tv Bloomberg Markets Bloomberg May 6, 2016 10:00am-11:01am EDT
is on bloomberg television. vonnie: we are going to take you from new york to london to louisville in the next hour. jobs report showing u.s. payrolls climbing by the lowest amount in seven months, 160,000 positions. what does it mean for the economy and the fed rate decision? volatility spelling trouble for goldman sachs. extending job cuts in fixed income operations to 10%. vonnie: it has been called the most exciting two minutes in sports. we look at the kentucky derby and who the favorites are. desk head to the markets where julie hyman has been watching the jobs numbers.
julie: let's take a look at what is going on right now. a little bit of a poll -- we are not seeing anything because we had technical difficulties. vonnie: this is where we need your hat. i can get it up on my terminals. julie: we are seeing sacks down in the wake of the jobs report which on balance is being seen as mixed to negative overall in terms of its indication of what it means for economic growth in the u.s. and interest rates. if you take a look at u.s. futures and what we saw directly in the wake of the report and following, we did see a little bit of a delayed drop in the futures and climbing back up, and now it is lagging back down. traders and investors are sifting through the data and trying to figure out what to
make of it. commented thatn investors might come around to the view that this still leaves the door open for the fed to increase rates sooner rather than later. if you look at the 10 year and what we are seeing today, similar downward movement in the yield but now it is coming back up. i have been watching the fed fund futures to see the reaction. this is specifically for the september meeting, that is the next one that has a press conference. you can see here, the likelihood of a rate increase is going down for 25% or so. we have seen that likelihood decrease in the wake of this report. a quick check on the u.s. dollar , the bloomberg dollar index had been seeing an increased and it has changed direction. it is really sort of a model in the wake of the jobs report. the jobsesides numbers, we are getting earnings
and they are impacting markets. julie: we are seeing some very big moves in individual stocks. square plunging 17% after the company expressed some concern about financing for its small .usiness consumer loan programs investors are expressing those concerns. that had been viewed as an area of growth. gopro delaying the introduction of its karma drown. in the first quarter wider than estimates. that is what we are seeing in terms of the movement. mark: julie, have a look at how european equities are faring. we fell as much as 1.3% 15 minutes after the release of the u.s. jobs report. we were down anyway it as you can see, this is the stoxx 600. 1%, so the third of
initial reaction has changed somewhat but we are down for the fifth day, heading for the seventh consecutive weekly decline and the biggest weekly decline since february. since we reached the 2016 high on april 20, the stoxx 600 has fallen by 5%. big day for italian banks. this is an intraday chart. lender posted first-quarter earnings that beat estimates. what the chief executive is trying to do is reducing risk, has lostssets, which half its market value this year. since the creation of this bad set up,soured loans was we have seen a bit of a rally in the oldest bank in the world. in the case of samp our shares, they are a little higher -- sao
paulo shares, they are a little higher. we still saw a 24% fall in net income, record low rates. barclays said the revenues were disappointing. i want to show you shares of mattel today because first-quarter profits fell by 33%. they have contended with falling steel prices but what they see in the future is a broad recovery as prices for the metal and iron ore recover. it has been a tough period but the future looks better than the past, so says the world's biggest steelmaker. vonnie: that would definitely be good for the global economy. let's get to bloomberg first word news, matt miller. matt: it was an extraordinary development involving the likely republican president for candidate -- presidential
candidate and the speaker of the house, paul ryan is not ready to support donald trump. trump fired back saying he is not ready to support ryan's agenda. they plan to meet next week. at least one mega-donor on the republican side is all and for trump. hetells the new york times is backing the likely gop nominee and has donated millions to republican candidates in the past. and local and regional elections gave no sign they are ready to defy their leaders and leave the european union. the party appears to be on the brink of setting up council seat. it is scheduled for june 23. nationalists are on course for a third straight victory in scotland. nicola sturgeon will extend her term. north korea kicked off its first
full meeting of the ruling workers parties and 30 -- party in 36 years, giving kim jong-un a chance to tighten his grip on the country. he came into power after the death of his father and little is known about what he plans to do at the congress. global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world, i am matt miller. vonnie: let's get back to the april job report. projectedoyment rate to ease, stayed at 5%. one bright spot, wage growth. average hourly earnings climbed 2% from last year. for regional fed presidents have said jude is a live -- june is a live meeting but earlier on bloomberg, bill gross -- that. >> i am not so sure that june is
out. we have heard from bullard and stand fisher and williams in san francisco. they all seem to get it and seem to know that it some point they should be raising interest rates in order to preserve a semblance of profitability for savers and pension funds. vonnie: the folks at goldman sachs changed their call for the next rate change from june to september. journey may a student half -- stuart hoffman. the messaging this week from federal reserve presidents was definitely june is a possibility. is it still a possibility? stuart: i think it is a slim possibility. the job report was mixed. i think it was mixed to positive, but it was not strong enough coming on the yields of
the gdp report. we know it is understated but at 0.5, i have been in the june rate camp. i would not rule it out but in light of this report, the fed still will see and report before their mid june meeting so the odds are they will delay until july or maybe september. i still think the case is there as the fed presidents said earlier. the fed made -- may need a little more signs of acceleration. if we get a decent many jobs report i think we will probably be there, but not necessarily at the june meeting. vonnie: i am wondering what has changed because we are expecting a weaker topline number. we have had some great quarters of job growth. the fundamentals of the report to a certain extent were way better. types of jobs being created were
better, average hourly earnings, and wage growth is to one half percent year over year. stuart: those were the bright spot, wage growth is accelerating. we are also seeing some pickup in hours. yes, there was a drop in the labor force but that was after three huge gains in a row. i think the fundamentals are there but june might be just a bit early. i would not rule it out. i would certainly given a greater probability and the futures market, maybe one out of 10 odds. it is probably not the favorite in the race to what the fed will do in june, but if not june, july. if it was not a presidential election year you would think maybe they would go in september. i think sometime in july or september the fed will have enough evidence on the wage
front, growth acceleration and gdp but they will raise the rates in the third quarter and probably again in december. mark: because we are at full employment we did not come down to 4.9%. should we be expecting fewer jobs gains through the rest of the year? is expecting 200,000 plus from here on in a little bit much? stuart: yes, it is. year iscast for the that will average about 175,000. we have done better than that in the first four months of the year so maybe numbers like 160,000 to 170,000 not be viewed as disappointing. as he also mentioned, we had a drop in involuntary part-time jobs. there were some bright spots. i think the story of the fed meeting to raise rates if not in
june in july or september is still much into in with this number. we should not expect 200,000 jobs a month for the rest of this year. i would think if we average about 175,000 and maybe we are getting there already. mark: in the last 24 hours we have had a few central banks, the czech republic, mexico, and australia worried about global growth and inflation slowing, adding to the cores of central bankers who have expressed concerns. is there a dark cloud globally on the horizon when it comes to growth, when it comes to inflation? are you as worried as some of the central banks seem to be, especially in the last 24 hours? stuart: no, i do not think i am as worried. in 24 hours there are definitely clouds.
i do not know if they are as dark and menacing -- [no audio] dark clouds coming on the horizon in the last 24 hours at some of the central banks seem to be talking about. mark: stuart hoffman, chief economist, thank you for joining us. coming up, more job cuts in banking. we will discuss why trading desks are bearing the brunt of cuts in the finance industry. ♪
vonnie: live from london and new york, i am vonnie quinn along with mark barton. time for the bloomberg business flash. prosecutors in geneva are expanding their investigation into credit sweeties and one of its former wealth -- credit suisse and one of its former wealth managers. investigators have identified three more employees as suspects in an unauthorized trading case involving the accounts of rich europeans. herbalife is in late stage talks to resolve a federal trade investigation- into whether it is a pyramid scheme. begano year-long probe after a shortselling campaign by activist investor bill ackman.
that is our bloomberg business flash. as record low interest rates and volatile markets -- for more how volatility is impacting the jobs market, let's bring in michael horn. let's start with goldman -- michael moore. let's start with goldman. they typically do a 5% cut every year. this year it is going to be a percent and they are bumping it up to 10%. this reflects the environment, the tough markets and perhaps the outlook for the rest of the year as you typically do not see the cost savings from these types of cuts for six to 12 months. this certainly does not bode well for the outlook. mark: banks are having to deal with all sorts of issues.
this is the chart of the vix, the volatility gauge in the u.s. we have written a lovely story isthe bloomberg, not only there plenty of volatility but there is little volume. left.t the bravest have chief executive has called it paralyzing volatility that is scaring away clients and causing trade revenue to tumble to the lowest since 2009. clouds, any light at the end of the tunnel when it comes to this from all the banks that we have heard in the last few weeks? michael: i think there have been a few that preached the message of this can turn in a hurry, sentiment can shift quite a bit. i think there are some secular issues here that are not going away anytime soon. you have the hedge fund
underperformance and that is causing perhaps some more cautiousness. if they are down 5% for the year, they are not going to perhaps swing for the fences in the same way. you also have less leverage in the system. if the market moves 5%, there may be are not the margin calls that force funds to react in the same way. they can wait out some of the volatility, and that is what people are saying. they are paralyzed by it. in that scenario, you do not have the kind of trading activity that you would five or six years ago. paulo, thearding sao market is reacting well today. how long will investors give that bank? michael: you saw our revenue down like a lot of the european banks but they did beat estimates. certainly it is kind of the
same story that we have seen from some of the other lenders in the region, hurt by low rates, trying to cut costs. i think they have a lot of the same issues and certainly the italian economy, there has been a lot of credit issues. mark: michael moore and bloomberg news. isnie: still ahead, it friday so we have your weekend look at the $3 trillion etf market. ♪
what are we talking about here? out as not have gone just asset classes but as trades. it basically holds s&p 500 stocks and rights call auction -- options on the money at the s&p 500. the benefit of doing this is you get premium for selling the call options. that means about 5%. what you give up his you basically give up a lot of your upside. raise, people will exercise that stock options and you will have to pay out. this would be a perfect environment for these product because you still have low rates and at this point i think most people think the market might not go bullish that bad, or might go down.
these kind of have the stars aligning and it is an interesting look. even though all the money seems to be going to these low volatility etf's, they are low volatility. when the market goes down, a will go down last. julie: this first one you are talking about, this power surge etf by right, -- eric: it is an option on the whole thing. there are others like the horizon. let one is saying, we will the stocks raise a little bit before we have the strike prices and that means you get a little more upside but less yield. kevin kelly has one, recon capital, options on the nasdaq 100. because the stocks are very jumpy, this yields 10%. this one is going
to obviously have a little bit more volatility to it. this year it is down 4% but the q's are down about 6%. --ically want a product julie: the reason why you are protected somewhat is because you are collecting income? in 2011,ce it came out it is up 30%. 70%.&p is up of that 30%, all of that is the yield. it is down 5% in its price that when you throw in the income, the. -- boom. julie: there is also one for gold as well. eric: it is underrated. peoplehis year, as thought gold was not going anywhere and i still think people think that. this is a way to get yield out
of gold. you give up your upside but i think a lot of people do not think gold has upside. this is for people who think the market will go south. julie: or a way to hedge. wildcard,ne is the high volatility etf. eric: put options are the most volatile stocks in the s&p, yields 11% or 12%, a little more risky but an alternative option. is thisric balchunas guy, our etf guru. we will be back with more bloomberg markets. ♪ . .
television. matt miller is in the newsroom. in canada mays become the most expensive catastrophe in that country's history. the blazes cover an area or the new york city. more than 80,000 people have fled the city and 8000 had to be airlifted. insurance losses may total more than $7 billion. legal gridlock has come to an end after brokering a deal in parliament. the prime minister won a second term. he will be leading the fastest-growing economy in the euro region. since he took office in 2011, i respond returned 92%. pope francis is announcing what he calls selfish interests that led to european governments to build fences and keep out refugees. leaders from germany, italy, and the european union, the pope was given the charlemagne award for promoting european
unification. the cup series comes to new york city this weekend. catamarans will take part in qualifying races. the 35th americas cup will take place next year in bermuda. elon musk has done it again. for the second time in a month, spacex has landed a rocket on ocean platform without crashing. the booster touched down on a barge in the atlantic ocean after launching a japanese litigations satellite. global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. i am matt miller. mark: let's look at what is happening with european equities today. we were much lower after the release of the u.s. jobs report. we felt we low of 1.3% on the day. we are now down to just .25%. inis the sixth daily decline
seven. we are on track for a second consecutive weekly drop. small gain for germany's dax. have a look at the best and worst performing industry groups today. after thell falling release of the jobs report but then turning. basic resources higher. energy higher. banks. insurance lower. we have had earnings from banks. both italian lenders posting earnings that beat estimates today. in the currency markets, sterling is falling against the dollar after rising for three weeks. the euro is rising for the second week against the pound. 10-year is down for a second week. today it is down by four basis point. it has been a week of weaker than expected data in the u.k. which leads to next week bank of england's quarterly inflation
report. let's get to abigail doolittle who has the latest live from the nasdaq in midtown manhattan. what have you got? abigail: we have the nasdaq down again, the fourth day in a row. we will see how the index closes. we could be looking at another weekly slide. one stock trading lower. go-pro shares are down after the company did post a wider than expected quarter loss despite the fact that revenues beat .8 .5% in the company reaffirmed its full-year outlook. what could be dragging is the fact the company did delay the thatse of the drone michael said could be bad, for investors. he believes profitability is unlikely until the third quarter on a stock down more than 80% over the last 12 months. mark: what does it mean in the long-term for go-pro? abigail: not surprisingly, we
see a very strong downtrend of selling pressures. unrelenting sellers. nonetheless, the stock did have a nice rally, 67% off the february lows. it seemed bullish, back above the 50-day moving average. the rally failed. the stock is still above its record low of about nine dollars per share. it is critical the support holds with very strong sellers. mark: thanks a lot, abigail doolittle at the nasdaq. vonnie: let's get more reaction to the u.s. jobs report. april seeing the lowest gains in payrolls in seven months. joining us from newport beach, california, is the managing director at pimco. this is the number everyone was watching for this month. we had a lot of variation in forecasting. what were you looking for and does this surprise you? >> know, we are seeing a
gradually improving labor market. we have added 2.5 million private sector jobs in the last year. this month was a little softer, but the trend is positive. if you look at implement growth, we are growing 1.6%. wages are up 2.5%. the income proxy of the u.s. consumer is up 4%. that should be very good for the consumer and spending going forward. we think the fed can raise rates later this year. vonnie: when you say later this year, is june off the table? fed funds futures are going down today alone. roomuld seem the fed needs to maneuver and need to raise at some point. >> i think they want to raise. you have the brexit vote on june 23. that could cause them to delay. there is only 2% probability they will go in june. they typically don't like to disappoint the markets. they will probably wait for june. july is about a 15% probability.
they will probably start with one or two hikes by the end of the year. that is our general sense. by the way, the market is not a good price for one hike this year. we think they will go a little faster than the market. is the u.s. credit market still the sweet spot when it comes to the global fixed income space? >> we still think it is. we have been traveling around the world for the last three to six months. clients all over the world are allocating more money to u.s. credit markets. the logic is very simple. fundamentally, we don't see a u.s. recession. technically, 30% of the government bonds are now in negative yield territory. credit can offer 4% to 7% returns. we think that is near and equity return with half the volatility. we think this is the year of credit. we are seeing inflows into the asset class at pimco. mark: talk to me about the
high-yield portion of the market. i have a chart to my right which you probably can't see. i can tell you it is the bloomberg high-yield corporate bond index. you know as well as anyone the rebound we have seen since february. as an index, this has rebounded by 11% since then. is there further upside in high-yield? and if so, where? >> the rebound has basically been a function of oil prices bottoming at 26.21 on february 11. now oil is in the mid 40's. 20% to 30% of the spread in comes from energy and commodity-related stocks. the rebound in energy has played a significant role in the recovery of the high-yield market. it has also been the fact that central banks have turned more dovish, tilting away from interest-rate policy towards qe. that supports the overall economy and eliminates risk.
china has been more stable on the currency front. those reasons have supported high-yield. we have taken a more cautious stance and more selective approach. we are not chasing the higher data energy or commodity sectors in high-yield. however, we do see significant value in housing, consumer related sectors, not agency mortgages. health care, cable. in sectors tied to the u.s. consumer and housing, we are quite constructive. vonnie: i know you are constructive on corporate as well. i want to show a couple of indexes. of white line is the yield corporates in general. the bottom is when you include software and and other types of instruments. where are you looking at investment space? >> a year ago, 8% of the market had negative yield. today, it is 30%.
traditionally are moving into safe assets are moving more into investment grade. we think investment grade is the sweet spot. 5%.an deliver roughly 4% to for investors looking for more equity-like returns, high yield can deliver close to 7%. 7%, whether you are more focused on safer assets or more equities, corporate bonds have a very good solution for investors around the world. we think investment grade has 1/3 the volatility of equities. that 4% to 5% return prospect looks compelling for clients all over the world. i was just in europe. they had negative rates in are nowand and 75% negative yields. they are moving into global corporate investment bonds that can offer the 5% return. vonnie: when do we see inflation
-- 30-your tips are yielding 84 basis points now. there is no inflation view whatsoever. 2% in june. no chance this year or less than 50%. >> we are more constructive on the inflation outlook. 59% of cpi at cpi, is services. the u.s. domestic economy is 70% consumer. services inflation is up 3%. you have a healthy health care sector, housing sector, and the consumer is generating income proxy of near 4%. we think inflation will trend higher. we think oil is trending higher and recovering. that should lead to inflation higher. we have been overweight treasury inflation protected securities. in 10-year maturities, the market is on pricing in a breakeven inflation rate of 1.5%. we think that is too low.
we think tips are very attractive at these levels. point youfinal mentioned about europe. it led me to search through maternal -- my terminal. vonnie and i seem to be outdoing each other with charts. i'm going to show the european corporate bond index. corporate bonds have seen an upturn since the backend of last year. and then of course we had the e.c.b. announcement they will start buying corporate credit, corporate debt, excluding financials. how do we take advantage of the buying corporate debt which is about to begin? >> that buying will likely start in june. qe has been increased overall in europe from 60 billion to 80 billion. they will start buying corporate bonds in the second half. we think they will probably start with 5 billion. that could pick up.
given how low rates are and how tight spreads are, corporate bonds are rich in europe. you will see more issues in europe. investment perspective, we are favoring the u.s. market where the corporate bonds are cheap versus the underlying default risk. for investors, by u.s. corporate bonds. for issuers, now is a great time to issue into europe because the e.c.b. is going to be supporting that market. mark: thanks for joining us today. the c.i.o. of global credit and managing director at pimco. coming up, legendary graphic designedmilton glasser a new "get out the vote" poster. his take on the u.s. election cycle next. ♪
"bloomberg markets." designernow graphic milton glaser for his iconic "i love new york" campaign. he has created a new election poster. allen pollack joins us now. glaser givinglton you the scoop on the new get out the vote campaign. how did that come about? >> "business week" is known for design. it has a design issue every year. we just had a design conference which we have done for four years so it kind of made sense that overdesign, we would bond. vonnie: tell us about the get out the vote campaign. >> this is sponsored by the american institute of graphic artists. they challenge members to come up with a poster. this poster says "to vote is to exist." nothing glaeser believes one great way of affecting people is through a combination of imagery and words.
our posters outdated in the digital age? >> one thing about posters is they can go online. i think this is going to be shared online. institutehe american of graphic artists that will be sponsoring exhibits of the posters with the republican party, the democratic party. the league of women voters is involved. there are going to be the less they are going to be asking members to share the poster in areas where vote turnouts are not historically great. mark: what does he think about the election cycle? >> he does not like this cycle. he did not say who he was going to vote for, that he feels there is something about the way this cycle is going that makes people feel they cannot effectively voting which is why he feels so strongly about the poster. vonnie: did he talk to you about the process of coming up with the idea? he chose something quite
cerebral, french philosopher from the 1500's. also the idea of not allowing your personal biases to come into the campaign like this. >> i think he feels if you don't vote, you are invisible. i think that is what drove him. that notion also that you are affected by this combination of imagery and words. remember, he is an expert at this. he did the "i love new york" campaign which he expected to last for three weeks and go away, so he has some kind of magic. vonnie: how come those colors? >> to be honest, i don't know. i don't know. they are kind of unusual and they are not red, white, and blue. they are kind of interesting. and i: green, mustard, want even try to describe them. ellen pollock, you can meet her exclusive with milton glaser in the latest issue of "bloomberg businessweek." mark: it has been called the most exciting two minutes in
to let yout wanted know president obama is going to make a statement on the economy at 12:05 eastern, likely addressing this morning's jobs report. we will bring that to you live here on bloomberg television. 20 of the best thoroughbreds and america will compete in the 142nd running of the kentucky derby. watchpatrons gamble and the athletes run, what happens makes this year truly special. ♪ the kentucky derby is rich in tradition and beauty.
it is the longest running sporting event in the u.s. it is considered the most exciting two minutes in sports. >> they are off. the kentucky derby! year, american pharoah made history by winning the derby, the preakness, and the belmont, the elusive triple crown. after his amazing career on the track, he is starting his second career as a stallion. the derby spotlight this year is not on a.p. it is on the up and coming sire against america's top stallion. if you want to breed your mayor with him, it will cost you $300,000. have three of their offspring running for the roses. this will be the first time in history two stallions will have three horses each in the derby. uncle mo's first offspring propelled him to third when it comes to sire earnings this year
and has given him a leg up on derby date. mo's career on the track was exceptional as a two-year-old. as a three-year-old, he got sick and was scratched from the 2011 derby and then retired to the barn. >> i never thought uncle mo would be a better stallion than resource. >> his co-owner cheered with 40 members of his friends and one ofas they watched uncle mo's sons win the memorial. the victory guaranteed the third baby is spot in the derby, proving his progeny are a force to fear. >> in the short time he has been a sire, he has proven he will be one of the greatest of all time. this has been special. >> he bought uncle mo in 2009 for $220,000. >> overwhelming performance by uncle mo. >> before he was retired, mo won
over $1.6 million on the track. as the babies prepared to run for the roses, the poll is readying to cash in on their success. uncle mo is visited by 150 to 200 mares each year. with recent success, visits could rise to $150,000 each, double the $75 dollars he demands now. that means you could bring in $29 next breeding season. his valuation now is $100 million. -- that means he could bring in $20 million next breeding season. vonnie: let's get more insight on the derby. we are joined by our triple crown correspondent who normally has responsibilies for latin america and those markets. when betting time comes around, you do extra research for us. talk to us about churchill downs and the forces you think maybe
undervalued. 's i like one of uncle mo courses in this race. outwork maybe 15 to one tomorrow. looks a lot like his father. big, good-looking horse. great stride. one thing about uncle mo was he covered a lot of ground. he had a tremendous strike. those. has a lot of at 15 to one, i feel you get some value. the favorite at 321 is a great horse. between.otown is in >> he is another one of these mo babies and he can run. he has a terrible mac of getting himself in trouble. in a field of 20, that has got to make you worry. . but he can run mark: if i was putting money on names alone, i
would choose "sudden breaking news." "oscar-nominated" because i love films and "exaggerator," what a great name. if i put money on each of those, how would i fair? >> no shot. i would love to take those vets with you. mark: why is that? vonnie: no betting on this table right here. >> we will bet offline afterwards. i would say exaggerator can run. he will be over-bet, but he can run. oscar-nominated is a joke in this race. seven breaking news -- sudden breaking news, i can't back him much but he can run a little bit. vonnie: 20 horses in the race this time. conditions might be tough. >> 20 is what they do just about every year. it is the most you will have in any race in america.
there is an additional concern. there is a japanese-owned horse that arrived. ever since he arrived a few weeks ago, he has been acting erratically in the morning which is creating concern he will act erratically during the race. when there are 20 horses on a tight track, it has everyone a little on edge. mark: really quickly. what is better, the kentucky by as we call it in england? >> i'm probably biased, but i will go with the kentucky derby. it is true that we stole our idea for the race from you guys. mark: the european close is next. stay with us. ♪
♪ mark: we are going to take you from new york to london in the next hour. here is what we are watching today. voters in a brexit as the u.k. decide on a new mayor among other things. in ireland, his second term as prime minister. we will break down the outlook in europe. vonnie: labor markets slowed in april. payroll data coming in weaker than expected with 150,000 jobs added. how will the federal reserve read the report? mark: area finance ministers will hold an emergency meeting on monday to discuss greece. we are speaking to the largest private holder of greek government bonds.