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tv   Bloomberg Markets  Bloomberg  May 18, 2016 12:00pm-2:01pm EDT

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scarlet: good afternoon. we areere is what watching at this hour. the prospect of higher u.s. interest rates pushing up the dollar. we will get the minutes from the fed april meeting in two hours. scarlet: and the expectation of a fed rate increases pressuring the elements of steel. alix: so long time warner cable. it closed its $55 billion purchase of the provider. we will hear from top -- from tom rutledge in the hour. scarlet: we are halfway through the u.s. trading day. let's head over to julie hyman who has been tracking the moves. julie: we have seen the stocks
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trading in a pretty tight range today. it feels as though they are waiting more direction. that said, stocks are new the highs of the day. earlier, we were offering -- we were saying major averages trade lower. on the plus side, we have the financials, which have been writing today along with technology. on the downside, consumer staples and consumer discretionary. apple is one of the stocks on the rise today. tony over a bernstein says the company could reach a trillion dollars in market cap if it shifts toward a subscription services type of model where people will pay a monthly fee for their iphone and other apple services rather than one lump sum for the iphone of front and so an interesting call and the stock is trading in the obit higher. we are watching the banks trade higher. they have been going up along
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with rates today. that is treasury yields on this outlook. perhaps some insight in the fed minutes that we will see in interest-rate sooner rather than later potentially. , bank of america, citigroup all of today. we have seen a significant increase today. alix: that is the good side. what is not performing well today? julie: target is on the losing side of the equation after the comparable sales missed estimates, dragging down walmart as well. walmart is set to report its numbers tomorrow. we are watching media stocks as well. some will be left out of the cold from the new sports-oriented live tv service , that to keep the price down, they may leave them out of it. so all those stocks selling off seur then we are watching the
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-- the soda companies. court rejected an injunction from some of these leverage firms to try and stop on some ofthat city these sodas. so coca-cola and pepsi are not down a lot but still under pressure along with the rest of the consumer staples group. scarlet: great context. let's get a check on the bloomberg first news today. mark crumpton has more from our newsroom. it was a split decision last night for hillary clinton and bernie sanders. the results don't change the dynamics of the race. senator sanders is running out of chances to stop mrs. clinton. are june 7, tests in california, new jersey and
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four other states. the top u.s. intelligence officials say washington have seen indications of foreign hackers spying on the presidential candidates yard director of -- candidates. fbi and homeland security officials are working with the campaigns to help them tighten security. the activity follows a pattern in past presidential elections. closing arguments are expected today in the civil tire -- civil trial for the 2012 colorado theater shooting that left 12 people dead and 70 others injured. 28 victims and their families .re suing cinemark holdings james holmes is serving a life sentence for the attack. u.s. secretary of state john kerry is in cairo for talks with egyptian officials. they are exploring egypt's ideas for supporting a new israeli-palestinian peace initiative.
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secretary kerry flew into the a day after the egyptian president offered support to revive the peace process and said he was willing to serve as a mediator. news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. scarlet: thank you so much. investors say markets are underestimating the central bank's readiness to pull the trigger on a rate increase this year. >> if you look at where the -- d curve is >> if you look at the financial futures, you're expecting at most one increase. >> the ark it isn't even price for one hike this year. normalization of monetary policy. >> the fundamentals in the u.s. economy are strong enough that we are likely going to be
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removing accommodation a little bit more ugly than is currently anticipated in the financial market. >> we think there's a higher chance the fed will go. >> i don't know how many rate increases we will have. currently, my assumption is two, possibly three are possible. >> i do think markets are underestimating their willingness to follow through on what they say now. markets may be more pessimistic than i am at this stage. alix: here is all the action we have seen in the treasury market. take a look at the bloomberg. this is the two-year versus 10 year spread. basically, investors preparing for nature straight for higher borrowing costs in the shorter term but lower inflation in the longer term. --ever, just in the last
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actually, just today, we saw this curve actually steep and pen with idea -- stee the idea that the fed will have a hike in june. when you look at the yield curve, what kind of rate hikes cycle -- hike cycle do you see? guest: all the folks we heard from having to virgins of opinion. we expect continued flatness. i think the overall backdrop is one muddied with uncertainty and with volatility. scarlet: so compare and contrast this uncertainty right now versus what we saw last year while we were waiting for liftoff. david: there are more similarities this year to last your than there are differences. but there are some important differences. one is the yield curve. we are seeing what investors do, continuing to hunger down. we see record-setting flows into
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bond etf's because there's so much uncertainty. $10 billion more this year has gone in than last year, just because a fact that folks don't necessarily would know what to go -- necessarily know or to go. scarlet: with all of these countries adopting negative interest rates. alix: what happens to these flows once we get clarity from the fed? how sticky are those investors? david: i think these investors are quite sticky. even if we have a move by the fed in june and the percentages to around 20%, not necessarily up toward cities percent or 100% at the fed is going to move. that means it notes -- it is good to be modest. thisdo they need in market? they need diversity from all the risk going on in equities. scarlet: where are we in this great liquidity debate? tf's -- in do body
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what way do bond etf's argued the liquidity rates. david: on average, it trades 6% doeser, j and k, than it in the primary market. this liquidity wouldn't exist. it is buyers and sellers expressing opinion on high-yield bonds every day. the average spread of a high-yield bond is 150 basis points. that is pretty expensive, whether you or not -- whether or not you are a small investor or a large institution. alix: we look edgy and cayenne most of its portfolio is triple k and-- we look at j and most of its portfolio is triple c rated. david: we have seen interest in high-yield etf's. when we are looking at high-yield as an investment, it is the near term because it has an attractive coupon. we are likely to see investor
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flows. looking into the future, we will need more clarity on where energy and oil will trade because it will fall back into the bonds itself. scarlet: there is j and k and there is sj and k. people like you because you get the same yield but you get half of the interest rate risk. is that a good idea? in this kind of environment with all that uncertainty? david: there is always a trade-off. there has been growth and products. soon i have sj nk, which is similar to j and k. reducing theally risk by half and not losing much of the yield. so for folks who are really concerned about what the fed may do, then sj nk is a good solution for them. scarlet: where's the risk than? david: again, always a trade-off. action, it is credit cali that is -- credit quality that is weaker than jfk. -- j&k.
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for others who are seeing the quality play out, they are moving toward j&k. alix: these flows have not been tested in the environment, with the fed raising the rate where the rest of the world has negative interest rates. how do you factor that into your outlook? david: i think you are right. this is in some ways an unprecedented market that dropdead there is nine: dollars in negative yielding debt. . seen bears, time and time again, they've been tested. they were tested last year when week. markets became they were tested again with the issues in the liquidity in the market. so they are getting a lot of inflows. are they being used in place of
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money market funds? in today's market, folks are comfortable taking a little bit more risk. moreve seen folks move into investment-grade corporate bond funds for that, not necessarily high-yield. that's a bit of a different trade. but that is an area where we have seen folk saying i am not getting anything from cass, getting nothing. i'm going to take a little more risk to do so and stick to invest in grade to do that. alix: thank you for your insight. good to see you. scarlet: coming up, and mr. stop of the day. we know that nobody likes -- our ministry stock of the day. we know that nobody likes spam. alix: who makes spam? scarlet: carmel? -- hormel? i don't know. julie will give us the news later on. ♪
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mark: companies earnings for share beating estimates. the stuff is down 9%. so what gives? analysts over at jeffrey says it has to do with rocket margins, specifically toward refrigerated food segments so not the one
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that includes spam, but one that trades 9% last quarter before interest and taxes. it had been 14.4% in the prior quarter. to affectis is likely the company's upside. and looking at what is going on with work prices. this company uses a lot of pork. even though over the past several years we have seen pork prices fall, you today, they have been higher when those prices are low. that is good news for hormel's margins. but they have been limited to some degree. that is part of the story and what is going on today. elsewhere in earnings, they are sort of a little under the radar and this is axiom, a tech and marketing company.
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,ip shop, the online retailer apparently disappointing investors. it was downgraded to neutral from overweight by jpmorgan, saying the forecast was to blame. and also that there is deteriorating earnings visibility for this company. so a couple of the earnings losers that we are watching in today's session. scarlet: thank you so much julie hyman. alix: it's time for the bloomberg businessalix: flash. saudi arabia may take some of its bills and ious. a budget's are facing deficit this year. some contractors may receive on's like interest -- like instruments to recover what they are of. -- they are owed. last week am i rp alleged that face us editors leaned toward liberal sources
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when selecting stories for training news topics. zuckerberg says they have found no evidence. americans may not be shopping at the mall, but they are still willing to spend on their home. lows posted earnings that beat estimates. yesterday, home depot also reported better-than-expected earnings. business flashr update. scarlet: coming up, what is moving in the fx market? from the dollar to the yen, we've got it all. ♪
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scarlet: this is bloomberg markets. negativity on the dollar may have gone too far. the u.s. currency has been gaining ground. better than expected economic data this weekend comments from fed officials -- ted national and alix: the: taking a look at dollar, what kind of repricing
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do you think still needs to happen if a june-july rate hike still seem imminent. vince: the price is very low. it has been discounted considerably given what the april minutes basically said. that was taken as dovish by the markets. what is going on now is a repricing with the markets thinking that, with better data that we have seen recently, especially the hawkish testimony, the fed is tried to get back towards the middle if not over the edge to a rate hike this summer. ugly.t: so we could get if the dollar moves up suddenly, you have all sorts of other asset classes that need to repricing medially, such as the emerging markets. vince: it did catch people off guard. alix: i want to take a look at the yuan. take a look at the bloomberg here. this is on shore versus offshore. we see a diversion's between the two. this is a dollar-you on. uan.t -- dollar-yo
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the herbal line is the shanghai composite. when you see this to virgins, you tend to see a selloff in the shanghai composite. for one. one vince: the speculation around the yuan is whether we will see the-shaped -- a recovery or an l-shaped recovery in china. certainly a fed rate hike would be dollar positive. the yuan would be weaker. but we are seeing, which is pure fundlation, that the hedge leverage money will be ahead the dollar in anticipation. scarlet: as we track currencies every day, you and i and joe talk about how the pound is getting a lot of attention. i know you have your opinions on it.
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we see a correlation between the pound and emerging-market currencies. , anee this peak up here increase correlation, a link between the two. obviously, we are not at one, which means that they would move at lockstep. why is the pound trading more like an emerging market currency? vince: you just mentionedvince: two event risks. 2009 and brexit. there was a poll this morning oft shows the remaining vote the very highly entrenched versus the leave vote. so there is a massive short covering tonight, which is taking the pound a lot higher. is not as commercially traded as the euro and the yen is. so there are gaps between
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liquidity, which hedge fund speculators try to to give into job. scarlet: so does that mean the pound is more vulnerable every time there is a risk off scenario? volatile,can be more given their liquidity gaps that other currencies don't have. alix: taking a look at the fed minutes and other data points, what is the one currency watch? vince: -- one currency you watch? vince: the dollar really wants to test the 1.30. to me, the canadian numbers have not been spectacular. by a large, it is due to the massive appreciation in currencies since january. nonenergypairing exports. and even with a boost in oil prices, that doesn't catch up as quickly as they may need. the potential.
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the canadian dollar could test that 1.30 level. retail sales to marmite be the trigger. scarlet: thank you so -- retail sales tomorrow might be the trigger. scarlet: thank you so much. lending club subpoenaed over its lending practices. last week, it saw its shares fall by more than half. under more scrutiny now over its lending practices. alix: we should see what that is doing to the stockalix:. the stock is now falling off its highs of the session as the headline crossed. we will keep an eye on anymore data about lendingclub. we will be right back. ♪
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bloomberghis is
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markets. mark crumpton has more from our newsroom. mark: vice president biden will announce new rules on overtime that make it more than 4 million americans a pay raise. the rules say workers must be paid at least $47,000 before they can be considered as managers in eligible for overtime pay. that is twice as much as the current threshold. of voters want to see an independent candidate trump in clinton and the election. 65% say they are willing to support a candidate that isn't mrs. clinton or mr. trump. rests in the death of freddie gray. edward nero faces assault, charges.t and reckless
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closing arguments are expected to begin on thursday. opposition activists groups there there has been an air raid on a central syrian town. the airstrikes came a day after one ofar tack on rustan, the first areas to rise up against the bashir al-assad government. scarlet: silver leapfrogged over gold last month. fed, ae a dovish stabilizing chinese economy and u.s. expansion. alix: we are awaiting fed minutes later today that could the fomc.e mood on
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mitch, what do you say to those who say silver went up to fast? go: silver has a long way to . i think it ballooned up the 80's to one -- 80 to one. it is now in the 70's. at that as a proxy to wear silver could go. silver is a lot different than gold. with silver, you have the same dynamics of gold on the investment side, but then you have half of that demand coming
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from real consumption. which hasn't been all that strong. electronics globally have been week. silver has done well. if you get both pistons going at the same time, the commercial demand and industrial demand, silver has a chance of flying. scarlet: it has a dual identity here. at what part of the economic cycle does it work as a industrial metal versus a precious metal? mitch: it's hard to say. a little bit is used in a lot of different things. and a lot of those applications are very clean uses, things like solar panels, water purification, and electronics. those are growing markets. grown, theve proportion of total demand in industrial applications has expanded. alix: when we look at the supply side for commodities, more supply needs to come off.
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deutsche bank came out and said supply still needs to be cut. the you agree with that? mitch: i think silver supplies probably part of the story that people don't pay enough attention to. you look out over the next five years or so and silver supplies expected to continue to decline. it declined last you for the first time in about it -- in about a dozen years. 2012. was high in 2011, but as prices have come down, there has been no expiration. there has been no investment in new assets. effect is only now being felt, both from production and from scrap looking out over the next several years. i think that is a real positive. scarlet: so as we look ahead to what the fed may or may not do, the stronger dollar, what impact do you see it having on silver versus gold, given silver's dual identity?
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mitch: i think goal -- gold will probably take the lead on any fed changes. gold will probably take it on the chin a little more than silver, if there is some reversal as far as where the fed seems to be going. alix: in terms of breaking down the industrial versus the investment part of it, on the flip side, you have not a lot of big investors, not liquid as gold good also come on the industrial side, you have solar demand not picking up that much either. so how do you reconcile those two factors? mitch: on the solar side last you are, total demand going into solar panels was 75 million ounces. 25% last year versus the year before. isyou look at installation in places like china and the
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u.s. over the next five years, solar is only going to get bigger and bigger, as far as the component of overall demand. i think one day, solar will be the kind of country bitter to that 35mm film used to be for silver, which is a constant 20% of 30% of annual demand. on the institutional versus retail side, i think the silver holders generally are a lot more retail-based, a lot more sticky. if you look at the etf holders, for gold, remember what happened were so left, etf and right on gold. silver, that hasn't happened. alix: they differently had that retail watch out. mitch: the etf's have stayed constant on the silver side. if you look at the coin side, that was the big story in the survey camming out -- coming out a few weeks ago. the other thing that
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comes up when i look at silver and minors in general are these streaming companies that pay the to minors to lock in price. stream buyers are on a search for output growth and minors are theirg for a way to lower production cuts without having to issue stocks or bonds. words you access the market for capital? mitch: we have used streaming financing as a way to help finance the construction of mines. what i have seen on the streaming site is a much more competitive market, a much more efficient source of capital for the operating companies looking for capital to expand. fairlyed to be a expensive form of capital. now it is more competitive with more traditional forms of funding. royaltyreaming and companies are underwriting returns on new streaming deals that are low, low single digits.
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a closerrator, that is look when you're looking for external capital. you are outperforming the broader market, the s&p 500. how long are you looking for that last? mitch: i hope for a really long -- alix: forever. [laughter] mitch: to infinity. off of largely been people's radar screens for a few years. in the meantime, we have done a to transition this company. our costs are down by a third. we made a couple of good acquisitions. cash flow is growing very rapidly. are very liquid stock on the nyse. we are kind of known as a go to equity when you want to play the sentiment of a higher precious metals market. we have seen a lot of short-term momentum buying in our stock. arelly now the generalists
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wanted to talking get back up to speed on the sector and our company. do you feel like you need to see silver get over $20 announce ounce for your company to take another leg up on the stock? or do you think that stabilizing is enough? mitch: stabilizing is even more than enough. $15 silver, $100 gold, this tailwind is gravy on top. cash flow will continue to flow -- to grow whether price goes up or not. alix: thank you for joining us. , anothercoming up commodity that we are watching closely -- coffee. i could use some coffee right now. ♪
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scarlet: we -- you are watching bloomberg. alix: this is your global business report. who has the most a lose if the u.k. votes to leave the european union? and will the ceo of unicredit get the boot? plus, another scandal in the auto world. suzuki says that in proper used in over were 2 million vehicles sold in japan. the pound climbing the most this year versus the euro and rallying against the dollar, despite evidence that the campaign to keep britain inside the eu is extending its lead. who has the most to lose if a brexit does happen? >> the u.k. has the most to lose
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because they will suffer. if they decide to vote to leave, boris immediately, johnson and others will say that we need to have another vote on the basis of a new engagement with the europeans. the level of uncertainty around brexit in the u.k. will be immense and immediate. the ceo of unicredit may be forced out by investors. shareholders met on monday to discuss a possible shakeup. they gave the chairman orders to draft a plan over the next few months. he isco biz own eliminating thousands of jobs as regulators step up pressure. madea group is looking to raise its stake in cougar -- in kuka. inillustrates a surge chinese investment in europe.
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kuka says it will evaluate the upper. the scandal over the flawed fuel efficiency tests has gotten bigger. now suzuki says he used an improper method for testing how its miles to the gallon cars get. shares are down 15% in tokyo. last month, mitsubishi said it had overestimated mileage ratings in four of its models. scarlet: it is time now for our bloomberg quick take, where we provide context and background. we begin in poland. it began the 21st century in a positive note. but an election last are caused a political shakeup. when there wasse a parliamentary majority. peopleised a poland for left behind by the economic transformation.
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it overhaul the nation's highest court. concerned about these developments, s&p in january downgraded its rating on polish debt. moody's and fitch have held off the poland fell to communists in world war ii. then the solidarity trade union toppled that regime in 1989. and free-market capitalism began to take hold. the eu started pouring money the country into thousand four, building roads and schools as part of a two and $50 billion aid package. poland has seen two decades of uninterrupted economic growth, yet unemployment has remained stubbornly high. at least 2.5 million poles have left the country in search of jobs and prosperity. are somern provinces of the poorest areas in the eu. here's the argument. the eu has begun investigating whether pollens is affecting the constitutional court and the media give the ruling party too much power. the prime minister says her
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government uphold the rule of law and history shows that poland suffers when outsiders interfere in its politics and the standoff is raising questions among investors. alix: coming up, rising content costs. cable television relevance and a brand name phaseout. we will hear from the ceo, tom rutledge, next. ♪
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scarlet: let's head over to the
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nasdaq were abigail doolittle is standing by. abigail: we are looking at a bit of a rally on the nasdaq. apple is nicely higher. we also have my from trading higher. and tesla. as rabble, it is the biggest boost in the nasdaq, higher on the bullish comments from bernstein. he thinks apple's market cap trillion ifp to $1 apple implements its subscription-based revenue model. ae stock has been trading in range between the buyers and the sellers over the last year. they things that happened. last week, the buying support did break. bond the news that warren buffett took a $1 billion position in the first quarter, the buyers have reclaimed the stock. the question is whether or not it can last. we have seen the stock trade backup up to the top of that range.
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so it is one to pay attention to. alix:alix: he also mentioned tesla helping to boost the nasdaq higher. gill: tesla is nicely higher. it is having its best day in six weeks after goldman sachs improved tesla. bottleel them on -- the -- the model 3 launch was impressive. the 200-day moving averages a line in the sand between the buyers in the sellers. above it is bullish. below it has tended to be pretty bearish. did reach behind the 200-day moving average. whether or not there is more downside for this one, too. so two big names here at the nasdaq to keep an eye on around those technicals. alix: thank you so much. scarlet: charter communications closes its purchase of time warner cable year after it first announced the deal.
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the shares jumped on the announcement, which creates the second largest cable tv provider in the u.s.. alix: betty liu announced .herman talked to tom rutledge tom: one we get we call spectrum services deployed, that means we will have a state-of-the-art interactive user interface with search and discovery of content will integrate over-the-top services with that product so you will be able to search and see content in a seamless way, whether it is an over-the-top service or whether it is a service delivered by us. we will take you data speeds up. we will put a two-way interactive alek on every tv that you have so that you will have on-demand on every outlet. and the full range of user interface services that i
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discussed. we will price and package everything in a compelling way so that it is competitive and better than what our competitors offer. with awill put that voice product that is fully featured. a data product that is faster than our competitors and a video service that is better than our competitors, all hd and all interactive on every outlet. david: one of the things you acquired is regional sports networks. this is an something the charter did all that frequently, wanting to go in and acquire regional sports networks. are you comfortable owning time warner cables sports regional networks? it wasn't the reason why we wanted to do the transaction.
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we fundamentally believe that cable is a superior infrastructure and that, done well, it can be a really great product and well resonate with customers. so the sports channels were not the driver of this transaction. but they are there. they are valuable assets. and we will try to evaluate how that fits into our long-run strategy. the fundamental strategy that we went within this transaction was just to do the business better. sorts ofare all upsides that come from the scale we are acquiring and the assets that we are requiring -- are acquiring. but we are not going to say how we are going to implement those opportunities. betty: what about programming costs, which are quite high at charter? how are you with a combined entity like this where you have a larger scale? how are you going to approach content providers differently now? tom: it is an interesting situation.
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content is changing the way it is distributing itself. but the nude charter will have more than 9 billion -- the new charter will have more than $9 paid to the content industry. on that platform, the content industry sells about $5 billion in advertising. biggest cost drivers of all of our products over the last 10 years has been the rise of content costs. we hope to get that under control but we also hope to work with content companies in creating new products and value for customers so that customers actually are comfortable with what they are paying for. that has been a challenge is constantly raising rates. scarlet: that was tom rutledge earlier today. we have breaking news. can lessner of goldman sachs
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reportedly got money from a former employee of malaysia's mdb investment fund. the money was a transfer of hundreds of thousands of dollars. we know that prosecutors are examining this alleged transfer to this malaysian investment fund. alix: also news on lending club. the company was subpoenaed for information on rates, fees and duration of loans made to new yorkers. when that news first came out with. dow jones, we saw the stock take one leg lower. but now he had -- but now it has rebounded. scarlet: we will be right back with bloomberg markets after this. ♪
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scarlet: it is 1:00 p.m. in new york. scarlet: welcome to bloomberg markets. ♪
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>> from bloomberg world headquarters in new york, good afternoon. alix: here is what we are watching at this hour. we are meeting -- waiting on the minutes of the meeting, due out in just about an hour. scarlet: target missing the mark. ship -- sales fell short of analysts. exclusive withrg the cochairman of bain capital and co-owner of the boston celtics. why he thinks the u.s. is still a safe haven. scarlet: let's head over to the markets desk where julie hyman has been tracking the movements. it looks like we are making a
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lot of headway. the range has been pretty tight here, stocks are at the so theof the session, s&p is up nearly half of 1% going into the fed minutes, this afternoon, which a lot of investors are looking into to get more insight into what the fed is going to be doing, going forward. the nasdaq has been doing the best, we are seeing technology stocks on the rise. i want to check on some of the other assets going into these minutes. the u.s. dollar has been seeing a bump. we are seeing a bit of an increase in interest rate futures, so that appears to be reflected in the dollar. the 10-year note is seeing an increase in yield, so some selling as -- selling at treasuries. we have been watching the yield curve, very carefully. this looks at the yield, going back quite a ways, to the early
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1980's, so we are seeing it at the flattest it has been since 2007. debateas been a lot of over whether the flattening of the yield is going to augur a recession, but it does seem to reflect a view that the fed is going to move at some point, this year. lenders are gaining on the possibility of higher interest rates. >> that is something that has been happening even though curiously, it would be the yield curve whitening, but we have seen on the days, if you look at what is going on, we have been seeing these banks go higher as we have seen rates go higher as well, that is what we have seen this year, thus far. if you take a look at some of the regional banks we have been seeing, gains in today's session.
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>> let's check in on the bloomberg first word news with mark crumpton. mark: senate democrats are holding a mock confirmation hearing for supreme court nominee merrick garland. people who know the federal judge are testifying about his vacations. senate republicans have refused to hold hearings on the nomination, saying that selecting a justice to succeed the late antonin scalia in an election year is a job for the next president. photo clinton and donald trump are locked in a tight race in new hampshire. the democratic front runner leads trump by two points according to a new survey. a pollster attributes the close race to the high negatives among both canada. each has an unfavorable rating of 58%. from senator bernie sanders leads that will trump by double --its -- leads double digits
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bernie sanders leads donald trump by donald -- by double digits. -- as a tool against possible unrest. earlier today, members of the lower house quickly and overwhelmingly endorsed the legislation in the first of three required readings. the number of climate records broken in the last few years is stunning, but a new measure of misery. but only did we experience the hottest april in 137 years, but it was the 12th consecutive month to set a record. 15 of the hottest 16 years ever measured have come in the 21st century. global news 24 hours a day. >> in less than one hour, the federal release minutes or minutes april meeting and ahead of that release, the dollar is -- at least to rate
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increases, this year may be warranted. -- two rate increases this year may be warranted. >> i don't know how many rate increases we will have. currently, my assumption is two, possibly three. it depends on how the economy evolves. >> i think two to three is reasonable, given how the job growth we are seeing, inflation data. >> joint is just joining us from ofmford, connecticut is one bloomberg's top-rated forecasters on the u.s. economy. what would a market that needs to reprice for a june or july rate hike look like? >> we made some strides in that direction, although there were
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is still only about one in five that the event will take action in june. i have to say, while we are looking to the minutes this afternoon, in the end, i think the market wants to hear from the chair herself and when you talk about lockhart and williams, we have 80 -- we had a slate of fomc participants seeming to support two rate hikes which presumably would be this summer, and at the end of the year, but we have to hear from the fed chair herself, because in the past, she has come out and sort of set the scale the other way in terms of we think the fed moving in one direction and then if the fed chair is not on board and she is not believing that two rate hikes are warranted, then no matter what the other members say, it will not matter. >> if june or july are really options, will janet yellen have to make that clear on may 27 or june 6? 6 event, i think is
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the one that everyone is sort of looking most closely at. i do think that this fed will want to have the market fully prepped for a move in june if they are going to take action. with the vote in the u k, the following week, i don't think this fed likes the surprise -- likes to surprise the market negatively. they have done a good job of telegraphing intentions ahead of rate hikes. given the nervousness -- nervousness surrounding the u.k. vote, just more of a reason not to surprise the market with negative news. i do think if there is serious consideration or if they are leaning toward a rate hike as early as june, i would think she would want to signal that at one of these upcoming events. >> here is the problem, if the fed does not go in june, the
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likelihood they will hike at back-to-back meetings seems unlikely. if they do not hike in june, will they have to downgrade their forecast to one hike, this year? >> if they don't move in june, for whatever reason, i think we will be inclined to keep two dots in for a moment, leaving the door open and signaling that july is indeed still on the table. they made the point every meeting, whether it's a press conference, and i think in some ways, taking action in one of those meetings might drive that point home and leaving two dots in june would signal to the market that it is a possibility, so i think that if they don't move in june, taking out a dot and signaling only one rate hike is appropriate. i feel like that is too much of a shift from what we have been hearing for most -- from most fomc members.
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if they don't end up moving the summer and move in september, there, you talk about back to back quarterly moves, going in september and again in december. in september, i could see moving if they have not, hiking in september followed by a recognition that it could be it for the year. >> we talk about how there is a divide between the doves and the hawks. is it being replaced by a divided over those who focus on domestic gross by those who focus on a lack of global growth? soundedthe doves have andas founded more hawkish we think of him as one of the more dovish fomc members, so there does appear to be less of a divide in that direction. it sort of seems to break down more along the lines of those who take greater account of the in theirckdrop
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determination of what appropriate u.s. monetary policy is. governor who has a lot of international experience at the treasury, working at an international focus capacity, even herself interacting with other g7 finance ministers and having to attentive to global concerns. talking about how global developments play, overall. that may be a better way to sort of -- how it breaks down between those who think rate hikes are appropriate. >> thank you very much. chief u.s. economist at our bm. you live up, we take to google's annual developers conference were we are hoping to learn more about the company's plan to map the great indoors. >> a bloomberg excuses --
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exclusive. hedge funds have been under fire for their ormond and these. we take a look at why hedge funds have a tendency to crowd into the same stocks. ♪
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>> you're watching bloomberg markets. time for the bloomberg business flash, a but the biggest stories in business, right now. manufacturing service providers in the u.s. are less optimistic this year than the end of 2015.
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week overseas growth remains a drag on manufacturing, although the industry has shown signs of stabilization. begun adin has investigation into whether a breach of users in 2012 was bigger than thought. linkedin reset the passwords of everyone it believed was part of the breach, about 6.5 million users. >> regulators have find raymond james for widespread failures against money laundering. the financial industry says the firm failed over several years to detect suspicious activity by investment accounts and report it to government authorities. it was fined in 2012 the same problem. that is your bloomberg business flash. >> let's head over to the markets desk were julie hyman has a check on his book, the four-year anniversary of the
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ipo. julie: it started trading those latter days, so if you look at facebook today, it is up about a half of 1% but since the ipo, it has risen about 200%. at the time, the outlook was not clear. remember the trouble that plagued the ipo at the time and we saw a dip in the shares, so if you look at them since the lows, they have rallied something like 500% from those levels, but over the pastoral years, we have seen more of a straight trajectory of words. a lot of that has to do with the fact that they spoke a good out how to monetize, that was the holy grail for many of the early social networks. take a look at the terminal, this looks at advertising revenue for the company, their main source and its mobile advertising as a percentage of that, which has also been climbing and was especially evident in its most recent quarter.
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seeing that increasing mobile ad revenue, even though the margins are little lower on mobile apps -- mobile ads. i was prompted to look at how these so-called fang stocks have done since facebook's ipo. i was surprised that netflix is far and away the best performer over that time, even accounting for that game we have seen in those facebook shares and the others have not been too shabby, either. netflix has left them in the dust. >> thank you. speaking of netflix, here is what's happening on the west coast. googles ceo is holding court at his company's annual developer conference, exploring the next generation of tech, global and beyond. more, cory johnson joins
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us from the conference in mountain view, kelly -- california. cory: the ceo is on the stage, right now, -- let me paint the scene. there are buses full of programmers, thousands of people gathered here. programmers to write on android, chrome, google and work -- thinking about where technology is going to take them. it is a really interesting and big crowd, but the focus right now is on the ceo. he is talking about what is next for google and just announced consumer product that sounds a lot like what amazon has with their echo product, a personal assistant networks through voice commands and does artificial intelligence work. the amazon product has really captured the imagination of programs.
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it is a machine learning in a sort of optional form. have you guys seen this? >> no. cory: it is really cool, a speaker like device. you ask in what the weather is, tell me a joke, add milk to my shopping list and it really captured the imagined -- imagination of programmers and google capturing the same idea. last year, we -- when you think about ai as the future of computing the same way that mobile was the future at one point. it will be curious to see what developments they announce and what development they try to inspire developers to chase after. >> cory johnson reporting live from mountain view, california. >> much more coming up, we have a bloomberg was it, the
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cochairman of bain capital and a co-owner of the boston celtics talks with us about presidential politics and why he is not worried who wins the white house. ♪
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>> this is bloomberg markets. u.s. is still seen as a safe haven despite the current political atmosphere according to paint capital cochair -- who
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is also co-owner of the boston celtics. he explains why he is not worried about the president election outcome. steve: it has been more extreme than any other election we have had and might've even started out in the democratic race of obama and romney, where there was a lot of partnership and class wealth -- warfare. being effect keeps -- as long as it keeps being effective, people are seeing more and more of that. we have people that are angry and the american system will triumph over this anger and hopefully turn the anger into positive progress, no matter who gets into the white house. our system has always been proven to be bigger than the people in the jobs. i'm not nervous, no matter what the outcome is, that america is in dire straits because i think america will do the right thing and the system will transcend
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the candidate. there are a lot of checks and balances, but it is interesting that you spend a lot of time and the first question you get asked is what is happening over there. >> really? steve: they want to know what is happening, politically. >> these are your existing investors. steve: people that run companies, it is definitely a hot topic. >> do you perceive that is affecting their decision-making about what to do in or about the united states? are they not prepared to commit capital? steve: absolutely not. the united states is seen as a very safe haven for money. a strong currency, rule of law, best in the world, fundamental growth. back, and you look over the history of time, we are not in a major war, right now.
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there was a lot going on, politically outside this country , but the country itself is not in a major war. gasad a huge oil and dividend. we have 5% unemployment, and i think we are struggling with that sense of trying to get ahead, that income gap and to me, that comes back to something that the politicians are talking about, they should be talking about education and reforming education and investing in education in a big way. it is the only industry that has not changed in the last 100 years. to my classroom up, it is the same classroom and they are basically teaching the same way. we need to pay our teachers more
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and put more money in the system. that is the solution to income inequality. it is not building a wall or any of those kinds of ends, it is education that kinds of things, it is education -- kinds of things, it is education. we have to embrace knowledge. >> that was bain capital cochairman steve pagliuca. -- they said they would prefer hillary clinton to the president, but barely. they said the best of three evils looking at her, sanders and trump. hopefully the free trade world would still rain and be able to do business. he is saying they are not holding back investment decisions, but it is on the forefront of ceo's minds. >> people on global wall street seem to believe that trump was not going to be elected and as
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we have seen, primary after primary, the people are saying that it is completely different. it is interesting how there is such a big divide between the investing class and everybody else. >> still ahead, we are talking hedge funds as a professor says tough times for the asset class, especially as hedge funds crowd into the same name. ♪
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show me top new artist. ah, ha ha. show me top male artist. my whole belieber fan group. it's not a competition, but if it was i won. xfinity x1 lets you access the greatest library of
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billboard music awards moments, simply by using your voice. the billboard music awards, live sunday may 22nd, 8/5 pacific, only on abc. alix: i'm alix steel. scarlet: and i am scarlet fu.
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mark: now it is on to california. was a split decision last night for burn is and hillary clinton. the results however do not change the dynamics of the race and sanders is running out of chances to stop us is clinton. the next big tests are june 7 with primaries in california, new jersey and four other states. aboutans are more upbeat their own finances than they are about the nation's economy. just 42% of adults described the u.s. economy is good, based on they -- a new poll by associated press. but two thirds say their own households are faring well. many people worry about risks beyond their control, from a volatile stock market to another economic downturn. one of the girls kidnapped from -- by boko haram has been found.
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the girl is traumatized. she is the first of the nearly 300 girls freed since they mass abduction grabbed attention. chances of an outbreak across europe of the zika are "low to moderate." thee is a high likelihood mosquito-borne virus crude spread in only three european regions, madera island and the atlantic and the laxity coastal areas of georgia and russia -- and the black sea coastal areas of georgia and russia. scarlet: new developments unfolding today about the rise and fall of a former goldman sachs banker tim lester. u.s. prosecutors are examining a knowledge at six-figure transfer from him to a former amp or a to a malaysian investment fund.
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- >> this is an exciting saga to the imb d issue. in order to fund that fund, goldman sachs at the time, headed by tim leister in southeast asia, helped raise $6 million or more of bonds that funded it. much of that money at this point has disappeared. justice,partment of authorities in singapore and authorities in switzerland are investigating exactly what happened to that money and if there was embezzlement involved the department of justice is looking at goldman's role in this, in particular its role in the bond sale that raised the that at this point appears to have disappeared.
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it is basically a broad investigation into what goldman's role is. a part of that, what we have been able to report is that there was a payment or transfer of funds made between a former one mbd employee. this was after the bonds had been sold by goldman, made to leistner. we have indications of a payment, but it doesn't mean that anything was wrong. but it is an interesting twist and a very interesting investigation. scarlet: it's not just the doj. you have authorities in singapore, luxembourg looking into this fund. >> it does appear that billions of dollars disappeared basically without permissions of the government. and no one knows where that is good that is why we have all of -- where that is. that is why we have all of these governments trying to figure out where it went. scarlet: the advisory of this
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board was the prime minister of malaysian government. >> right. odd basee all sorts of where this leads back to the market but we cannot see what is going on. we have the investigation looking into the disappearing of thefunds to now we have investigation looking at the goldman's role. if there is any evidence or indication that goldman was involved in any wrongdoing. alix: the saga continues. scarlet: thank you so much. the core of criticism -- the course of for this is him against hedge fund is getting louder. scarlet: the hedge fund industry saw a negative net asset flows
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of $15 billion in the first quarter. that is the worst quarter since 2009. i feel like a lot of the blame gets and on the fact that these hedge funds tend to move back into the same games time and time again. allergan -- all, apple, allergan. >> if you look at a stock that was a, immensely popular last year called clovis oncology, 34 different hedge funds own 44% of this oncology stock. fundyou talk to hedge managers, they say they have an edge in this space. can they do. 34 people knew more about small
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cell lung cancer than the average guy. in fact, the stock went from 115 and match rated at 17 and they got actually -- absolute crushed. but how do 34 different hedge fund managers get into it? leisure -- gaming and leisure is a typical rate in the -- typical reit. they have all added it. you've got a guy with three people on the team. i really don't have time to do a whole lot of research, but i bet you download a lot of it. so i'll join the team. that is what happens as this me, too trading occurs. and then it is a very narrow exit to the doors.
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a hedge fund manager does his due diligence and does his homework and then looks at the holders of the stock. he is worried that if hedge funds have to exit, there's nobody left to sell. is that what we have seen? fabio: in some of these trays, yes. if you look at the goldman hit list, you will find the largest holdings in hedge funds have tended to outperform the market. at the same time, what you're doing is deselecting the investment decisions of a dan loeb, have a dan cooperman -- a leon cooperman. it is a difficult balance. you want to look at percentage of daily trading volume and how much of it. when you've got 42% held by 34 hedge fund managers on an uncle of you stock that in their heart oncology -- on an stock that in their heart of hearts i know nothing about.
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scarlet: i wonder how much of this is due to the fact that a lot of these tech funds have gotten too big and now they are being pushed into a lot of the same names. fabio: you are also getting of the -- with a lot platforms, you're getting younger and younger managers, -- with less lexis experience who also tend to group at a higher level. when you look at the managers who do it because they believe in it, i don't think you have seen bill ackman do a me too tra de. lead dog.proverbial i love apple. month, he doesn't care. he doesn't care what the press thinks or what the world thinks. he does what he does. alix: the problem is you look at something like the pershing square, staunch defenders of valiant. but there were other hedge funds
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in there as well. when the other hedge funds get redemption requests, they have to sell valiant. this 360 of pain. : that is exactly the thing. when you are leveraged at 20% decline in a stock in your $100 million fund, you have to hit the emergency escape button, even if you believe in the stock. and ideally, you want to do it before the next guy. scarlet: we look at the fees that these guys charge.
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the leveraged finance conference, there is a lot of concern that the fee model is broken. side of it, it is slowly trickling downwards. the 20% -- i'm going to say two things. you might get in little bit of shading on that, but people are trading on the performance bar and investors are more willing to concede on the fixed rate than on the performance part. the challenge is, when you look at even-driven managers, emma when you go back over the last 100 months, when the asset -- , howthe s&p has been down much of this 20% of the upside is beta? one of the things that was raised at aqr, of the 20 eight
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28 quarters since the 2009 trough, we have only have five down quarters. so if you are hedged and the market is rising, it is a very difficult environment. the long-short guys have had a tough time. the macro guys have had a tough time dealing with zero rates. we've seen oil do unbelievable opportunities. you throw a dart at the bloomberg screen, you will make money on fx if you bet on the dollar. the opportunities have been there. with some of the macro funds, too large and just trading with each other. alix: great to see you. good perspective. scarlet: we've got much more coming up on bloomberg markets. keep it right here.
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this is bloomberg markets. to the markets desk where julie hyman has been checking out some individual movers. julie: let's start with walmart, which has been falling because of the target numbers we got today. walmart shares are down about 2.2%. one of the things i have been looking at is the forecast for same-store sales. the forecast by analysts [indiscernible]
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alix: thanks some julie. we were just talking about market and its affect on retailers. scarlet is digging in as well to walmart. scarlet: we are going to talk about walmart a little bit later. but first, let's get to target. target is one of the biggest losers in the s&p 500 today. let's dig into the discount retailer. faces the same problem confronting all retailers, which is getting people into the stores. no matter if it is high-end or not, retail is seeing a consistent decline in foot traffic. u.s. consumers are increasingly embracing the convenience of shopping from home. you contrast that with a 17%
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increase in physical store receipts and it is just bumping along the bottom in comparison. targets response has been to focus on categories. since the ceo brian cornell took on the top job, same-store sales have returned to positive gains. still, comps sales in the first quarter only gained 1.2% and missed analyst estimates of 1.6%. e-commerce is growing at a double-digit rate. target online sales were at a high point, jumping 34%. but this past quarter, the 23%.lly slowed to however, these online sales do committee cost. target had to offer some steep discounts and there was a clear effect on profitability. gross margins did bounce back in the last quarter, but still missed analyst estimates. on the other hand, target is oversaturation. it currently has 1800 stores, choosing to keep the store count fairly stable. target stocks down 7% today.
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investors currently punishing it. alix: targets rig miss as to the case that u.s. store sales are experiencing a slump. there is a certain difference from the good retail sales number that we got at the end of last week. it sets up who the real losers are in retail. >> after that number, i think expectations were a little better for target. maybe this was a macy's problem. maybe this wasn't a broad-based problem. but target is a pretty good well but other -- early good bellwether for the u.s. middle-class consumer. now we are asking ourselves where is the consumers spending their money? that brings us to lowes. that looks pretty good. home depot looks good. also cars. autos.a record april for
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travel this summer is supposed to be a record-breaking travel year for the airline industry. people tend to continue spending on their homes and bigger ticket items and expenses like travel. tomorrow, we will see if that really holds for walmart. target is a bit of a bellwether, but nothing is a bigger bellwether than walmart. scarlet: did he refer to the struggles that the retailers have pointed to? he definitely admitted what all the other retailers are saying -- the consumer is a challenging environment right now. there is a big slowdown, particularly in april. they saw this slowdown in the consumer. target says there are other things going on, not just all the u.s. consumers saying i'm not going to spend. excuse, buteather maybe it is fair this case. they saw people coming in for fewer fill in church during the
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week. maybe they just need to position themselves better for folks coming in for smaller, quick trips. so could be some weather thanks answer -- and some specific target things. alix: were there any bright spots to target? shannon: there would say online. the ceo was really pleased with 23% growth on their online sales . some analysts are saying that that is a deceleration from where it was. maybe it is getting to a bit of a law of large numbers. he would say that was a real positive and the key areas that target has focused on, clothing, home goods, style, beauty, those areas to good. their apparel business did good in a climate that everyone has been saying no one wants to buy clothes anymore. he says that is a sign at the strategy is working. they still got work to do, but
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the strategy focused on these key areas is working. scarlet: let's talk about walmart. it will be reporting tomorrow. we also have costco which hasn't posted results either. are we to expect that the same trend will continue with these guys? they are kind of in their own separate category. giant. is such a it goes much further than grocery store for so many. half of walmart's annual sales comes from groceries. so a big chunk of their is this will be grocery and, did people stopped eating this quarter? i don't know. or they are buying from amazon, amazon fresh. exactly. so there is food deflation going on, too. so there is a whole separate set of issues going on with the grocery business. but the other half is general merchandise and nonperishable items. i think people are watching the very closely. 140 million people go into walmart every week.
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that will be a good indicator. sclet: wait, how many? shannon: 140 million people everywhere -- every week into a walmart. scarlet: so walmart is so raising itwages as well. shannon: another pressure. so the consumer is not spending, yet the wages are going up. we know all these things. we knew about the higher wages. we knew the margin pressure. they have been saying that for a while. this surprising to me why turn has been so drastic in the market for these retailers. shannon: i saw analysts lowering their estimates for same-store sales. i think that is why we are seeing this hammering of target stock. expectations were already low, given everything that we have been saying in the retail
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climate. then investors thought, oh, boy. they also said the second quarter isn't looking good. they've already got a bit of a window into may. it's flat or down 2%. thinkey are saying they that is not going to look good either. scarlet: kind of like the re-rating of the media sector last month, alix. alix: shannon, thanks very much. scarlet: we are just minutes away from the release of the minutes of the fed april meeting. you've got a chart. take a look at the market probability of a rate hike in june. it is now 14%. it was 4% just a few days ago. but it looks like we are reaching that 50% chance of rate hike in september. the market has re-rated fairly
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quickly to price in a little more rate hike than we would thought. scarlet: and that is thanks to a lot of data in the last couple of things that indicated that things may not be as bad as some investors may have anticipated. alix: minutes away from the fed fomc. ♪
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david: this is breaking news. just moments away from the release of the federal open market committee meeting minutes. julie hyman is at the markets desk. there seems to be a mixed perception about what these myths are going to say. reits market, the it seems to imply that there is an expectation for higher rates. but we are seeing some buying in stocks. so that coincidence hasn't really been consistent throughout the year thus far.
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if you look at the s&p 500, you will see that trajectory throughout the day. we are just off the highs just a smidge as we get closer and closer to those comments coming out. take a look at the bloomberg here. financials, which have been rising, they are -- their correspondence with rates rising has been pretty tight so far this year. we can see consumer staples. you just heard about targets earnings. consumer staples on the downside today. the u.s. dollar has been rising versus a basket of securities, although it is coming down off its highs as we go to the minutes. again, it has seen some strength today on the expectation we will get some insight that would perhaps indicate the fed is more ready to move. here is the 10-year note. it is also moving in that direction. let's look at the two-year as well. we have seen a flattening of the yield curve as those
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expectations have risen. 0.85%. well.y, gold prices as we have seen them under pressure today as the dollar has been going up. david: getting hard to call the yield curve. furthermore, let's bring in michael hansen. it is great to have you with us. i want to get your sense about what we might learn from these minutes today. michael: i think the key is to look how the fed is assessing the, both globally and inflation outlook. about junembers talk versus july versus later? it is probably less useful now, three weeks later we have had commentary from other fed officials already. david: you are talking about later yourself, rtu? you're not thinking this will -- aren't you? you're not thinking this will happen in june.
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good,l: the data is very concerns around the u.k. referendum will have to fade. david: do you expect there to be a tonal difference in the minutes we get today and the statement we got immediately after the meeting in april? michael: there is a risk that there will be a significant minority of members who are much more willing to get going with the rate hiking cycle. there is a bit of a split in the committee. that has been reflected in some of the speeches we have seen the last few weeks. the minutes could highlight that. do you see a growing divide among members of that committee? we see folks more focused on the domestic situation than the global one? michael: that is one area of division. there are a handful of members that are concerned about the global outlook still. since the march and april meetings, generally speaking, the global outlook has improved modestly. therefore, the minutes will
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probably highlight that is one of the areas -- i know there are start divisions. remember, the committee has a majority of people who want to rate hikes. but the market has been well price for one. david: the economic data we have gotten since the last meeting, indicates? we won't see that reflected in the minutes today, but the fed may process that when amy in june. michael: yes, the labor market has been ok, but not as good as some people were hoping. gdp for the second quarter's tracking stronger than the first quarter. it is probably enough to make the fed comfortable with a hike somewhere in the next few meetings. right before the blackout period, one of the last opportunities for a fed official to speak. i would be surprised if janet yellen is looking at june. she might give a signal that july is in play. david: stay with us.
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we are seconds away from the release of the fomc minutes from its meeting on april 27. again, a meeting after which the fed decided not to raise rates. let's go to michael mckee and washington, d.c. he has had a look at the minutes. the keyword here is june. rateitely tilting toward a move in june. officials are worried that the market is not ready for that. closely. this most part testament judge that, if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and inflation making progress toward the committee's 2% objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in june. that sounds a lot like the language they used in october, all the promising a


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