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

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>> from bloomberg world headquarters, good afternoon i'm alix steel. stocks rebounding from the worst week since february, traders slowing expectations for rate hike in june after data showed manufacturing slowed last month. global leaders convene at the milton global conference. our guest from the conference, senator harold perdue. puerto rico will default. the u.s. territory will miss a major payment that could deepen the island's financial crisis and put additional pressure on congress to act. we are halfway into trading day.
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let's head to the markets desk were julie hyman has the latest. julie: last week beside saw the biggest decline for major averages since february. it looks like a bounceback today. a lot of different things for investors to talk about. manufacturing data came in weaker than estimated. we are seeing it rationing down of interest rate expectations. major averages around the session. the nasdaq is billy hanging onto gains -- the nasdaq is barely hanging on to gains. consumer discretionary in the top spot. financials are helping matters. amazon is rising for the second straight day. ceo jeff bezos getting praise from one buffet. energies laggard down if you look at oil prices, we are seeing a pullback. interesting that they are not tracking down stock unlike what we have seen recently. iran exports rising putting
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pressure on those low prices. futures are going higher. when to check on currencies. the euro is trading at its highest since the u.s. dollar up since last august. the dollar lower versus the japanese yen. we continue to see various currencies rally. if you look at expectations for the dollar, traders and analysts are looking for the yen's gains to continue. you have the dollar forecast versus again and you can see it is at its lowest since late 2014. that means investors are expecting the yen's strength is going to continue despite the best efforts of the central bank in japan. there is some interesting commentary talking about the habit that central banks are playing with the currency markets here. alix: especially the treasury
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report saying the criteria of what it would mean like to inflate currency. there are assets that have not rallying. julie: apple stocks are down. the company not recovering after a disappointing earnings reports. valeant pharmaceuticals down once again. jeff bezos got praised -- got praise from warren buffett. biotech shares down about 8% in that periods time. alix: thanks so much. let's check in on bloomberg first word news this afternoon. mark crumpton has more. >> all but three of detroit's public schools are closed today. teachers are staging a sickout protesting funding issues.
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the union encourage instructors to call out sick after the district said it would not have enough money to pay teachers this summer. in march emergency funding was made available to keep the district operating for the remaining end of the school year. a new poll shows ted cruz has a lot of work to do. according to the wall street journal cruz trails donald trump by 15 points in the state. s cruz hopes his grassroot organization -- the pressure is on investors in congress to help saw puerto rico's debt crisis. the u.s. commonwealth will default on a $422 million bond payment for its development bank. it as a another $2 billion due coming july 1. congress is working on a rescue plan. playground concussions are on the rise.
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monkey bars and swings are mostly at fault. researchers found almost 215,000 kids were treated yearly. almost 10% had tremendous brain injuries including concussions. global news 24 hours a day, powered by 2400 journalists, in more than 150 news bureaus across the world. i'm mark crumpton. alix: thank you so much. we are halfway through s&p earnings and 70% of companies that beat profit estimates, but there was a downside and it is lower growth projections for the future. what is an investor to do? history is a guide that might make sense. take a look at this chart from research that shows s&p 500 performance since 1950.
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may to october, the weak point. joining us now is katie n icks. do you want to sell it may come or go away that? >> no. charts are one thing but this is something that always works. alix: where would you be putting your money? >> we remain very risk on. our most recent move was to cover our emerging markets. more positive sentiment story and fundamentally are improving. alix: how do you make a case in investing in stocks. >> we can look at apple or individual stocks and there have been disappointments on the earnings front. companies are chaining a very
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low bar. we have had disappointments. we think the second half of the year will be better. we will have many of the headwinds that characterized first quarter earnings, very strong dollar and weak commodities. we think the second half will be better. alix: i keep hearing that, but when you look at growth expectations, it is different. this is earnings, you're looking at sales growth and earnings growth. sales growth down on mostly percent and it is not just energy, it is utility, tech financials, you name it. >> we don't see strength necessarily, but we see negative numbers. it is important to realize companies and corporate management talked him expectations. what you are hearing during this season is trying to push down
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investor expectations so they can achieve earnings they want to achieve for the rest of the year. alix: do you feel that central banks are as confident today than three weeks ago? >> absolutely. i think the fed and the comments janet yellen made recently should dissuade investors p 'fears. our perspective is that it will be much lower than the market expects in terms of rate increases. maybe we get one in december. we got a suggesting the fed can be patient. alix: in terms of manufacturing data, numbers are lower. many make the case that the rally is still built on actual quiddity from central banks. we have a doj that did not act. ecb is standing still.
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maybe we have central banks on hold so the fed can hike rates down the road. >> central banks are on possible a moment to see if their policies can be affected. one thing we don't remember all the time is that central-bank policies acts with lag. we are in very retrospective territory. it is wise to take a pause to see how negative rates impact financial markets and the real economy. alix: that leaves us to banks. what is your take on the banking sector? >> energy is going to be a big worry. we are starting to see the impact of that on banks' balance sheets. and since the interest rate hike may be push to december, the tailwind that things got from the first tailwind me not occur -- tailwind may not occur from november. alix: it is not like things
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aren't as bad as we thought? the last point is the yen and how strong that rally has been. and affect that they will have on u.s. equities. >> it is been remarkable. looking at the truck the julie showed earlier, investors are expecting the yen strength to continue. it is a conundrum for the bank of japan. it takes a significant headwinds in the u.s. from the first quarter of last year to the first quarter this year, we are wearing about a strong dollar. now we are seeing a stronger yen much more than anticipated. that will be a nice tell one for u.s. investors and u.s. companies. alix: katie, thanks for coming in. we have breaking news for you. the governor of puerto rico coming out and saying the u.s. congress shouldn't blame only
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u.s. for the debt issue. same today's decision to not pay bondholders was very difficult but he chose to defend the services for the people and that they are protecting credit unions peered -- credit unions. he ends up being relatively optimistic saying puerto rico will turn out ok, it is just a question of time. he says some declarations of u.s. congressman -- congress people is an insult saying they should not blame only the u.s. for its debt problems. u.s. congress should not blame only us for its debt problem. [laughter] coming up, our mystery pick today is a winner and a shrinking field. fans of the stocks have been cheering it as its big rival fouled out.
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have to be baseball, right? when bloomberg market returns. [laughter] ♪
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♪ alix: we have a mystery stock we need to read bill. we will go over to julie hyman. was it a baseball stock at go -- was it a baseball stock? julie: it's big sporting goods -- dick's sporting goods. you can see the game in the stock, 36%.
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the to bank analysts say -- deutsche bank is poised to pick up sales and there will be merchandise coming to market that might depress company sales . but they should recover according to the analyst. the sales are up year to date and rising again in today's session on the commentary from this analyst. they are up 4.5% in today's session. we are seeing a sporting and health seen because the are watching gnc. we are watching gnc. the company starting a strategic review including the sale of the company. it is considering a number of options including we franchising or other changes to its capital
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structure. there are analyst talking about would it make sense for gnc to combine with vitamin shoppe is the month ? bank of america and merrill lynch says the likelihood may be greater than a couple of years ago, but still not likely. alix: i may need more clues for that. julie: yeah. alix: ok. now time for bloomberg's business flash. hulu is planning to offer a life package with a mix of channels from their peers. the online video services talking with 21st century fox about gaining price to channels like fox and espn. hulu has a partnership with
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comcast. gnc holdings says it is starting a strategic review that could result in a self of the company. the retail says it is working with goldman sachs. gnc reported a 20% drop in first quarter profits. a lawsuit accusing starbucks of filling their beverages with ice. they said that it 24 ounce cup contained 14 ounces of fluid. starbucks notes they be make beverages if customers aren't satisfied. still ahead on "bloomberg markets" we are going to take you live to the milton global conference talking to senator david perdue of georgia. ♪
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♪ alix: this is "bloomberg markets." i'm alix steel. we will take you right now to the milton institute global conference in los angeles. scarlet fu is standing by with senator david purdue of georgia. scarlet, we miss you here. take it away. scarlet: i am here with the senator from georgia, david perdue. welcome to bloomberg and welcome to the milton global conference. you have four decades of business experience and you understand how that consumer growth in the private sector. what is different about debt at the federal level? sen. perdue: in business, you get a return or don't make it. we don't have a capital budget in the federal government. we don't look at investments that way. we look at it as a cash flow decision.
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that is why we have the debt crisis. scarlet: how should we be looking at it? sen. perdue: first is to put it in perspective and to realize we are in a debt crisis. there is $50 million of new interest. if interest rate went back to the 30 year average, we would be spending 3020 and dollars. i am talking about a perspective how it fits with a global security crisis. it undermines our mission to protect national defense. scarlet: there is a direct link to debt crisis and foreign policy? sen. perdue: no doubt about it. the world is more dangerous on several levels. you have the rise in russia aggression. you have isis. we have the threat of nuclear
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and cyber warfare. also, the arms rate we are not talking about. scarlet: you have been traveling around meeting heads of state in talking to leaders of different countries. what are they saying about our debt levels? sen. perdue: there are two things i get from all of these heads of state around the world. one is, and this is universal. america needs to lead again. we are telling others how to get their house in order. a lot of them are telling us you own a third of government debt right now, $23 trillion. that's a lot. a lot of people fear we will not
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live up to our commitment. we created a world where allies don't trust us and our enemies don't their us. scarlet: how do you persuade them that work is being done in washington? sen. perdue: we're trying to find a way to get to the polarities -- priorities. this crisis has reached a level where people back home understand there is a real problem. they won us to focus on the priorities. that is one reason you have an unusual presidential race. people are very frustrated by the lack of involvement in washington. sen. perdue:scarlet: i want to bring in the idea that washington is a broken place. you are known as a turnaround specialist. you were ceo of the reebok brand. you have to reap rewards for investors. what does washington need to do to turn around from being a broken place? scarlet: we havesen. perdue: the biggest
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contributor over the next 10 years is how we have to deal with social security and medicare. they will run out of money. we have to develop a budget that works. if we don't fund the government and a routine way, there is too much volatility. we have redundant agencies. we have to grow the economy. with more people becoming -- this is the weakest recovery in seven years. more companies went out of business last are them were started. this is a real problem. that is why i'm fighting to make the changes that need to be made. scarlet: given all of that, heading towards the presidential
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elections, -- [indiscernible] sen. perdue: i'm a republican so anyone we put on our side will be better. this is a serious time for our country. we can't afford seven more years of failure of fiscal policy. we have had monetary policy that should've stimulated the economy. it is not working because of our lack of attention to the fiscal policies not working. scarlet: what if you heard from the current presidential candidates on how to fix the school policy? sen. perdue: you hit them talking publicly, but i have not endorsed anyone because i wanted to influence each campaign about the crises i am talking about. you are hearing them talking about anyway they have not been talking about it before. it will be interesting to see how specific they get. scarlet: very quickly, would you be able to -- [indiscernible] sen. perdue: absolutely not.
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the conservative posture that we stand for, it is not about the individual and the white house. it is the hundreds of people they will put into government. scarlet: thank you so much for your time today, senator david perdue from the state of georgia. we are here at the milton global conference in beverly hills, california. up next, i will be speaking with chris aleman on "bloomberg markets" just ahead.
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♪ alix: live from bloomberg world headquarters in new york, i am alix steel. this is bloomberg markets. let's start with the headlines from the bloomberg first word news. mark crumpton has more from the newsroom. mark c.: thank you. bernie sanders is promising the democratic presidential contest -- convention will be contested. he says by the end of the primaries next month, front runner hillary clinton will not have enough pledged delegates to win the nomination. senator sanders is counting on being able to flip some superdelegates. mrs. clinton raised about $600 million in april. senator sanders raised the same
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amount last month -- $26 million, marking a steep decline from what he raised in march. the first u.s. cruise ship to cuba in nearly 40 years pulled into havana harbor today. the 740 passenger adonia became the first crew ship to dock in havana since jimmy carter eliminated restrictions on travel to cuba. travel restrictions were reinstated after carter left office. a judge is temporarily barring the city of louisville from removing the confederate
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m monument. the monument is 121 years old. it honors kentuckians who died fighting the -- fighting for the confederacy in the civil war. 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. alix: thank you so much. that's get right back to the milne institute global conference in los angeles. scarlet fu is standing by. scarlet? scarlet: thank you so much. i am here with chris ellman. you have made gender diversity of the part of your investment mandate. tell us about the teachers who depend on you. >> from our perspective, it is tapping into 50% of the population's iq. we don't think the corporate america has been doing that and off. for us, 72% of our membership is female. we get it. what we want to do is have the expand in our portfolio. scarlet: how will you do that?
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>> we do that by putting our money where our mouth is. we focus in on companies with leadership of women. they either have a woman ceo or women on the board. we think that companies with a more diverse workforce make better decisions. scarlet: you have committed $250 to it probably expandable to half $1 billion in time. you thank say you want to see what happens. it is a little bit like an experiement. >> we are committing long-term. any investment idea we have to see how it performs and how it does. we think the construction methodology is indexed better than most. we think it is actually a pretty effective active management tool.
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i'm not looking for massive outperformance. i think, again, because the companies will make better decisions, we will see a better risk profile overtime. scarlet: calstrs also is investing into preventing climate change. what results have you seen so far? >> it will be a challenge. it has been difficult to see a return. we are incorporating it in all of our investments and across our investment profile. we want managers were thinking about these things. to us, sustainability is long-term, the matter of investing for a decade or two decades. scarlet: does it mean not investing in certain areas or companies as a result? >> we have a long history where we have not invested in tobacco. just recently arbor
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we are looking at nonthermal u.s. coal companies. we understand that we change over the future. it is difficult to predict when. the climate is changing. it is difficult to deny it. we think that is a trend we can and best ahead of and mitigate our risk exposed to it. alix: it is not just clastrs other pension funds are responding also. do you think companies are changing as a result? >> definitely. the one who really focuses in on it is exxon mobil. they admit that they have been looking at climate change since the 1970's. you see other companies who are changing their cost structure and looking to the future and new opportunities great ceos get clastrs, other pension funds are .
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ceos get it. they are starting to address these risks as a cost to their business, and an opportunity. scarlet: do you see a buy into it to it? >> europe gets it. certainly, parts of australia and canada get it. the united states looks like an upside down u -- sadly, the midwest of the country is stuck to their knitting, and not look ing at this at all. they are seeing stronger storms. alix: thescarlet: the evidence is in their backyard. the target is 7.5%. we are living in a 2% gdp world. >> i wish we could get 2%. scarlet: given that, isn't 7.5% wildly optimistic?
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>> it. they are starting to people have been predicting a low return environment for about 7-8 years. they are finally right. last year was a low return environment and this year. if you look at the decade of the 2010s, we produced a double-digit return. you could have low return years we will still average 7.5% over a decade. we are not year-to-year on investments, we are long-term. i think we will see some innovation. obviously europe is slowly turning around. we think asia has opportunities to turn around. the global have about a 3%-4% gdp rate. that is what we need. scarlet: 3% will get you to 7.5% over the long-term? >> i would say 3% in the dell about -- the developed markets and the usa scarlet:.
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you do not anticipate having to reduce your target? >> i think there will always be pressure to reduce it in this environment. i have been investing in pension plans and's 1980. there was a ton of pressure in the 1980's and 1990's to raise the hurdle rate. i think when you look at it from that perspective of a 30-40 year time period it is about the right number. scarlet: warren buffett was warning to be weary -- what do you think of it? >> the oracle of omaha. scarlet: what should fees come down to? >> if i could pick a price, i would love to. as an investor of capital, we
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negotiate hard. i have said very clearly. the model is broken for large institutional models, it is off the table. we are negotiating lowerwhat do you think of it? >> the oracle of omaha. sets of a manager fee and an incentive fee. scarlet: how could cutting fees help your mandate? >> reducing fees is your best return on capital. we focus very much on cost in every single asset class. scarlet: chris ellman, thank you so much. here at the global conference in beverly hills, california. i will send it back over to you. alix: coming up, allyson schwartz will be speaking to us at 1:30 p.m. don't miss that. much more coming up on the other side of the break. ♪
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alix: you are watching bloomberg. i am alix steel. this is your global business report. here is what we are watching. there is a ceo switch at for robbery. an immediate move. we will give you the details. the european central bank is discussing the fate of the 500 euro bank note. and, a potential move from francois hollande. let's start in italy. sports carmaker ferrari has named sergio marchionne ceo. this move comes as ferrari shares its best quarter results
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ever. he is replacing the ceo, who retires after 26 years at ferrari. the european central bank may decide as early as wednesday to start phasing out the 500 euro note. people have called it the note used by people of to no good. it has been called the note of choice for criminals and terrorists. one sticking point. in germany, the ecb trying to eliminate cash altogether. frontfrancois hollande considers a tax cut. ensure reiterated profits.
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all the ons -- allianz will reach its 2016 outlook. david: time now for our bloomberg quicktake, where we provide context and background on issues of interest. puerto rico has taken on ballooning debt and tumbled over the fiscal cliff, but solutions are not cut and dry. here is the situation. puerto rico has giant debt levels and will default on its most recent bond payment. next up is a payment due on july 1. the debate in washington is brewing over how to move forward since puerto rico is not allowed to use bankruptcy to restructure debt. congress is struggling with the bill that could restructure debt. in march, the u.s. supreme court has arguments on whether or not
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puerto rico could reinstate a local law to reinstate talks with lenders. here is the background. things -- banks ranked in the the and million dollars in fees. economic conditions changed when the u.s. gave special tax breaks to the island. since then, the economy has contracted every year, except for one. it is on track to hit a 100 year low by 2050. curious argument. republican lawmakers say a controlled board could make the politically unpalatable decisions that the country needs . the government proposes tightening a tax collection system. critics say they have not done them enough. the government says political oversight must give an orderly
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bankruptcy process to cut liabilities. meanwhile, bond investors have posed the move because it could force them to take losses. the heritage foundation considers it a bailout. for more stories, visit alix: also staying on the debt problems in puerto rico, the head of the blackrock municipal group discusses why it is so critical on bloomberg . >> it has been wildly expected -- widely expected, generally un known, perhaps they come up with a four forbearance agreement. it is likely they default on some. they have already defaulted on public entities. january of this year on some highway dead. this is in the market.
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the problem is july 1, not only is it a big one, it is a general obligation bond. that is the gold standard of the market. i think the headlines will be sensational around that time. >> is this having affects on the general bond market were isolated to puerto rico? >> it is isolated. it revolves around a high level of debt week economy. there are others that have problems, but they have a growing economy. that is not the case in puerto rico. this has been widely expected widely coming now for the past several years. i think a lot of investors have transferred the risk. they are comfortable owning it, or they are not. we have investors get involved in this credit, and making the ultimate workout process probably more comfortable. the good news is in regard to this gdp payment is it will not
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impact the market. what i worry about is the headlines for the july 1 payment, and what it means. retail can be very reactive to negative headlines in the market. we are paying attention to that. >> to use the word headlines -- i'm interested in the use of the word headlines. you think it is more of a sentiment issue? >> the market is big. it is $3.7 trillion. if you look at the index, it is very different. 74000 different issuers. they don't have similar problems. one third is general obligation. of the one third general obligation there in lies the problem. a lot of places like puerto rico, illinois chicago have the obligation and debt outstanding. it is impacting the market. the broader market is actually
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very healthy. the problem is each of these problems have gone bigger. we have detroit -- put a rico now is a much more bigger, complex problem. that will grab more headlines. it will be interesting how investors react to that. alix: coming up, one of my favorite topics, the competitive edge in global lng market is slowing. we will look at what it means for u.s. markets next. ♪
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alix: this is bloomberg markets. i am alix steel. a quick check on u.s. stocks. we are seeing a bit of a rally after two horrible days that we saw at the end of last week. the rally fizzling just a little bit. looking at the s&p, around the
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highs -- nothing to write home about. lower oil prices as well. for more in technology, we want to go to abigail doolittle, live from the nasdaq, looking at tech movers, starting with apple. it is hard to imagine the nasdaq pushing any higher without apple. abigail: true. apple is down today. not just today, but eight days in of row. down today, even as bernstein is essentially defending the shares of apple, saying the iphone business is still healthy. this is a bold call, considering they posted the first revenue drop last week on the iphone. they also offered a well below consists -- consensus. all of the weakness in the stock does have shares on the buying
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support of the recent lows. the question here is whether or not the buyers will hold or fold. alix: [laughter] hold or fold. the u.s. is ramping up lng exports pretty much at the worst time. this chart shows the legal fight -- liquefied nationalural gas in the u.s. and the u.k. global prices have fallen and the difference between u.s., asian, and u.k. lng has shrunk. what does that mean? nicholas potter is here. why would anyone choose to buy u.s. mmg when the -- lng when they can get it in the u.k. or asia at the same price? >> in 2012, these economic looks
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great. you have three dollar gas in the u.s., 20's argos in japan. look at those spreads. you can see why people took the opportunity to use the gas liquefy it, and send it off to other markets. it seemed like a real home run. alix: take a look at the u.s. and u.k., that is where the dynamic comes into play. if you take a look at u.s. lng cash costs, what it costs once you look of fire, and send it to europe, versus the u.k. price, does this gap shrink even more? they used to move in tandem until about 2010-29. >> i think that is the big story out of all this and what we are telling our clients. northwest europe they are very distinct, that means lower prices in europe. i mentioned earlier, you have
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seen european prices that have historically been linked to oil that would $10-$11 in the past. now, it is about four dollars or so. we saw that start in 2014. it will only get worse. alix: where does the u.s. gas go? >> that is the thing, the devil is in the details. people look at it and say, this does not work anymore. a lot of this was done with long-term contracts. i sell gas to you over the long-term. from the analysis we have done about 70% of the gas that leaves the u.s. is sold to downstream marketers. that means the price is not her not as much because you can pass on the cost. that means there is a sliver
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left over, where there is some risk. alix: what is the magical price that all of a sudden puts investment decisions out? >> as far as future financial decisions, i think things have slowed in the u.s. currently, the market will be so awash, it will be hard for projects to take final decisions now. you have seen things slow to a stop in the u.s. even looking at projects in canada and africa, it has slowed as well. it is hard to move forward with these investment decisions. alix: i love talking this on a monday. thank you so much. coming up in the next hour, we will head back to the milken institute conference. ♪
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from bloomberg world headquarters in new york, good afternoon. here is what we are watching this hour. the markets try to rebound since the worst week in february. investors see a cause for concern. the $28 billion merger between baker hughes and halliburton is called off, but it might not be a total call off. and, donald trump and hillary clinton are butting heads already. we will talk with alan shorts. let's head over to julie hyman with the latest.
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julie: last week stocks having their worst week since february. we are seeing a bit of a bounceback, the nasdaq rising. all three averages near the high of the session. we are now into the next quarter. a lot of strategists have their own opinions. the dow and s&p you can get a feeling for what you might have missed out on it sold in may. it has been uneven. lester we saw a decline in the periods of time, but we saw
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gains in 2012, 2013, and 2014. this was again you might have lost out on. we are looking at the 200 day moving average on the s&p 500. arnie wall at oppenheimer, you can see the moving average. he says when stocks go above the 200 day moving average, that concept is not a good idea. the other thing investors have to consider is where oil prices will go. there has been a close correlation between oil prices and stocks. the oil is having downward pressure on his on stocks. oil profits -- oil stocks -- oil prices down. energy is the worst-performing group today. alix: the other big story is puerto rican debt default.
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julie: it is having a big effect . we have been seeing a decline. if you take a look again, this shows the prices we have been watching in puerto rican government debt. here is a recovery price that the government had proposed various investors except. now bonds have fallen even below the recovery price. it was expected, but there are a lot of questions on what happens now. alix: for the future payments coming up in a couple months. julie, thank you so much. let's check in with bloomberg first word news from mark crumpton. >> it is an unscheduled day offered kids in detroit. teachers are scheduling a
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sickout. they are protesting funding. the district said it would not have enough money to pay teachers this summer. in march, emergency funding was made available to keep the district operating through the end of the school year. secretary of state john kerry says intense work is underway to try and restore the truth in syria. particularly in the northern city of aleppo. secretary john kerry says the syrian government and opposition have contributed to this chaos. >> they are ready and prepared to go back to the table the minute the cessation is in place appropriately with these new mechanisms, and the minute that the humanitarian blockade is opened up. mark: secretary kerry blasted the syrian government for unleashing what he calls the killing machine. the departure hall at the
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brussels airport has reopened the first time since the deadly terrorist attacks in march. suicide bombings killed 16 people. authorities say the airport should be back at 100% capacity by the middle of next month. a minnesota judge has confirmed the appointment of a special administrator to oversee the settlement of's a state. the judge says the estate can move forward. they did not address how long -- how much it is worth. five of print's siblings attended the hearing. global news 24 hours a day, powered by 2400 journalists, in more than 150 news bureaus across the world. i'm mark crumpton. alix: thanks. plenty of data over the weekend and this morning giving investors an update on the biggest global economies are faring. take a look inside the bloomberg , this is chart 1153.
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both japan and china released manufacturing. japan's number coming in below the 50 level, which is the orange line. china's manufacturing, the redline, appears to have stabilized. in europe, you had a stronger reading in germany, the light blue line. france, the other blue line. i don't know what to make of that. bob, a global strategist joins me in the studio. how do you interpret the mishmash >> mu? bob: two thirds of the manufacturing pmi for below 50. you had contracting manufacturing activity in two thirds of the country and it was more than that on a weighted basis when you have the u.s. and china both the low 50. in the data we got out over the last 24 hours or so, you got
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about two thirds that are now above 50. not dramatically. china is above. u.s. is above. if you standouts. france suffering from whatever france is suffering from. they have been an underperformer in europe. we have gone from a global manufacturing sector in the latter part of last year into early this year that was contracting. commodity prices were weakening. industrial metals prices were weaker. in the last two to three months, we have seen gradual improvement in now you have manufacturing expanding. manufacturing was never going to be the strongest part of. the services sectors have been stronger. the services sector continue on their expansion. you now take manufacturing from a modest contraction to a modest expansion. mobile growth is accelerating. -- global growth is accelerating. this is not a booming global economy. but it looks like the downside
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has been spent and we are starting to build production again. alix: i love it to product commodities. there has been a lot of debate in the commodity world that the rally across the board has been a fake out not driven by fundamentals. chinese steel prices are at the highest level. do you see fundamental support for that? bob: it is not aggressive support. three quarters of the rally in commodity prices is the weaker dollar. but i think a quarter of that is in industrial demand. that is consistent with this and now you we are getting out of these manufacturing indexes. things are growing again. this is not a booming economy. but we are used to a manufacturing economy contracting during the second half of last year.
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modest improvement on a rate of change basis is good news. inventories have been depleted and a lot of the industrial sectors. commodity inventories have been worked out. oil is an exception to that. we are setting the stage for a firmer, global economy the second quarter that will filter its way to commodity markets and other markets. alix: it seems like the rhetoric from last week is that the markets we were expecting, didn't. i heard conspiracy theories about a weaker dollar. it would give the leeway for the fed to hike in june. seems like you don't buy that. maybe there is some fundamental growth in the economy. bob: japan is in a bad place. they have had a weaker currency in the last month. they cannot afford them a stronger currency. we are seeing that in the chart. that and france have the lowest pmi among industrial countries.
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there is android exception there. japan is in a very bad place. there in a modest recession. the doj does not have a lot of leverage left to pull. they are turning around and saying, what about fiscal policy? we are hearing more and more talk about fiscal policy. that is going to be the theme of the second half of the year, is fiscal policy going to take up what it should be doing now? alix: helicopter money here? bob: no, no, no, real fiscal spending out of the government. we are seeing that in china. we might be able to see that more in japan. certainly, monetary policy has done what it can do. it is trying to do more than it can do. it is really time for the policy focus to shift a fiscal policy for monetary policy -- from monetary policy. it will be tough in the u.s. for that to happen. we do have to have a shift towards this goal policy.
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alix: bob thank you so much. great to see you. global strategist. coming up next opec's could production climbing. an investor is predicting oil prices will rise to $60 a barrel by the end of the year. he will tell us why.
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♪ alix: you are watching "bloomberg markets." i'm alix steel. it is time for the bloomberg business flash, the look at some of the biggest stories in the
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news. lost it accusing starbucks misleading consumers by overfilling its drinks with eyes. the suit alleges the 24 ounce beverage contains 14 ounces of fluid. starbucks says that customers understand that ice is a part of a beverage and will reamak --remake beverages of customers aren't satisfied. american express is trying to reverse its stock since the recession. opec boosted production by 480,000 barrels of oil to 33 million in april. that is the most month the most monthly data going back to 1989. emerging markets investors mark mobius and franklin templeton says it will rise. in bloomberg market middle east
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mark mobius asked if there will be a production freeze? >> the market will handle it. you must remember that the demand for oil continues to rise. it is not going down. the rig count globally in the u.s. has gone down precipitously. this only means the supply has got to diminish despite what is happening in the middle east and the demand will continue to rise maybe 1% or 2% a year. a culmination of this means -- a combination of this means we will see a higher price of oil going forward. >> do you see we beyond this $45. how far? >> i am looking at $60. i can't speak for everybody else. [laughter] $60 is a target. i am not saying when. [laughter] >> can i get $60 by the end of the year?
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people think there will be rebalancing by the end of the year. >> it is possible. these prices are driven by derivatives. not supply and demand. some even could trigger a become a big jump in price. >> grace want, black swan whatever kind is one you want to call it. the irradiance are not for stopping -- the iranians are not for stopping it. you do need some discussion, no? >> the big issue is who is controlling the market. if you look at russians, they are not a part of opec. they may not cooperate. >> they did not cooperate the last time, right? is that the biggest risk in this whole monopoly board? >> the biggest risk is some event that triggers activity to either go a long or short which
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drives prices to very, very unusual and irresponsible levels. alix: that was franklin templeton, executive chairman. time now for the bulletin. want to head over to our markets desk. julie: popper falling for the first day and three. manufacturing. copper being an industrial metal relies on u.s. manufacturing. pulling back three quarters of percent. still holding above 50 if you look at that chart. just barely above 50 at this point. 50.8 could a. that appears to be what is putting pressure on copper. we have seen not as copper, but other industrial metals rally considerably your today. copper is up 6%. also aluminum has rallied this
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year. the pullback now coming on the back of what has been strong performances. a strong secondary move related to copper's move has to be a peruvian copper. we have seen -- we have been seeing the dollar game. if you look at the minors that rely on copper, we are seeing weakness for report mac moran. we will be right back with more "bloomberg markets" in just a moment. ♪
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♪ alix: this is "bloomberg markets." i'm alix steel. as we enter a new month of trading, we are putting the spotlight on somatic investing.
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the concept of choosing investments based on broad social economic trends. for more on the strength and risks of somatic investment, we are going to head over to carol massar and cory johnson. >> we have an interesting market right now as he tried to figure out what is going on. we need to approach it differently. do you think things are fundamentally different? >> i think we have seen continue stability in the marketplace. the fed has done a great job of managing this market through the financial crisis. we are 110% of gdp output than where we were at the start of the financial crisis. we have had 200,000 jobs added to the market. 215,000 last year in march.
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unemployment is down to 5% which many of us think is pretty good. we think the market is in pretty good shape and shows resilience from last year to this year. we anticipate that going for it. we have a strong dollar that creates a headwind. other than that, the market is good. carol: i want to look at a theme, one is a reorganization. his real estate are different things? dan: we think investors ought to take their wealth or investments and segregate them in different pull, shorter-term pools for immediate liquidity. and that longer-term pool, we think that theme investment is important. one of the things we have to think that is interesting is reorganization. some urban areas for the first time, are growing more rapidly than the suburban surrounds.
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places like seattle, denver manhattan, boston, washington d.c. we think it is driven by two elements. one, a different perspective on home ownership. definitely opting for getting married later and having kids later and sharing space. then we have another component which are baby boomers waking up in a four bedroom house in the suburbs and we are seeing signs of them opting to moving to an urban area. we see some interesting dynamics going on for the first time in many decades. >> we see companies taking what had been mainly suburban developments in doing urban things. but do you look beyond that to other types of investment other than real estate? >> absolutely.
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as we see the vibrancy from your organization, there is a cycle that goes on. as you have a strong labor pool coming into urban areas, you have institutions wanting to be there, hospitals, education institutions, and corporations to capture the talent as they enter the urban area, the tax space increases and municipalities have a greater tax base to invest in infrastructure. that infrastructure creates a more vibrant environment and draws more people and so you can get into urban real estate. you can also get into infrastructure spending. urban delivery is an early one and fairly substantial. at this point, in many cities with a touch of an cap, you can get anything -- with a touch of an app you can get anything delivered. carol: there is another thing you like that has to do with robotics.
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are we talking about robots in the home factories was specifically? >> we think of robotics in three forms. one, it has to actuation, it can move it self and other things. two, it has to have perception sensors to allow it to understand its environment. three, the ability to make decisions based on those sensors. people think that is home vacuum cleaner that bumps into a wall senses the wall is there and makes a decision to back up. the other end of that continuum would be self driving cars which would have the capability to understand a changing environment. there are significant decisions on our behalf. even a self driving car would fit into that robotics category. the typical image we have might be robotics that are industrial robots in a manufacturing capability. >> you don't want to confuse the
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rumba with a self driving car. [laughter] >> that is why i give you the spectrum. >> thank you so much. great stuff. we appreciate your time. want to throw it back to you on tv. alix: thank you carol massar and cory johnson. we want to get you to breaking news. the u.s. treasury has released a letter to congress on puerto rico. puerto rico needs orderly restructuring to address debts and he does one of cascading default without puerto rico. congress must work quickly to deal with it. we will be right back here.
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show me movies with romance. show me more like this. show me “previously watched.” what's recommended for me. x1 makes it easy to find what you love.
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call or go online and switch to x1. only with xfinity. show me movies with explosions. show me more like this. show me "previously watched." what's recommended for me. x1 makes it easy to find what blows you away. call or go online and switch to x1. only with xfinity. alix: we'll get institute global clouds this conference -- global
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conference is underway. scarlet fever is there. -- scarlet fu is there. scarlet: i'm here for -- you have moderated panels on income inequality. what is changing in this conversation? >> think this is the fourth year, i'm not positive. it started where i started with income inequality is a big growing problem that we need to address. i think by last year we agreed that we no longer had to debate whether it was a big problem that it really was, and we are starting to talk about what are the solutions or who are the forces that are going to come together to deal with the issue. scarlet: everyone accepted it as an issue. what action do you see has been taken? >> i think very little.
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that's why we keep having to have his panels. things are happening walmart starbucks, some companies newark city has universal pre-k, which has been good. i think of the country, we have too polarized to do much about it. we don't have much time it. we have to be talking about the issues that need to be addressed and trying to mobilize people to do it. scarlet: a lot of people think hedge funds, get extra special treatment. should things yet to accident -- get taxed at a higher rate? >> the tax rate needs to be reformed. you always have to look at the total solution. is there more effective and fair way to raise the tax revenue that we need? i think there is.
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scarlet: does global wall street have a certain responsibility in prioritizing how to address this income inequality? >> i think, again, you have to look at the total package. i think there are a lot of things you need to do and tax reform is very -- i was involved in the 1980's. it's a complicated subject. but it can be done. your to look at the entire balance sheet. you don't have to say let's do this one thing, it just doesn't work. scarlet: one thing people are brought up his saxon version. with a sense that even though companies are playing by the rules, they are looking to lower their tax burden. they are skirting the rules of the same time thereby exacerbating inequality. >> is one of those things is the most misunderstood about tax policy. the united states is the only country in the oecd that tax is
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not only will you aren't in the united states if you are invited state taxpayer, but it taxes everything you earn in the rest of the world if you bring the resources home up. in certain industries, that puts you at a very big competitive disadvantage to countries who have their headquarters here and a lot of operations here, and can invest the money that they learn overseas. companies doing inversions are not avoiding paying u.s. taxes at all. they still pay u.s. taxes, and then they have the opportunity to invest foreign earnings back into the united states. this is one of the most understood subjects. scarlet: if they don't pursue tax inversions, they are at a competitive disadvantage compared to their global competitors. let's talk about guggenheim and what you are doing their overall. you've been hiring bankers for
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mna where you placing the focus and where do you think the business is going? >> we can to get a best and the brightest. what differentiates us is we are not just an advisory firm, we're also sales and trading in equities. i think some of them are strong right now, some of them aren't. scarlet: let's focus on him and eight certainly there headwinds do you think we have the pfizer elegant deal and yesterday we had bigger and halliburton not going through. >> i think the regulatory environments -- i think the political process is broken. i think the regulatory
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environments is one where regulators use transactions as an opportunity to get behaviors out of the people who are trying to do mergers that they think will be beneficial, even if they don't have right now to make them happen. you were seeing the number of transactions create an uncertainty as to what are the costs of doing a transaction, different from the days when he just looked at what the laws were in said as long as we are within those guidelines, we will be able to know what a transaction can do. i think the whole political environment in the united states is making dealmaking somewhat harder. scarlet: this government resistance to dealmaking that we've seen in health care and now in the oil and gas industry do think it is delaying the recovery? oil and energy cannot recover if they cannot combine. >> it is hard to say. i think any kind of regulatory drag is bad for business. i would say yes it hurts.
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i know the specifics of what went on gas are going to have a problem, but i think that the regulatory environments is going to hang up the business employment in the united states. scarlet: things getting better with elections? >> the only thing that might get better is if we have an election when the house and the senate and the president all go to the same party. an election to get some new legislation one way or the other that unblocks some of this regulatory obstruction. scarlet: what other conditions are instructing dealmaking? >> any the overall market. i think that the global economy has been weaker you see that coming out of the emerging market in europe. you look at the u.s., i think profit margins went up a lot and now there's a stronger dollar which puts the pressure on margins aired the high-yield market has gotten weaker. financial positions are quite as conducive for dealmaking as they were a year ago.
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scarlet: what is your outlook about yields? what do you see as the prospect? >> always look to our cio, he's a genius. the latest i heard was he's looking forward to getting a point to where the market was attractive. scarlet: alan schwartz former ceo of bear stearns. back to you. scarlet: -- alix: thank you. halliburton and baker hughes are calling off their merger. the deal faced this -- a stiff resistance over antitrust concerns, but the collapse may not be the worst news for baker hughes. stock is up nearly 18% since the department of justice filed a lawsuit against the halliburton merger in early april. we get on to david who joins us from houston.
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it's all about the $3.5 million breakup fee that halliburton has to pay up to read. david: he gives them options. on a standalone basis, baker hughes by itself if they walked away from the steel, didn't have $3.5 billion in their pocket would not look as attractive -- my be overvalued, in fact except for now it has this report $5 billion. the gives them options to do -- they can buy that 1.5 billion dollars in shares, it can pay back $1 billion in debt, it still has more money to work on some other parts of its business to kind of sure things up and work on better technology proposals. it really has the chance to finally do stuff. in addition, it's also targeting some costs that it just couldn't bring out of the system because of this merger agreement. about $.5 billion in costs by the end of this year it expects to drive out of the system it's going to be a bit leaner. some analysts are now saying that is perfect timing for
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possible recovery in 2017. activity starts to pick up his world prices start to get better and customers start to order more work. you now have them set up for a better operation next year. alix: unlike its competitors they did not engage in the cost-cutting. halliburton was known for doing great cost-cutting and helping their operating margins. that was going to be of limited in baker hughes. now they have to do that on their own. -- implemented in baker hughes. david: you expect cost-cutting to happen because of the merger but now not because of the merger they have to do cost-cutting. it's the opposite of thought, but you are glad that the merger is over, because now you can absolutely get rid of these cost that were hanging over the company while some of its peers in north america were able to cut costs. because they were part of her merger. alix: the other issue is the
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operating margins like i mentioned. baker hughes trails desperately behind its peers, but even weatherford, who was a mountain of debt. to be expect these cost cuttings to fundamentally move the needle for baker hughes? david: it depends on when you are looking at. it will take some time for that evil to in terms of these cost cuts to affect the margins. -- that needle to move in terms of these cost cuts to affect the margins. it's being more selective and where it's doing its pressure pumping work. there is a lot of nonprofitable work being done in hydraulic fracking right now. anybody can get into that business. things like that, were baker hughes is going to be more selective and where it operates. and not just one of chase everything. in that regard, that will help move the needle over time. but that will take some time to do. alix: not all is lost. david, good to see you.
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still ahead on "bloomberg markets," candidate adds to the merger monday frenzy with the biggest telecom company announcing major expansion plans three details on the $2.5 billion acquisition, next. ♪
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alix: factories are struggling with a strong dollar and weaker demand. in video, was able to duck a band on an import of chips by
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settling of hand agreement. the agreement came hours after a trade decision. a trade judge has been -- determined that samsung infringed on patents. the dutch company is considering an ipo according to people familiar with the matter. phillips may seek evaluation of about 61 $3 billion. the companies expected to make a final decision soon. that is your business/update. -- flash update. julie: let's start with wwe world wrestling entertainment. the company would make an attractive acquisition target that is digestible by many media companies who may want to
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diversify away from basic cable networks, according to the tig analysts. the time may be right for the company to consider considerable strategic investment or potential put itself up for sale. we are also looking at seagate once again, the stock fell sharply by more than 10% after reporting earnings that fell estimates. today's getting a trio of downgrades being downgraded to jpmorgan, rbc, and bank of america merrill lynch. the analysts at j.p. morgan say the current quarterly dividend of $.63 is unsustainable, they see the risk of that dividend being cut in the shares are down by 6%. and then there is weight watchers. itg has conducted a survey of sign-up trends and say they improved year-over-year and quarter over quarter in the first quarter of the road -- of the year. those shares hated -- trading
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higher. talking about apple today, apple has a bit of a mixed growth. on one hand, the shares are inexpensive, he has an outperform rating on the stock and $135 rice target. on the other hand he does say the company runs the risk of the iphone seven being seen as just an incremental improvement, not a big enough improvement to draw new users or replace users for the product. shares are down for the eighth straight session. we haven't seen a losing streak like this with this many consecutive days lower going all the way back to 1998. in addition, we are coming off the worst month for apple of january of 2013. a 14% drop in april. alix: those are great stats. julie, thank you. it's been a busy day for m&a,
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you baker hughes failed to deal with halliburton, along with the pulp business warehouse or. canada is adding to the merger monday frenzy with bce acquiring manitoba telecom. rudyard griffiths joins us. rudyard: it is an oligopoly here when it comes to telecom. we have former ownership or sections, the reality is you have a couple of big incumbents who have to find ways to grow. acquisition is the strategy bce is picking up one of our provincial/state providers at an attractive price. it's a mix of stock in cash, it is not going to add to bce's debt version -- debt burden. it lets them grow their subscriber base. they will have to throw a few
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off to their rival to ensure they don't get snared with needing competition. but looks like a brutal -- a blue ribbon day with a nice pickup of a great asset. alix: as going to mention antitrust, that's really been a story here in the u.s.. any antitrust issues with this? rudyard: there could be. some people are saying this is going to have to have a close look at, because it's going right in the face of the government's desire -- multiple governments in canada to see more competition in the wireless space. the reality is consumers in manitoba were spending 30% less on their cell phone bill, their data bill then people in other provinces and other states where there is less competition. it will get a catholic but what is the government going to do --
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they are very attractive stocks to hold, they are in everybody's pension funds and stock holdings. it's not that the government can take a hard run against them considering how power the -- powerful they are. alix: thank you, rudyard griffiths. coming up on "bloomberg markets," big banks have been underperforming in fixed income markets. that's next. ♪
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alix: "bloomberg markets," this is alix steel.
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in the first quarter, banks reported double-digit percentage decline. ceo and founder of viable markets quiz -- chris white talked about how banks are having trouble making money. chris: this has been going on for several years. larger institutions have seen year-over-year declines in their ability to make money in fixed income. this is not in the rate area of the market. it's been behaving itself for very long time, this is regarding credit. these large banks last year in 2015 were 65% of the secondary trading volume investing in corporate bond trading. but they are not making money. the question remains is there's something that has changed about the model that then requires adjustment from the big banks. i think the question it -- i think the answer is yes. >> one needs to change? what was working? chris: what was working as
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holding positions. if you speak any trader, the biggest fears are when they help positions and they had a year-over-year market gain. >> prostrating is no longer allowed. chris: position getting yourself of the market rate. >> directional bets. >> am not saying it's a bad way for a market to function. i think we have seems a very successful markets where the market makers took directional bets. as it is right now, the cost capital of many these institutions is so high that you cannot take a direction or bet as a traitor. that's what we're seeing the effect of this, which is essentially how much revenue is out there for market making if you are acting as if your agency and not taking principal risk? >> we were talking about this earlier, where banks blamed the lack of volatility. you do have some volatility, but
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now it seems to be having the unintended effect of damping trading. is there a difference between good volatility in bad volatility here? chris: the good volatility is when there is irrational reaction to the marketplace, and therefore the market makers are getting deep discounts on bonds or they're able to sell bonds at higher prices than maybe they should be trading up. mostly if you speak to market making veterans in the corporate bond market, they will point to for five days throughout the year in which they made most of their money for the year. that's the good volatility. most interestingly, it enough you saw this, the berkeley their first quarter earnings. they highlighted how well they did in credit for q1 2016. they pointed to the fact that they want really holding positions as much anymore. therefore, all of the gyrations we saw didn't create this downturn in terms of overall holdings. i think over the long-term if you were a sea level of these large banks, you would rather have a barclays type business
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model than the business model of the old days where is the little girl with the curl, when you are good, you are good, but when you are bad, you are very bad. alix: that's chris white and it was interesting he was talking that it is ok it -- it just depends on where your market is. >> we see these banks quarter after quarter with weak earnings and weak trading revenue. more cost cuts. there are models that will work. they are still a long way from finding a stable model and asserting this new regulatory environment. alix: we're going to be talking about earnings today. on the revenue end, we've seen the earning side. but really guidance has been particularly week. we had a great try from citigroup looking at the six-month percentage change in the s&p, versus the guidance of total guidance. that white line has actually been rolling over currently
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it's around 20% versus 21% at the beginning of the year. joe: the earnings don't mean anything, they set a purposely low bar for them to skip over. but that's genuinely interesting, that the guidance can't massage that with gap burning accounting tricks. alix: or buybacks. joe: we will talk and see if that's ominous for investors. alix: we will be talking with tobias leftwich today, as well as what is good for stocks. coming up interviews with steve tannenbaum from the conference. ♪
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>> welcome to "bloomberg markets."
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david: welcome, i'm david gura. what is driving the market on this, the first trading day of may. we had live to the global conference, our interviews were with steven tananbaum and neil chriss. puerto rico defaults on a payment and the governor admitting he does not expect to be able to make a $2 billion payment in july. we're going to start this hour at the milken institute global conference in los angeles to go to steven tananbaum. erica: i'm here with steven tananbaum.


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