarter. scarlet: saudi arabia is considering a new plan to attract more investors to its new aramco ipo. let's start with the big decision out of europe. the european central bank left interest rates unchanged. mario draghi refrain from speculating about further potential moves and tried to accentuate the positive aspects of the governing council decision. >> our policies work. they are effective. just give them time to fully display their effects. were also if there structural reforms, the effect of these policies would be quicker. scarlet: he said he is ready to
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step up stimulus if the outlook worsens. he said inflation will remain low but it should pick up in the second half of the year. iscy: saudi arabia considering a sale of shares of aramco. there could also be a fund in the u.s. that traits and invest only in the company. it could be the world's largest ipo and is expected to take place next year or the year after. sab miller says pierce sales --e 3% in the first quarter beer sales rose 3% in the first quarter. they are set to be taken over by anheuser busch later this year and it has been cutting costs while it waits for regulators to approve the takeover. group led by they'll come is among suitors to make final bits for anglo american phosphate business in brazil. valet is bidding and zero cam
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group was shortlisted to make a final offer for the assets would could fetch $5.5 billion. scarlet: it is time for our quick pick where we provide context. since the financial crisis, global regulators have been maneuvering to make it possible for the biggest financial institutions to close their doors without triggering an economic meltdown. there is plenty of skepticism whether they could do it. regulators rejected so-called living wills submitted by jpmorgan, bank of america, and three other u.s. banks. they are required under the dodd frank law. they are meant to lay out how a bankrupt financial institution would wind down quickly. the banks have until october to rewrite their plan. last year, international regulars published rules that could require the biggest banks to raise up to $1.2 trillion in new debt funding. this encourages the bank to issue a class of debt that could be written off. we are talking about the coco lawns. the lenders them's -- coco
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bonds. under,hman brothers went regulators learned that the biggest firms were so interconnected that only massive l out cap dozens more around the world from failing. and response, regulators extent of the safety net until it covered more than half of the financial sector. there is the argument -- some studies of shown that big banks can borrow more cheaply because investors think governments will always bail them out in a crisis. they say more recent data shows that advantage has shrunk dramatically. in december, standard & poor's downgraded the debt rating of the u.s. bank saying new capital makes bailouts less likely. others say too big to fail is not gone away but been shifted within the corporate structure. that is your global business report. coming up, the story behind the amazon echo and how the talking speaker ended up as a surprise hit, next. scarlet: here are some of the
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top story trending on ♪
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tracy: you are watching bloomberg markets. scarlet: continuing with what we were talking about earlier, what is over nine niches tall, three inches in diameter and can play music and answers you on command? tracy: scarlet: she owns one and it's the amazon echo. it's a surprise hit. sold more than 3 million of these devices. joining us now is josh blumstein who wrote the real story of how they built the echo. 126 which is amazon's hardware division was behind the fire phone yet they also came up with the echo. >> this is amazon's hardware division. the echo was in its last legs of development when the fire phone came out. that was a huge bet for amazon.
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it was high profile and it was immediately apparent it was going to fail. was a lot of concern from people making the echo that maybe this crazy speaker is also going to go down in flames. tracy: your stories about the genesis of this product and how the company managed to create a piece of hardware that means more successful than its previous efforts. where did the idea come from? atthe idea was much broader first. in 2010, amazon started filing a bunch of patents related to augmented reality. they never actually built the whole thing but it seems like they wanted to have a series of projectors around your house that would show you hologram's and you would interact with them either with your voice or gestures. they broke off the echo from that project and said maybe we will just build a talking speaker on the side so we have
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something to show. actually did a lot with the voice recognition technology. until a few years ago, they were way behind apple in doing so. amazon the people within looked at it as a daunting project. google and apple were in a good position to do voice technology. they have smart phones with people talking to. amazon did not really have a smart phone to work with. it really dove into this. they came up with a system that seems to work pretty well. tracy: part of the thinking is that people can also use this product to order other things from its service like maybe you need 10 new chocolate bars and it will add them to your shopping cart. do we have any indication that it has been successful in terms of cross selling? are people just buying it for the fun of having a mini robot to talk to?
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>> that's a good question. we have not seen any statistics about how much is being taught through the echo. amazon wants to tie all of its products into shopping. we would think that would be of all that we are not sure how they are doing on this one. scarlet: tracy is a proud owner of an echo and you love it? tracy: i wouldn't say i'm emotionally attached. i have mixed feelings because sometime she does not do what i want her to do. my cat is confused. my cats name is vincent and now thinks it's name is alexa which is the name the echo turns on. ande it a lot for the radio sometimes i ask it what the weather is like. scarlet: is this a profit reducing product for amazon? >> at the moment, i think they are taking a loss. the devices themselves are selling at a loss right now and they cut the price this week. moreare selling it to be
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of a loss than when we wrote the story. the only way they would make direct revenue is from the shopping which, as we said, is not probably the main thing people are using it for. scarlet: thank you so much. his article on the amazon echo appears in the new bloomberg week. a quick check on stocks -- the devil industrials are off by 75 points in the s&p is losing 1/3 of 1%. the big news is the ecb deciding not to do anything. tracy: it really wasn't much news. it was priced in. scarlet: the data we got on jobless claims came in lower than anticipated. perhaps that's one reason why indexes are pushing losses right now. let's go to abigail doolittle live at the nasdaq. abigail: we have the nasdaq
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trading slightly lower. one stock is surging today and that is viacom. it is having its best day's and's march of 2009 after was announced that -- and viacom have agreed to a multiyear content agreement that will allow viacom's programming to remain a part of the dish service. there had been some material concerned that this would not be the case. this is a huge relief for viacom investors and while we don't have the details of the agreement, paul sweeney says mid single-digit annual increases in fees would be a big win for viacom. the stock is having its best days and march of 2009. tracy: it's a big day for some very notable technology companies. what are we seeing at of that action? we have microsoft and alpha that reporting tonight after the close. investors are looking for low single-digit earnings for microsoft. it's likely this quarter will mirror recent quarters talking
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about how the company is moving more toward the cloud. alphabetic different where investors want to know how the company is bringing its search business to mobile and growth expectations are different. investors are looking for 21% growth in earnings, 19% in revenues. a huge difference with microsoft but when we look at these two stocks, we see they are trading in tandem. i spoke to the head of technical analysis and he explains the difference of both companies being part of a strong industry group, the software and service industry group. microsoft and alphabetic are the top picks in that industry group. scarlet: thank you so much and we will break down those numbers for you when the company report after the closing bell. i am looking at shares of general motors higher today. they gained as much as 3.8%.
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after the carmaker beat estimates in the latest round of earnings. the general motors cfo spoke with matt miller today about the company's performance of late. >> the china market and china vehicle market continues to perform as we expected, low single digit growth. we saw that in the first quarter. we delivered more than $500 million of act woody in the first quarter, 9.7% net income margins and we are on track to deliver another strong year in china with strong margins just as we provided guidance earlier in january. we are very constructive on china. matt: i have been talking with david westin. his father used to work at a plant in flint. i wonder about the stock. what is the problem with the stock? why don't investors recognize what you are doing as you post record after record as far as
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profits and margins continue to rise? perspective,vestor there is a lot of negative sentiment around automobiles in general and whether the industry and how the margins will get better. within that context, we have performed reasonably well over the last settlements and our focus is on delivering short-term and long-term results, executing our plan which will drive shareholder value. if we continue to put the result on the board like the last couple of years, we will see improvement in the stock price at some point and that is what we're focused on. matt: we saw a report that because of increased efficiency, your stock is worth 25% more than a string for now. even of sales rollover, that's what most investors are worried about. do you expect u.s. auto sales to
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plateau or come down a little in 2017? >> we think the fundamentals in the u.s. from an economic perspective will support a strong industry level for the next couple of years. that was the general motors ceo speaking earlier. hour, up in the next half warnings about the negative but what aboutt britain leaving the eu? we will talk about that coming up. ♪
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tracy: welcome to bloomberg markets.
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scarlet: from bloomberg world headquarters in new york, good afternoon. tracy: here is what we are watching -- mario draghi says the ecb is ready to step up stimulus if the outlook for the euro area worsens. he is keeping monetary policy steady for now but what happens if britain leaves the eu? scarlet: once the biggest , whatble energy resource does this mean for terraform global. tracy: vw will set aside $10 billion to resolve claims against it and investors are cheering the deal. scarlet: let's go first to the markets desk and julie hyman. arrow postell -- era
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ostale is aerop looking to reorganize under chapter 11. they want to finance its operations during the bankruptcy and this is according to people close to the story. shares to date, the shares today are plunging on these headlines. i've got an intraday chart of the stock and it is going down after the story came out and looks like it is down about 19%. 3 a's have been troubled in recent years. we saw a drop in mall traffic and demand and they have been struggling to keep that teen demand going. eropostaleike a
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could be the first casualty. earnings are a major focus for investors as stocks fall to the lows of the session but the nasdaq is doing the best. a lot of big tech earnings are coming out after the close. are tradings&p lower. over the course of the day, the s and p has been bouncing all over the place. lows of the session as people try to weigh earnings. oil prices and comments from mario draghi as well. about 100 and ea, nine companies in the s&p 500 at last check have reported. this is the sales figure for the current quarter. we're looking at a gain in sales of 3/10 of 1% with 60% of companies beating estimates. sales are down 7.5%. scarlet: we have breaking news
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that just crossed the bloomberg -- steve cohan's new firm has no plans to run outside money before 2018. there was confusion because bloomberg had reported earlier that under a january settlement, there was a way he might be able to raise money from outside investors prior to that your because he would form a firm that would employ top executives from his current family office. they would be allowed to run private fund that would invest in the liquid and nonpublic securities. the headline years that steve: has no plans or his firm has no plans to run outside money before 2018. that date is part of the sec settlement that it made. i'm sure we will be talking about that more but in the meantime, we have a big day for earnings. what is moving? julie: looking at the highlights, some of the big up over today include under armour
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which defied some of the negative production going into its report with earnings that beat estimates. it's not only athletic wear that is selling. it is tractor supply company's. one company beat estimates and had strong sales of pets and livestock consumables. johnson controls is a maker of auto components after its numbers beat estimates. ual is declining after one metric of its revenue is falling. it's down by 11%. sales at mattel were disappointing and rockwell collins is another one coming in below what anna -- analysts were estimating. within the dow, some of the laggards includes travelers the only insurer in the dow, down by 5.5% and arise in lower on a
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second quarter focus. -- forecast. american express is also in the dow but doing better after its numbers beat estimates following on the heels yesterday of discover financial. scarlet: thanks so much. let's check in on the blurb -- bloomberg first word news. we have breaking news at this hour -- authorities are investigating a death at paisley park where pop super par -- superstar prince has in recording studios. the carver county chief sheriff deputies tells the minneapolis star tribune that the investigation began this morning. he said officials are withholding information about the identity of the deceased person until next of kin has been notified. a news release his fourth coming but tmz is reporting that prince has died. that has not been confirmed. stay with bloomberg television and we will bring you more
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information as soon as it becomes available. president obama has left saudi arabia's now andrew to london. the white house says the u.s. and gulf arab allies have agreed to various security initiative to defeat the islamic state as well as counter iran's actions in the region. the leaders have committed to accelerating an early warning system for the listing missiles and have finalized plans to gulftake a u.s. -- cooperation military exercise in march of 2017. in london, president obama will hold a joint news conference with u.k. prime minister david cameron. and bloombergw television will have life coverage. 's shortlist of vice president will include women. that has some suggesting that massachusetts senator elizabeth warren could be on the short list because she can help bridge
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the gap between mrs. clinton and supporters of senator bernie sanders. judge merrick garland made his first public comments today since's supreme court nomination was announced. he spoke for about five minutes at a breakfast honoring law firms for their pro bono work and made no mention of his nomination. the meet and greets continue today with republican senator john hogan and democratic senators off menendez and tim kaine. attack suspect has been charged with attempted murder. the charges or in connection with the shoot out with police last month in brussels. 4 officers were fired on and slightly injured when they arrive to search what they thought was a vacant apartment are you police fatally shot an algerian suspect and his fingerprints were found. three days later, he was arrested in another russell's hideout. in the key suspect november attack that killed 130 people in paris. young american women are saving less than men but are socking
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away more than their mothers are. a new poll for personal capital found that 54% of women between 34 have af 18 and retirement savings account compared with safety 7% of men that age. the survey found that of older women, only 44% are saving for retirement. millennial men are more likely to withdraw money early to pay for a vacation, a boat, or a wedding. news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. scarlet: let's get a quick check on the markets with julie hyman. there is a lot of individual company news percolating even though the losses in the s&p are not a. what are the big headlines? e is preparing for bankruptcy as early this month. tracy: that is having an effect
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on other companies. scarlet: i am looking at the intraday charts of abercrombie & fitch and american eagle. it does not matter which one is which. are both tumbling to session lows, off by more than 1.6% on this potential bankruptcy filing. this is according to people familiar with the matter but it's having its impact elsewhere. tracy: that will be an interesting one to watch. scarlet: we will be back after this. ♪
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tracy: you are watching bloomberg markets. scarlet: let's go to the market
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desk and julie hyman. julie: a lot of companies are coming out with earnings in the metals industries. newmont mining reporting first quarter earnings that beat estimates by a wide margin, coming in at $.34 a share. $.18 is what analyst predicted and sales were up by 3%. year aftersen this we talked about the average price during the quarter lower than the first quarter a year earlier. newmont cut costs aggressively in order to keep its bottom line relatively robust. in the face of what has been an unpredictable metals environment. the shares are up by 4% today. if you look at their mining cost per ounce during the quarter and over the past several quarters, its costs have been going lower as it has been cutting the cost of production. that has been what is helping support the bottom line for the company. we heard from a couple of
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steelmakers. newmont focuses on stainless steel. littleynamics was changed after that company's earnings beat estimates but revenue came in and matched estimates. shares are not doing much. if you look at the very kinds of price the robes steel which steel dynamics manufactures has done better. we talked about steel and what it's done this year and the unexpected gains it has experience. tracy: thank you so much. so much earnings and breaking news. scarlet: let's go over to mark crumpton covering a developing story. mark: the associated press is confirming that pop superstar prince has died at his home in suburban minneapolis at the age
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of 57. we received word about half an hour ago that there was a in suburbanhis home minneapolis and his studio there is known as paisley park. there was a report about a week or so ago that his private jet had been diverted as he had gotten sick on the plane. there were reports that he had flulike symptoms. the associated press is reporting that a publicist says pop music superstar prince has died at his home in suburban minneapolis at the age of 57. we will continue to follow the breaking news and bring you more details as and as we get them. scarlet: thank you so much. tracy: china has gone back to the future. the country has abandoned years of austerity by opening up the floodgates of money to the market. the property market has exploded an automobile sales are hitting the gas pedal. orebeneficiary is iron
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which is rallying as steelmakers ramp up production. scarlet: it's up to d2 percent year to date. they have increase their output to a record. how long can this party last? hofmann whoin ken joins us from princeton. apologies for the breaking news earlier that interrupted us. give us a sense of the perspective of iron or. people have said this is speculative but now it's maybe back to fundamentals? >> we have talked in the past about what we were looking for to see if this rally was real or not. numbers have come out over the past few days to suggest that the rally is real. they are using quite a bit of steel. if you look at construction, it's up 20% year-over-year. the amount of loans they are giving out our up 41% year-over-year. the numbers are staggering and that shows that the way they handled the crisis in 2009 when
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they pumped $2 trillion into their economy. it seems at the start of this year, they are doing the same thing and putting a time of money into it. it's a complete change of course for the government but it is what it is and that's helping propel metal prices especially the last two months. i seem to have forgotten but wasn't there supposed to be a steel production freeze in chinese mills? now it seems they are producing again? some of the stories we hear what we talked to analysts in china and hong kong is that this is part of their plan. they have gone to the mills and said you need to cut 150 million metric tons over the next couple of years. wille meantime, maybe they go out and spend money to keep these mills with some cash flow to help them with capacity closures. scarlet: what does this mean in terms of the retail investor in china who bets on iron ore?
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will they extend their long positions? >> that's a great question because an hour ago, the chinese exchange just came out and raise the margin requirements by 60%. toy are actively trying tempt down the iron ore market as we speak. tracy: if we have margin requirements working against the retail investor run come as is the price of iron or have further to go? chinese government just doing this as a temporary increase in loans or is this a new policy shift? what peoplehis is got wrong in 2009. they said china would do this slowly but they did this for two years. that's a big question. you see the demand buildup in other metals like copper? not to the degree of iron or by you have seen copper up about 12% off its lows and most of the other metals like zinc, up 22%.
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all of them are beneficiaries of this. scarlet: to what extent are each economists reworking their forecasts where the metals will go in the face of this evidence that there is demand out of china? >> two months ago, everyone was falling over themselves to be bearish. they said the price would go lower and lower and now some of the analysts are starting to figure out that if this is real, i don't think anyone has go -- gone in a whole hog to say this is a bear market. scarlet: thank you so much. ahead, amazon takes aim at netflix with a standalone video service. can netflix afford to respond? ♪
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scarlet: this is bloomberg markets. for supremacytle
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in the video streaming business is getting more intense. amazon is rolling out a new service that takes direct aim at netflix. it will offery, its video service for one dollar less than netflix and you don't need to subscribe to amazon prime to get it. scarlet: let's check in with carol massar and cory johnson as to what's at stake. carol: thank you so much. we are here with porter bibb. we were talking about the different choices in terms of video streaming and there are more options, where do you see this going? demise ande slow melting of the iceberg of television as we used to know it. and that reedflix talkeds and his earnings about being able to download content and play it whenever you want wherever you want on any device. that is where the whole business is going. cory: you can see the download
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component of this. amazon prime will let people do this but netflix doesn't. they are priced similarly so what do you think of their likely success? they had free shipping and all the video and music through amazon prime and that's a bargain compared to anything else that's out there. they are trying to unlock the contract necessity and give you a no contract month by newmont system that's priced underneath netflix. it's not just netflix and amazon. to putk is just starting live news video from television on facebook and you will see the same thing on youtube and half a dozen other websites. forwarduge, huge step for internet, video, and a big step back toward for old media television as we know it.
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as it gets more competitive, the winner is the consumer? i think the consumer is always the winner if there is more diversity and less cost. sooncc is coming out very with the no set top box ruling and it will allow you to use any device you want to access cable television and the internet. manufacturersn are building that into their sets right now and that will be almost automatic going forward. very big transition that is moving faster than many people thought. also see the capability built into the xbox already. we could wind up with very different devices. >> the other thing that nobody talks about is google, with all of their moonshot rodgers, the one that captures my attention is their fiber.
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-- moonshot projects. they are in 50 cities with 100 times faster broadband delivery. they have put these little free wi-fi hotspot pillars all over manhattan. they have a secret wi-fi broadband that is wireless. you don't have to use any of the existing infrastructure. it's going to be revolutionary and will really put a lot of pressure on the traditional telecoms. so like verizon and at&t and comcast? >> who are the main internet service providers but they depend on a wired internet service. carol: what he is think about verizon being interested in yahoos web-based assets? >> the motivation that verizon has is tim armstrong. he worked at google as the ad director with marissa.
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who is now at yahoo!, obviously and he knows the business. he has salvaged aol and turned it into a very high-tech ad serving system. that had no reason for existence before that. i think he thinks he can do the same thing with yahoo! what he wants and what verizon wants is 240 million regular viewers. carol: is it a good fit? >> it's not a great deal but it depends on much of a cost. we're not talking a lot of money, between $5 billion and $9 billion. cory: if they want all of it. they might just want pieces of it. do you think they would rather have more content from yahoo! or would they rather have the ads? marissa's sure initiative on content has delivered on any level. if verizon ends up with yahoo!,
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they have the resources and capability to go out and buy any content they want. carol: thank you so much. back to tracy and scarlet. scarlet: our thanks to carol massar and cory johnson. tracy: con edison gets burned by its acquisitions. will it be able to reinvent its self? that story is next. ♪
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scarlet: we have first word
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news. princeop music superstar has been found dead at his home in suburban minneapolis. his publicist told the associated press that the music icon was found dead today. let ring in the former billboard editor who is now at mac presents and joins us on the phone. thank you for joining us. what is your initial reaction? >> i am just as shocked as everyone. for one thing, it's a testament to his tireless work ethic that he reportedly passed away in his studio, paisley park in minneapolis. i think we are still just trying to process this news. mark: he was famously anti-piracy and told billboard and 2013 that he had a team of black female lawyers that ordered takedown notices on you
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two. as we went from the age where we knew him from the 80's and 90's toward this new high-tech social media age? embracedsomeone who change reluctantly and very recently. he aligned this past year with 's title music service to stream his catalog. for the longest time, you could not perform -- find his videos. he is someone who just now within the last 12 months as come along to the new era of digital music and online copyrights. he was percent -- protective of his legacy. mark: speaking of his legacy coming he rarely did commercial endorsements. how does that change upon a superstar's death? witso it happened after michael jackson died and even after david bowie died earlier this year. their record sales one through the roof. >> absolutely, it will be
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interesting because in the same way he protected his music from streaming, he was very protective about where it was licensed. as recently as last year, he was threatening to sue dr pepper for a series of commercials with playing a prince like character. things that did not even involve his music, he was combative about. we will see how the estate handles that going forward. he has so many iconic songs. used ford easily be all sorts of purposes going forward. would he have done something like that in his lifetime? i was wondering if you might speak of moment about his crossover appeal?
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he was embraced fervently by the african-american community but he also dipped into the rock status. how did that help him and his wider audience? prince was rooted in r&b and blues but quickly became a pop artist and dance icon. within the last couple of years, he was one of the most active touring artists out there. a 40 dayhe did residency at the forum in los angeles. he would do prop up concerts with in the last couple of months that he would announce sometimes the day of and people would go because it's prince. he could play everywhere. oe could headline bonnero and other festivals the next day. he transcended boundaries. mark: i have to ask if you could describe his legacy, what is it? bustingnk it's boundary , timeless music. are the mostsongs
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iconic songs that are 30 or 40 years old and may sound like they could have been made today. mark: thank you for joining us on the phone. news 24 hours a day powered by her 2400 journalists in more than 150 news bureaus around the world. scarlet: thank you so much. back to the financial markets, whatever it takes. that was the message again from the european central bank president mario draghi this morning. inflation to ensure returns to a 2% target and policymakers decided to leave the key interest rates on hold citing geopolitical risk and he talked about some of the volatility surrounding a possiblebrexit. >> we expect a continuation of market volatility. certainly until the referendum. i don't want to speculate about the outcome of the referendum,
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probably even after the referendum. enough to endanger the economic recovery in the euro area? the assessment of our staff is that the risk of this happening is limited. scarlet: what are the implications of a brexit? groupask the eurasia director of global strategy. do you agree with the mario draghi assessment? >> mostly yes but i think it depends. if brexit were to happen, the first shock absorber we think would be sterling which has an impact on the trade weighted euro and may have an impact on activity. the next question is what are the implications for other assets both within the u.k. and outside. it gets tricky because if you have a spillover from sterling into european bank cds or u.k.
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bank cds then you get more systemic concerns. that is on the economic side. on the political side, the question is, does the fact of brexit mean people start worrying about the eu itself breaking up? our view is that is not likely to happen but that does not mean that people will not fear it. there are several channels by which a brexit and have an impact. plug -- ifshameless you type this on the bloomberg, you will see a snapshot of the top news around brexit and a chart that highlights where the public is in terms of whether the u.k. should leave her in the percentage of people voting to leave are saying they want to leave his 40% and the percentage of those want to remain is 51%. 9% don't know. tracy: that was a shameless plug
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indeed. going back to the big question -- you say that no matter what the result of the referendum is, you expect some volatility and markets ahead of the june date. how extensive could that be? >> i think it will depend on the polls. this is something we saw with the scottish referendum. people do not pay attention for quite some time. than the week before the scottish referendum, it was all they talked about. especially if the polls look like they are close, then you could see some pretty significant impact. issue is there are two social science principles at war here. one is that a nurse should usually wins -- is that inertia usually wins. angry people are more likely to go out and vote and that something we know. these are different things
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fighting with each other. scarlet: what happened in the netherlands is that were not his -- is that there were not that many people went out to vote with a trade deal of ukraine and it got rejected. there is no percolation of a netherlands exit from the eu. our other countries at risk as votet closer to a brexit of coming up with their own referendum? >> i think there may be talk of down, ourng but deep view is that is unlikely. dissatisfaction with the eu. one thing about britain in particular is that the u.k. has been the country that has been the most likely to see the relationship is purely economic. it has never really bought into the political benefits.
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also, from the point of view of the other countries, britain is not a member of the eurozone and is not a contributor. the cost-benefit even though brexit would be costly, unwinding's are much easier in the case of the u.k. than anybody else. i think people recognize that. scarlet: we focus on the economic benefits of u.k. staying in the you will -- in the eu. where the economic benefits of -- of leaving the eu. described isey are a change in immigration policy. you can take what ever immigrants you have and have a point system like some countries do. contributionsnet to the eu budget. that is not so important but it plays out politically and the freedom to make trade deals as they wish instead of being subject to eu trade regulations. our view is that all of those
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are somewhat illusory and they are outweighed by the benefits but that's not what the lead camp thinks. we have been talking about the risk for some time and are in the middle of earnings season in the u.s. and the u.k. have we seen any companies talking about real-world effects of the brexit risk on their results? you have seen some indications in terms of investment and some indications like with real estate companies talking about a slowdown in real estate investment in the u.k. spilling over into the central london property markets. some of the banks became quite vocal recently but then obviously, there has been an effort to get them to be less vocal. there was a brief upsurge of concern that was articulated and has been tempted down -- tamped down.
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scarlet: thank you so much. still ahead, we have much more to come on bloomberg markets. ♪
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scarlet: this is bloomberg markets. tracy: let's go to the market desk with julie hyman. julie: i am taking a look at financials. [indiscernible] my microphone is not plugged in. scarlet: maybe we will get back to her a little bit later. let's move onto another big story. tracy: sun edison, i thought you
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were going to say aeropostale. here we have the bloomberg news reporter who has been all over the story. scarlet: you have been tracking this one. if you look at the share price, bankruptcy has been a near certainty for a while? >> it has, they have two companies that control, public holding companies, and both of them said the company was at significant risk of bankruptcy. in late march. we have known for about three weeks this would happen. it was a matter of when and not if. tracy: sun edison filing for bankrate protection and i've been upset the story is not received more attention. here you have all the things that have made valley into big story over the last few months. financial engineering in the form of those deals, you have willing debt capital market
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investors who were more than happy to get higher yield in debt by buying the sun edison bonds and you also have a hedge fund hotel that investors crowded into. why hasn't the story got more attention? >> the big thing is that renewable energy is not fully understood by the wider markets. a lot of the investors in energy are mlp investors in gas. they are not necessarily to the left politically. they are people who understand a very particular structure. i think it did not have the wider view. scarlet: i like how you framed it, comparing it to valley and. one thing sun edison is known for is its acquisition. this is a function that allows you to look at the buyer profile. go on the profile and
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they made 35 deals worth $35 billion across the world. as you look at the deal distribution, most of the deals came after 2014. ont wanted sun edison to go a buying spree the last two years? -- what prompted sun edison to go on a buying spree the last two years? >> they were rewarded for their growth. they made $3.1 billion in deals in 2014 and last year. julyannounced a deal in with a residential solar company. project's build a memo hamid desert or in the plains but this is a company that focused on rooftop solar. credit a more uncertain profile based on fico scores.
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utilities usually by the power. this prompted a reckoning. then they said they are buying too fast and i realized that the pace of acquisitions was too quick. sun edison files for bankruptcy protection and still has the two listed yield codes. what will happen to them? >> great question, we don't know. they are not listed as debtors so that gives them some protection. they control these companies the right class b share and they control it and maybe will sell the shares to help them going forward and maybe they will be dragged into bankruptcy. says they have significant risk because of the financial situation. it remains to be seen. scarlet: thank you for joining us. tracy: we are going to go back to the markets desk with julie hyman who is ready to talk to
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us. julie: i am ready, my technical difficulty has been solved. i want to look at the financials. on the plus side, raymond james financial after the company per earnings topped the highest estimate out there, $.90 per share which is $.50 over the highest estimate after the first quarter profit was down 17%. some of the other movers we watching within financial earnings include some of the regional banks and some of the bigger companies. blackstone came out with numbers and those are not as good as some analysts had expected so that is causing a drop in the shares. american express is coming out a little bit better than estimated particularly when you talk about revenue. customer card spending was up 3.3% even though net income dropped year-over-year. the earnings-per-share missed estimates at keycorp.
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investors are more content than not with the numbers. when we look at the financials, the reits are down today. we tend to see them trade lower when we get a bump up and interest rates and treasury rates as we see today. these are some of thereits we are seeing decline. goingt comes to earnings, into the earnings season, financials were expected to be a drag on overall s&p 500 earnings. let's look at earnings analysis for the s&p 500 and you can look at individual groups. . 28 ofthe 90 members of the s&p financial index are now out as you can see, the earnings are down more than 18% than the overall s&p 500. good snapshot, thank you. is cliffordg up, jet and the energy industry
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reaching unsustainable levels? that is next. ♪
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tracy: this is bloomberg markets. scarlet: since the start of 2016, lenders have yanked $5.6 billion in credit from 36 oil and gas producers which is a reduction of 12%, making this the most severe retreat since crude oil began tumbling. how do companies that are struggling to survive find more time? we spoke with the asset manager founder on the market and whether now is the time to buy? lost this sector, oil, we -- we passed the best opportunity to invest but it's not too late when you look at the chesapeake stock tripling in
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the last couple of weeks. i don't know what the banks think but $4 billion line rollover sounds like good defense. >> how much further is not too late for companies in that space? >> it was a coin toss whether the banks would flip a coin. question whether the boards understood them reappraising their lending. this was a flip of a coin. there is no question in my view that the company now is a $4 billion equity cap. had they call the tune earlier and said we are not extending that line, that could have been a catastrophe for everybody. scarlet: we talked about chesapeake energy and that is more of a destruct category.
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what about glenn core which is investment grade but on the cusp of losing it? investors losee confidence in investment-grade companies? >> i don't think so. i think about when the last investment-grade company that went bankrupt not for fraud was. it's not typical, in fact it's highly asymmetrically probable for investment great company to go into bankruptcy. we all recall glenn core in 2011 went public at 560 pence. the stock stopped dropping in the middle of the crisis at 67 pence. they dropped 90% of their value. bys is a great company run one of the world's great ceo when they are paying down that and they threatened to pay down $18 billion of debt in the next couple of years. these are highly cyclical companies and these are
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the behaviors of the ceo and board that determine the don't go into bankruptcy. it's the resilient, obstinate in ceo that rides his conviction to the ground. now is joeth us weisenthal. we will focus in argentina today. joe: this is an interesting story because argentina is associated in people's minds with terrible credit worthiness. yet there is extra ordinary demand for its bonds. they have already made a bunch of money so why are people so excited to buy debt from these deadbeats? scarlet: search for yield? tracy: is it a continuation of the rally we have seen over the past months and weeks? thatit's still interesting you can stipulate that there has been a big credit rally and big emerging markets rally. you would expect to see some penalty. countries historically that the
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fault or seen as being pariahs for a long time but is that still the case? scarlet: argentinian companies were able to issued debt during this drought. if you look at their yields and how they trade, they are trading inside a high-yield average and the emerging markets. : you would think there would be more penalty for that. we are all going to read up on this before we come back. thank you so much and we will have more in argentina later today with paul mcnamara at 4:00 p.m. scarlet: we will also talk to the goldman sachs chief economist at 4:00 p.m. more bloomberg markets on the way. ♪
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david: it is 2:00 p.m. in new york and 2:00 a.m. in hong kong. lisa: welcome to "bloomberg markets."
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david: here is what we are watching this our good markets are trading lower as u.s. stocks threatened to snap their three-day winning streak. after thealso down ecb decision to not release further stimulus. lisa: the lights have gone out for sun edison, the company filing for bankruptcy. waiting on big earnings after the bell today. a starbucks kamal for that alphabet -- starbucks, microsoft. julie hyman has the latest. julie: stocks falling to the lows of the session right now. yes indeed 500 is now off i .5%, as is the dow --


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