tv Bloomberg Markets Bloomberg May 20, 2016 12:00pm-2:01pm EDT
scarlet: from bloomberg world headquarters in new york, good friday afternoon. here's what we are watching this hour. recoveryocks staging a today after they got rocked on speculation that the fed is moving closer to raising interest rates. underwater again. first your house, now your car. why negative equity is putting the brakes on automakers profits. what is the mistry behind the bid for yahoo!? a new report says offers for the company's core internet business may not be as high as it had hoped. we are halfway through the u.s. trading day on this friday. let's head over to the market desk where julie hyman is tracking the recovery in stocks, not just s&p 500 but globally. julie: fed officials must be feeling pretty good. they signal that there is potentially higher rates. june is a live meeting. for the weekallied
if not in the immediate wake of the fed minutes coming out. the nasdaq and the dow all higher. the nasdaq is the winner of the day on strong technology numbers from applied materials and a general lift and technology. if you look at the week now for the s&p 500, it is posting a gain of nearly half of 1% even though there was that rocking this in the wake of those fed minutes coming out. week,still again for the snapping a three-week losing streak for that index. in today's session, tech is the best performing sector here. information technology up nearly 1.5%. financials also doing well as well as health care. consumer staples not faring quite as well. , watchingage terms some of the best performance on the s&p 500 today, i mentioned makerd materials, the of chipmaking equipment, with a forecast ahead of estimates as orders search.
endo health solutions -- apparently the federal trade commission is granting some kind of antitrust approval for an action, but it's not clear exactly what it's for. buy a pharmaceutical from tpg, but that happened last year. brands fell slightly yesterday after naming a new head of the torilla secret with -- with ao of spanks new head of victoria's secret with the ceo of spanks leading that. all three of these companies reporting earnings that missed analyst estimates. scarlet: there was a lot of movement and a notable week for treasuries. julie: the market did get the message here that the fed is going to potentially be more
aggressive than the market have been pricing in. we are seeing the best year for the 10 year yield increase since june. this long-awaited move in the bond market, even should point out that we were about where we were a month ago. scarlet: julie hyman, thanks so much. we will check in later on for the mistry stock of the day. let's go now to mark crumpton in our newsroom. mark: searches believe they have found the first traces of that missing egyptian jetliner. egyptian aviation officials say that wreckage from the plane and passenger belongs have been recovered. egyptian military aircraft and ships discovering the debris in the mediterranean sea about 180 miles off the coast of alexandria. theegypt a320 was over mediterranean for a flight from paris to cairo when it vanished of radar screens. 66 people were on board. each of it is not ruling out
anything, but officials say it was more likely a terrorist attack the mechanical failure. donald trump says that you care prime minister david cameron's office invited him to visit the country. the invitation came after donald trump said the two were unlikely to enjoy a very good relationship. cameron and trump have clashed over the proposed ban on muslims entering the united states, which mr. cameron said was "divisive, stupid, and wrong." michigan governor rick snyder is setting up a new board that will work to illuminate children's exposure to lead across the state. it comes in the wake of the lead tainted water crisis in flint. they created the child lead poisoning illumination board. residents are still using bottled water and filters as the public health emergency continues. intrusion labels on food packages are getting a long-awaited makeover. calories will be listed in bigger, bolder type, and in will be added for sugars. serving sizes will be updated to
make them more realistic, so is small bag of chips does not count as multiple servings. is the first major update since the labels were created in 1994. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world, i mark richt am mark crumpton. scarlet: to the federal reserve sounded deathknell for the rally in emerging markets? they are down for a fifth straight week. fed policymakers insist that an interest rate increase in july is still possible. higher u.s. rates means a stronger dollar, bringing potential paint emerging-market assets. i want to welcome gerardo rodriguez. would you say that e.m.'s are at the mercy of the u.s. dollar? >> they are affected by financial
conditions, but there's been a lot of talk on the fed changing the narrative. i would say that the dollar was strengthening even before that. e.m. has had a pretty good run after a difficult initial part of the year, but it seems in late january, em equities had a nice 22% rally. at this point, i think the markets are taking a pause and reassessing the reality in terms of global financial conditions and reassessing the oil prices and commodity prices. run,as had a really nice but at this point, getting it close to $50 per barrel, the supply response has started to kick in and one needs to be cautious going forward. scarlet: oil does go back to the dollar. what is different about this decline since april when emerging-market stocks were down for a fifth straight week versus the downturn that we saw on the fourth quarter? again, all assets in
emerging markets, not only equities but also high currency fixed income, locale rates, and fx, did perform very well in the initial part of the year. high currency bonds were up 8% at some point in april. locale rates were up 13%. what we are seeing is the market undoing some of that rally and reassessing the prospects of the fed oil prices in general and economic activity. where in the e.m. world do you see some untapped value? is in sovereign debt or elsewhere? gerardo: clearly when you look at the different asset classes, , iereign debt in general would say spreads against developed markets are relatively attractive values. ofh currency bonds
high-yield credit names. when you look at the bond markets, there are some markets like mexico, even like columbia and south africa, that they have sold off recently, but the steep this of the curve also offers an attractive value proposition on a currency hedge basis. scarlet: i want to bring it back to equities and look at china for a moment here. bejune 14, msci will announcing a timeline for the inclusion of chinese a shares. we care because there's a lot of money tied to this. what do you see is the likelihood of msci including shanghai or shenzhen stocks next month? gerardo: i think the inclusion of china is going to happen. sooner oreaking, later. china is underrepresented. it is about 40% of the emerging markets gdp and just over 20% on
an equity market cap perspective. establishing the connectivity of financial markets as they move ahead on opening their capital accounts. what we are going to see is a broader integration of chinese equity markets to the rest of the world. the same thing is going to happen eventually with fixed income markets where china is actually not represented in the major indices. talket: i also want to about argentina for a bit because that country's main etf has seen esther the stream of steady stream of inflows and that it will be reclassified to a frontier market. when do you see that happening? what conditions need to be met before that happens? gerardo: argentina has been shut out of capital markets for very long time, but before the 1990's,of 2001, back in argentina was one of the prominent emerging market economies.
what we are seeing right now is the new government is reestablishing a normal economic policy and reestablishing the connectivity of its economy with the rest of the financial world. that consideration of index providers is going to happen eventually. it may still be too early to tell, but now with argentina basically able to issue debt in the international capital markets and local companies being able to tap both equities and fixed income markets, clearly argentina is back on the table as one of the main an interesting emerging-market countries to consider. scarlet: there was argentina's first ipo and about two years yesterday, so a lot of excitement focused on that. do you have a forecast for how many more ipos we might expect argentina this year? gerardo: there is a big gap in terms of economic reality in
argentina and its representation in international capital markets. the business of equity markets in argentina is actually not that important, but the entrepreneurship and the quality of argentine companies is very good. we can expect for this conductivity of the local entrepreneurship base, especially on the energy sector, businessricultural sector, to take advantage of these opportunities as the country again comes back to the international arena. scarlet: thank you so much for your time, gerardo rodriguez, blackrock portfolio manager. coming up, yahoo! may not have a lot to yodel about. shares of the company are falling afte bids are coming in lower-than-expected. we have an update for you next. ♪
scarlet: u're watching "bloomberg markets." i am scarlet fu. it is time for the bloomberg business flash, a look at the biggest is the stories right now. jefferies group has eliminated 17 positions on its equities trading desk this week. the move came after first-quarter revenues plunged. martin smith was among those cut. jefferies first quarter revenue plummeted 99% from a your earlier to about $1.8 million. allowr says it will not the repricing of stock options without shareholder consent. this was introduced by ceo jack dorsey last fall. it's part of an effort to retain
talent as the twitter stock prices tumble. his core business may not bring as much on the auction block his priestly expected. verizon and other bidders are expected to make offers in the range of $2 billion-$3 billion. last month, some said it could bring $8 billion. here they are speaking to tom keene about the discrepancy. >> i cannot comment on the specifics on the pricing environment around yahoo!. we have a role in the process. i do think the totality of the process -- and other words, it's not any specific thing that's going to be a catalyst for a drop of 50% as in the press today versus buyers and sellers expectations. i do not think that you contend that down to an accounting issue. scarlet: the next round of bids are due the first week of june. that is the bloomberg business flash. let's stay with yahoo! here and take a look at where the stock is trading.
it has defied the gains in the broader market. let's bring in abigail doolittle, live at the nasdaq. abigail: shares of yahoo! trading down when 1% come off the lows, but even so, the second-biggest drag on the nasdaq today. while this report from "the wall street journal" may be surprising to some, weeks ago, an internet analyst told me that he thought the sticking price around the yahoo! deal would be priced and that the rumored prices were way too high. his logic was based off of what verizon paid for aol. work -- healuation had a hard time even getting to $5 billion pe. this will be a continuing story to watch. scarlet: pretty wide range of there. one chart that we looked in the past has been pretty bullish. what has it shown enough? this chart is still
bullish after it sliced below average today. that suggest near-term weakness and choppiness at yahoo!, but the chart that we have been looking at is a longer-term chart and shows a bullish golden cross. that's when it moves up to the 200 day moving average, showing us the serious buyers are very much interested and are gathering positions, buying the stocks. the last two have been very bullish. the stock doubled after the golden cross back in 2012. despite the possibility of some near-term choppiness for the shares of yahoo!, we could see some nice upside ahead in 2016. scarlet: think you so much, abigail doolittle, with the golden cross on yahoo!. still ahead, the bank of japan shows no signs of letting up on asset purchases. the central bank now owns a huge chunk of the country's etf market. can exit those positions as quickly as it entered them? it is etf friday next. ♪
scarlet: this is "bloomberg markets." i'm scarlet fu. if you build them, will they come? if you're talking about japan and exchange traded funds, the event answer appears to be us. yes. they now own 59% of the market. joining us now is eric balchunas. we need to back up a little bit here and get some context and perspective here. let's explain what's going on with this etf buying. it is the latest stage in the bank of japan's quantitative easing. eric: their buying $30 billion u.s. per year. the total market is $140 billion and they on roughly $80 billion of that. it is highly unusual in a sense. what they're doing differently lately is that they want to customize the etf's are investing in, which makes some sense. instead of taking the popular
index, they want the company to come back with something that would invest with companies that are doing, putting money in to hiring people and r&d. remember -- in the u.s., a lot of qb money went to companies doing by backs and dividends. here they are trying to alleviate that issue and funnel money into companies that are actually spending money on the economy. in a way, it's kind of clever. what you have to get over is that number on the screen. 59% of the market is pretty wild by any standard. scarlet: this rings up a lot of questions about the distorted effects of the bank of japan in the market and what kind of difficulties they may have from exiting those positions eventually. eric: i would say, what about the fed? this is way less of a situation than the fed. the fed bought $3.5 trillion with of treasuries during qe. they have not sold them.
if they were to start selling treasuries, that would cause the equity market collapse essentially. a lot of the market and etf's are fed driven over the past seven years because of all the bond buying that they did. japan is getting the bonds and going right to the equity market. i do not know if it is that we are. the weird part is that we are not used to central banks owning the etf market directly. you could argue that a lot of the etf assets and equity stock markets right now are partially because of the fed and it's three chilean dollars -- and it's $3 trillion. scarlet: tie that into the bank of japan and their holdings of etf. eric: the reason that it's not that unusual is that we see in the u.s., we call these smoked etf's. company has abig vision and it will do whatever they say because they will get a lot of money. we have seen the smoke etf's from the united nations. you see in arizona pension have
a smoke etf that ishares also made. we have seen advisers have done it. this is all the anchor japan is doing. -- the bank of japan is doing. we have this vision, can you make it for us? that is the etf that they chose for this a next round of qb. e. scarlet: let's talk about the fed here. the minutes from this week rocked everyone's world. you have seen some early data that shows investors are pretty scared. they are fleeing certain assets. ishares rthe world plus zero, everyone else is two plus one. i can tell you that the fed is scared. that is the most outflows from an etf on history, so clearly
that is a lot of money. i confirmed with ishares that it was not just one big investor. you seen money come out of ltd and iwn. connected to a risk on play. it is early, but those numbers again, member this is the 25th time that this is happened where the fed talks and investors scurry some out of the longer data and then something happens like in a comic statistic is not good, and then they go back in. here we are again. you seen this movie 25 times now. scarlet: it is all based on rhetoric and not based on action. eric: is all based on words. right now, it does appear that there are some investors hot money taking the fed at their word. scarlet: it is good to know that it is t plus zero. do we see the same thing for jfk?
that outflow was for two straight weeks. eric: hyg has been seeing outflows for quite a while. i will not go into the weeds there, but basically jfk will know more tomorrow. it is better to look at weekly. for daily flows, ishares is the way to go if you want to see what is happening day-to-day. scarlet: eric balchunas, think it's a much. -- thank you so much. first it was your mortgage underwater, and outer carlin. now it's your car loan. we will discuss the state of equity next. ♪
this is bloomberg markets. but begin with the headlines from the first word news. mark c.: thank you. egyptair officials say more wreckage of the plane has been found, including body parts, luggage, and passengers' seats. the flight was in route from paris to cairo when it vanished from radar yesterday. 66 people were on board. the first questioning section for the leading suspect in the paris terror attack did not last long. they hope the he will give information about islamic state strategy in europe. today, he think to say. he was arrested in belgium after four months on the run and then extradited to france. jury selection set to begin today in the higher trial of a former suburban police officer. drew peterson is accused of killing -- accused of threatening to kill the
prosecutor who put him behind bars. he was convicted in 2012 of first-degree murder. of pre-olympic training camp is being moved out of puerto rico for threats of the zika virus. it will now be moved to atlanta. they say that there is no plan bail on the olympic games and brazil, even though that country has empty center of the virus outbreak erie president obama says the virus is not as dangerous as ebola. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. scarlet? scarlet: thank you so much, mark. remember the cost caused by underwater mortgages. rearing itsnomenon head in a new area, the car market.
here to explain the ramifications is chris bryant. he joins us from frankfurt. negative equity is when the value of your loan is worth war than what the current value of your asset is worth. tell us why you are worried about the car market in particular. it is surprising, isn't that? on the face of it, the car market is doing really well. record sales, transaction prices going up. financing is allowing people to drive around in cars that they probably could not afford in the past. the problem is arising because they were not many used car sales after the financial crisis. used car sales are increasing. thenumber of cars hitting car market hits people on pricing. scarlet: part of this is because lenders are extending the duration of carloads. explain how that has evolved. >> that is interesting as well.
the link of loans have been increasing. some are taking them out over as much as seven or eight years on the cars. that means that payments are low, that is nice, they can afford the car. after they go -- after a few years and the go into the dealership, they have no equity. in fact, they will have negative equity. the dealer will say, you have two -- your payments have to go up, or you could not afford as nice of a car as you are driving now. the u.s. market is increasingly dependent on leasing. that risk is on the side of the carmaker. when you go into the dealership after three years, and want to get a new car, and the dealer looks at your car, and sees the residual value will be low in the future, that means that the monthly payments have to increase or the deal or has to give you and symptoms. either way, it looks like they will suffer in the future. scarlet: when it comes to the
leases and the payments could go , you say the consumer does not suffer as much as the car dealer themselves. what automakers are on the hook more than others? >> essentially a whole u.s. car makers ared foreign wonderful. in particular, car dealers have these captive finance operations. to have enabled people to drive much more expensive cars. and mercedes-benz have been through cheapars financing. other risk is in terms of the kinds of cars people are dr driving. it puts pressure on the price of two cars. scarlet: i think it is interesting, the story.
we started by talking about home loans and how they are underwater. in the aftermath of the financial crisis, people were thinking, people might walk away from their homes if they could not keep up with the payments, but they are less like to walk around -- walk away from their cars because they need cars to get to work. dealing with these on cars are now rising and, in some cases, the highest in two decades. how does this change the auto market going forward? you talk about having to use smaller profits going forward. what does it mean for the willingness to extend the incentives? balance. is a tricky it has been increase in subprime lending. people have talked a lot about that. ultimately, the risk is mainly on the side of residual values. in terms of the credit cycle, it has been really great for the industry, but will get increasingly more difficult. even so, it is manageable for
most people in the sense that you do not have to buy a new car. no one is obliged to buy a new car. you can keep hold of that car for as long as possible until interest rates rise. scarlet: thank you so much for joining us. chris bryant joins us from frankfurt. for more on his commentary, you can check it out on the bloomberg. let's turn now to dealmaking. you heard peter k talking about mna earlier. here is the outlook for the rest of 2016. >> there is still very much high level of activity and conversation around a ma m&a. it is consistently the industrial sector, the largest contributor. you do a transaction
and he used to take out 12%, do you assume now that you can take out more? >> know, the cost savings and benefits from combining two companies is totally transaction specific. vonnie: do you anticipate more oil and gas going forward? >> we have seen a couple in the last few days, the technique did a deal.range we are expecting a higher level of stock for stock transaction activity where one company is trading a currency that may be undervalued, but they are trading it for another undervalued currency, therefore the economic still make sense. vonnie: is that because of necessity? >> there is no question that the markets are much tighter today than they were one year ago.
that said, the relative necessity for us for the company tactic very a as a much depends on the sector and even down to where the specific assets of the company lie. ne: we hear a lot of deals in beer making or drinks -- is it the same companies that keep on being consolidated? there are few players left they demand higher premiums. >> for instance, you referenced beer. they are already very consolidated. we are not predicating m&a off of beer consolidation. there are industries like technology, health care, which, by virtue of the need for growth, you will see a lot of activity this year and for years to come. onnie: activity coming from
where? u.s. companies buying u.s.? european? or, the other way around? a the chinese tried to get hold of everything they can? >> we are looking at cross-border activity, something around 35% of global m&a volume, very close to record. we have much more coming up on bloomberg markets. three decades ago, david booth managementmall asset fund. now, he manages billions. his strategy for investors next. ♪
scarlet: you are watching bloomberg. i'm scarlet fu. this is your global business report. we will have the latest on the g-7 meeting taking place in japan. he would hear about a potential agreement on an aid program. we will have the latest on cook's first trip to india. food labelsrhaul on years. first time in 30 the global meeting for think and
ministers is underway in japan. bloomberg television asked how far discussions have come and whether or not a deal can be reached. >> at the end of 2012, we were already in a major debt operation, basically reducing annual debt burdened by 40%. now, we are looking ahead, what more needs to be done. we can take different measures, some at the short-term -- in the short term. we are designing those now. hopefully in the next euro meeting, we will get the deal that i think greece needs and deserves. scarlet: germany wants to assert more control over the auto starteds scandal that there, but not everyone is cooperating.
the minister's italian counterpart has said to leave fiat alone. hsbc will rely more on digital thinking in india to expand its business. they're putting almost half of their branches in india. one analyst says they are the minister's italian charging affluent indians who have the devices for online banking. tim cook enjoying rockstar treatment on his first term to india. he hopes the publicity turns into sales. india is mostly untapped territory for apple. he says he wants to sell refurbisheded -- iphones there. time now for our bloomberg quicktake, where we provide context and background on issues of interest. how to eatout healthy? you are not alone. the guidelines keep changing. why? it is fairly simple, but you will need to watch this. >> simple question, what is action healthy for you to eat. we know this is good for you, but is this? what about this?
this? or this? if you are confused about what healthy to eat, you are not alone. knowing what to eat is complicated. a draft of the recent dietary guidelines say that he is healthy, until -- recommended lower and processed meat because it is linked to cancer. that was until the meat industry got way of it, and it was dropped. concluded that trans fats in butter alternatives were more dangerous, people started avoiding fats altogether, a fat-freeple to eat
diet, leading people to eat more carbs and sugar. still, the connection between fat and disease is far from settled. that is because nutritional science relies on observational study. for example, all that these come from observational study. the problem is it is impossible to know for sure if these connections are real because so many factors can affect the outcome. here is the argument. the 2016 nutritional guidelines won praise for being very specific about being -- about what you should eat, but work criticized of keeping the what a vague list.tion of th people say that food lobbies are to blame. some nutrition experts think the u.s. should keep it simple. lots of fruit
and vessels, and go easy on salt and sugar. scarlet: that is your global business report. for more stories, visit bloomberg.com. coming up, the mistress stock of the day. julie hyman will be here to deliver it. you will have to concentrate on today's pick, which is getting canned after a shortage. ♪
i am scarlet fu. we need to head over to the market desk were julie hyman has the big reveal on the mystery stock. you will have to caught the trait to pick up the days mystery stock which is being canned after a weak sales report. i am scarlet fu. we need to head over to the markettim, the floor director, i are convinced it is campbell soup. julie: you are correct. we're talking about a carrot shortage. a play ony, carrots -- that. sixth straight decline in sales. getting canned. it is doing well today. take a look at how does doing in today's section, pulling back by the most in one single day. do we have the chart of today? it is not working, for some reason. the quarter sales, indeed declining. they did raise the forecast, but well today.oking
weather-related issue to its carrot filled by -- supply. there you go. there is the stock. down about 7% in today's session. we are looking at other companies down today. those in retail, foot locker coming in with lower sales traded to say that they think the 2016 sales will be on track. estimates that missed down as well.val seeing here some week this in retail and soup. scarlet: we are at the tell end of the earnings season. abigail: we are. scarlet: we have 478 out of 500
companies that have reported. julie: in retail is one of the last sectors to report. there you go. scarlet: thank you so much. soupystery stock, campbell . david booth started a firm in the 1980's with little cash. now, both manages $400 million billion. his strategy favors fundamentals over market noise. on bloomberg go, he said there no evidence that stockpicking has paid off. david: if you look at institutional money managers, in aggregate, they know what the market return is. in order for one institutional investor to have a sieve to. -- to have a superior return, another has to have an inferior return. >> what is your approach?
david: portfolio construction. we think that people need to to stick with.hy if you have a robust philosophy, you will not do a lot of trading. nevertheless, the overall structure, how much you have in stocks -- we spend more time on the structure. over the years, what has emerged from academic research is a notion of the mention audi of .eturns that there are certain threads or dimensions that run through stock returns. people say where do returns come from? there is an underlying return underlying the- focus of research. >> a lot of firms will say they don't pay attention to the short-term noise and look at the long-term trends. this is something that a lot of people take claim to.
can you walk us through one specific positioning or thread that you picked up on? david: one from us, but also our clients. in the financial downturn of 2008-2009, people got built bailed out of equities. our clients stayed with it. people want to stay sorry for those -- after they lost 50% of the money, they went to money markets. that was not uncommon. that is what we mean by having something to stick with. the key for us, and we are relatively transparent, so people understand that we are not going to be shifting around data day or week to week. over the long call, we manage money differently than we did 30 years ago, but not significantly differently. the role of academics in
your institution is quite unusual. tell us about that. david: i don't know what it was like before say 1950, but over the last 60-70 years, academic research -- academic finance has emerged as a discipline. beginning with computers being developed in databases being available, a lot of the hypotheses that people have can be tested out. a lot of the things that people out for granted that turn to not be accurate. >> you have a pipeline directly into the academic community. many nobel prize winners have you had on your board? david: four in total. >> what is the one thing people
are getting wrong right now? david: the things they get run now are things they get wrong all the time which is they get nervous in trade. it gets worse than just trading a lot. systematically, people have a tendency to want to invest when returns are low. they want to get out of markets when they expect returns are high. you take the financial turmoil. by the end, everyone knew we were in trouble. that is why the market now he percent. that is no time. say, we sudden, you will get out. cake. baked in the the only thing that counts is if you can forecast better than the market can. the answer is probably not. scarlet: that was david booth. more bloomberg markets after this. ♪
from bloomberg world headquarters in new york, good friday afternoon. here is what we are watching -- the return of risk on/risk often how the familiar trading pattern is dominating global currency markets. xio mi have a plan to take on microsoft. donald trump is scheduled to speak at an nra event. will the group support a candidate who did not always support them? first, let's go to the markets desk and a julie hyman. julie: we are holding onto the gains through this last day of the week after what had been a rocky week in the wake of the fed minutes and fed commentary
about june being alive meeting in the fed perhaps moving sooner than the market was pricing in. major averages are hovering near the highs of the session. trajectory has a that had this gain early on and has now moved mostly sideways. the volume today is relatively high compared to what we have seen recently. even on the s&p 500 on the 20 a moving average. looking at the various group volume, slightly higher for financials but we are seeing a surge in volume for technology stocks and consumer staples. technology has been gaining the most today. even as stocks gain this week, we have seen an uptick in volatility of stocks, particularly versus other types of assets. and even though
it's down, it has seen an up take closer to the higher over the longer-term average. we are looking at this versus bond volatility and golden oil. stock volatility has been outpacing them all. scarlet: i did not expect that one. a lot of people would said it would be quiet. in terms of the leaders of today's market, what do you think? julie: it is technology-heavy and we are seeing volume in those stocks. it could be a bullish sign. microsoft, apple and alphabet are leading the gains. we are talking about applied materials with one stock up 12.5% after reporting earnings that beat -- that beat estimates. demand,ates that chip memory chip demand is high right
now. alsoof its rivals are rising and we're watching the media companies. these companies are having upfronts where they roll out the new shows the tv networks are talking about offering easier access to reruns, taking a page from netflix and the binge watching model. we are seeing some of the media companies perform well in today's ocean. scarlet: thank you so much. let's check in with first word news. three european security officials say the passenger manifest for egyptair flight 804 contained no known names on current terror watch list. officials were not authorized to speak about the ongoing investigation. the passenger manifest was leaked online and is not an officially verified by egyptair. flight 804 was carrying 66
people from paris to cairo when it is believed to have crashed thursday officials say some apparent lane debris and oil slick have been cited in the region. donald trump one supported restrictions on gun rights but today he will address the national rifle association convention. tens of thousands of gun enthusiasts will hear him speak at the meeting in louisville, kentucky scheduled later this hour. he once criticized republican politicians who walked the nra line. british prosecutors say the man who climbed over a buckingham palace wall and wandered the grounds for 10 minutes wednesday was a convicted murderer. the intrusion triggered a police search with dogs and the helicopter before the man was apprehended. several intruders have breached palace security over the years. istucky derby winner nyquist at the number three gate in the preakness race tomorrow. he started the kentucky derby from the 13th post and won the kentucky derby.
the runner-up has the best treatments odds behind nyquist and will start from the fifth position. news, 24 hours a day, powered by our 2400 journalist in more than 150 news bureaus around the world. scarlet: thank you so much. back if risk off his you look at the emerging-market currencies. instead of being led by economic data or monetary policy, their moves are increasingly tied to stocks and commodities. you can see that the link is strongest since going back to at in the first or second quarter. it's unlikely to let up as investors brace for the brexit vote and the fomc meetings and the election at the end of the year. let's bring in the site that senior currency strategist at rbc.
was this paradigm already in place before the fed minutes were released and we got all this fed talk about june and july being back on the table? >> absolutely, you can track it through the correlation between fx and equities and if you look at the number of equity mutual pairs we have, that has already in a proposed crisis low since last summer. it started in august with the chinese devaluation and has not really recovered since. scarlet: when you look at head to what the implications of the fed minutes mean for currency markets, it seems as if the fed and the dollar is in the driver's seat. the fed wanted to reset market expectations and it did that to focus on what could happen in june or july. you say the conditionality of the statement is what you are worried most about. >> absolutely, if you look at the fed minutes, it's clear that
the market was underpriced for june and july. there was less than a 5% risk of a hike and they were not happy with that. several members are saying we are not sure we have enough parity in the data by june to make a decision. is fed is cautious so there a long way to go before they deliver the next hike. scarlet: what needs to happen before we can expect the rate increase? >> june will be tough because we've got the uk referendum one week after their meeting. i think june would be a set of for july but even then, there is more data that we need to see in order to consolidate the case for a hike. the other thing is they can lay the ground of a hike in the back half of the year. they are laying the groundwork or some kind of tightening. currencies,k at many people say they are the leading asset class before commodities and equities, do you agree? >> the dollar is clearly important.
it has an inverse relationship with commodity prices. if the fed x next to hike sooner than later, it puts pressure on emerging markets. they may say they are looking at the s&p 500. which pair will leave the way? >> there are a couple of areas you can look to. dollar-yen is one where if you see the fed hiking rates faster than anticipated, you should seek pressure from the topside there. ,ollar against emerging markets they are vulnerable if the fed hikes. scarlet: speaking of dollar-yen, the g7 meeting is taking place in japan and you've got to opposing views on what has been going on in dollar-yen. tokyo warns that excessive and disorderly moves hurt the global economy. on the other side, you got the
u.s. saying this does not merit intervention. together, it's hard to make the case for a coordinated intervention. >> absolutely, it's not just the u.s. saying it's not warranted. we have looked at the ministry of finance intervention behavior. if you look at the probability of intervention, it's described by the rate of change in the value of the yen. neither one of the moment points to intervention and it would be difficult to justify based on the moves we have seen so far. scarlet: when japan talks about disorderly conditions, what are they referring to? we have come back from above 120 in dollar-yen. 100 could break this year because of difficult for the japanese authorities to make an international case for intervention. they are in the spotlight.
for japan or the ecb or the dad, -- or the fed, they have to be careful when they are setting their policy. scarlet: thank you so much. coming up in the next 20 minutes, an exclusive first look at mebox, the new powered set-top box. the the next big thing to next big economic shift, a managing director discusses how new technology is improving urban life or businesses and government. donald trump is making his financial records public just not his taxes. is the presidential hopeful as rich as he says he is? ♪
scarlet: this is bloomberg markets. chinese smartphone maker xiaomi has unveiled its set-top box. the vice president of global operations set down in an x was of interview with emily chang. whichiscussed the mibox is a competitor to other set top boxes. we asked about the latest report that it sold 70 million new phones. don't really have a tech target. that was a number that became a target somehow. it's a very competitive industry. secondly, we really are focused on user acquisition. we are focused on acquiring internet users more than selling
phones. it's also the supply chain. we obviously make phones as quickly as we can. higher than what we have supplied so far so we are still ramping up constantly. is that we don't measure ourselves and how many phones we sell. we measure ourselves and how many internet users we at wire and how many -- and how much data they require and how much revenue per user are we generating. we don't talk about these things openly but these are the numbers we look at most closely. only: the global smart market is saturating especially in china. how do you overcome that? >> we estimate china will top out at about half a billion phones per year which is a big number. there is some growth opportunity for us and china particularly on a channel we almost own
continues to grow. there is huge room for us to grow in china still. already growing for growth's expansion into other markets. india is our second market in the world. that's why spend a lot of my time and we continue to hit sales records there. any idea when you will cell phones in the u.s.? >> we are getting closer. we are starting to do preparation work. it's further out to what i can easily predict the we are not talking about that this year. it's something we're working on it will take a while. preparing phones for the wireless spectrum in the u.s. and having the operations up and running and knowing how it to do marketing -- while we are launching this product, it's made for the u.s. market and we
will learn how to do business here. droneswhen are xiaomi coming? there was a hint yesterday online. is that happening? we are excited about consumer electronics in general. we have made huge investments into a number of companies from our self allen singh scooter all the way -- self balancing scooter. we are interested in cool electronics which are connected especially english photography and media. it would not be a terrible gas but i cannot say anymore. scarlet: that was the xiaomi vice president of global operations. let's go to julie hyman at the markets desk. being these stocks are affected by analyst calls. dick's sporting goods was up yesterday after the company came out with a disappointing forecast. investors said this is a company
that is poised to benefit the bankruptcy of its competitor, the sporting authority -- the sports authority. it's getting some up grades like at morgan stanley. sachs, they are bringing up the sports authority and the competitive advantage that dick's will have as the sports authority liquidates and perhaps its customers will migrate. those shares are up for the second day in a row. we are also seeing a fallout in oceaneering. this was upgraded following the technologies to merge. ofs raises the possibility fundamental headwinds. it's up 4% today. a duo of downgrades from jpmorgan for avery dennison which makes pressure equipment as well as be aerospace.
introduced us to a digital assistant. for more on how this technology is creating big economic shifts, let's go to cory johnson and carol massar. carol: thank you so much. this is bloomberg advantage on bloomberg radio and karen harris is with us at rain and company. -- at bain and company. talk to us about spatial economics. >> what we've noticed is over the last decade, the cost of moving goods and people and information have collapsed particularly information. you can think about the cost of a postage stamp and how often you read letter today or send a bill by mail versus what you do online, that cost has gone away. for those of us who live in new york city, we know if you forget something on your way to work, you can order it on the subway
and amazon will have it to you in 12 hours. that's just one small example. we see more and more that the cost of moving people is going down. transportation costs but also being transformed. when you are analyzing health information and you don't bring yourself to a diagnostician, you bring your information which gets sent and we see the separation of people from their information. the declining has meant we expect an acceleration in the decline of the cost of distance. notion thatis this we would all someday be working from home. that has never happened. one of the reasons i think is that collaboration is so important in the workplace. are you forecasting that that will finally change? >> that's a great question.
it's important to separate what we see as two distinct trends. one of the longer term observations that bain and company is had is over the last three decades, the holdup of capital super involved in's -- super embodiments -- super abundant been -- super abundance. pushed down interest rates and driven up the price of every single asset class in correlation. 1 real estate has gone up massively in cost and many of the kinds of workers you are talking about, the knowledge workers who work in clusters in silicon valley or boston or new york city can afford to live in those walkable courts. for most people, working in those tier 1 areas has become increasingly unaffordable.
the millennial generation is moving into their peak family formation years and feeling the cost pressure. people don't want to raise their kids with a crib in the closet. as that combination of the rising asset class, family formation comes, more and more family are looking for solutions that don't involve telecommuting but living and working and staying in smaller communities out side the tier 1 cities. exurbs andse of the the increasing cost and richness of tuier 1 walkable cities. carol: what does this mean for trans businesses that will take off and investors can take advantage of? >> we have the potential for stranded assets we have not seen for half a century in the u.s., since suburbanization when the middle of the city got hollowed out.
that was the peak of urban living. since then, the suburbs rose and flattened out. now we are seeing that very same compromise, the second circle being gutted. where can businesses profit? looking at the knowledge workers , livability for the well-to-do who can afford to live in cities and single people willing to put up with less space and light eating your other single people and well-to-do families or empty-nesters who may be coming back into the city, catering to that group of customers. simultaneously, there are opportunities to build smaller, more automated out late and retail and restaurant that can serve those exurbs. a restaurant that may be a smaller location that could be somewhat automated with fewer workers but in more locations that hit the middle class family rearing group that wants the space. carol: it sounds like robotics
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searchers believe they found the first traces of that missing egyptian jetliner. wreckage from the plane and passenger's belongings have been recovered. the egyptian military aircraft and ships discovered the debris in the mediterranean sea about 180 miles off the coast of alexandria. 4 was an route from paris to egypt and 66 people were on board. it is not ruling out anything but officials say it was more likely a terrorist attack than a mechanical malfunction. president obama will meet with indian prime minister in washington next month. the leaders are expected to discuss climate change and clean energy partnerships the president announced on his last visit to india in 2015. the prime minister is scheduled to address a joint meeting of congress as well. iraqi security forces have fired
tear gas and gunshots in the air as hundreds of protesters stormed baghdad's green zone. they were rushing for the prime minister's office and parliament building and this comes after the compound was first breached by shiite protesters back in april. time off from work to care for a child is federal law and no 40 and older americans want that job to be paid. center for public affairs research survey says 72% support paid family leave and at least 19 states are considering these laws but only three have active programs. new york is the latest state and will launch its program in 2018. day,l news, 24 hours a powered by our 2400 journalists, in more than 150 news bureaus around the world. scarlet: thank you so much. supportedmp once restrictions on gun rights and now that he is the presumptive republican nominee, that has changed.
we will take a look at a live shot of the national rifle association convention taking laced in louisville, kentucky. the gun enthusiasts are gathered to hear donald trump of dress a crowd this afternoon. timothy o'brien joins us now. thatis a biography questions the size of donald trump's fortune. he sued but the suit was later dismissed. >> that's right. scarlet: when it comes to the nra and we talked about how he once favored restrictions on gun sales, tell us about what could be construed as a flip lopp and whether nra support is critical to him. >> around 2000, he supported deeper background checks on gun buyers and an assault weapons ban. he has flip lopp them both of those positions. this has to be understood in context. he has been staking out
oritions since securing appearing to secure the gop nomination to shore up his support among conservatives. this is the same week in which he put out a list of potential supreme court nominees, largely to placate conservatives. move to the nra is in keeping with that. the issue it raises is that he has changed his position so many times during this campaign what do voters know he will authentically stand for once he gets to the white house? conservatives have concerns from the beginning. scarlet: much of the establishment is rallying around him. senator bob corker of tennessee who many people consider a contender to be his running mate talking about donald trump saying that what i heard in that speech was a candidate on like -- not unlike bush 41.
could he be a credible running mate? be ahave no idea who could credible running mate to donald trump because he will probably devour attention for whoever accompanies him. you sell when he appeared with chris christie at a fundraiser. 10 seconds into it, he began making weight jokes about chris christie. certain frat boy element to donald trump of the campaign trail so it will be hard for any running mate to manage. strategically, donald trump will have to think about which demographics he is weakest with. that is voters of color and women. does that mean ben carson could come into play? gifted femaleor a republican to join him? i don't know. these things are hard to predict because he only takes his own counsel. scarlet: let's talk about his finances. in your column, you write about
how he has filed an up dated financial disclosure form. what do we learn from that? he hashe two disclosures filed, the first one last july and the second one this week, is that he has an odd way of accounting for his own personal income. appears he conflates the revenue from his many businesses with his own income when he reports these numbers. i don't think it's an accident. he has a long history of trying to inflate expectations around what his real wealth is because he gets traction out of that. calling onehe is thing revenue and the same number in income in different ways. a separate report that shows the donald trump received attacks rake for 10 hours hold -- for households that made $5,000 or less which does not jibe with his philosophy. this on himported
getting a tax deduction in the state of new york for households that earned $500,000 or less per year. it could be that he used the tax code to his benefit and his income might have been higher. it could be that his income was in that range but we don't know. cat and mouse with his own tax returns and tax rates. he is also talking about reforming the tax code and going after hedge fund managers. yet he himself is playing hide and go seek with his own returns. scarlet: when i come to donald trump in his finances, he is a really rich guy. >> by anybody's definition, he is wealthy. scarlet: his supporters don't seem to care if it's 50 million dollars or $10 billion. why is he throwing out different numbers all the time question mark >> i don't think anyone
cares about it as much as he does. it has been an object of fascination for the media. scarlet: it's our fault. >> in part it is because it's easy copy. the media is at fault with that and we have fetishized wealth in america. i think he has used it to present an image of seeing a successful businessman and that is works to his advantage because his track record is very next to that is a business person. he is the steward of for corporate underplays was almost personally bankrupt once. he has not really been a significant real estate player in new york in two decades. scarlet: but he is a genius at licensing his name. >> yes, he is. scarlet: thank you so much. coming up, angry birds is making its way from your smart onto the big screen.
scarlet: this is bloomberg markets. let's go to the market desk with julie hyman. rally the dollar has a for the past three weeks. today, we are not seeing much of again at the moment at least versus a basket of currencies. lower but it's higher for the third straight week. that means the month of may has been a winner for the u.s. dollar. if you look at the weekly performance for the dollar, the
index shows it's up about 8/10 of 1% and most of the gains are coming after the fed officials about possibly changing the market perception of when they might change rates. looking at the month to date returns versus a basket of currencies, all of them are down versus the u.s. dollar. the south african rand has done the worst but even the pound is down versus the dollar. it has been a sweep in terms of dollar performance. i want to take a look at what's going on with rates in the wake of this changing fed perception. today, we see the 10 year yield go down a bit. the two-year yield is not changed at this point in time. we had been seeing the yield curve flattened to some degree. here, perhaps, we will see more
that thee to the idea federal raise rates and that will have a big effect on the market. that's because of foreign support to some degree, demand for u.s. treasuries. this is a look at the term premium which is a federal bank of new york measure of the term premium for the 10-year note. it's the perceived riskiness of long-term in the united states. it was at its lowest since 1962. essentially, it reflects this worldwide demand. even if the fed raises rates and you would normally see some selling of treasuries, there is a floor under treasuries because of demand because you get negative yields. it is not high here but it's lower in other places. scarlet: thank you so much. with a macro scene and talk about finance ministers and central bank governors from the group of g7 who are meeting
in japan. they are focused on ways to revitalize global growth. the canadian finance minister has some suggestions. he joins us from toronto. what are canadian officials hammering home now? >> the message being carried into the meeting is not so much advocacy for fiscal stimulus but supporting that vision. canada has embarked on a multiyear fiscal plan that would add $96 billion of debt to the public debt load. that is to spur growth. both he and the central bank are aligned on the idea that monetary policy is losing its effectiveness. other things are needed like fiscal measures or structural reforms. the minister spoke to us 48 hours ago saying this in japan. >> i think there is a sense that monetary policy can have -- can't have as big an impact as
it could a decade ago which means we will need structural reforms and fiscal measures that can make a difference, getting something that looks coherent internationally. it's a challenge but we are on a path for that. as you saw, the minister was signaling that he believes fiscal measures are the way to proceed in this week demand environment. i think it remains to see if it is working. scarlet: what kind of data can we point to to look at whether the stimulus is making an impact in canada? when you had the current liberal government in the fall, that's when you saw a turn in the economy. the indicators through november and december and january all pointed to positive developments. there was great trade data coming out and tax cuts coming into effect that were listing
people's incomes in lower income households and there was an indication that the stimulus measures were taking hold and proving beneficial to the economy. since then, the numbers have been pretty bleak. there has been a sharp drop-off in trade and wholesale and retail pointing down. there are questions about whether the fiscal ineffectiveness is being felt. q2 could be set up for a contraction. q1, it looks like growth is ending on a flat note. it remains to be seen. the stimulus measure which is a multi-year program with major infrastructure projects like a light rail system that will go into montreal, you also have bigger child benefit checks that will find their way into lower income households starting in july. this is probably a question we can revisit in one year for now for a better answer. scarlet: thank you so much.
to the intersection of entertainment and media. we talked about the angry birds movie and it's flying into chinese and american movie theaters today. it was popular five -- the app was popular five years ago and has grossed $43 million since last week. this is critical. joining us now to give us a perspective from los angeles is the bloomberg film and entertainment reporter. -- the app came out in 2009 and was very popular. why is rovio making it into a movie now that you mark >> sales are declining and this is a huge gamble for the company. they had some losses last year
3ut they are putting 17 million dollars on the line. it will help them in merchandise form. when it opens in the u.s. which is the biggest market in the world at the moment, we expect it to do maybe around $39 billion or $49 million. it's a close race this weekend with captain america. that would be great for them. momenthe forecast at the , it could generate 200 million dollars worldwide and the company would be happy with that. the question is not evident makes a profit at the box office, it's really when it goes into tv and what translates into selling toys on shelves. that's where you hope this will push through. all the so merchandising surrounding the release of the movie, to what extent have a signed different
deals and capitalized on that? >> they have already got a mcdonald's game which is the apex my come to toys. versiono have the lego so theysesz are popular toy brands. it will be popular with younger kids at the movies. those whom not see action-packed movies might see this. it is definitely a gamble. the critics are mixed on it. , game to movie type films have not been great like super mario brothers. only gamest the company doing this. we expect movies from others like war craft and assassins creed. we will see how it goes but it looks like it will be a win for rovio. of a sequel,terms
they don't make a movie without thinking of another version. what talk has there been on this or how likely is that? the threshold for a sequel in hollywood is pretty low as long as it does not. to bomb. itequel is a possibility if does well this weekend but nothing is done until this movie debuts and they have a good idea of making their money back. it will be distributive by sony. rovio spent the money making the thumb so it will be interesting. scarlet: thank you so much. moving on to the bloomberg america flash, captain civil war will smash the $1
billion global march at 824 days after it was released. the third movie in the franchise is the number one film of the year globally and is now the fourth movie distributed by disney based on characters from the marvel universe to beat the one billion-dollar threshold. the three captain america films of made more than $2 billion combined. the city of chicago's huge pension problem just got bigger. thanks to new accounting rules, chicago's net tension liability rose more than $11 billion to almost $19 billion. the issue is left chicago with the lower pension rating than any other city beside detroit. that is your business flash update. sales of existing u.s. homes increase in april to a three-month high. we will discuss what is driving these results. ♪ ♪
markets. has high yield run too far too fast? the head of high-yield strategy at active america merrill lynch thinks so and he has a call for a correction. retestink we can february 11 lows specifically in the non-commodity area. oil stays at $49 or around their per barrel. the energy portion of high-yield is a big art of the market is likely to not retest the lows when oil was $26. for the non-commodity portion of the market, it could easily trade back down to february 11. scarlet: which portion of the credit market is less concerning, retail? >> it is the most concerning at present. we are seeing the most stress outside the commodities space. we worry about a few different sectors. we look at consumer products and would look at durable goods and tech knowledge he come anything
exposed outside the united states is something we are looking to as eating a potential problem area in the future. what specifically about these issuers concerns you? >> the market is very clearly trading on oil, more so than is justified. if you look at earnings growth, it is the worst in a non-recessionary period and we have seen in u.s. high-yield. leverages never been higher. x energy is also trading higher? >> absolutely, if oil goes higher, a consumer that is not been willing to spend as oil has fallen is certainly not going to help a consumer as oil goes back up. many of the exposed corporate's to the u.s. consumer and the global consumer could really suffer in that case. alix: bank of america has not so great price target for the rest
of the year. $39 for the third quarter. on a technical and fundamental level, oil might not yet up to $70 anytime soon. >> it's difficult to where we see oil get to 70. it comes back to $39, not only with the energy portion selloff but the non-energy sector is down to set -- february 11 and will look similar to the end of last year. the fed started to become more hawkish indicating that december was going to be the date for the hike and oil was $39 around that time. high yield underperformed most other markets. scarlet: that was michael contopoulous. with today, we will speak calculated risk about housing. u.s. housing data came through today with existing home sales rising better than expected.
of 4.50 4nual rate million. the existing homes inventories keeping prices high. we are in the thick of the spring homebuying season so this s for a federal reserve that once the consumer to stay healthy. we will discuss all that and more at 4:00 p.m. later today hour, thethe next former australian prime minister comingt down with david up here on bloomberg television at 2:00 p.m. eastern time. ♪
here is what we are watching this hour. markets are rising today. u.s. major averages on track to snap a three-week losing streak. my target at the beginning of the year was 2150. we need better second-half earnings. david: the next phase of crude oil prices may be a battle between rising dollar and supply disruptions around the globe. factors arehat affecting the oil prices in the coming weeks. ministerstralian prime kevin ruddjo