tv Whatd You Miss Bloomberg May 20, 2016 4:00pm-5:01pm EDT
scarlet: u.s. stocks closing hire with the s&p 500 erasing a weekly decline. joe: the question is what'd you miss? scarlet: a volatile week in global markets. we break down the charge that you can't miss. joe: good news with the u.s. housing market. islook at why lean inventory keeping prices elevated. scarlet: and will be right wing candidate come out on top? we begin with our market minutes. we are in the green through the entire day. lowebounded from a six-week and the s&p 500 finishing positive for the week. i would not have guessed the s&p 500 finished positive.
i know we have a race some losses by it is impressive given the volatility we saw with those fed minutes. 5 i'm glad you bring those up. it is which that fared the worst this week. telecoms andities, consumer staples declining by 2% or more. you can see utilities are the worst performers of the bunch. if the fed is going to start raising rates earlier, that makes them less appealing. picturear -- the bigger , the record high was set last may 21. onhave had the fed following february 11. belowar later we are 3.5% that all-time closing high. looked many times it like we would break that record only to be denied again.
that is the story, on those hawkish minutes. here is the chart. you can see we're at the higher in of that range as the market gets set for a continuation. you see that jump up in the last few days. that is the defining story of this week. we are still very much range bound. looking at the dollar, the dollar consolidating its recent gains. it has advanced for three straight weeks. bringing the bottom to 2.4%. commoditiesk at the that represent the different end of the spectrum. here is a one-week look.
the other end of the curve, we see gold. it had a great start to the year but it does not like the idea of tighter fed policy. i don't know if we have a one-week chart we can see it. that is the story of commodities. precious metals, not so good. >> the turning point was in the middle of the week. it when out on a week now. >> that was a defining know of the week. we take a deep dive into the bloomberg. you can see this at the bottom of the screen. joe: i want to look more at the crucial thing when we got the .awkish fed minutes the market implied policy rate that green line is where the market expects policy to be
currently. based on the market, let me tweak this to get a good comparison. that green line is where you see it is pretty low. line is where we started the week. you can see the shift up across the entire curve pricing in a more hawkish fed. this is not really intense in terms of future hikes but you can see the shifting where the markets expect policy to be. >> inside of a week. it is pretty notable. >> i'm taking a look at emerging-market policies. the return of the binary risk on, risk off trade. you can see it is tightest going off to mid 2013. it has been building up for a while clearly since the start of
2013. but it is this week with the reminder perceptions of what the fed does next will determine where the fed goes. it determines how markets perform. we have a whole series of disruptive events coming up. the brags it. presidential election. it made me bring back some memories. >> all right. you can see all these charts and more on twitter. i want to bring in our bloomberg news stock market reporter. joe: you have stocks rebounded from a six-week low. investors worried about central-bank action, who won this week? guest: i don't know about
specific traders but i will tell you which sectors. it is bit of a switch. the defensive sector, they had been providing the market come in keeping them of float. it is closely related to the fed. people start to expect yields to move up. those value names don't look quite as appealing. they also happen to be those dividend names. if you have the expectation of a hike in yield going higher they will selloff. energy is big here. scarlet: we have breaking news. matt marantz oil and natural gas ipo has been suspended or withdrawn. this is the headline. they are withdrawing their ipo. they were planning to share sale for $9 billion to
finance extension plans. you have the falling commodity prices getting in the way. maybe it is once again full of uncertainty and prompting the company to withdraw. ipo.nd gas withdrawing its scarlet: market not looking for those. scarlet: not looking for those assets. we were talking about the different industry groups. you are looking at volatility. what did you learn when you look approachingr-term this one year anniversary? >> we touched on the fact that in a bulliciently market without hitting a new high. if you look at the past seven years we have always been able to hit a new high. it is the first time we can go about that. this is at a time when we had
volatility. we hit those new highs. that obviously hasn't happened. about the value and dividend stocks there has been a rush towards exposure to these minimum volatility funds. i want to look one in particular. it has had the most influence. here is how the sector breakdown happens in terms of the waiting. care, one orealth two of those, these are the value areas that have seen volatility. financials as well. week theens, this minimum volatility was actually higher than the s&p over the past month. the discrepancy has gotten
smaller. it has gotten more volatile. been verys, they have susceptible to changes and rates. i was talking to has been saying you can't complete with these minimum sectors because those are the ways -- ones that have had volatile situations. >> people are rushing into these funds like crazy. there's been a lot of talk about them over the last couple of weeks. rush.has been this huge do people know what they are getting into when they go into them? >> the proliferation of index type investing and the etf powerhouse sector where people whether it is a minimum vault. because of the ease of
accessibility they don't really drill down into that. i think volatility is going to go up. is if this goes beyond the sophisticated investor some may start to get burned. ashas happened in the past well. they don't understand volatility. they think because they can get it it should be a product for them. 5 the chart were first to define convention. what are you hearing in terms of the investors that populate these? are they retail investors? >> typically someone who is going to have a convicted view. maybe they work in wall street pre-baby they think they have an understanding so they will get into those exotic etf's.
joe: continuing on this. in some of your last several appearances, one of the things has been markets held up ok. people piling in etf. do you think the surge in low volatility is this of people want market exposure to this going up but they wanted in some way they feel they are protected against the downside? >> absolutely. when you talk on the street there is a different sentiment where yes people are getting some lower exposure. they get the long s&p contracts.
see whether it is retail clients, somebody who they haven't really moved those positions but it has definitely gone up. to get into aant volatility etf because they know it moves inversely to stocks, that is a big part of the population for these funds. it's one of the most popular and yourum volatility space to point. joe: thank you for joining us. scarlet: data release shows shows of existing homes increasing to a three-month high.
mark: let's get to first word news. a lockdown at the white house has been lifted after police said a person was shot in downtown washington. president obama is not at the white house. the shooting happened at 17th and e street. the fire department says the person was taken to the hospital with critical injuries. the president is trying to turn up the heat on congress to pass legislation to fight the zika virus. he says lawmakers have got to get moving and spoke to reporters after a briefing from health officials.
packageve put forward a that costs $1.9 billion in emergency funding in order for us to make sure we are doing effective mosquito control, and we are developing effective diagnostic tools. and to develop the vaccines that will prevent the tragedies we have seen. scarlet: the president says researchers need time to develop a vaccine and that states need time to ramp up mosquito control programs pre-three officials say the passenger manifest for egyptair flight 804 it contained no new names on terror watch those who areg to
not able to speak about the investigation. he manifest has leaked online and has not been verified by egyptair. the plane was carrying 66 people when it disappeared early thursday over the mediterranean sea. some plane debris and an oil slick have been cited in the region. nutrition labels on nutrition packages will get a makeover. calories will be listed in erulder tight and -- bold type. is the first major update since the labels were created in 1994. global news, 24 hours a day powered by our journalists in 115 news bureaus around the world. scarlet: what'd you miss? sales climbed in april to a three-month high.
if you take a look at the bloomberg, they are below their prerecession high. there we go. bill, what do we learn from the existing home sales report? it has more than a broader effect on the economy. what does it tell about demand versus supply? homes aren't as important as new home sales. inshows us a turnover level the existing home market. anything in this range is probably normal. the focus should be on new home sales. >> let's talk about inventory. housing markete
for existing home sales. does that tell us anything about pricing in the future? >> it's on the tight side. when some areas it is. overall it is not supertight but it is on the tight side. that means more price increases usually. just supply and demand. >> i saw in your write up one of the things you mentioned a contributed to the lack of inventory is that more people are holding on to real estate as rental properties. they are renting it out. you think that is the function of this graph we have seen. everyone wants to have income generating in this low rate post prices -- post crisis era? >> i definitely think that is part of it. what i have posted was some data
, we went from 10 million single-family homes to 17 million now. most of the increase came after the housing bust. that, it is just mom-and-pop's buying one or two houses. help income for his retirement. that is a big part of it. those tend to be on the low-end. that is where there is a low supply. those are not going to come back on the market very quickly. people do like that income. leades the tight inventory to more new home sales? is there a direct cause and effect? >> yes but it has been very slow. the builders focus on the land
they have. they have been targeting the low end. some of the other builders are also. supplyup to the new home to meet demand we need to see a couple hundred thousand more housing units a year. >> you mentioned earlier inventory is not overall that tight but in some markets it is tight. where we sing the most acute mismatch between supply and demand? last time i looked areas like san francisco and denver have little supply. supply in those areas is coming up now. the supply is starting to creep up. it is still very low. scarlet: what has changed? prices went up. those areas, i solve the biggest price increases seeing more
supply creep onto the market. it is still not huge. it is not enough that it is going to stop the price increases. there are some rare spots we're seeing so much supply, on that we will see price decreases. >> the big event was the fed minutes. increased theve odds of a rate hike in june or to live -- or july. what is the key data point you will be watching to figure out whether we will get a hike or not? >> the focus is on inflation. it will be the next pce report to see if we get a hike in june. there's only one more. we onlyittle low but need 80 or 90,000 to hold the unemployment rate per month.
what did you miss? a brutal two weeks for retail. if you come inside the bloomberg, we illustrated it here. too fast fashion outlets. they by the same amount of stuff because the price point is lower. they spend savings on services. there is a differentiation zahran the owner of the and h&m. and the other the tent -- traditional stores. they have come off of their lows so far but clearly they are fearing morris -- fearing the worst. h&m has been 23%. that is the thing. scarlet: all of them are down. they are so negative for the past 12 months. company,oking at the
the swift company. , they said the luxury market is still pretty terrible. you can see the stock has been tumbling. , the year-over-year percentage change, one of my favorite indicators to look at since it is reflective of how the super wealthy are doing, you can see that has been declining. scarlet: right around the point everything changed is one china started cracking down. joe: i wonder if there is connection there. scarlet: coming up, place to win his country's election this weekend, we talk about the rise of the right-wing candidate in
♪ let's get to first word news. i locked down at the white house lifted after a person was shot outside the executive mansion in downtown washington. president obama was not at the white house. the shooting happened at 17th .nd e streets a person was taken to the hospital with critical injuries. no one affiliated with the white house was injured. they haven't solved the mystery, but searchers looking for that missing egyptian jetliner have clues, wreckage from the flight and passenger belongings have been recovered. egyptian military aircraft and
and a bodyed parts part in the murra mediterranean sea. , 56 passengers and 10 crew, were on board. aypt said it is more likely terrorist attack than mechanical failure. the foreign ministry, the u.s. guarantees that it will not seek the death penalty for the extradition of guzman. he will be tried for racketeering and trafficking. the process can be appealed, meaning it could be weeks or months before he is sent north. toman's lawyers have 30 days appeal the decision. rick snyder setting up a new board that will work to eliminate children's exposure to lead across the state. it comes in the wake of the
water crisis in flint, michigan. the governor signed an order creating the board. residents are still using bottled water and filters as the public health emergency in flint continues. the national rifle association today endorsed donald trump for president. 2000 wasump, who in among those calling for an assault weapons ban, told the group today "i will not let you down." thousands of gun enthusiast were on hand to hear him speak. he wants criticize republican politicians who "walk the nra line." global news 24 hours a day powered by our 2400 journalists and more than 150 news bureaus around the world. i am mark crumpton. thank you. breaking news come a top credit and headphones -- hedge fund executive at carlyle group is leaving the company.
this is after several funds in his units posted losses. he is leaving the firm and will become a senior advisor and fans to start his own investment firm according to a statement released. the firm's deputy chief investment officer for private equity will take on the responsibilities, overseeing this credit and hedge fund group. this goes back to the idea that hedge funds have had a rough go in 2016, all kinds of questions about whether the business model can persist. a terrible year for performance. they have been underperforming for a while. warren buffett notably questioning it out loud. of: let's take a quick rap the markets today, a nice rally across the board, especially on the nasdaq. s&p up 0.6%. it was a rocky week, midweek selloff with the fed minutes,
but then higher on the week. scarlet: when you look at the breakdown in terms of industry groups, you have utilities, telecom, consumer staples, dividend rich bond-proxy-like companies up 2% of more this week. joe: a good week for the banks. they like higher rates and potentially steeper curve. scarlet: all talk so far, no action yet. the freedom party hopes to make a breakthrough at the ballot box. the party is hoping to win its first presidential election. joining us now from the vienna is our correspondent. austria, the president has largely been a symbolic role in practice. in theory, the constitution does grant him or her quite a bit of power. can you explain what norbert ,ofer, leading in the polls now and of the freedom party, what he wanted to do? >> it's true what you say, the constitution gives the president
some very crucial powers. first of all, commander-in-chief, which is one of -- the chief of the armed forces basically. more importantly, he can hire and fire basically the government. he can appoint the government and dismissed the government. decades, thisven has been something that the tosident has not used actively shape government policy. he basically turned to the political parties and proposed the chancellor, the and appointed it. announcedrt hofer has to do differently is that he said that if he had the feeling that the government isn't performing the way he thinks it should do, then he would indeed dismiss it or dismiss individual ministers, and then he would appoint new ones. that is something the
constitution allows, so that would be perfectly legal, but it's a break with political tradition. reaction among other elected officials in austria, among the prime minister, this idea that the potential president might actually fully exercise his legal powers? have they responded to what he is saying? >> well, there is little to say because it is based on the constitution, so you can do it. it is just a break with the tradition that everybody was used to. comes from a different party than the governing coalition. the governing coalition suffered a pretty humiliating defeat in the first round of the election, so they are not happy about it, but it is not something that you can dispute really. scarlet: norbert hofer's stance his position
against multiculturalism and globalism. joe: he's part of this group where mainstream parties are seeing their party's collapse and support for the extreme right or extreme left. tell us more about his policy and how he would represent a break from austria's existing policy on things like immigration. >> well, austria has played a very important role in the last year. germany'sically under angela merkel and welcoming syrian refugees last september. the chancellor has stepped down in the meantime. he was one of the politicians who enabled angela merkel to implement this welcoming policy. this is exactly the opposite of what the party wants. they basically want a policy -- they have declared that they want a policy of euro
thegration, and they attack policy is wrongheaded welcoming culture that is letting terrorists and islamists into the country. haslet: i understand he made some noise for austria to leave the eu? inwhat he is saying interviews and debates for the election is that he would not butnd austria leave the eu, if the question whether austria should join today, he would say we should not join. ifis a little nuanced, but the u.k. does vote for leaving the eu and dynamics are set into motion in which i don't think norbert hofer would be one of halt the evolution of the european union and stop the
development and which austria would leave it. joe: what are the polls saying? is it a done deal that norbert hofer will win? >> there is a lot of suspense. had the chancellor step down after the first round of elections. the peoples, families, and those on the streets, they have never experienced this in austria. we will probably have a high turnout, which also makes the prediction very difficult, and even on sunday night we may not know immediately who will have one, because the uncertainties are so great. joe: thank you very much. we will be watching the results of that this weekend. peak of thehave a offense more hawkish side this week, but what kind of data will they need to look for it with a rate increase in exmouth? ♪ -- a rate increase next month.
scarlet: i am scarlet fu. it is time for the bloomberg business flash. withdrawnark moran is legislation to sell shares after crude prices collapse. the biggest copper miner said last week that it is scaling back its energy business and still trying to sell assets. the company has had six straight quarterly losses. europeanr central and assets are said to have drawn interest from private equity adventincluding
international, kkr, nbc partner holdings. this is according to people with knowledge of the matter. the firms are it's going to whether to make an offer for the assets vita $5 billion. deutsche bank said to be stopping boyit's for employees as it examines whether they improperly traded with the firm. that is according to a person with knowledge of the situation. six employees are tied to personal investments alongside a hedge fund. others estimate that they gained about $37 million. that is the bloomberg business flash. "what'd you miss?" the fed minutes sent a strong signal that an increase may come as early as june. the economy has been unable to keep growth momentum, and in fact been expanded in the first quarter, gaining .5%. for the economy have enough the fed to act decisively? joe: thank you for joining us. so you found a very interesting thing, which is that after these
fed minutes on wednesday, the rate hike probability, the distribution of different possibilities almost perfectly mirrored what we saw at the beginning of this year. once you explain this to us. to where we were in terms of what the market sees over the coming year, said the fed has to be happy about that to the extent that they were worried about the probability of rate increases being too low, market rates being too low, and policy being too accommodative perhaps, so -- joe: i think we have a chart showing the distribution. here we go. what we seeing here? >> the blue line is where we were yesterday after the minutes, the white line is where we were at liftoff, the orange line is where we were a week or two ago, so you can see that the theets modal outcome for number of rate hikes over the year was that the fed would only raise rates once, so they have kind of got to net back to where the market tanks we will have
two rate increases, and the big differences well is that markets were signing -- assigning a higher probability for rate cuts before the minutes came out, and the release of the minutes took that off the table, so people don't see easing next year. scarlet: we traveled a long distance to come back to where we were. the fed must of been frustrated. >> exactly, we did lose six months there, but now were sort of back on track, at least looking forward. joe: one of the other things we have seen is the tightening of financial conditions. you are looking at the goldman sachs measure of financial conditions and you converted it into rate hike speared what are we seeing here? >> this is an interesting comment on the same sort of theme. goldman's has their index 145 basis points change in their index is the equivalent of four rate hikes. what we have done here is convert it into the number of
rate hikes that we sort of seen since that index bottomed out in the summer of 2014 win financial conditions were at their easiest levels, and you can see that we have basically had five rate hikes over the past two years, and so if you think about that, it's like a rate hike every 5-6 months, and that's about the pace that we are so sitting with the actual tightening cycle, so that make sense of when you think of what the u.s. economy can handle in terms of tightening. you that is similar to what see if you look at the shadow fed funds rate, which shows that there has actually been a lot more tightening than the one hike. exactly. we did a story on the shadow funds rate, and that's what inspired that chart. tightening did not just begin in december on december 16. we -- it is a continuation of what we have seen for the last two years. scarlet: we need to look at these alternate measures and metrics, because you can't go by the actual and just rate increase because it's a minimal at this point. >> exactly.
the taylor rule is a widely cited rule that said interest rate should be two percentage points higher than they are now, but if you look at the financial conditions, they are consistent historically with a 2% funds rate, so maybe in a sense we are already there, just looking at a different metric. scarlet: let's talk about inflation and what the fed is most concerned about given that the labor market seems to be doing ok is inflation and core pce is what it focuses on a particular. the target is 2%, but were not getting there. firsthad quite a strong quarter for corp. ece, 1.7%, some acceleration there. in march it tick down to 1.6%. the latest report for april looks like or pce is going to end up at 1.5% for april, so this is the last inflation data that that will see going into their june meeting, and that sort of -- the question is whether this continued acceleration -- deceleration
you want to be informed on the progress we're making on greece, and luckily i could give him a positive message, a lot of work has been done since we reached the political agreement on the third program for greece. the greeks have worked hard to push through structural reforms on all different fronts, and now we are entering into a debate about their debt sustainability. >> the secretary has been urging europe to provide that relief to greece. are you concerned that if we don't get that relief and don't have a solution for greece in -- next couple of weeks or months, we may look at a summer of and certainty on greece, brexit, and the eu like last year? about i'm not worried that. we are in a different situation than we were a year ago. the current greek government is constructively working with european partners to improve the
state of the economy, to improve , and they ares fully committed to the program, which is a completely different situation from where we were a year ago. on the basis of that confidence, we are now entering into a discussion about debt relief. greece has a high sovereign debt. we have given them a very long time to deal with that, on average 32 years, and already the interest is very low, but we stand ready and are now discussing to do more. worried or is it a key concern for a lot of finance chiefs, currency wars? will you raise the same concerns this time? >> i think there is general agreement that adjusting your currency rates just for the
purpose of improving your competitiveness is not going to work. it only has a short-term effect and will probably provoked the same kind of reaction from other currency areas. the effect will only be short-lived. wante thing to do if you to improve competitiveness is to deal with the structural business environment in your countries and make sure that investments go up, make sure the productivity improves. that is the kind of thing you need to do if you have a competitiveness problem, and not try to adjust your currency rates. keene in here. good morning. thank you for joining us from japan. if i look at the dance over the new greece work out and the imf's ability to project their plan upon the german people, many bag for a restructuring, exactly as the imac proposes.
what is taking so long? what do you need to get a proper debt workout for the people of greece? come you have to realize that at the end of 2012 we were already in a major debt operation and reducing the byual debt burden for greece 40%, and now are looking ahead, what more needs to be done. we can take a different measure, some short-term and some at the end of the program. we are designing and discussing those now, and hopefully next tuesday in a next euro group meeting we will get the deal that greek needs and deserves. >> can you structure the deal and particularly the interest rate out to 2040 given the negative interest rate environment? >> as you know, the largest part of the greek debt is in the hands of the european emergency funds.
already, they are providing a very low interest rate and we are considering what more needs to be done and can be done on that front also. that you other levers can use, like a maturity time, of moreme, swaps expensive loans for cheaper loans, so all of these instruments we are considering to put a package together which, as i said, some things can be done up front, and some things will be put ready for later dates. for example, the into the program. grouphat was the your president and dutch finance minister. scarlet: what you need to know to gear up for next week, coming up. ♪
scarlet: japan trade bounds, imports, and exports of all coming out next week. the month inil is which the yen strength and 5.5%. looking forward to next week when janet yellen speaks friday. she will be speaking at harvard in conversation there. it will be very interesting. after this week, a huge week for the fed, we will see if she gives anymore hence about what the fomc is thinking about a possible rate hike. tease thatey did