Skip to main content

tv   Bloomberg Markets  Bloomberg  April 25, 2016 12:00pm-2:01pm EDT

12:00 pm
scarlet: from bloomberg world headquarters in new york, good afternoon. i am scarlet fu. i'm tracy alloway. here's what we are watching at this hour. saudi arabia is try to revive its economy without oil efforts. scarlet: another chapter in the valiant saga. will this version of ceo musical chairs work? tracy: a lot of huge tech earnings will come out this week, but one tech giant is holding most of the attention. we will discuss what to expect from apple. scarlet: we are halfway through the u.s. trading that could let day. lettuce head over to julie hyman. tracy mentioned apple. it is spring break, so it's wait-and-see for the market. julie: when we are talking about
12:01 pm
apple overshadowing everything else, it is passover, so i thought of how is this day different from any other day earnings season? it is also seasonally and apple appropriate. let us look at the major averages that are hovering near the lows of the session. as investors await all the various events that scarlet was talking about, as it is bring break, we do see a drop in volume and this pause at the very least from the rally that we had last week that took other major averages as well and other individual groups to multi-month highs. if you look the s&p 500, it's sort of made a little bit of an attempt at a bounce an hour ago and did not quite go anywhere. it is still down one half of 1%. take a look at the bloomberg for volume in the various groups of the s&p 500. overall volume is down 10% to 11%. telecom is seeing a particular slot, financials as well.
12:02 pm
consumer staples also seeing a decline in volume. apple is on the list of drags. there's a lot of questions about iphone demand going forward. tara go losing their ceo. it also cut its earnings forecast, so that did not help the sharing's forecast either. tracy: what else this week out there? julie: we are seeing financials after reaching a multi-month pullback fromg a jpmorgan, bank of america. also seeing declines with the fall in oil prices. we have specific reasons as well. gas did not get a pipeline permit that would have brought some of the products to different parts of the u.s.. transocean also declining could we ar. we are seeing the rails decline even though norfolk southern got
12:03 pm
in under rate to neutral. canadian pacific in a filing said that it sold 1.4 million shares of the company. that appears the putting some pressure on canadian pacific as well. it a lot of different groups to choose from. tracy: thanks so much, julie. let us check on the bloomberg first word news. mark crumpton has more from the newsroom. mark: president obama has made it official. he is sending more u.s. troops to syria to fight the islamic state. the president spoke after visiting a trade fair in germany. 's small number of u.s. operations forces are already on the ground in syria and their expertise has been critical as local forces have driven isil out of key areas. given the success, the deployment of up to 250 additional u.s. personnel in syria including special forces to keep this momentum. he says they will not be
12:04 pm
leading the fight but training local troops. the administration will decide to release part of a secret chatter. that is according to bob graham. the documents may shed light on possible saudi connections to the attacks. donald trump is firing back in an attempt to unify the anti-from vote and some of the remaining presence of primates. ted cruz and john kasich are colluding in a way that would be illegal in many industries. competehave agreed to in some primaries and back off and others. the goal is to avoid splitting the anti-trump vote. loretta lynch is trying to smooth away prison inmates facing lose. she is urging governor's to make it easier for convicted felons to obtain state issued identifiecation.
12:05 pm
global news 24 hours a day powered by our 24 hour journalist in more than 150 news bureaus around the world, i mark crumpton. back to you. scarlet: bond investors are taking bigger risks than ever before. the context here is that yields on $7.8 trillion of government bonds have been driven below zero by global growth worries. that is pushing money managers looking for income into debt with maturities as long as 100 years. tracy: our next guest says investors may be setting themselves up for losses. kathy jones is at charles schwab. it seems like investors are faced with a tough choice. yields are very low. if they are going to hit return targets, they really only have two options, which is extend credit risk or duration risk. kathy: both of those options are unattractive in many ways. we get action, even if modest rise in long-term rates,
12:06 pm
you're going to see the price of the bonds go down. it will be harder to recover. that is going to be really tough. on the other hand, credit can get very extended and risky. we saw that earlier this year at high yields. it is now come back to it kind butn average yield, it is a dilemma that most investors face and we do not think you should move to either extreme. scarlet: when it comes to liquidity, which strategy offers more liquidity? kathy: that is a good question. [laughter] if you are an extremely long duration bonds, liquidity can dry up as well. you'rewant liquidity, going to have to stay in some of the intermediate-term bonds, big issues, whether it is corporate or in treasuries. you have to find a market that is liquid first and foremost. tracy: i want to bring up one of my favorite bloomberg terminals because i'm a total bond beat. if you look at something like
12:07 pm
the japanese government 30 year and take a look at the terminal now, you can calculate duration the using something called cbo one function. what this basically shows the change in market value position for a one basis point change in yields. the idea is that as yields get very low, that change its bigger. are investors who are taking it on duration risk, are they setting themselves up for a big stock if we do get a rise in interest rates? kathy: it depends. if you are a buy and hold investor and you have a coupon that's a positive coupon and on the negative yield, then if you hold to maturity, you do not necessarily have to worry. if you are an investor who is a buy and hold investor and you buy something with long duration with a coupon, but you plan to match that up against liabilities come another deal. if you are buying negative yielding bonds, then you are
12:08 pm
going to see a lot of price volatility and you are setting yourself up for some risk. scarlet: when you look of the u.s. treasury market, the furthest out in duration you can go is 30 years. other countries like japan and switzerland gets a little bit longer in duration. come inside the bloomberg here and we look at two examples of the japanese forty-year and the swiss 50 year how love those yields have gotten. 37 basis points for the swiss fifty-year. 44 basis points for the japan forty-year. no choice butave to go to countries like japan and switzerland to get that duration? kathy: there are very few investors that the that kind of duration. it would be maybe a pension , but it's very red and individual investor or many other corporate types need to go 40 or 50 years. that is pretty far beyond the duration levels. the big event for fixed
12:09 pm
income investors this week is probably going to be the fed meeting. how are you expecting that impact the markets? kathy: the have a real dilemma on the hands. no one expects them to raise rates. , they have to communicate something that leaves doom on the table of the possibility even though the market is not expect in that. the language is going to be the question. what do they put in a statement? i guess they say the risks are balanced. they may be taken as a little bit of a negative in the bond market. scarlet: is going to be a balancing act for janet yellen and her colleagues for sure. kathy: they would probably rather be linguists than economists. scarlet: in the bond market, everyone is complacent that bonds will be rallying. if you could tell us, what is a trade that you feel you have missed or charles schwab has missed in the past year or so? kathy: a trade that we have missed? we do not encourage
12:10 pm
long-duration bonds when they were rallying at the beginning of the year because we do not like to encourage investors to but that kind of risk, had we done it, that would've turned out well for people. we have been speaking in intermediate-term which is five or 10 years. 20-30, but wene did not have the courage. scarlet: kathy jones, thank you so much. hopefully for this company's investors, today's earnings report will not see it duplicated. shares are being shredded after its numbers have missed estimates. any guesses? tracy: it is on the tip of my tongue. i'm not going to ruin it for everyone else. scarlet: when you come back, you'll find out and get tracy's guess. ♪
12:11 pm
12:12 pm
12:13 pm
♪ scarlet: those were some of the top stories on bloomberg.com. tracy: you are watching "bloomberg markets." i'm tracy alloway. scarlet: i'm scarlet fu. let's head to the markets where julie hyman is following up on the mistry stock. tracy was about to give us her guess. tracy: i want to give others a chance to get it first, but it looks like xerox. julie: yes, that would be correct. the name of the company isn't
12:14 pm
worth what the company does. i frequently say i'm going to xerox something. the stock you today is down and that is because of the action in stocks today when it came out with earnings that missed estimates. the company cut its full-year forecast and a couple of other things are going on. you see the 13% in the decline in stocks today. you can see the decline from document technology that includes printer sales and related services. that, the ceo said they have to accelerate some layoffs and cost from those layoffs that made cost much higher than anticipated. so all that contributing to the decline in stock. xerox is planning on splitting into and says it will be doing that by the end of the year. that is from pressure from investor carl icahn. financial analysis and look at pgo, which looks that at a company by segment, you can see services here in
12:15 pm
this orange amber color. technology is in red. technology business has been shrinking considerably. services have bounced around, but these are the two parts of the company and what it will look like when it does split into two. $11 billion in sales versus $7 billion in sales. data processor went public last october. earnings beating estimates here. revenue increasing 3%. that was in line with analyst estimates. the investment in first data has proved bad news for another company out with earnings news today. afterd a loss in earnings the first quarter. you can see those shares are lower today -- ironic since first data is higher at least for today. scarlet: thank you so much, julie hyman. tracy: saudi arabia is heading for its biggest economic shakeup and's its founding.
12:16 pm
mohammed bin salman is leading this overhaul. he spoke on saudi tv earlier today on his post oil plan. >> this fund will control more than 10% of the investment capacity in the world and the volume of its assets will represent more than 3% of the world existing assets. john mikel plates back with the deputy crown prince this month. he spoke earlier this morning to discuss his vision on saudi arabia's 2030 vision plan. >> they now know and understand that something has to change. second, there does seem to be extraordinary waste. when they talk about money being pumped into things in the desert, it's on the level unknown. normally people like you and me are used to hearing when a politician stands up
12:17 pm
and says they're going to get waste, they are saying rubbish. there is large amount of money where they have no idea where went to if they pull that back in, that's another area. if the king want something and the sun want something, there is an ability to push things through in a slightly chinese way. i just quickly grabbed from the bloomberg terminal saudi arabia's unemployment rate. to information only goes 2015. we are looking at 11.7%. the high would be pretty normal for say southern europe. i'm thinking about the other half. how many of the 90% people unemployed are actually working in jobs and how many just count as employed because they are on ande oil pra payrolls are not really working? >> a huge amount.
12:18 pm
you have a huge number that are underemployed and you have the whole issue of women in saudi arabia, many of whom do not hold jobs. all the same, there are people who are not working when they want to. there is a vast reservoir of people who may feel discontented and angry. one of the big issues here is that those are the people that they are pushing subsidies toward. what happens if they take away the subsidies, which is the rational and economic thing to do? at the same time, they do not given the same type of representation. there is a country called america where taxation without representation got mixed up very unfortunately. [laughter] >> we also understand there is going to be social change. changes for women may be being able to drive and have greater rights there. does that jeopardize potentially the economic request of this plan? john: the answer doesn't have anything to do with making saudi arabia a more liberal base.
12:19 pm
you have the king abdullah financial center and this huge gleaming thing. work empty because if you at goldman sachs or morgan stanley, you do not necessarily want to go there because it is not the kind of place that families want to go and all that sort of thing. it is definitely a problem that way. in the short-term, it brings the reformers in saudi arabia absolutely into conflict with some of the more conservative elements of the religious establishment. that is the deal that the saudi monarchy has posed. they have allowed the cleric some degree to say on the religious side in exchange for supporting them. at some point, those two things come into conflict. scarlet: that was bloomberg's editor in chief this morning. is portions arabia of this position because of the collapse in oil prices. if you look at oil prices versus darling costs, you will see that brent crude has come down below
12:20 pm
$40 a barrel. come inside of bloomberg and you can really see this illustrated. brent crude in blue coming down in the white line there is the three-month interbank rate. it is short-term interest rates and a climbed above 2% for the first time since 2009. you're seeing that stress in the financial system as oil prices continue to hover near these lows. tracy: i think that's a really good point. the interesting thing happening in markets now is that if you look at saudi arabia and stocks for instance, you can see that the index actually entered. asthma doing pretty well given that -- it has been doing pretty well given that there have been spaces on the economy and interbank lending rate. according to technical analysis indicators, it has more momentum to go. i guess the question is how long can study arabian stock investors keep that momentum in the face of these massive
12:21 pm
headlines? scarlet: part of it goes back to the idea that the kingdom is trying to expand other parts of its economy away from oil. it is like the equity market opening up to foreigners. tracy: but they are not there yet. scarlet: still ahead, valeant is getting a new ceo. is he the right person to help restore investor confidence in the embattled growth company? ♪
12:22 pm
12:23 pm
tracy: you are watching "bloomberg markets." i'm tracy alloway. scarlet: i'm scarlet fu. tracy: valeant is getting a new chairman and ceo. joseph pop-out is helping value to execute a turnaround after a series of scandals last year. they say he will get to work in early may. scarlet: drew armstrong joins us here in new york. leaving perrys
12:24 pm
go. is it more for him being up to the task at valeant? drew: when he took over as ceo there in 2006, they had is pretty -- a pretty spectacular run. up until april lester, the shares have gained with a fantastic return during any ceos tenure. but since then, they got embroiled in this really nasty and made a lot of promises to investors about what their earnings were going to be. today, they came out and said they were going to cut their forecast. they were taking charge potentially on a deal that they finished up last year. the stock is down by almost half since that high-speed. clearly the momentum that he gained has not necessarily been maintained over the last 12 months or so. headinglittle bit somewhere where he is going to have a chance to build this thing pretty much from the
12:25 pm
ground up. scarlet: valeant share prices have cratered following all the disclosures and the delayed earnings releases. tracy: with your fantasy ceo hat on, what do you think his first task is going to be when he lands at valeant? drew: the one thing everyone talks about is restoring credibility. this is a company that not only have they had some outside forces come in and disrupt their business in terms of investigations and criticism over drug pricing, but they have not been able to get the abcs of their business necessarily. we are still waiting on them to file an annual report. investors forgot totally trust them. a lot of them are out of the stock because the don't know what's in here. we do not think that this is a $30 a share company. god knows what is coming next. when we talked to a lot of people, is job number one is to come in and say i've got this under control. we are to do financial reporting on time. you're going to know what is
12:26 pm
this. scarlet: you have to wonder if bill ackman has signed off on this. pershing square own 6% of value. tracy: that brings up an excellent point. is the new e ceo going to stave off bankruptcy without the goodwill of investors in a particular creditors? drew: a lot of credit issues are going to be solved when valeant files. they have been flirting with some of their financials, but never approaching the point of crisis there. this is an issue where you need to file your financials in time. it seems like they will be able to do that. scarlet: drew armstrong, thanks so much for joining us today. we will be back with more on "bloomberg markets." ♪
12:27 pm
12:28 pm
12:29 pm
tracy: you are watching bloomberg markets. i am tracy alloway. scarlet: i am scarlet fu. of thelet's get a check
12:30 pm
market performance so far today. we take it over to julie hyman. we see, as we talked about earlier, abroad decline. even if it is not deep, it is affecting a lot of different stocks. i want to talk about the stocks triggered by analyst calls. leading by community health, analysts are saying they are to deal with the spinoff of quorum. t it is also affecting others in this industry. we are also seeing a selloff of homebuilders as we saw declines in home building. what is leading the declines is colpulte.
12:31 pm
the analyst they're concerned about an ongoing dispute between the family and the board of this company, among other reasons. again, not a hugely steep drop, but a broad drop in home builders. netflix. target, butrice largely, a lot of the commentary is positive saying that expectations for the growth has been beset, and catalysts are rebuilding after a negative period after curving international growth, for example. scarlet: thank you so much. let's check in now on bloomberg first word news with mark crumpton in the newsroom. mark c.: thank you. wrapping up his trip to europe, president obama has been meeting with heads of state from france, italy, the united kingdom, in germany.
12:32 pm
they made quiet conversation around a large table as they posed for photographs after the meeting. they are expected to touch on a number of topics including ongoing refugee crisis on the european cotton it. the five primaries tomorrow could be telling for hillary clinton. while she can not win enough delegates to officially clinch the nomination, it could raise doubts over whether she could be the nominee over bernie sanders. a suicide car bomb exploded in an iraqi capital today. at least 14 people were killed. the attack in baghdad also wounded at least 38 other people. no group has claimed responsibility for the attack. the brussels subway station hit by a suicide bomber has reopened.
12:33 pm
16 people were killed on march way second, when the bomb exploded. meanwhile, the other target, the brussels airport, still is not up to full capacity. news from the football league has ruled that tom brady must four gamefor suspension for the deflategate scandal. 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: ank you so much. cheniere energy is the first company to export the gulf i natural gas in the u.s. itsebruary, it shipped from location in louisiana, and did so without its ceo. tracy: that's right. he was fired two months ago. he wanted to take lead in texas to export crude.
12:34 pm
disagreed. many think that the company is a takeover target. alix steel sat down to find out if a buyout is on the table. >> my only fear is that i wake up with a letter on my desk that someone is interested in should near -- cheniere energy. i think it holds today. representsprice, it a great value. valuationer any scenario can come up with. as a result of that, if someone wanted to own our company, they would have to pay a premium over what traditional and emmaus -- mma is used to pay.
12:35 pm
alix: why? >> i think it is valued above that. very our shareholding is concentrated. i think equate investors understand that, and i'm sure they would not allow her stock to go at traditional m&a violations. alix: some names were thrown out -- chevron, exxon -- what kind of company would you match up best with? >> i think cheniere energy could be strategic to a variety of companies, by will not conjecture on who they will be. i will go back to what i said, at the $37 price, i think we are relatively cheap on an evaluation method. if someone wanted to own this company, they would have to pay a relative premium. because the ceo was pushed out and the expansion he wanted was not going to be the future,
12:36 pm
that is litter the opening you up to a sale. is that a wrong interpretation? >> let me challenge the interpretation. i think the board of cheniere energy once it to be -- once it wants it to be a big player lng market. let's be absolutely clear about it. we don't want to do other things, particularly if it is with prospective cash flow. alix: do you or the board still have a relationship with him? t-storm interact at all? >> sharif is out along with martin houston building their own company. people wanting to be in the elegy business makes me feel good about the business we are pursuing. alix: when he was forced out,
12:37 pm
should near energy had reinvented itself so many times, and for this time, it seemed to be the breaking point. what do you attribute it to? >> i don't want to get into the details, but i will repeat what antsid, the board when sh cheniere energy to be an lng company now. that is really our focus for the company. we think there is enough for us to do. the most important thing for the build ourday is to seven strains, build them since themessfully -- successfully, and be a reliable company to our client. alix: do you talk to carl icon a icahn a lot? is he happy for the direction
12:38 pm
the company is going now? >> i think you would have to ask carl. he has a variety of investments. pushback -- as happy, and i think the board is happy with what they see today. alix: are you going to be the interim ceo? >> there is an active search, and i'm confident we will fill the position, especially before summer. this is a great company, a great role, and fabulous people are interested in this company. scarlet: that was some of alix interview withve the cheniere energy ceo. coming up, and unsolicited aid bid for tribune
12:39 pm
publishing. oncy: and, the focus will be apple star product, the iphone. scarlet: and, the biggest economic shakeup in decades.
12:40 pm
12:41 pm
scarlet: you are watching
12:42 pm
bloomberg. i'm scarlet fu. tracy: i am tracy alloway. here is what we are watching on your global business report. scarlet: there is a well snapping up huge chips. tracy: and, saudi arabia prepares for life without oil. can a r reboot say that the economy? and, slowing car sales. wealthy down term lead to -- two the down turn the consolidation? let's start with japan. current stimulus plan, the central bank buys every year,lion
12:43 pm
more than $27 billion. make the top 10 shareholder -- that makes it a top 10 shareholder. critics are wary of the central banks outside impact on the japanese bond market. they also say that the doj growing influence on stocks valuations.ting tracy: saudi arabia is unveiling era.dmap for the post-oil oil accounts for 80% of the kingdom's income, but they are being prompted to diversify. the prince gave details about the plan. now, the full valuation has not been established, but we think the number will exceed 2 trillion
12:44 pm
u.s. dollars. tracy: in germany, the ceo of deutsche bank has been acquitted in a fraud trial. began,closing arguments prosecutors said they had felt to prove their case. china, a shakeout. three out of four automakers lost money last year. the problem? a sluggish economy and car dealers pushing too much inventory into showrooms. and, phillips is leading towards , the first time the company has said they prefer an ipo to a private sale. the unit had more than a billion dollars in revenue last year. the company -- parent company wants to put its focus on health care. scarlet: time now for our
12:45 pm
bloomberg quick take where we provide context and background on issues of interest. unsolicitedmade an bid for tribune publishing. this comes as the publishing business is fading. revenue has fallen by one third since 2005. "thenent papers like your times" and "the washington post" are pushing digital subsections. -- subscriptions. the trend is not limited to the u.s., we see it echoed in europe and australia. in britain, subscribers who prefer print over digital is only about 7 7%. print has been on the asphalt radio -- age of the
12:46 pm
assault since the age of the radio. local papers have withered radi. here is the argument. somendustry decline has wondering whether a sense of democracy is being lost. that is because newspapers still conduct important revelations. still, revelations about the u.s. electronic surveillance program came from the government worker to an independent journalists. some industry watchers say that part of independent journalism could blend. those paying for news with an someonline new suspicion has gn to 59% in 2014. that is your global business report. for more stories, visit bloomberg.com. tracy: coming up, apple reports earnings tomorrow. slower sales.t
12:47 pm
we will discuss. ♪
12:48 pm
12:49 pm
tracy: you are watching bloomberg markets. i am tracy alloway. scarlet: i am scarlet fu. it is time for the bloomberg business flash. tracy: folks like an -- volkswagen is appealing a ruling from its auto plant in tennessee. votingd a decades long strength of union leaders in the south. scarlet: apple is reporting sales tomorrow, and is to show just how long iphone sales have fallen. shares of apple have fallen 18% over the last year. iscy: aurora management
12:50 pm
returning over $500 million to clients. the move comes after the termination of a deal last week under which the firm was being advisors0,000 capital in global asset management. that is the bloomberg business flash. scarlet: let's get you a quick check on equities. i would notlloff -- say selloff. retfor a treat. pullback. pullback in equities. here in the u.s., we are looking at a dow down 103 points. .5%.&p losing 1 that's go live to azriel doolittle -- abigail doolittle. aigail: we are talking about ritchie, a pullback. we have the dow down slightly.
12:51 pm
one of the biggest drags, netflix. and analyst says he sees a reset of executions after the first quarter report last week, and disappointing second-quarter guidance, a reset the allowed catalyst to build, showing the investors are more focused on weak guidance. stock, a big internet stocks that investors are watching, facebook. the company reports wednesday after the close. there has been a lot of chatter about what the fundraising revenue will be. in line orted to be better, something perceived as a positive, but on the fallout alphabet weak corder, facebook has slipped back below the 10 day average,
12:52 pm
perhaps signaling that more volatility could be ahead for shares of facebook. tracy: tell us what other big companies are reporting this week? abigail: most of the highly anticipated every quarter, apple. apple reports tomorrow after the close. investors will be very closely watching the iphone sells the you both were just talking about after the company forecasted its .irst revenue drop it looks like 50 million iphone units is the line in the sand that will be positive. below that, negative. the nikkei review asking suppliers to keep reduction at reduced levels. raymond james cut numbers last week. the stock is similar to netflix, trading in a range.
12:53 pm
we will have to watch and see tomorrow what they report. scarlet? scarlet: thank you so much. abigail doolittle reporting live from the nasdaq. apple kicking off round two of earnings tomorrow, followed by facebook, twitter, and amazon. for al bring in tom summary of what to look for. we start with apple. the chart of the hour is about apple sales. they have never posted a year after year decline, remarkable after how long this has been going on for. this started in 2007. when does the tide turned? >> this quarter, we will probably see the first downturn in sales. a big milestone. this means there is a big saturation in the market. apple was behind spurring the smartphone boom. it is kind of topping out now.
12:54 pm
tracy: if we are talking oversaturation, what can apple due to offset that? >> one, they have introduced the smaller iphone. they went big -- bigger is better -- it's not. they may have gone too big, too expensive. you see them come down in terms of size. we will see that come through in future quarters. there also really investing in new technologies. we will see more down the road. we think they are working on a car. there could be one that he tim vr. hinted at people will be really tuned in. and, bots. the revolution -- they siri.utionized t i think you will see more in
12:55 pm
terms of artificial intelligence. some good growth, but not seeing user growth that the investor community and analyst community want to see from twitter. not seeing it, and i don't think we will see it tomorrow. scarlet: especially compared to facebook, twitter is faltering. >> absolutely. journalists among the users -- tracy: we seem to live our lives on twitter, but others don't. scarlet: for amazon, what are people most interested in? about amazon's margins and the quarters, except for the ones we don't.
12:56 pm
right? some quarters you here, we are investing in the future, we are worried about what is going on at amazon. other quarters, investors wake bezos isy, wow, selling like a drunken sailor, we are really worried about the margins. scarlet: thank you so much for joining us. a quick programming note. bloomberg tv and radio will be airing the fed this wednesday. we will have instant analysis with our guests. don't miss it. 1:00 p.m. on wednesday right here on bloomberg television. ♪
12:57 pm
12:58 pm
12:59 pm
>> 1:00 in new york, welcome to bloomberg markets. ♪
1:00 pm
scarlet: good afternoon. tracy: thank you for watching this hour. since climbing within 1% of its all-time high, investors playing it cautiously ahead of the fed next meeting -- fed's next meeting. the saudi prince second in line to be king is leading the biggest economic shakeup since the founding of saudi arabia. kenny and the kingdom's dependence on oil. john kasich and ted cruz are teaming up to stop donald trump, but is it too late? first we had over to the markets desk where julie hyman has been checking out energy, but more broadly, the pullback in global stocks.
1:01 pm
julie: bouncy little but off the lows, there has been a lot the folks are literally -- waiting on. we will see the pace of earnings reports including hearing from apple, the fed as well as the bank of japan. as investors await that, we are seeing declines, but not much that activity -- not that activity. was down as much as 7/10 of 1%, earlier. it is still a commodity led decline, energy shares performing the worst in the s&p 500. industrials,t the also feeling the pain today and materials. anything that is reliant on the oil and gas industry is falling as well as other types of commodities. --ecoms and communities telecoms and commodities on the other side, gaining some steam.
1:02 pm
prices have been bouncing around a little bit, but right now, we are down by about percent as we heard saudi arabia announcing that it will be completing an expansion of one of its oil fields by the end of may, so that is going to keep its production from being disrupted. we are also watching natural gas which is coming down off a 10 week high. we are seeing the forecast for some milder weather, so it is down by 8.3%. scarlet: is this the return of the old pattern where -- julie: earlier in the day, even when oil had sort of gotten a bounce and was going positive, stocks were still lower, so it sort of is dependent on what time you look over the course of the day. energy shares are a heavyweight at the moment.
1:03 pm
we are also seeing oil services and pipeline companies return lower. getting rejected by regulators for a new pipeline and other commodity related stocks are also lower. line dell basil falling. alcoa off by 2%. i will talk about steel more in the metal bulletin coming up. >> let's check in on the bloomberg first word news. mark crumpton has more. mark:, president obama is returning to the unit takes after his trip to europe and audio hrynvnia. the president met with the heads of state from france, italy, the u.k. and germany. they reportedly touched on a wide range of topics including the battle against islamic state, the civil war in syria and the ongoing refugee crisis. donald trump is firing back at a
1:04 pm
attempt to unite the anti-trump vote in the remaining primaries. he says the -- he says ted cruz and john kasich are colluding in a way that would be illegal in many industries. the two have agreed to compete in some primaries and back off in others to avoid splitting the antitrust vote. the city of cleveland has reached a $6 million settlement over the death of tamir rice, the african-american child was playing with a pellet gun when he was shot by a white police officer. an order filed in federal court says the city will pay out $3 million this year and next year. a grand jury declined to bring criminal charges. in california, tweeting about a trial could cost jurors. judges can find some jurors up to $1500 for posting this is a little media. jurors could also be. fined for researching cases on google.
1:05 pm
supporters of the bill say it would give teeth to current bands on internet use by jurors. 3300 foreigners suspected of having links to jihadist groups have been deported from turkey. global news, 24 hours a day. scarlet: all eyes on saudi arabia today as officials unveiled a blueprint for -- for diverse eyeing the country's economy. this shakeup is being led by the deputy prime -- deputy crown prince. he spoke about reducing the country's decade-long reliance on oil. have developed an unhealthy oil addiction and saudi arabia and this is dangerous and has hampered development in many sectors. scarlet: joining us now is the director of economic research at
1:06 pm
the gulf research center think tank. john, the blueprint envisions 2030, giving the kingdom 14 plans to check -- 14 years to turn this plan into reality. >> i think it is a tall order, no easy task by any imagination, but you definitely need to have visionand explain the and the country for the first time in so many years has a definite, realizable goal and has the approval of the king, of the parliament. now, you need to have the rest of the society to support you. he also has the leeway and support of foreign countries, foreign powers to move ahead with this very important vision and reform act.
1:07 pm
how tough is this transition going to be, and will be authorities the able to see it out? difficult and that is why it has not been accomplished in more than 70 years. see a countryt to that is so oil dependent move to a economy that is less dependent on oil. it needs the bureaucracy, the prince has shown he wants accountability and transparency when he fired the minister of order along with his majesty and that is important for the government and its officials, to feel that they are being watched and that is important for a country that tries to have such an ambitious plan. scarlet: that oil revenue has
1:08 pm
dropped to bid for the governor -- for the government. ofwas 80% at last check total revenue. oil made 92% of total revenue in the past. tracy: we are talking about this big reimagining of the saudi economy and is there any country in history that has managed to accomplish this kind of thing in the timeframe that they are talking about? >> i don't think so and that is the challenge. at the same time, nobody has been able, within saudi arabia, put together a plan within a short time, try to have the support within the royal family as much as you can, and also talk to people in very simple language because today's interview and discussion was talking all about economics to the average person. it was all about ringing people
1:09 pm
into this -- bringing people into this and having people say this is a good plan, we need to diversify because of necessity, otherwise, the country will have four more difficulties in the years to come. morell have far difficulties in the years to come. scarlet: coming up next, the next fed meeting on interest rates starts tomorrow. they will be looking -- investors will be looking for guidance about rates down the road. ♪
1:10 pm
1:11 pm
1:12 pm
scarlet: you are watching bloomberg markets. with the global economy struggling to gain traction and the u.s. inflation still below the feds target, only about a 20% chance of an interest rate move in june. our next guest says the market has been to dovish. -- too dovish. karen previously served as the director of financial stability, market monitoring at the new york fed. that is quite a former title. expectations are pretty low this that meeting, almost no one is expecting any sort of rate hike. what will people be watching out for? >> no one is looking for a rate hike, so people will be looking at how are they assessing the state of the economy right now, because that will help them decide in june whether they go.
1:13 pm
you have a meeting coming up after april and the need to start to signal that. we don't think in this statement, they will actually signal any movement in june, but they mark -- they might start to suggest that the economic outlook has improved, that inflation is stabilizing and that the headwinds have abated. the might be a sense that june is on the table. what will be interesting is after the statement, how going towards june they start to work this idea that they want to prepare the market for a potential hike. >> to your point about how we have seen stabilization in prices, come in for an illustration on how sinful banks have helped fuel recovery in stocks, especially stocks, the white line there covering the world index and commodities which is the blue line.
1:14 pm
in the wake of g-20, we have seen or heard about how central banks coordinating their monetary policy and that has been really explicit. is there any circumstance where could be explicit? it has been pretty tacit coordination and i think everyone understands that they are setting monetary policy jointly. it used to be the case for you can set up your own economy and forget the rest of the world, but we realize that everybody is creating waves in the ocean for each other, there has been a tacit sense that they need to coordinate. i don't think we will do anything explicit at this stage because they communicate around keeping currency off the burner, so you know you see the bank of japan and other japanese officials talking about comfortable -- being comfortable with yen strength, they are
1:15 pm
still indulging in committing to this agreement to not change the currency unless they really have a good reason. i think there will be any more need for any additional coordination. and tacit coordination is holding the line and the elevators to improve as we expect it to. your really need to take further steps. -- you won't really need to take further steps. >> we had a really dovish speech from ellen and -- from yellen. do you think investors are getting too complacent at this? they realize is to already that inflation is starting to stabilize, and we are looking for inflation to be or the end of the year, a lot --ser to 2% that it is now that it is -- than it is, now. i don't think anyone would be
1:16 pm
surprised if they were to hear that yellen is comfortable overshooting, she has been extensive about that. actual inflation is starting to pick up, even in japan and europe, albion from a low level from a low- albeit level. >> what movement will we need to see for people to start shifting their expectations? >> probably a very solid second-quarter in the u.s. they would need to see inflation and probably need to see everything else being in, housing market and consumer sentiment, consumer spending, the jobs market which is still very strong. it becomes a tipping point of it is inevitable but joyless recovery is continuing and we
1:17 pm
just need the knowledge that it will and what yellen would like to do is kind of see long and -- we are expected to bring back that idle capacity that would obviously raise and put pressure on prices. -- cycle that we could be seeing in steel likely -- like we have
1:18 pm
seen in the chinese equity markets, so we are watching steel rebar prices but if you look at chinese industrial out steel rebar prices but if you look at chinese industrial out but of steel, that has been surging as you can see here and that has not seemed to put pressure on prices, also one of the look at seal markets, this is something we found on the bloomberg today which looks at margins in the steel industry if you take a look at the terminal, -- will you would see the increases that we have seen in margins, the highest since about 2009, that is one of the things that has been profiting, to bring back work capacity. it remains to be seen whether it will start to pressure prices. we will be right back. ♪
1:19 pm
1:20 pm
>> this is bloomberg markets. tracy: time now for some majorly -- majorly gaming.
1:21 pm
the global east fourth economy continues to surge, but how big is the competitive gaming world to mark scarlet: -- gaming world? sports exceeds traditional sporting events such as the mlb world series. let's check in with our colleagues in new york. we have a really interesting story, a look at an interesting business that is shockingly huge, the e sports business. let's start with the question, how big is the sports? >> e sports is about a $500 million business, globally. grow at aboutd to 50% per year, so a lot of the or cast in the market right now show it being a billion-dollar plus business in the next couple of years, so superfast. >> that is amazing.
1:22 pm
>> it looks like a lot of people that are aware of the sports, that is getting bigger. how high is it a jump from awareness to participation? >> that is a great question and one of the big findings from the research that they did was that awareness is relatively low, but weis really growing, so would say unaided awareness was about 15% across the population that we spoke to, but when we mentioned to them, what example that these sports could include, it jumped up to 30%, so it more than doubles. those kinds of metrics that suggest that there is a lot of potential once people start to understand how this market is being defined and who is playing in it. >> what other drivers of growth?
1:23 pm
what other drivers of growth? >> what is interesting about this business is that there are a lot of different ways to play and a lot of different ways that people are participating. i would say first and foremost, this is not just a gaming business. this is about gaming, players and viewers. one of the core drivers of and wewill be viewership have seen some examples around the globe, for example, events where global viewership is north of 35 million individuals. >> that is huge. that compares to nba finals. events in the few e sports space that are on par with the nba finals and the world series. i don't think that we know about it as much in the u.s. began inness really the east, first and foremost in south korea and now very much a
1:24 pm
chinese -- it has been very developed in and around china. we are seeing now that a lot of that, through social and other kinds of media, the awareness is building in europe and the u.s. the extent that we have those platforms established and gaming communities already playing, in europe and in the u.s.. we think it is like a match to the haystack. >> i'm struck by the notion of who a gamer and how that is changing. looking at your report, it is not all young men as you might have on it would then. it is a pretty wide swath. >> young men and older men. >> i think that is one of the really interesting nuggets out of the research that we did. --n the data came back, it
1:25 pm
on average, 20% of this population that is participating in he sports, but when you break it down by gender, 22% were female and 18% were male, so we and this is 18 to 24, but there for dissipating -- they are participating more than men are. they will skew toward viewing a little bit more than playing, they will also tell us that they like it because it is social. their friends are on. the guys on the other hand are like for -- to learn, they seeing what the black belts are doing online and learning on them. they obviously like the competitive nature of it, as well. >> a cool study, we will get though statistics because they are fascinating.
1:26 pm
we talk it back -- toss it back to the tv side. mean well, we are still here on bloomberg radio. >> thank you so much. still ahead, the public and presidential contender donald trump rallying in rhode island. he is blasting the alliance between his rivals john kasich and ted cruz who are paring up to stop him from cinching the gop nomination. we will get some insight from the manned -- from the man behind marco rubio's campaign. ♪ . .
1:27 pm
1:28 pm
show me movies with explosions. show me more like this. show me "previously watched." what's recommended for me.
1:29 pm
x1 makes it easy to find what blows you away. call or go online and switch to x1. only with xfinity. shoshow me more like this.e. show me "previously watched." what's recommended for me. x1 makes it easy to find what you love. call or go online and switch to x1. only with xfinity. tracy: from bloomberg world headquarters in new york, you are watching bloomberg markets. scarlet: let's start with the
1:30 pm
headlines on bloomberg first word news. president obama spoke at a trade fair in hanover standing along german chancellor angle merkel. -- angela merkel. : you will seea pioneering companies changing the way that we live, the way we work. this is another chance for me to tell everyone to come here and by made in america. the president said companies looking to create jobs could set up in the united states. the primary could be telling for hillary clinton about presidential bid. win enough delegates to clinch the nomination, the performance could clinch any doubts about whether she would soon be the democratic nominee
1:31 pm
over her challenger, bernie sanders. urgeta lynch is trying to governor's to make it easier for convicted felons to obtain state issued identification. it is aimed at helping the 600,000 state and federal prisoners released each year. an unidentified assailant stabbed two men in it bangladesh, including someone who worked for the agency of international development. it's the latest in a series of attacks targeting atheists, moderate's and foreigners. there was no immediate claim of responsibility. global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. --cy: it is an unlikely duo ted cruz and john kasich are joining in a last ditch effort to deny donald trump the
1:32 pm
nomination, dividing their efforts to try to block trump from gaining enough delegates to claim the nomination. little, but is it too too late? our guests has served as a senior adviser to marco rubio's campaign. he joins us now from stanford. we talk about whether it is too little, too late. but well they stand aside for each other? is there a more active approach they could take? they recognize if they are going to stop all trump from reaching 1237 delegates that a have to team up. for ted cruzario or john kasich to be the nominee is to go to an open convention. i recognize it does feel a little passive. tracy: could we maybe define the variables? how does donald trump get enough elliott votes to get to the
1:33 pm
nomination? -- get enough delegate votes to get the nomination? in all likelihood, he's going to be a little underneath that or potentially a lot underneath that depending on what happens in the states that vote next week. we have a series of votes coming up tomorrow and i think donald trump will do quite well there. the question is beginning with the states in early may and beyond, what can the stop trump forces due to keep him from getting across 1247? there byk he won't be the time the convention begins. to what extent will this help to bolster trump's argument that the nomination process is rigged? i think to a certain
1:34 pm
degree it does play into donald trump's hands. these guys are throwing everything in the book at me, they are doing everything they can to stop me -- he's been making this argument about the process being rigged. that is legitimate because the rules have been clear and transparent for a long time but for those people who were sitting on the fence and wondering if trump was the guy, it does seem like a sign of weak us that they are teaming up.
1:35 pm
+++ the benefits but i don't think kasich and crews had a lot of benefit. scarlet: the other story is charles koch sounding like he is endorsing hillary clinton. let's listen to what he said. >> as far as the growth in government and increase in spending, it was two in half times what it was under clinton. >> is it possible another clinton could be better than another republican? >> it is possible. >> you couldn't see yourself supporting hillary clinton, could you? >> we would have to believe her actions are different from her rhetoric. tracy: how many other people might be out there who think hillary clinton is a better presidential choice than donald trump? think the quote that you just played does reflect amongnease that exists people regardless of whether it is donald trump or ted cruz. continue to hear about white knight scenarios areas and people coming into the contest -- that's why you continue to hear all of that. at the end of the day, most republicans will come home to vote for the republican nominee
1:36 pm
because hillary clinton represents a problematic vote when it comes to things like the supreme court. now anda lot of talk it's tough to say until there is a nominee. there's a campaign that will be most but i tend to think conservatives will not end up voting for hillary clinton. scarlet: i have to ask you -- should we expect marco rubio to endorse ted cruz or donald trump? i think senator rubio is wanting to finish out the term strong. he also wants to express his point of view and policy perspective, so i imagine he is going to be making appearances when he feels like he can have an impact. but his focus is on the senate. more nexte will have
1:37 pm
hour when we speak with tennessee congresswoman marsha blackburn. tracy: and pay day on wall street may look different if a new set of rules takes effect. the new rules would require employees to wait at least four years to collect performance-based pay. +++ financial risk taking but it could make recruiting more difficult. here with more analysis is the bloomberg compensation reporter who wrote the story. let's break it down. guest: if you are an executive,
1:38 pm
normally that would pay out in full. you get 400,000 in the brewery and 600,000 from that. it applies to the bulk of your incentive-based pay. tracy: i'm sure we are going to get a lot of banks complaining that this. some from hiring talent, but banks are known for their financial creativity. what are the chances that we see a workaround for these rules? in 2014, thosepe were brought up to bonus payments for bankers. some workarounds we saw was jpmorgan and morgan stanley were -- they went from making $700,000 or $800,000 to making whichl million dollars don't necessarily count as notices and are not included on those european rules. we have spoke to experts who think we can see similar arrangements if these rules are written into law.
1:39 pm
scarlet: how broadly will these rules he applied? , it could affect anyone who makes more than one third of their pay package from incentive pay. of it is the top 5% earners those people and that applies to anyone who can put half a percent of the banks capital at risk at any point. it is not necessarily to cast a wide net. sure those who can put the bank capital at risk will be covered by those rules because there could be small segments of the company as we saw with the london whale and financial products that have a substantial impact. scarlet: coming up, as the canadian prime minister going
1:40 pm
back on his pledge to put moratorium on tanker traffic mark -- tanker traffic? ♪
1:41 pm
1:42 pm
scarlet: this is bloomberg markets. tracy: time for the bloomberg business flash, look at the biggest stories in the news right now. the for teedo brothers could hit the jackpot when red rock resort goes public. rpo --d be the largest ipo on tap this year. the biggest windfall, about $335
1:43 pm
million will come from their casino management unit. as part of the ipo, red rock will buy the entertainment division. they also own the mixed martial arts league. the company that makes labels for dell monte and slim fast foods is working with an advisor to seek a bed according to people familiar with the matter. the first round bids are due in may. tracy: aurora investment management is returning the five point $4 billion it overseas to clients in the coming months according to a letter seen by bloomberg news. it comes after a deal during which the firm was to be sold by a parent company.
1:44 pm
that is your business flash update. let's head to the markets or julie hyman has a look at some of the biggest movers. it's not often we get the opportunity to show cute a be video on bloomberg television, so let's just appreciate that for a moment. who are not appreciative are investors in para go after the ceo said he was departing to become ceo of valeant. they've been higher for all they session. para go not just lower after he announced he was leaving. forecastny has cut its and analysts are weighing in. saying it's an
1:45 pm
effort to defend against the hostile bid. a little mixed but a lot of negative sentiment around the company today and that's having a negative effect on other drugmakers. we are watching specialty drugmakers having that dispute. though the forecast doesn't have direct implications for competitors, they have set lofty .oals for their earnings been appearing frequently on the boards we look at. chart onlook at the the bloomberg.
1:46 pm
is how volatile an individual stock is versus the broader market. the stock price is in white here. many of the specialty drug break -- drugmakers had a good record until the past year or so when we have seen the shares fall. big, stocks are having daily swings. thatlso curious as to how compared to pharma as a whole. profile seems to have changed to some degree in part because of a bigger reliance on biotech. here's the price of the pharmaceutical index versus the data which has gone up a bit. it has gone down in the past six months or so which was frankly surprising but it is interesting to watch.
1:47 pm
one of my favorite aestions is is health care growth industry or value industry? people have different opinions. enbridge's proposed pipeline may get -- there may be a moratorium. is it an about-face by the trudeau government? pamela ritchie joins us with more on this from toronto. is it an about-face? least a fews at wrinkles. the backdrop is almost minutes after justin trudeau took over, he imposed a moratorium on tanker ships going up and down the west coast of canada into what are deemed sensitive ecological parts of the coast.
1:48 pm
the northern gateway pipeline was meant to come from the alberto oilsands and to load onto tankers and take it to international markets. because of this moratorium on tankers was seen as something they were going to move on, it usefuln that it was not because there is nowhere for it to be picked up on the coast. different voices of people in charge seem to not want to be held down on whether this moratorium will be put into force completely. and perhapsestions the moratorium would be on certain types of tankers or petroleum products loaded into those tankers, in which case, the proposal for putting through the northern gateway might have
1:49 pm
a little white left in it. scarlet: what could this mean for alberto and rish columbia? pamela: it means there's less of a chance of the whole conversation of stranded assets and not being able to get seaside or international markets. the premier of al burda is maybe there are a few creases to this moratorium. a few different issues in a few different con -- few different comments. for alberto, it would mean getting the product to market. infrastructuree built around creating infrastructure for the tankers , itome in and for ambridge will likely mean good things for the stock. when the pipeline was approved and the pipeline was approved,
1:50 pm
the stock was up 3% or 4%. up, a look at valuation models in the global bond markets. and my favorite, of course. ♪
1:51 pm
1:52 pm
tracy: welcome to bloomberg markets. scarlet: foreign bonds are turning heads in terms of what makes an entrance -- what makes an attractive investment. we asked our guess how he applies global valuation models to the market. guest: we are getting into uncharted territory and where you have a situation where there is low, if not negative yields around the world, most people when you say bonds, they just get discussion did -- just get disgusted.
1:53 pm
around one and a half for 10 year bonds. however, it offense prizes people. it's actually foreign bonds. how much do u.s. investors allocate to that? usually zero. you don't want to allocate to the market cap waited indexes because that just put you in the super low yield docket. tons of academic research on this that says if you invest in the higher yield, the higher yield countries, you get the top third of foreign high-yield countries, you end up with a yield of 6% or 70%. about two percentage points and we are at a pretty steep spread. we think it's a great opportunity and we just launched
1:54 pm
the only sovereign high-yield etf a month ago and we think it's a great spot. >> the last time you came on, you talked about herself. are there any other countries based on the momentum screens starting to come into view and look interesting? we have been saying for a while that the bottom 25% of the world is super cheap, the super -- the cheapest it has been since the early 80's. a lot of these countries are in europe and many of those haven't responded yet. with thestarting to really beaten-down stuff like russia and brazil. year is having great
1:55 pm
returns because these countries are starting to rebound, but they are massively cheap. the average p/e ratio is around nine versus 15 for the world. i think it's a great spot. is joenow joining us weisenthal. that was an interesting segment. joe: we talk about sovereign bonds, we usually talk about ultra low yielding ones. this idea that there's more to an global bond market is interesting idea and i haven't seen the academic research but he says there are opportunities there. scarlet: today, we will have a did eight to talk about whether the prospects of a recession are legitimate. joe: we had a guest on the show
1:56 pm
who warned that it was possible. not only would there be a recession, but it should be shamed on the show, so we will give them an opportunity to fight about it. scarlet: if you look at the atlanta gdp forecast, doesn't show we are headed to recession. joe: it just seems to be the story of the last several years. that was joe weisenthal, cohost of "what'd you miss?" coming up, we will talk to doug ramsey about his outlook for market volatility. ♪
1:57 pm
1:58 pm
1:59 pm
>> it is 2:00 p.m. in new york. >> welcome to bloomberg markets. ♪
2:00 pm
lisa: welcome. david: here is what we are watching this hour. what are the key factors the fed will be looking at question mark our guest says the u.s. dollar and global growth are playing a much bigger role in the eyes of janet yellen. lisa: how is donald trump playing with congressional republicans? marshall is here to tell us if trump is making it harder for the gop to govern. will tomorrow be the first time apple reports a year-over-year decline in iphone reportincluding our's for the most malleable company by market cap? in two hours and stocks are lower. julie hyman has the latest. julie: a lot of big events are happening this week like the fed and the bank of

12 Views

info Stream Only

Uploaded by TV Archive on