tv Bloomberg Markets Bloomberg May 26, 2016 10:00am-11:01am EDT
this is "bloomberg markets," on bloomberg television. vonnie: we will take you from new york to london to qatar. here is what we are watching. oil rises over $50 a barrel for the first time in months. shares of energy and mining companies are gaining, as well as the currencies of oil-producing countries. mark: bill gross is trying to go short on credit, a position he says runs contrary to his instincts and training as an investor. vonnie: and a preview of the grande pre-where some of the world's wealthiest most gather. much more than a formula one race. all right, before we get to
that. let's head to the markets desk. have the three major averages trading slightly lower. this includes the dow, the s&p 500 and the nasdaq. the best sectors are energy, consumer staples and consumer discretionary as for the consumer being back today, relatively to the consumer staples sector, we have cost go -- cosco up on stronger levels. again, it appears that the consumer is back today, at least in some areas. well-knownook at two stocks trading higher, netflix and time warner. both in the news and the financial times. the financial times says apple may be looking to buy a media company. a top apple executive has
broached the idea of buying time warner. the owner of cnn and warner bros. -- netflix may be the better fit but we have shares of apple trading down. the company may be looking to diversify away from the phone business. vonnie: we have natural resources also making news. abigail: we do. we have a rally in the natural resources, starting with energy. wti crude is back slightly below, it had been above $50 a barrel earlier today for the first time in six months. gold is higher for the first day in seven days. copper is also higher, three days in a row. iny'd could be the weakness the dollar index, we do see the dollar index trading down today, perhaps helping the commodities. mark: tying in nicely to that,
the resources best-performing group rising by one point 3%, as 1%,ole went down by 1/5 of but it was the biggest two-day increase. it is pausing for breath after the two-day rally. and co-popular espanola, shares are falling by 24%. they say they need to write down more real estate assets and cut about 2.5 billion euros to repair the balance sheet. the spanish lender says it may suspend its dividend as "surgeon uncertainties could lead to provisions of 4.7 billion euros this year." shares in 2012ld
after stress tests. they built up balance sheet after the construction room, what a big decline. another big decline today with the daily and the general trust. the owner and the publisher of the daily mail newspaper, shares today, the 13% biggest drop in 16 years. it reported a fall in the first-half profits. readers are shifting to news websites and social media. it is leading to newspaper closures and job cuts. the chief executive said the declining ad market means the dnt media in which the daily housed,the metro are are set to deliver an operating margin of 10% for the year. they previously projected 13%. gainer, telecom
italiana, shares up 3%. the chief executive will receive a bonus of as much as 14 million euros if hemillion succeeds in the turnaround of the telecom company. he was named ceo two months ago. nice work if you can get it. vonnie: i would take it. let's get to the first word news. >> president obama says world leaders are rattled by the prospect of donald trump as president. obama is at the g7 summit and he doesn't know -- and leaders don't know how to take donald trump. >> a lot of the proposals he has made display ignorance on world affairs or a cavalier attitude in getting tweets
and headlines instead of inking things through. emma: tomorrow, obama becomes the third sitting president to visit hiroshima. meanwhile, two men on donald trump's team say an endorsement by paul ryan is imminent. he spoke to the presidential nominee last night. the splits to repair in the republican party. it is one of the strongest comments a british business leader has made about the referendum. the bt chairman says there is no doubt that leaving the eu would doubt the british and economy. he says it is already holding back investments and hiring. -- experienced a problem on the international space problem --
space station. it could resume as early as tomorrow. if all goes well, the pod will swell four times in volume. global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. mark: thank you. getting back to our top story today, oil is rebalancing. rent crude climbing above $50 a barrel for the first time since november. brent sinking to a 12 year low since january and it surged on signs of the global oversupply release. we are joined by javier blas. to what extent is the rebound in oil playing into the hands of the league of shale producers in the u.s.? a rebalancing of the market means a contraction in shale production in the united states.
javier: it is down more than 600,000 gallons a day since last year. , youow, with oil prices are trying to lock in prices for 2017, some of the shares of the business may be able to deploy new brakes. now, we are getting to the point , getting from $30 to $50, that was the easy one. $50 to $60, we will see. every time the price goes up, shale production comes back and then the saudi's take the pain were actually, no. it is like the delay in production comes back and prices could rise to $100. mark: there is a belief by many that the market will rebalance
in the second half of the year. let's talk about the supply part of the equation. canada, nigeria -- what is the situation? javier: we have lost about 50 million barrels a day in may. those outages took the market by surprise. in canada, there were expectations of trouble. but not what we have seen today. most countries have been affected in one way or another. we are expecting the market to be in balance by the third quarter of the year. these disruptions mean that probably we have to say in june, we are in balance and we can start seeing growth in inventory. we have seen growth in inventory for the last couple of weeks in the united states. it is a sign that it is helping. if that continues and nigeria may continue, and that will
facilitate the rebalancing of the market in the next few months. vonnie: to what do you attribute the fact that brent is now almost nothing? is almost nothere difference between the two. javier: the main reason for that over the last few weeks is twofold. one is the shale production in the united states is falling, so they need to attract more imports into the country. that is one thing that is driving. the other one is production in canada, it is only two days away the a pipeline into the united states. that is the disruption that is happening in canada and it is affecting the wti markets. that leaves the wti not having a major impact in brent. that is why we have seen them as
a parity. vonnie: will there be an advantage to being the first part back to market? will there be a rush? javier: i don't think there will be a rush. i think the companies who will be rushing are those in a more difficult situation. those countries that are getting calls from banks saying hey, the market is that $50 for 2016. do it now. because that is what the bank wants you to do. there are companies who will be hedging earlier that will put pressure on the market. companies who have more financial breath, a better balance sheet, they will be waiting. for now until the end of the year, the trend is going to be choppy but it will be upward. withose shale companies the balance sheet in a better shape, they will be waiting for next year, later in the year, when rent will be up higher.
american manufacturers are backing away from investing. orders of business equipment fell in april and it is the third straight decline. thanks tout that was the aircraft category. sears is planning to restore options for some of the more popular rams. the company may put brands like kenmore and diehard on the block. it's repair business may also be sold. that is the latest bloomberg business flash. let's head to the markets desk where abigail doolittle has the latest. abigail: we are looking at a rally in retail. o nicely weathered the difficult retail environment. and apparently, it was
cost-cutting that helps the shares. having its best day in more than a year. also trading higher, the company that owns tommy hilfiger and calvin klein. other brand shares are also surging. the ceo is citing strength in the key brands along with strength in china and europe. and the retail strength continues into the low and sector. dollar general is trading higher after both companies reported strong first-quarter reports. it raised the full first year forecast after they beat earnings. they missed sales slightly that they were high today. a record high for dollar general. we do have one retailer faring less well, abercrombie & fitch. the company is down sharply, plunging on the 13th straight sales miss on the same-store sales. down 4%. weak retailer.
vonnie: i was listening but we have a headline. the associated press is reporting that donald trump has enough delegates to clinch the republican nomination. this is from the associated press. it is reporting that donald enough delegates to clench the republican nomination. more on that, coming up. mark: still ahead, from brexit to china and mr. trump himself. we are navigating global risks. up next. ♪
you will see the shanghai composite has fallen. this is 17 right here. you can look at up yourself. things are looking calm in china's market now but not so much over the last year. our next guest reminds us that china will continue to fuel global risks. now, what kind of products will lead to volatility? >> we have products that lead low volatility access. we provide a way for people to capture the upside of the market. solutioni think, a that investors can use to navigate the global economy and the problems that are present in china. vonnie: how do you do that relative to china? nick: we have some broader
emerging-market products that do that. that i think it is more based on china's of avoiding fallout from the overall impact it could have on the economy. mark: what are the risks that china settles into a much lower rate of growth, like japan? nick: i think that probably is a high probability scenario. ofis an l-shaped type recovery. they have to recalibrate their growth. so the slower l-shaped recovery is most likely going forward. mark: another big risk going forward is the european banking sector. it is an update to mention it. banco as has announced further share sales, four years
after selling shares in the wake of stress tests. this is the legacy from the real estate slump in spain but we are feeling the legacy of the financial crisis here with in europe's banking sector, aren't we? it is prevalent. nick: we really are. the interest rate environment, negative interest rates are slowing the recovery process. we have a slow growth type of picture. the relationship the between bank for performance and interest rates is strong. i have gone negative and it has been a big headwind for the recovery. that is something that we will have to deal with. i bring it back to the idea that low volatility solutions work well in this environment. and we actually have a solution that is focused on europe, which has been able to capitalize on the risks that have been present. mark: as we look at the v stocks , our volatility index, it is at
half the level we saw in february. can you tell us about the type of solution that you offer? nick: really, what you are doing is picking low volatility stocks based in europe and it is recalibrating the basket every quarter. so it is designed to essentially provide some upside, if it is there and protect against the downside. recently, since banks are volatile and there is some spillover impact that is present, it is to avoid that trouble and really gave investors the ability to be in stocks that are less subject to the volatility. vonnie: i am having a problem with this because etf is based on the idea that underlying shares are there. there is an underlying share their at some point. so the next market meltdown, be it to the u.s. or wherever in the world, it is going to affect those? nick: it certainly will but when
you get into the factor based etf's, they have characteristics and they act differently than a traditional market cap aced index. the breakoutee are of risks performing better and it doesn't essentially capture the upside but it does protect against the downside and it is able to generate a performance by the stocks that are present in the portfolio. vonnie: one of the risks you see in the u.s. is a political risks. not just in terms of monetary policy but fiscal policy depending on who is elected. i want to play you some sound from president obama talking about world leaders being surprised by the republican nominee. president barack obama: they are paying close attention to this election. it is fair to say they are surprised by the republican nominee. they are not sure how seriously
to take some of his pronouncements. but they are rattled by him. vonnie: are you actually saying that a donald trump presidency or some kind of uncertain path between now and november could cause an equity market meltdown? nick: i'm not sure it would cause an equity market meltdown because people are offensively positioned as we stand today but i do think it creates the chance for volatility, uncertainty and i think it makes for a choppy market. historically, the stock market has done well from june-october during presidential election years. it is up 19 out of 22 times. with the injection of donald trump and the potential for change, people are uneasy. they want to see more what we will actually get. we will get a better idea of that once we get to the convention time.
he signaled that he might move to roll back from a dodd-frank or for move some of the executive orders. do things like change the kyoto treaty. so he is trying to tilt towards a policy that is pro-growth. he has to gain more trust with the marketplace. mark: nick kalivas, thank you for joining us. bill, still ahead, why gross is trying to go short on credit. a position he says runs contrary to his instincts and training as an investor. ♪ okay, ready?
markets," on bloomberg television. emma: donald trump has reached the number of delegates needed to clinch the republican nomination for president. it was put over the top by a small number of the unbound delegates, who told the ap they would support him at the convention. he is the only remaining candidate in the race. he will accept the nomination this summer. hillary clinton is leading donald trump i seven percentage points, that is according to the latest online poll for bloomberg politics. family incomes of 30,000-70 $5,000 incomes, clinton was backed over donald trump by 46% to 39%. bernie is making marijuana an issue.
sanders told the crowd he backs a proposal on the state ballot that would legalize pot. sanders does better among young voters then hillary clinton. in iraq, more clashes between the islamic state after the fourth day of a large-scale military operation to drive militants out of the key stronghold in the west. meanwhile, separate attacks in that dad and new write-downs have killed at least 12 people. police say the deadliest happened north of baghdad. electricalsome workers have joined strikes at oil refineries, cutting power. workers have walked out, that has created gasoline shortages. the strike is protesting the presidents proposal for reform. businesses are warming of
economic damage if the strike continues. global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. thanks. bond king bill gross is trying to go short on credit, a position that runs contrary to four decades of instincts. unconstrained fund and spoke exclusively to erik schatzker yesterday at the fixed income event in california. erik schatzker asked him what defensively positioned means. have a listen. >> it means there a short and that hasbonds, always been the case with unconstrained, because unconstrained investors by mandate and nature try to eliminate duration exposure. credit,, in terms of
but insuming for risk some cases, selling credit risk. erik: you are short credit? >> increasingly trying to be. erik: quiet trying? >> it is hard. it is hard for all investors. 35-40-year-old veteran, so to speak. i have grown up and warren buffett has grown up and other investors have grown up in a time when markets have always snapped back and when risk has been validated, going forward. so it is really hard to train and change your psychological makeup, and to be a hedge manager that is comfortable being short. i tried to convince myself and
clients, and clients tried to say bill, ifthey this is the scenario, why are you just trying to reduce risk? why aren't you on the other side? and i say, i'm working on it. i am an investor that ultimately does believe in the system but believes the system itself is at risk. erik: what are some of the practical options to shorting credit? >> not much. erik: so when you say you are trying, you mean psychologically? >> yes, at the right time. it is delicate between trade and a long-term thing. for janice, $2.5 billion, there are no practical limits. you can buy protection on high-yield, you don't have to
short companies. erik: you don't have to go single name? >> no. so it is relatively easy to get there, it is just that it comes at a cost. it comes at a cost because instead of realizing spread and yield and -- you pay for it. and that, that would be my warning to all investors. all investors are used to setbacks and higher and higher moments, in terms of the market and rejuvenation, and going back to the good old days. that we are in a different situation now. there will come a time when pain, as opposed to receiving, becomes the way to reserve capital and make return.
erik: if your inclination is to re anywhere is the where you do feel you are taking risk? is there a risky position? >> sure. that is my traditional feeling with volatility. selling volatility can earn an investor money. typically, because it is an insurance premium. warren buffett would appreciate that. although it he doesn't sell bollettieri -- volatility explicitly. there is risk because when markets move quickly when you sell volatility, you are selling trade. you start to lose money. is, it is that if
you are selling risk in terms of itself but the system disappoints to quickly, then the sale of volatility begins to lose money that is more than the profits on the credit side. aaron cohen where do you feel you are being most contrary and now? , mostterms of volatility investors recognize, and i do too, that there is volatility everywhere. is not historically low but it is at 12 or 13 and it is close to a historical low, certainly for a time in which there are uncertainties with china and so on.
erik: a lot of people would think -- >> they would. it is the same thing with the bond market. it is very, very low. so it is not a great time to sell volatility because the price is not low, in terms of the dollars. erik: yet you are anyway? >> i'm turning it back but as i have indicated, it is part of me. there is a bill on the shoulder and a bill on the shoulder. making a transformation. erik: what would it take for the bills on both shoulders to agree with each other? >> to start shorting credit? erik: or to find yourself reluctant to go? , itt would take a moment
would take a recognition that and china was not growing could not maintain a 7% growth rate. erik: we are not there yet? >> you have to believe in fairy tales to accept the chinese numbers. they claim we are at 7%. china is the growth engine. if china doesn't really chug up the mountain like the little engine that could, i think i can i think i can, then that does affect prices everywhere. so that would be one. what would another be? brexit. let's not go overboard that that could be a moment. something with greece, greece is
not resolved and the imf has their stance. we know was ill is in a recession that supposedly is recovering politically. but they are in a deep hole. we know that venezuela politically and financially is a disaster. so you know, there are lots of things. and maybe the fed itself goes 2-3 overthose who say the balance of 2016, followthrough. and the market can't handle it. mark: bill gross, speaking to our own erik schatzker at the 2016 bloomberg 16 income event. coming up, pressure raises $9 billion in the middle east.
mark: this is "bloomberg markets," i am mark barton in london with vonnie quinn in new york. we will check on the markets with 45 minutes left in the thursday session. we have a small gain, not as big as the previous two days. that was a gain of 3.5 percent of the stocks europe 600. investors positive for breath today, have a look at the industry groups that are making waves on the stoxx 600. they seek resources are at the
top of the pile. energy was up earlier, a little bit lower now that brent crude has crossed $50 a barrel for the first time in six months. media stocks and bank stocks are lower today. toko popular says it needs write off stocks. the daily mail and general trust reported a drop in first half profit. in the currency space, quickly, sterling is up against the dollar. he highest level since january. in february, it fell to the lowest level since 2009. the euro is up one third of 1%. data outget we had gdp of the u.k., showing the economy did grow by .4%. qatar sold $9 billion in bonds yesterday. tois pushing 2016 offerings
a record 29 billion for the first half of the year. joining us now with more on these record sales is lyubov pronina, who covers the emerging markets for us. why did it need to sell double as much as investors were expecting? lyubov: basically, it needs to finance and raise more money. countries from the region are running deficits, because of the slump in major commodities and oil. this is a way to raise money, and a lot of money. it is an unprecedented deal. recently we had abu dhabi come into the market with $5 billion in on sales. and qatar in the past was a big issue. this is really unprecedented. next, we could have saudi arabia and the region itself is showing a record first half.
mark: just the fact that it has plonked so much debt out there, it ensures that there won't be other offerings in the near future, other big offerings from the countries you were mentioning? lyubov: there are expectations that saudi arabia will come to the market with the first international bond sale, and people are expecting a big volume as well. the country has said it will be a significant amount, but we don't know exactly how big it will be. some people are comparing possibly to qatar volumes. vonnie: so it is great that the bond markets are getting more sophisticated and liquid, however, the flipside is that this is the product of stress. lyubov: yes, indeed. when you pour so much money into , itmarket, into the country
has to be digested by the investors. and also by everyone else in the region and across the world, they are looking at such big significant deals because there are lessons to take away home, to analyze what happens and what to expect next. vonnie: it is a sign that the likes of qatar and saudi arabia have to access capital markets. they need this money because oil prices are so much lower. lyubov: yes, that is true and it is a major commodity. this is happening at a time when countries that have significant big-ticket infrastructure ,rojects, for example, qatar which raised $9 billion in the yesterday's bond sales, they need to cover $200 billion in
infrastructure spending. they are obviously expecting a big event, the world cup coming and that needs to be addressed. it is a record. how does this compare to elsewhere in the emerging market space? lyubov: if we take emerging market issuance this year, there are expectations that it won't be as big as last year or as , becausears of 2014 the market conditions are challenging. but we are seeing that the middle east is the region that is driving emerging market this year. elsewhere, asia, traditionally is big and we see a revival in latin america with the giant argentinian deal. and we did have a big -- recently and we have russia back in the market. mark: that is bloomberg's lyubov pronina telling us about the
park sale. time for a look at some of the biggest business stories in the news right now. saudi arabia regulators have asked banks to explain why they are letting speculators set the currency pay. that is according to people familiar with the matter. it comes less than four months after the saudi government blocked options that allow bets on currency devaluation. it is a sign that the home selling season is off to a strong start. home sales rose more than 5%, the biggest increase since october 2010 in the western u.s.. contracts to buy previously owned homes are up more than 11%. the most in 15 years. corporation rose in the trading day after raising $1 billion in it biggest corporate ipo -- has sold 44.4 million shares at $23 a piece, that is the top
for a lot of people, it is the bucket list item. it is a really big deal. itself is aco labyrinthine city, that is why partially the event there is so major. how many people go? hannah: thousands and thousands. it draws the world's most wealthy people. it is through the streets of the city so there is unlimited amounts of space. there are grand stands and balconies and everyone vies for the best vantage point that in terms of the 50 -- city space, thousands of people can see be race. mark: it is about the party, isn't it? monaco is synonymous with glitz and lemmer and partying. hannah: that is definitely the truth. there have been a couple of years when i've gone
and i have been on a vespa the whole time. space is at a premium. mark: how do you navigate the town? what do you do, where do you go? what is the best way to optimize the experience? hannah: by the best ticket you can afford. you get what you pay for. using get them as an offensive as 71 euros and you can pay up to 2800 euros to get the premier package. you could bring your jot in and watch from the deck of your boat. make friends with someone who owns a home along the race course. you will get what you pay for. if you can pay for a lot, it is worth it. vonnie: in your story, you say the top ticket costs 2800 euros, which is not exorbitant. but you're are not getting access to the parties. hannah: exactly, that requires a
bit more finesse. vonnie: it is not jersey city and f1 did try to get to jersey city at some point. it manages to not have that many accidents. that amazes me because you have tracks that people get killed on. but monaco has never had a for talladega. hannah: it is a special course. it is a slow course because it has so many turns. there are 78 laps in this course. so technically it is difficult. everyone has to drive slower. vonnie: and it is the one that all the names want to win. hannah: it is so procedures and they all want it so badly. vonnie: i wish we could go. hannah elliott, thank you. mark: coming up, volatility in the pound jumping up to the
highest level since 2010. and manchester united's fifth place in the english premier league may have gotten the manager fired. but the team bottom line is fine. our global head of sport joins us for a report. a quick check on the equity markets. little changed after the biggest two-day gain since february. these stocks europe 600 is down by 1/10 of 1%. a small decline. gains in germany and france. big news in the banking industry. the spanish lender has written down more real estate assets with the shares plunging as much as 26%. ♪
mark: i am mark barton. you are watching the european close on bloomberg markets. ♪ mark: we are going to take you from new york to london to milan. this is what we are watching today. commodities on the move. and brent crosses $50 a barrel. iron ore rolling to $50 overproduction issues. vonnie: saudi arabia set to probe think currencies products as a new currency code of conduct report is rolled out. it's changing the fx industry under way? mark: the real madrid goes against athletic oh for the league title. we are breaking down the massive lu of europe's biggest football club -- massive value