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tv   Bloomberg Markets  Bloomberg  May 25, 2016 12:00pm-2:01pm EDT

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scarlet: from bloomberg world had quarters in new york, good alix: afternoon. i'm scarlet fu. alix:i'm alix steel. don't fear the fed is the new mantra from global markets, rallying as investors price in, -- as global economy can withstand higher rates. scarlet: oil maintaining its showingnths high after continuing declines in the u.s.. we will look at outages in venezuela and nigeria. alix: and tutor is just one of many getting burned by a lack of hedge fund investments. where do investors go? will get those answers in this hour. halfway through the trading day. let's head to the markets where julie hyman has been tracking the moves.
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big today gain and as you say, don't fear the fed, even in the face of this perception that the fed will potentially be more aggressive. all three averages hovering near their highs of the session. been talking lately about anniversaries of record for the major averages and we are approaching the anniversary of the doubt. it was at a record last may 27 and as you can see, distill trading lower by 1.7%. but since last friday, we have embarked on a significant rally, to thate getting closer record level. what would it have to do to get to that level by friday? let's look at the last week of trading. we have seen the 360 point gain for the dow. it would have to go up by the same again to regain that record status.
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part of what has power to be stocks generally higher has been the financial group, which has seen this big increase here. we have seen financials move higher along with bond yields. financials still the second worst-performing group year to date, so there is a rotation factor. news recently that at&t will be approaching yahoo!. from: this is coming to us alex sherman. you can see the shares still down. they did take a leg up after those headlines crossed. at&t supposedly said it was not in the bidding for yahoo! and now according to our reporting is one of the suitors. at&t shares little changed. ourrty media according to reporting is not likely to be a winning bidder. timeill have a little more
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to talk about this. the bit is not due until next week and hopefully we will figure out which one of these companies will be the winning bidder for yahoo!. let's check in on the bloomberg first word news with mark crumpton from our newsroom. mark: a state department audit is blaming hillary clinton and previous secretaries of state for poorly managing e-mail and other computer information according to the associated trust, which obtained a copy of the report by the agency's inspector general citing long-standing, systemic weaknesses related to communications. these started before mrs. clinton's appointment, but her failures were singled out as more serious. house speaker paul ryan has told confidants that he is ready to end the standoff with donald trump according to people close to the speaker. he may endorse mr. trump for president this week. ryan is said to be concerned about the split in the
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republican party. egypt has contacted to foreign companies to help locate flight data recorders from the plane that crashed last week in the mediterranean sea. 66 people were killed. a french and italian company will be working with it just in search teams to try to find the black boxes which could give clues as to what happened in the final minutes of the flight. the transportation security administration says the agency will add 768 new withners by june to deal increasingly long security lines. a house panel was told today that several factors contributed to added weight times this year, including more passengers and a shortage of applicants for the expedited screening program. global news 24 hours a day powered by our 2400 journalists in more than 150 news euros around the world. i'm mark crumpton.
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back to you. are emerging markets ready for higher interest rates this summer? whatever it a fed decides, we have seen the asset class get buffeted by headwinds. this is the emerging market index. there was a selloff in the weeks following the fed lift off in december alix:. alix:what can we expect this time around? our guest is the foreign exchange strategist at morgan stanley. he just turned bearish. rallyday, you have a huge in emerging markets. what is going on? this has been going on for the last three months. this is behind are more bearish call. risk conditions will change, so the tailwinds we have had are becoming headwinds. the fed is one part of the story. we would all agree that last week's minutes were the game
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changer. it is surprising how hawkish they sounded and the possibility of earlier rate hikes is back on the table. that creates volatility. second and very important for us is where china is going. we have a bearish view on chinese growth. some of the indicators are already pointing in that direction. we have seen significant areanes in the commodity and that is where we see a lot of risk here. you have a chart that shows how sensitive emerging markets are two oil but if it holds up around 50, would that not be a bullish sign? oil is that redline at right there. guest: what is surprising on this chart is the commodity have been struck off
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by emerging market debts. oil has been holding up, we know because of supply side related reasons which will be short-term and temporary. when and if we fall back into a lower oil regime, this will be done in the crisis. scarlet: bloomberg is reporting that chinese officials plan to ask their counterparts about the prospect of the fed rate in june, trying to get more clarity on when the fed might try to raise rates. what kind of pressure does that put on the yuan? puts chinaefinitely under pressure again, but not because of the fed. i think what is important for emerging markets that -- we saw this in 2013, we saw this in december once again -- the carry
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trade becomes undermined by fed hikes. why haven't we seen in august or february like scenario yet. it seems it caused such panic in august. where is it? the market is still digesting it and a little bit torn. i think there is a notion what the fed is telling us is not necessarily how it is going to play out. we don't see any of the foritions for fed hikes as filled right now and i think the market is struggling with that. scarlet: do you think investors are differentiating between the different markets and asset classes or are they treating it as one big asset class and mark -- asset class? guest: that's a good question. we have seen a grab for yields where the countries with big yields have done extremely well
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and that sets us up for a lot of older ability going forward. there will be much more differentiation with investors looking along the fundamentals and maybe being willing to leave some of the yield on the table for better quality. alix: i know i made you sound bearish in the beginning, but what is your top investment choice right now? e.m. fx ishink acting as the canary in the coal mine. we are moving away from riskyigns and from countries, which is supported by the oil price chart you were alluding to. in local markets, we are looking for credit positive stories, stories that can withstand global volatility and have a positive anchor like brazil. scarlet: what about turkey? the deputy prime minister was reappointed. and initiallped
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reaction on a day when the central bank was cutting rates, we think setting us up is quite risky where inflation is still above target. we have seen a lot of influence into turkey. it was one of the hot arc it's in the last three months. we see turkey weakening and growth is going to be slower. we have geopolitical risks. we think it will widen out. we think turkey is quite vulnerable. maybe time has come for people to consolidate. what about what the central bank does next? we have any better visibility into what it does next given the turkish prime minister's unorthodox policies? guest: i think that's one of the reasons why the many investors that have come to turkey will be much more cautious going forward.
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you mentioned that you did like brazil. what do you like there and how do you invest? brazil, we like the local rate story. there's a lot of room for the central bank to cut rates when and if the central rates are coming down and inflation expectations come down. it is really an interest rate focused strategy for us. on the sovereign side, we are worried about a negative credit dynamic. some of the measures were approved this morning are supportive, but brazil has a long way to go to get out of its pain. alix: good to see you. today, billing up gross will be sitting down with erik schatzker. don't miss the hour-long
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fireside chat that begins at 4:30 eastern time. ♪
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scarlet: you are watching bloomberg. i'm scarlet fu. i'm alix steel. this is your bloomberg business report. scarlet: moore european films may be coming to netflix. alix: alibaba is being investigated by u.s. regulators. the ftc is looking into the company's accounting practices. scarlet: toyota takes sides in a taxi wars. the company has a stake in uber. alix: we started europe where
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regulars want to see more european content from video on demand providers. they wanted netflix and others to devote at least 20 hours to european content. netflix says the rules won't actually give a boost to european production. alibaba says it is being investigated over at accounting practices. is company says it cooperating with the probe. one issue is data reported from its singles day promotion. wilbur ross may be a buyer of soured chinese loans soon. they are hoping to clear some of their books and stoke the economy. he says it could be a good opportunity. : i'm getting very interested in china. the government has announced
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they are trying to develop a program to securitize the distressed loans there. withey do that transparency and reasonable be a goodhat will help for chinese strengths and create an opportunity for people like ourselves scarlet:. loans that chinese commercial banks have risen to the highest loan in 11 years. another big automaker choosing sides with right hailing apps. it will begin offering leases to uber drivers. staying with japan, the country's biggest brokerages slashing executive pay. top managers will have their pay cut by 18%. earnings in the fiscal year pledged 42%. back fromto pull european equities and reduce its u.s. stocks businesses.
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time now for a bloomberg quick take where we provide context and background on issues of interest. leavingocal economy is companies fighting for growth and some have turned to currency as the ultimate weapon. hope is the company drives down its exchange rate. when others retaliate, it ignites a currency war. the most recent currency battle broke out in august with the revaluation of its currency. japan jilted markets by introducing negative interest rates. the u.s. increase rates in december, pushing the dollar higher against 16 of its major peers. currency wars have simmered for years as countries fought their way out of the great recession. and japanome europe relied on bond cuts and kept easing policy to fight off
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deflation. , the first inn more than two decades prompted calls for clear indication and a united stance from the world central bankers. g 20 nations pledged to refrain from competitive valuation but have stopped short of criticizing any nation from doing so. more countries have turned to a currency paid to stabilize their rate. meanwhile, that is putting the world's largest economy at risk. for more stories, visit bloomberg.com. scarlet: still ahead, emerging market currencies ahead, we have a check on the loony. ♪
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scarlet: this is is bloomberg markets. i'm scarlet fu. alix: i'm alix steel. chinese officials are expecting to ask their american counterparts when they plan to raise rates. andlet: china is worried increase will have a negative effect on the currency. let's bring our first word fx analysts in. guest: i think they will definitely get an answer. the story is not that central banks talk to each other, it's almost like asking your best friend what is doing -- what he is doing for the weekend. part was ating report issued yesterday to their clients which is what the story was sourced from -- that the chinese officials were going to suggest to their counterparts
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that they would be better prepared for a february hike in july. that's the most interesting part. alix: explain how that works. we saw it is at its lowest level in five years. how would a prep for a rate hike? guest: it is just a guided, very slow devaluation. , it'se saw in the spring probably going to be in the six -- 650 range. they probably do not want to see it much higher than 60. if it were to guide lower, we could see as high as 670. they do not want to see the spike they saw in january were this passiveook in approach to their currency and were willing to see a large
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devaluation when the dollar spiked sharply. this is the onshore and offshore versus the shanghai composite. thedollar is stronger and yuan is moving lower. onshore than it is off shore and we've seen the divergence at the beginning of the year and back in august. we saw a big selloff in the shanghai composite. are we in for that kind of turmoil again? guest: it is the same as what to do. has been trying everyone keeps talking about the minutes being hawkish. i think they were rather balanced. the pricing was very low. the fed does not want to shock markets. they are trying to bring thisone to the center and
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is the reason for a conversation between the two parties. what will shock the markets the least? i think you can see it in stock prices now. the fed has done a great job preparing the markets for a hike and the stock market said ring it. we are ready now. you pointed out something to me last month which is japan is laying the groundwork for a possible china summit this year. they are going to propose a summit about currency. has this materialized? guest: not to my knowledge, but it is a game changer if it does. you look to adversaries on the political and economic front, and if they were to come again -- come together and join forces and bury the hatchet, it would mean for a substantial accommodation, it would mean a big positive for the debt market.
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it stands to hurt the west a little. germany probably the most, being the biggest competitor. general, igrowth in think it is a big positive. alix: he bank of canada did not actually cut rates, but the canadian dollar is moving higher. canada is in a tough spot because even though it is lower, it's much higher than it was a few years ago. big rusherutting a on exports, which is what they want to see. the stronger currency mucks that up a little. froms weakened about 7% its strongest point the year, so it has come back a little bit. the decision today wasn't so much a surprise as there was a hope there would be dovish.
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they did leave out a very key line about positive growth to which folks who heart these things, i don't, which suggests they could be a little more dovish than initially implied. canada hasdata from not been great. april and may numbers are not very strong. as the trend continues, the market will do the work. he does parse things, don't let him full you. coming up it is our mr. a stock of the day. our mistry stock is surging. it ceo looks enterprising as shares climbed to a record. ♪
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. .
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looking at live pictures of the parade of ships traveling in new york's hudson
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river. alix: that looks beautiful. what a beautiful thing. let's go down there. scarlet: let's head over to the markets desk julie has a big reveal. the ceo looks enterprising as shares rise to a record. computer science is where we got the rocket science. and to reformat the i.t. supermarket, which is what mae whitman called the supermarket at this point. she said it makes sense to split them apart into more specialty markets, one could say. you see the big surge. by the way, computer sciences have definitely seen a lot of d consolidation within the industry, and now many of these
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players are coming back together. sortct, whitman said it is of the beginning of the way of and she wants to be ahead of it, rather than behind it. today's rates rising as we are seeing this deal with hewlett-packard, enterprise, itsh will be spinning off enterprise services unit. the deal is valued for 8.5 million dollars. we are seeing a huge gain and shares of computer sciences as win-win view this as a situation because these companies coming together can perhaps combat some of the slowing they have seen in their industry. in addition to that, the value is seen as positive. incidentally, hewlett-packard enterprise, as you can see, is rising and hp ink is reporting its numbers after the close of .rading looks like everybody is doing well today. scarlet: let's go now to the
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.eadlines mark crumpton has more. mark: thank you very hillary clinton and donald trump each one primaries in washington state. mr. trump us win moves him to it in 28 delegates of officially clinching the republican nomination. for mrs. clinton, there were no delegates at stake in the democratic primary. washington democrats already awarded their delegates to bernie sanders in march. president obama says he plans to use his historic visit to hiroshima with the japanese prime minister to reflect on the suffering of war and the need to take steps to prevent it. said he had no plans to reciprocate the gesture by paying his own visit to pearl harbor. the obama'sorts of will lease the mansion of former press secretary joe lockhart. the home reportedly has nine
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bedrooms and 8.5 bath and was built in 1928. the national hockey league participation in the next two winter olympics in south korea and china is still to be determined. in a bloomberg exclusive, the says why thater is still the case. >> we do not make any money going to the olympics, but there are pretty significant costs in we shut downhen relating to transportation, insurance, accommodations to players and their families. mark: you can see the entire interview in about one hour at 1:30 p.m. new york time. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. scarlet: global crude oil outages are at their highest
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level in years, but over the past five years, the unexpected production losses are just 2 million barrels a day. is this a cyclical phenomenon? can we expect that oil to eventually return to markets? what if these disruptions are more cyclical in nature? so, which is it? do these supplies come back quickly, or is this a structural long-term issue to plague oil? >> i think it is both. i think we have had a move up in the vulnerability of oil supply to disruption, and that is caused by conflict in war torn areas. the middle east at the moment is in a worse state than it has been for many years, and a loss of the longer-term off-line production is out there, but we are also seeing the effect, i think, of climate change, and more natural disasters, i think.
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you could attribute the fire's in canada to that, and the weather has become a big deal and certainly interrupted oil shipping and supplies much more than in the past. the arnold thing is the low price itself causing companies and countries, of course, to cut budgets. in that sort of environment, you tend to have things go wrong more often. the big thing on the horizon is venezuela where money is very short, and that is causing concern about production going forward. i think we should expect to see more of these sorts of disruptions. what that means for the oil you've got production being taken off but then also andng back, so predicting forecasting and anticipating future supply i think is much more difficult now and sets the base for a much more volatile price. scarlet: while you were speaking, we showed a chart you had in your report where you put
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the disruptions in different buckets. i wanted to explain that -- the red bars are technical issues. the orange bars are sabotaged. the blue bar is weather. the yellow is conflict. what was staggering to me is that the weather is playing a bigger part right now than any of the other categories. niñalso have perhaps la this summer, which could hurt the gulf of mexico. following on that, do supply disruptions beget more disruptions? is this a coincidence or something more deliberate? isi do not think it deliberate. there are structural things going on right now. we have had a structural shift i think in conflict in war torn areas.
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i think a lot of this is structural. ins going to be a feature the market going forward. we had a very high level of underlying disruption in the middle east, and we will get more of these sporadic outages over the coming years. this is going to be something we have to deal with on a coming basis. found iti also interesting that we can see how lower oil prices lead to conflict in libya or nigeria, but what's also compelling as if you do not have a lot of money from oil sales, you cannot repair stuff, so your infrastructure is struggling. your rigs are struggling, and that means you have more technical damage going forward, and that will not be resolved any time soon. and i think this is an issue that we've got for the volatility in the market.
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opec is not playing the balancing role that it did. clearly, with opec and now operating in a very different way, not really acting as a custodian of the market or trying to balance it, you not only have a higher level of disruption but also much less ability to smooth things out. what is important for producers and consumers is we have a much higher level of volatility to deal with, and that is a function partly of lower prices, i think. as you say, not being able to toe what we used to be able on supply in the past. scarlet: bucket little bit about the timing of these supply disruptions taking place. we have a seasonal time we do tend to get a rise at the start
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of the u.s. driving season. >> it is coming at a tricky time. the good thing is the largest single chunk of outages have been the canadian ones caused by wildfires, and they are coming back, so that in a sense helps. and it should, i think, help to upward price pressures of it. the demand side of the picture is looking good. we expect a pretty good driving season in the u.s., where gasoline prices this summer will be a long way below where they were last year. the eia is forecasting they will be at their lowest in years. the demand side of the picture looks pretty good. as some oft is that the supply starts to come back, we might see some volatility in the price and we could see a move to the downside. we do have a very large speculative overhang in oil, lots of net long positions out there being held by people who have done well but who may well
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decide this is a good time to take profits. of course, the macroeconomic environment is probably a little bit different, too. i suspect we are in a phase of a slightly stronger dollar, which was clearly supported in the first quarter, but may not be so supported in the second quarter. looking at you are print around 50, if that supply comes back online, what is your target at the >> we are forecasting it will average somewhere around the low 40's. wti perhaps in the low 40's. more of that production that comes back, the more quickly it comes back, the more likely it is that speculators decide to liquidate their positions, and that is the potential driver of volatility in the short term. i think we are due for some decent swings in the price before too long. got it.
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thank you so much. managing director of emea research for barclays. up, how the u.s. stacks up against the rest of the world in job creation. john chambers speaks next.
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watching are "bloomberg markets." was telling usie earlier, it's really a continuation of a rally. seem to be dealing with digesting the prospect of a summer rate hike without any big problems.
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alix: let's go live to abigail doolittle. abigail: nasdaq is now higher two days in a row, trading lower, though. the second worst drag on the day our shares of yahoo!, despite recent news that at&t will be interested in bidding for the company, despite earlier reports that they were going to pass. not long ago, "the wall street journal" did report that wall street and others were likely to $2 billion or $3 billion lower than expected. bullishecently put in a golden cross. this has been the 50-day moving average, telling us lots of buyers are interested.
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there could again be upside for shares of yahoo! scarlet: we did mention shares are higher, so what is helping? abigail: one of the bigger boosts his shares of cisco. last week, cisco beat estimates and also guided to revenue growth for the current quarter. analysts have been looking for a decline and driving a shift toward new businesses, including software-based networking. the ceo did say around the report that the company's long-term investments are paying off. scarlet: thank you so much. cisco, duringwith john chambers' reign as ceo, he billion tompany $1.2
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$47 billion. now as executive chairman, he is lead the company into its next wave of growth. what the waveibed of growth in tales. chambers: it is a time you get -- you either disrupt or get disrupted. 40% of american companies will disappear. it will not be global multinationals. it will be micro or start up multinationals that really are where the job growth will occur. it is important as a country we deal with these issues. also as a company, you have to deal with your future. >> is no question we are going through a fundamental digital transition around the country, around the world. why are we not seeing that show up in growth and productivity? it's different. is it better? the answer is it will be a replay of the 1990's, it on the other political party.
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president clinton did a very good job of leading the information age. 18ated in eight years million jobs, 17% growth in per capita income in america. the last time americans got a pay raise was 2000. you can understand the frustration of american voters wednesday from 2000 through today had a decrease in earnings. with a socialistic government, the president is outlining how they grow their gdp by becoming a digital country. he talks about a startup nation where they were the top startup nation in europe in january and february in terms of venture capital investment. he talks about removing the regulatory issues that slowed down the economy. coming back to the u.s., that's the transition we have to make. will beur job growth around startups and new companies. continue no plan
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matter who is the next president, no matter how this election cycle goes? chambers: yes, it does. i had the opportunity to talk to almost every government in the world, including our own, and i hope if it's a republican or democrat, they get focused not on the symptoms of trade or what happens because of trade, but on the underlying issues. my parents are both doctors. they say do not treat the symptoms and take a couple of aspirin. we have to get our startup economy growing dramatically faster. you all know this number better than i do. only about 60 companies go public on the nasdaq this year to 300.orm early 250 we are a startup nation. that's will job creation will occur. unlike france and india, we do not talk about that. 90% of the new jobs, regardless of if they are agriculture or
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retail, will require technology skills. our ability to make that transition as a company, as a country will determine our future, and we think -- i think we need to make that front and center on the american stage. up, tudorng investments is cutting fees on .ts flagship fund our more hedge funds going to follow suit? we will talk to a top hedge fund recruiter. ♪
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head the golden age of funds -- hedge funds may be over. a hedge fund announced it was trimming fees after a lackluster performance. scarlet: let's get some insight into the industry from one of the top hedge fund recruiters, the ceo of the iw group. what do you think?
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is this a sufficient response? >> we are talking about three underperformance, the fact that investors pulled $1 billion of capital, and an industry norm fee structure, , so i kindder duress of think it's missing the point. investors are not really excited about a slight discount for crappy performance. am i allowed to say that on television? think investors will pull capital as they are not happy with the performance and figure out somewhere else to put it. of twot really an issue and 20 coming down a little bit. it's really about value for the premium they are paying where they can otherwise by the index or do traditional asset management. what does this mean for
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other hedge funds? are they likely to follow suit? be a real there will weeding out of hedge funds. there has been incredible growth in a very short time. there are almost 9000 hedge funds today. we saw almost 1000 shutdown down in 2015, the most since the crisis. hedge funds can either decide they are correlated to the market and need to outperform in a material way or they are going to provide something different and not be correlated and run and theand be hedged job is not to outperform when things are good but rather to protect you when things are bad. if they cannot play for one of those teams and play well, i do not think it is an issue of coming down a notch. has the issue been the
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macro environment or the talent? are the guys just not getting the job done? >> great question, and i will answer you with a little bit of both. today, it's more difficult to generate output than it was 10 years ago and more difficult to generate asymmetric returns, but of a premiums more -- maybe i'm tooting my own point in saying this, but i do think that puts more of a premium and being able to figure out who is really good and can navigate that environment. i would say the definition of talent has become more exacting because we are no longer in an environment where if you think about the bull market we have , upfor the last 3, 4 years to last year, it was an environment where hedge funds were largely in the same things. they looked a lot like each lot liked they looks a the broader market. now we really need to find
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a morewho can navigate difficult environment. that means they cannot just go long. they have to be able to short. we're looking for skill sets that makes them able to win over time. will those skill sets come from people working at the big banks who are being laid off? >> no. i think the sell side has been largely picked over. i do think -- and you have heard me say this before -- that isple who -- the sell side no longer just prop trading has sort of gone by the wayside years now, and what is left our market makers and franchise guys, not investors, and the hedge fund industry is more involved today than it was 10 years ago, so there's -- there are enough funds to go into to try to find talent. we don't have to go to the sell side. scarlet: final question -- what
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are managers doing to keep people, to maintain the talent they do have to make sure they can get back on track? >> in this environment, managers have to make tough decisions. founders who make all the decisions ultimately, have to decide in a year if they are going to reach into their own pockets to pay a star performer, and if not, that person has a lot of options. it's going to be interesting to see what people do. coming up, greece gets 11.5 alien dollars to reduce its debt mountain. we will weigh in on the deal. ♪
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scarlet: it's 1:00 p.m. in new
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york and 6:00 p.m. in hong kong. alix: welcome to "bloomberg markets." ♪ scarlet: from bloomberg world headquarters in new york, good afternoon. are: here's what we watching at this hour -- there's hope for greece, the country reaching and $11 billion debt deal with the imf. a standoff between donald trump and house speaker paul ryan may finally be coming to an end with a possible endorsement as early as next week, but how will ryan explained his change of heart? scarlet: the national hockey league looked at revenue just under 4 billion dollars last year. can they talk that this year even with the decline in the canadian dollar? i asked the league commissioner in an exclusive interview. hockey later on. markets first. julie has been checking on the moves.
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day. a risk on julie: it is and it has been for a couple of days as we see the second consecutive game for stocks. the major averages holding pretty steady with these gains. i should also mention that we are seeing a little bit of an uptick in volume over the 20-day average. as we look at this risk on scenario, wanted to look at the various asset classes to see how this is playing out. we had oil inventories also today feeding into what is going with the trade in oil prices. there was a larger than estimated drawdown in crude oil inventories, which would seem to be bullish, but there was an unexpected build in gasoline inventories. we have seen oil kind of bounce around in the wake of the inventory report which hit at 10:30 and still holding onto a
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above $49 a barrel. we have also been watching the u.s. dollar today, and it is kind of taking a pause after the recent rally we have seen. i want to look at the bloomberg here and look at the relative strength index. this is sort of a momentum indicator. you see the dollar indicator on the top and the recent bounce and has have -- it has had. look at this momentum indicator. when it gets close to the red line, it indicates it could potentially be overbought. this is where it is potentially oversold. we are seeing, yields once again going different direction, so a little bit of an uptick on the two-year, little bit of a downtick on the 10-year, but still at relatively high levels. alix: that is a lot of curves. stocks, the big
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names are leading the way. ofie: and it has been some the cyclical names. this has been the theme, but it moreeen groups that are vulnerable. banks have been rising along with those rising generally yield, jp morgan, wells fargo, bank of america were some of the suspects we saw a rise yesterday and tech stocks are also seeing some strength today. large-cap technology stocks like apple is the company also talks about cutting jobs and further unit. down its smartphone scarlet: let's check in on the bloomberg first word news this afternoon. mark: the head of the transportation security administration says the agency will add 700 68 new screeners by
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mid-june to deal with increasingly long airport security lines. peter neff injured told the house homeland security committee that help is on the way. >> clearly, the summer travel season will be busy. congress and travelers working together can improve the passenger experience while we maintain security that we need. mark: he said several factors have contributed to added wait times this year, including more passengers and a shortage of applicants for the government's expedited screening program. the romanian hacker who accessed the computer accounts of the bush family and others has pleaded guilty to identity theft in federal court. he also admitted to unauthorized access of a protected computer. he also revealed that hillary
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clinton used a private e-mail server as secretary of state. fighting between iraqi government forces an islamic state outside the city of illusion has briefly subsided. this is the third day of a large-scale military operation to drive militants out of their key stronghold west of that debt. has helped the city for more than tate of years. a swedish court has turned down the request to overturn the arrest warrant of wikileaks founder julian assange. is still wanted for questioning in a case of rape. he has been holed up in the embassy of london since 2012. global news 24 hours a day .owered by our 2400 journalists back to you. "bloomberg markets scarlet: --scarlet: shareholders have voted against splitting chairman
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and ceo roles. exxon mobil shares have seen a 7.3% total return on an annualized basis. up about .4%.k is we are also learning on shareholders are voting 95 .9% against halting exploration spending. the vote was about climate activists wanting to spend less on exploration and more on dividends and buybacks. almost 96 percent voted against it. the idea is climate rules will make reserves in the ground and pouring billions of dollars in two exploration unprofitable. chevron is also facing a similar question. ifrlet: we will let you know there are any other headlines. greece is set to receive 11.5 billion dollars in aid after creditors reached an agreement in brussels. the 10-year he'll
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briefly dropping below 7%. it has come that up a little bit, but that did was the first time since november. alix: billionaire wilbur ross spoke earlier about the new deal. i think this is a very big, very positive development. it averts any danger of any default on the greek national debt. second, i think the imf will eventually win its war and greece will get the kind of debt relief it really needs. i think the imf has been right to hold out for that. suggests greek banks will need to raise more capital. you have exposure to greek banks. do you think they will have to raise more capital? so.: no, i don't think i think they raised more than they needed to last time around. the only thing wrong with greek banks is the prolongation of this agony.
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will there be the resolution? the has been holding back economy. it's hard for the bank to operate when you have capital controls. now that they have achieved this sovereign debt relief and putting in these austerity measures, some of which will actually help the economy. fewexample, they said a billion dollars will go by october to repay overdue payables that the government has owed the private sector. that's going to be a big stimulus and help the liquidity of greek companies. >> the imf has been talking about this for quite some time now. we've had yet another instance where they have had to back off. why are you so confident that sooner or later the germans will back down essentially? ross: because imf can write a big check and that's the lever they have. if i were a german voter, what i rather write a big check on my all in or let imf right part of the check? thatd, everybody knows
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greece cannot pay all that interest and all that principle back, so it is a charade. like all charades, eventually, somebody figures out what is inside the package. >> you are investing in greek banks. .ell us exactly where ross: we are investing in euro bank, which we think is one of the whirlwind banks and greece. when you think about it, the only reason the banks have a problem in greece is the government. it's not like ireland where the banks went nuts, made bad real estate loans all over. greek banks got into trouble because the government blew up. so it is a very different phenomenon. to invest looking more in greek banks? >> -- ross: we have been looking to have this thing resolved. if they were going to go into another default, which they could have in july, or if the
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government did not pass all these measures that would let the economy stabilize -- i was frankly amazed at the bipartisan support for these austerity measures. passed very difficult pieces of legislation on sunday, and the coalition held up, the little majority. >> i want to be clear -- now that we are past this hurdle, you may consider investing more in greek banks? will have to see where they trade, but my guess is this news has been very positive for the greek banks, and i would guess they would trade up. >> you are the expert in distressed assets. let's take a look at italy. 17% of total loans and we can bring the chart up on screen. it just keeps increasing.
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ross: i think italy has a historic problem with the banks from theery different greek problem. a lot of the medium-sized banks and greece were owned by so-called foundations, which were really local political therefore, their loan portfolios are peculiarly bad. >> something you would touch? ross: carefully, gingerly, maybe later on. i'm getting very interested in china in terms of the distressed loans. the government has announced that they have been trying to develop a program to securitize the distressed loans there. if they do that with transparency and with reasonable pricing, that would be a very good health for the chinese banks and create an opportunity for people like ourselves. >> just to wrap things up, your
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assessment of distressed loans in china, how do you gauge what is distressed? ross: usually, you see who is in trouble. the imf estimates something like 10% of the loans are not covering their interest. outt's pretty easy to find who is distressed. harder to figure out is how to rehabilitate them. rosset: that was wilbur speaking earlier on "bloomberg go." alix: this is "bloomberg markets ." we'll be right back. ♪
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alix: you're watching "bloomberg markets."
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some of theook at biggest business stories in the news right now. a sale sayliar with the lenders working with sandler o'neill to solicit offers, although the bank may decide to remain independent. it's the largest community bank based in north carolina. scarlet: "the new york times" says it is offering buyouts to business staffers. they recently offered buyouts in 2014 when they eliminated more than 20 positions. alix: new eu proposals would force netflix, amazon, and others to devote at least 20% of their catalogs to european content. will notays the rules help european production increase. let's head to our markets desk where julie has a check on individual company movers.
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julie: let's start with kissimmee. -- with tiffany, shares trading lower. first-quarter sales missing analyst estimates. revenue falling by 7.4%, and the company, among other things, being hurt or the stronger u.s. dollar. foreign tourists account for about 25% of u.s. sales and 40% of revenue in its main store in new york city. stronger dollar, they have seen a drop in those foreign tourists visiting the u.s. also, we are looking at express, missing estimates. cop sales falling by 3% compared to an estimate for a rise of 10%, essentially a victim of what we have been seeing happening generally. we are looking at into it as well, the maker of turbotax and other tax preparation software.
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earnings beat estimates, and the company raised its forecast, but according to a ubs analyst, there is concern about onlineating quickbooks subscriptions. he is not concerned about it, but he says that is what is to blame for the decline in the stock that we have seen. finally, a servicer for the telecom industry is up 17% today. the company says that the telecom industry is boosting network brands dramatically, and that is producing unprecedented opportunities for the company. we are also watching yahoo!, shares are following today. at&t is said to be interested in buying the company's internet is miss. at&t now interested. verizon was interested as well. remind us again who is dropped out.ho has >> we know verizon is still
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interested. at&t is interested. at least two private equity bids still interested. tpg is still in the game. 's quicken loans bid backed by warren buffett we talked about a week or two ago. those are the candidates at this at&t is new and a little surprising depending on your linens. six weeks ago, we and others reported that at&t was not interested, and perhaps they because ypng back holdings, the digital yellow pages, was interested. they are no longer involved, so maybe at&t has stepped up their interest now that they are almost -- now that their 50/50 entities is no longer in the game. possible. or maybe we were just fed wrong
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information. you hope not, and others reported this, too. we thought at&t would be interested three months ago. verizon bought aol. it would make some sense that at&t would want to kick the tires to figure out if this idea of buying programmatic ad technology, when you buy all this information for these hundreds of millions of users for the service, pair that with wireless subscribers, maybe sell advertising -- it does make some sense. scarlet: how long does this go on for? >> i still think verizon is the most likely winner. in some ways, yahoo! is a glorified aol. there are definitely similarities. if they are willing to go to the half point there and they already have the leadership involved in tim armstrong, who still is working for verizon, he could run a combined aol/yahoo!.
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i still think that makes the most sense. scarlet: thank you so much. there will be a lot more gyrations for this story. still ahead, house speaker paul ryan says he has not made a decision on donald trump, but he could be getting ready for an endorsement. we have exclusive details for you next. ♪
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scarlet: this is "bloomberg markets." alix: scoops just keep on coming today on bloomberg. the euro the house paul ryan saying he wants to end his standoff with donald trump. scarlet: it has been about two weeks since the pair met in a theirencounter to end feud. what did we learn from paul ryan's meeting with reporters?
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>> he did not come out today and do this endorsement, and we did but heect him to, realizes the tight spot he is in. what has happened is a real early test of his speakership. he painted himself into a spot theailing to endorse presumptive nominee and really put himself at odds with many of his own party, and most importantly, he prevents the party from truly coalescing ofind donald trump in terms donors and support. we think he did not really realized how the backlash would be in terms of how quickly other people would fall in line, but the longer he holds out this endorsement, the longer questions will remain about his ability to lead the party going forward in this election. scarlet: if the speaker does cave, do other holdouts fall in line with him?
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>> there are not that many holds out -- holdouts left. the speaker is the most prominent one. he will all in line eventually. there are very few options left unless something very unexpected happens, but the question will be how he does it. how is he going to coordinate this and explain away his prior resistance to trump's policy positions on several issues and, frankly, his antics. this was not a position he ever want to find himself in, but he found himself in it and is going to have to find himself -- find his way out. scarlet: trump is on the threshold of reaching the number of delegates needed to formally secure the nomination. do we know anything about a possible vice presidential pick echo >> that's a good question. i wish we all knew something here in washington. bob corker in many people's minds would be a good fit for him.
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he is also an independent kind of guy. his own man who makes his own decisions and speaks his mind. many people think that would be a good match. he is not well known outside of d.c. and outside of his state. there are so many names, chris christie keeps coming up, new english still being mentioned. i don't think we will have clarity on that immediately. there is still too much at stake for who is going to round him out and who will help him win space. scarlet: the secretary-general said hillary clinton plus use of the e-mail system violated the rules of the state department. what does that do to her effort to get away from this? >> this is the big political moment of the day that is roiling washington. this is not great news for her. we expected this report, and we also expected the conclusion at
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some point to this fbi inquiry, but as long as this sort of scandal, this issue continues to hang over her, she will have to answer the same questions. why did you do this? why did you not disclose these e-mails? why did you delete so many of the e-mails found on the server when it was found out? this really resonates with voters as well. people just do not understand why she did it, and this will keep that going. the gift that keeps giving for bernie sanders, at least. alix: still ahead, part of scarlet's exclusive interview with the nhl commissioner. hockey in vegas, anyone? ♪
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alix: from bloomberg world headquarters, you are watching "bloomberg markets." i am alix steel. scarlet: i'm scarlet fu.
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mark crumpton has more from our newsroom. mark: egypt has contracted companies to help locate the flight data recorders from the flight that crashed in the mediterranean sea. 66 were killed. a french and italian company will be working with egyptian search teams to try to find the black boxes, which could give clues as to what happened to 800 four and its final minutes. a state department audit blames hillary clinton and previous secretaries of state for poorly managing e-mails and other computer information. that is according to the associated press. it cites "long-standing systemic weaknesses related to communications. these started before misses clinton's appointment as secretary of state." more troubles for the embattled department of veterans affairs. the agency mistakenly declared thousands of veterans dead,
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canceling their benefits between 2011 and 2015. there's ea has reportedly acknowledged its mistake and changed the process for confirming deaths. close to 400 refugees arrived in sicily today. they were found on rubber dinghies two days ago, and their group includes 83 minors. all were refugees from sub-saharan africa, some from mali and senegal. global news 24 hours a day powered by our 2400 journalists, i am mark crumpton. the bank of canada kept its key interest rate unchanged at 0.5 percent, signaling the canadian economy will contract as alberta wildfires cut production. for more on the headwinds facing the country, we are joined by pamela ritchie in toronto. take on the boc's wildfires and growth?
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pamela: in terms of the hit to second-quarter gdp, the bank of canada is expecting on an annualized basis 1.25% of a decline to show up because of the damage that has been wrought because of the wildfires. in april, the bank of canada was looking at 1% growth for the second quarter. 0.25% shaved about off that outlook. it is something that will pick up later on. the no policy response needed, meaning they won't have to lower rates to stimulate the economy in a response to this. also in these notes, there's waiting for the federal reserve perhaps. talking to a guest later on our show, robert spector, who says it seems to be a placeholder comment from the
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bank of canada. alix: you mentioned you didn't need to cut rates because the wildfire issue will be temporary. what kind of bounceback could we see in the third and fourth quarters? don't want actually to look at this from a human tragedy perspective, but net, it looks like the rebuilding will add to gdp and perhaps a race -- era what has been markeds -- erase what has been marked as a decline. we also saw the loonie down today. it has been tracking lower to the u.s. dollar, now sitting at $.76. alix: pamela, thank you very much. staying with canada, canadians are big hockey fans, but may be less so this year. no canadian teams made the playoffs for the first time in more than 40 years. the loonie's gyrations hurt
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revenue at the national hockey league. the league booked record revenue last year of just under $4 billion. i spoke with commissioner gary bettman and asked if the league will get to $4.5 billion this year. at least in have the way we report things slowed up a tad because of the decline in the canadian dollar. if the canadian dollar were still at par, we would be $100 million or $209 higher, but i do believe there will be an increase over 2015, and we continue to grow year after year and set records both in terms of revenue and attendance. thelet: i also asked commissioner about other sources of revenue, including new franchises and advertising on jerseys. gary: i am on record as saying two things -- one, we won't be first, and clearly we won't,
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because the nba has decided to do it. if it happens, it will be dragging me kicking and screaming. we are going to be 100 years old in 2017. i think our sweaters have the deepest history. our fans respect and love our jerseys probably more so than any other sport. this isn't something we are running out to do for extra money. it would take a lot of money in the marketplace -- money, and the marketplace would have to make it clear this is something everyone has to do. scarlet: helmet advertising is out of the question? gary: stop it. aboutt: let's talk expansion. las vegas and quebec city have applied for franchises. what is the status? gary: not to take issue with your question, but if we are going to expand, it won't be to make money. when you expand and charge a fee, the fact is you are dividing up the pie in additional ways.
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there is a cost to the revenue stream, and overtime, it probably equals itself out. you want to have a good owner, good market, and a good arena. you want to do something that will enhance the league.we have been engaged in a process of evaluating quebec city and las vegas. it is a process we are engaged in. the executive committee board of governors that is focused on this process is not ready to make a recommendation. scarlet: will we see it as early as the 2017-2018 season? gary: the earliest we would expand would be for the 2017-2018 season, which means if we are going to meet that timetable and expand, we have to make an announcement in the next couple months. scarlet: a franchise in las vegas as we discussed would be another run at the sun belt hockey theme. learn from the
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atlanta thrashers experiment, the situation with the arizona coyotes? gary: the thrashers, for a whole host of reasons, whether or not it was the location of the arena, the market, that was aberrational. if you look at what is going on in tampa, a team that is in the final four, doing extremely well, if you look at the , thatrs in south florida franchise is stable and beginning to thrive. look at the dallas stars and how well they have performed. look at the anaheim ducks. , and thehe la kings list goes on and on. have a problem, they are reasons other than the temperature happens to be warm. ,hen you are in a newer market
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it takes more time to establish your selves, and some of the very abilities that can negatively affect you have to be overcome, but we like where our franchises are. is evan joining me now no b williams who covers sports. commissioner gary bettman, controversial figure. fans hate him thanks to three work stoppages during his tenure. gary bettman will be booed when he takes the ice to hand out the stanley cup, but he has a very tough job. depending on who you ask, he has done a fantastic job. revenue is up. he set record revenue for the past three years. attendance is rising. he is growing the game digitally and internationally. there is a lot he is doing that is positive. just don't ask the fans. scarlet: one thing he is doing is looking to expansion. vegas is a possibility, which is curious, because vegas doesn't teams.y sports
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the oakland raiders are looking into moving there, but other than that, it's a desert island. gambling has been the big concern for sports teams looking to move there. nhl's thunder.he the nhl has been looking at vegas. , it's past couple months been the first time we have heard the nfl and the raiders are a real possibility, and there's a chance the nfl becomes the first mover las vegas, which would be a bummer for nhl in terms of their prospects and how enticing that market is. the nhl is looking at quebec city. they are looking at vegas. they might choose both. they might choose none. scarlet: he did say that the earliest they might move would be for the 2017-2018 season. i asked him about the prospect of the nfl moving the vegas. he said he's not worried about that because it is something out of their control. is out of their
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control. hypothetically, scarlet: if they were to put a franchise in vegas, what would he need to do to make sure they stay good with the sports world? one possibility is you have to make sure about the environment -- the arena has to be farther away from a place you would place bets. eben: a lot of the sports leagues that have done stuff in vegas, like the nba which hosted theyll-star game there, ask them to take the game off the books. scarlet: gary bettman made clear that hockey is a small fraction of the betting that takes place in vegas. he says it's less than 1%. eben: that sounds right. there might not be as many concerns for the nhl. scarlet: in terms of the olympics, i know this is something get -- that gets a lot of play. european players want to represent their country when it comes to 2018 and 2022. they are waiting for their showcase to take place first. eben: there are two real factors.
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one is the world cup they have revived coming up this year in toronto, which they're hoping becomes the soccer model in which the world cup is the event that all international hockey fans watch, and the olympics becomes a secondary event. right now, we are not at that point, which is why you are seeing the nhl punting on the decision as to whether they are going to send their players. that discussion has to happen between the ioc and international ice hockey federation. i think the long-term play for the nhl is they would love to see the world cup take off and be more successful than it was in the past, and there's less of a burning desire for players wanted to get to the aerobics. scarlet: thanks for joining me. coming up on "bloomberg markets ," microsoft is slashing more than 1800 jobs, completing its exit from the smartphone business.
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what is the company's strategy going forward? ♪
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scarlet: this is "bloomberg markets." i am scarlet fu. alix: i'm alix steel. let's head over to the markets desk with julie hyman. technology,ng at with some stories in tech -- the biggest is the deal between hewlett-packard enterprises and computer sciences, hpe selling its computer services unit or spinning it off, and it will combine with csc. that in aere is somewhat slowing industry that these two players will be stronger together, and hpe will continue on with its enterprise unit after this deal is done.
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i wanted to mention hewlett-packard, the legacy hardware company, out with its earnings after the close, as is csra. both of them are also rising in today's session, and another tech stock to watch is western digital. mark moscow it's upgrading the stock to overweight from equal weight, saying that the hard disk drive industry is not going to zero, that there will be a place for it. that is why we see shares of seagate rising. western digital is in the process of buying sandisk. that's another reason to buy the stock. staying with tech, microsoft is accelerating its exit from the smartphone business, the company announcing it is slashing more than 1800
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jobs, most of them in finland. scarlet: joining us to discuss the company's strategy is senior i.t. analyst -- this move to cut jobs, not a huge surprise. absolutely not a big surprise. it's a rebalancing of whatever is left. they really don't want to be in the commodity business. everything they are going to focus on, whether it is making high-end pcs or tablets, it's going to be trying to showcase the value of microsoft software rather than hardware. how alix: much of the business is left to be shed? >> it doesn't look like there is much left. this looks like some of the remaining pieces. scarlet: is there an ecosystem to speak of at microsoft that consumers can wrap their heads around?
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alix: the ecosystem is from the productivity apps, skype, word, excel. even though you might be using your android phone or ios phone, you are going to start using those apps. if you use those apps, you aren't leaving their ecosystem. alix: the other news we got was that hewlett-packard enterprises and computer science court are merging. what kind of consolidation in the cloud world is this going to trigger? >> the biggest thing is, ibm, hp, fujitsu, these companies one been very focused infrastructure outsourcing, and that business has been declining the last several years. these guys are suffering. what is happening now, you are going to combine these entities. the ceo of csc is going to take a lot of cost out of the equation. scarlet: are you looking for more consolidation among the remaining players? >> fujitsu has a business
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in this case. i'm not sure if they are out there to sell this stuff or what is happening. ibm has infrastructure outsourcing. you have a $900 billion market for i.t. services, and ibm only has about $50 billion in revenue. it's less than 6% of market share. the rest is scattered through hundreds of vendors out there. alix: because of that, you aren't anticipating regulatory issues? >> it's too small, 6% of the total market. it should not spark any problems. scarlet: nevertheless, watch this space. thank you so much. it is time now for the bloomberg business flash, a look at some of the biggest business stories. ogle's self driving car project is headed for the motor city. the company is opening a self driving car center in detroit. google says having a facility in
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michigan will help them access top talent. regulators say they freeze the lender from restrictions last year. the u.s. accused wells fargo of not fixing problems fast enough. scarlet: lufthansa is struggling to find workers to fill hundreds of flight attendant jobs. low wages and years of labor conflict are complicating the airline's recruiting. but times a wants to hire 1400 cabin and crew this year. the carrier had brought on about 500 through this year. that is the bloomberg business flash. alix: job opportunity? coming up, we are going to go inside the bloomberg for a look at how to get some insight on countries' risk premium and expected market returns. it's fascinating. we will be right back. ♪
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alix: this is "bloomberg markets ." scarlet: brazil's stock index is up 25% this year, beating almost all of its latin american counterparts even as the country navigates a political showdown. are the gains sustainable? alix: yesterday, we talked with kevin kelly. he showed us how he uses the bloomberg for insight on the country's risk premium and expected market return. >> what we want to do is take a dive into the crp function. crp go, and if we take a dive into the terminal, what this function is doing is it is calculating a country risk premium for all the countries you see listed. it is comparing the expected return on the equity market and comparing that with the 10-year yield on government bonds and it's coming up with this risk premium. ,we are familiar with how yields are calculated.
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what is interested about this function is its expected market return. not based on historical performance. it is actually based on future analyst estimates, and it also uses a bottom-up approach. it is not taking analyst estimates. it is using a bottom-up approach in terms of calculating expected return for each equity within the index animal and that up into an aggregated value. scarlet:scarlet: within that function, you can come up with charts, and we have illustrated one of them. this is the country risk premium for brazil. kevin: you will see brazil has the lowest. it was negative for a while. that is a more interesting point. it's on more of an upward trend in year to date, but for most of 2016, it's that negative.
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essentially, if we think about it from an equity investors standpoint, if you are holding brazilian equities, you have to question what you're incentive is holding these equities rather getting a risk-free rate of return with government bonds. you have to decide as an investor whether you feel more comfortable in equity safety or the government's ability to pay. it's twofold. that premium has been upward trending throughout this year. part of that is because yields have actually dropped on these government bonds, but another more important part is investors are becoming more bullish on these brazilian equities. you can see that, another function plug. run the w h c function. alix: iran the function on the terminal, and it says estimates. what is it telling me?
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kevin: this will give a snapshot of analyst sentiment. you can see this is for eps and revenue over a one-month and three-month time period. over the last month or so, there has been a positive uptick in terms of analysts estimates. >> it>> has been on both sides of the equation. it has been lower yields because the political situation is resolved, but at the same time, analysts are upping their expectations for brazilian stocks. kevin: as you get a more stable brazil, if analysts, out and are more bullish on equities, you will see that market return uptick even more. scarlet: the best part of this is it is all live. it updates constantly. you are not getting something from yesterday's close. kevin: brazil has been at the bottom of the barrel for a long time. scarlet: kevin kelly, equity analyst at bloomberg. alix: when you use the crp function, you have to have a view on the country. why is the market return for stocks at 13%? why is there no premium?
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you have to make a call, and that helps you make that call. scarlet: it helps get you to a decision. coming up later today, and exclusive sitdown with bill gross erik schatzker will be joining. manager in los angeles. they will discuss central-bank policy and the global economy, all beginning at 4:30 p.m. alix: exxon mobil and chevron, both holding shareholder meetings, and both companies' proposals to cut expiration spending were defeated. we will have the details. this is "bloomberg markets." ♪
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>> it is 2:00 p.m. in new york, and 2:00 a.m. and hong kong. >> welcome to bloomberg markets -- "bloomberg markets."
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>> from bloomberg's world headquarters in new york, i'm david gura. >> i am shery ahn. > stocks rally on as traders worry about a federal rate hike. today,is still rising but it paired some of its gains after a government report showed that u.s. gasoline inventories unexpectedly increased last week. we will look at whether now is a good time to buy some of the big oil stocks. david: hillary clinton violated rules by using a private e-mail server while secretary of state, that conclusion from the state department inspector general. there is hillary clinton in blowing a park, california. park, california. let's head to the markets desk with julie hyman. julie: second day of a bump for u.s. stocks. we are looking at a 2%

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