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plunge by 10% before snapping back in less than 60 minutes. decision, opec meeting in vienna. investors are braced for choppy markets. jonathan: a warm welcome to bloomberg , i'm jonathan ferro alongside david westin. from your long weekend and malcolm back to megan murphy, our washington bureau chief. megan: it is jobs week. david: we also have some terrific guests for you this morning. mark otten osseo will talk about
why he is endorsing donald trump for president in another exclusive you will see only on bloomberg tv. jonathan: a brilliant morning of conversation. let's check in with our bloomberg team for in-depth coverage of the stories. the one minute plunge and chinese stocks, and a look at the job report. vw still being hit by e-mail and cheating scandals. let's begin in frankfurt, paul gordon joins us. in-line but still not great for president draghi. paul: inflation just below zero, employment just above 10%, a flight improvement and reason for the ecb to say the stimulus
is starting to work at a long way to go. where did the inflation come from? it has never really come from industrial goods, it used to come from energy and that may return briefly but it is hard to see that sustained. services inflation is where the ecb needs to see prices increasing and that is a stretch at this moment. jonathan: if you are looking for a company that probably does not need to wait is germany. -- qe is germany. hand, they are likely to provide their inflation projection a little bit higher but he does not want to strike too much of an optimistic tone? paul: inflation projections may be revised a little higher or unchanged but the last four revisions have all been down so that is the first good news of the year for the ecb. there will be a writer --
reiteration that the ecb needs time to feed through. there was a discussion at last meeting that monetary policy will buy time that cannot solve governments and if do not use this time to push through structural reforms there could be trouble ahead. jonathan: a busy week for paul gordon from frankfurt, thank you very much. think muchou do not can happen in a minute, think again. it's good life to hong kong. what happened with the market today? markete chinese futures in the 10:00 hour plunged 10% in about a minute and snapped right back up to where it had been. a bit of a flash crash. chinese stocks and up closing higher on the day. does this raise some basic questions on the markets and how they are functioning?
was a fat finger trade rather than anything more structural from what we have heard. the market was up about three and a half percent, the biggest gain in about three months. there seems to be growing sentiment that the msci will include china and its emerging market estimates. friday's jobs report is seen as key as why the fed will raise rates in june. michael mckee, what are we going to be looking for on friday? fedael: the key to the might break off in the lock. if you are not on your company's payroll on the 12th of the month, you are not counted. 31,500 verizon employees were off the payrolls during the month of may. take a look at a chart i brought along that shows the number of
strikers. we have not seen this many since 2011 in august when verizon was on strike. look at what happened to job creation that month, 117,000 jobs created in july, zero that august. we could have the same sort of jazz performance and it could also hit hours worked an average hourly earnings. hike and she wants to given the comments she made last week, what do we think they are really going to be looking for underlying? michael: they are focused on prices and wages. they do want to see wages go higher and they will adjust for the number on friday but they will be looking at today's number on pce prices to try to figure out if it is matching what we saw in the cpi, if prices are actually rising at a faster rate, and also look at
iso numbers to see how they are doing, a big week of data. the omissions cheating scandal continues to take a toll on vw. let's get the very latest from matt miller. i came out today. what have we learned? matt: earnings were quite positive. 3.4 4 billion euros in operating earnings. even if you strip those out, they had 3.1 billion so counting estimates. the problem is the volkswagen brand itself. the world's largest carmaker in the first quarter, but the main unit hadnd's profit dropping to about 80 billion euros from about 500 20 billion euros so that is where the real destruction has come because of the diesel scandal. david: what are the analysts saying about the vw stock?
you take a look at anr go, over the last month 10 analysts have raised their rating on this stock to a buy. a number of analysts have cell thattings to a not nearly that many, about 2-1. you are putting a price target of 144 euros which is not so much above where it is trading right now but the drop we saw today after the earnings report only brings you back to last tuesday's price. it looked like investors were running the price up and taking profits today. david: matt miller joining us from berlin. two words, event risk will dominate the week ahead. and opec decision and meeting thursday and friday and the payrolls report. if you are looking for price action, look no further than china. the equities market higher by
3.35%. the futures market a 10% drop in ofn a snapback in the amount about 60 seconds. in japan we are higher on the session, closing up about 1%. the report that the prime minister will postpone the price hike -- tax price hike. streak,nine day losing the longest since march 2015, we strike -- strike those losses with a gain. a little bit softer on the brent contract, blasting through $50 a barrel last week. $49.48. that number at the dollar in focus. let's get to abigail doolittle. abigail: one of the top stocks
we are watching, monsanto shares were trading higher following a report that bayer is prepared to sweeten its bid following the rejection last week of the initial $122 per share bid. some believe monsanto is looking for between $130 and $140 per share. , a few of theope european apple suppliers trading down at this time following a nikkei asian report that apple could extend its iphone product cycle from three years to one years and that would reduce the supply chain. soaring and the premarket are shares of sella tour, up more than 40% on the news that jazz pharmaceuticals will acquire the , putting them in control of an experimental drug for a rare blood cancer.
those are some pre-market movers. megan: let's get an update on what is making headlines. korea's latest attempts to launch a ballistic missile appears to have sale -- failed. kim jong-un's regime try to launch the missile in violation of united nations resolutions. at strike against oil refineries and france is starting to hurt the construction industry. supplies cannot get delivered to building sites because of fuel shortages. in pro basketball, golden state is back in the nba finals. the worry is beat oklahoma city up -- the warriors beat oklahoma city. steph curry had 36 points. starting thursday is golden state versus cleveland.
kind of a disconnect between the equity market mainland and some of the bearish speculative activity happening offshore. doug: the chinese economy is really what is important for everybody and while it is still growing at a fairly strong rate, it has slowed down quite substantially and i think the slowdown has to be looked at not in real terms that in nominal terms. the real growth numbers and expectations but also the adjusted numbers. when we add those together we have a slowdown in real and inflation, and nominal slowdown is the most important. combined with that nominal slowdown with large amount of debt outstanding, it is not an excellent picture for investing. jonathan: the big question is what is going to stop the fed. if you look at what is happening in china, dollar yuan climbing back to highs for the year.
not a concern for investors as it seems for now. doug: i think the chinese have made it clear they are not looking at the chinese u.s. dollar trade sales rate. they are looking at it on a trade weighted basis and it is doing about what you would expect it to do, given the fact that the dollar has caught a bit again because the market is expecting the fed to increase interest rates. megan: how much are you still counting in brexit and near scenarios? -- in your scenarios? doug: the polling looks like they are going to remain. the day, the british economy is only about 2% somethingdp so is horrible happens to the british economy, unless there is tremendous spillover effects it should be relatively contained. what does everybody think about the eurozone as a whole if one
of their members decides to leave, that is the key question, and we do not know the answer. janet yellen,are do you pay more attention to china as you make your rate hike decision or europe? which figures larger? you: isn't it strange that are asking me the question of whether the u.s. fed is going to pay more attention to china or the europe -- or europe? i do not think that is particularly healthy and i think she should pay the most attention to the u.s. economy as if they were the right policies for the united states, they will be right for the rest of the world. i think it is a gradual normalization of interest rate. megan: do you think june is a real possibility? doug: the market only has it as about a 30% probability and i would say it is a little bit
higher. the key money was made when there was only a 4% probability. 34% or wherever we are now, and i'm thinking it may be closer to 50, that is not quite the same odds that i like when it is so heavily weighted toward one side. jonathan: what really interests me is about a month ago we would've had to discussion that went something like this, the fed is not going to do anything to the rest of the year. now we talk about what stops them, a radical change in the conversation in less than a month here at what do you make of the rate of change of the market sentiment? doug: i think the fed is to blame for some of that. i think what the fed should be doing and hopefully will be doing is to run the correct policy for the united states and the markets will react to that correct policy. jonathan: doug peebles will be
david: this is bloomberg , i'm david westin. the fed's next move, when will its raise its rate? >> it is appropriate, and i have said this in the past, i think for the fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months such a move would be appropriate. david: doug peebles still with us. you have interesting point of view. you are a cio for fixed income
and you say not all fixed income is -- not all fixed income is created equal. doug: there are those that are treasuries,ing -- german bunds, and those that are returned seeking. that investors are very wise to understand the difference of those. i often say that nobody needs bonds. some people need risk mitigating securities, some people need income, some people meme liquidity. -- need liquidity. let's figure out what do the clients need. do they need income, do they need stability, or liquidity? david: how much risk are you taking on when you go into risk seeking? doug: prior to july 2014 when a be believes the fed started tightening policy, because that is when they started doing the
qe. we have had a pretty large selloff in the high-yield and risk taking markets so in that space we are edging out the risk curve because we think the yields or spreads available of close to 600 basis points offer some pretty good opportunity in the space. mitigating side we are pulling back a little bit as we do believe the fed is going to increase interest rates. it is also important to go global because not only are we talking about when the fed raises interest rates or how much, outside the united states there is not a whole lot of rate abilityoing on so the to diversify your economic cycles is extremely important. jonathan: i wonder whether we need to rethink what you said, risk-taking versus risk mitigating. the question is whether big capital has been made this year.
if you take that risk that apparently is not one, you would get a big capital gain. do we need to rethink that? doug: the question is are we going to get more capital gains going forward? i think we have taken in the bulk of the capital gains. you bring it up japan and the superlong's. when we look at japan and our research on the japanese economy, they are pretty well divorced. the only thing that is really driving the movement and the jgb market is what is the bank of japan doing, are they buying or not buying, are they buying more? that is what is driving the price. megan: when you look at communication from the fed, where we at in the communication , our investor saying there is too much? is the fed doing an effective
job of communicating this move how much and when? trying think the fed is to the question is, are they succeeding? no doubt there is a greater degree of transparency. we joke about what greenspan used to say, if you think you understood what i said you probably made a mistake. pendulum wask the way over to one side and now the fed is trying to communicate what it is doing very clearly. the question is, are they succeeding? i would probably give them a be plus. --b+. for the right investor you are saying it is time to go into more risk. how much is that dependent on there is not going to be a significant downturn? doug: when we look at the u.s. economy we think the u.s.
economy is doing reasonably well. it is not gangbusters by any stretch of the imagination. i think a rate hike would be healthy for the u.s. economy. the notion that we currently have u.s. consumers with more money in bank deposits and money market funds them i have mortgages outstanding is telling us, and by the way, all of those mortgages are basically fixed right now. if we see an increase in the short end of the and investors who own a huge amount of that risking rate, the most free securities they could own, if they started getting some earnings on that maybe they would actually get a little bit more in terms of confidence and start to spend a little bit more. jonathan: low rates are the problem and not the solution? doug: i think it was the right solution to the problem that 2009, but i008 and
do not think we have that situation anymore. we still have a fed funds rate that is 25 basis points. depending on whatever measure you want to think about in terms of inflation, that is a real low nominal rate for an economy that probably has overall somewhere around 2% inflation. david: doug peebles, thank you very much for being with us. jonathan: friday's big number, a huge week for the u.s. economy caps off by the job report. what would give janet yellen the confidence to hike in june? ♪ get ready for the rio olympic games
down about 1/10 of 1%. what a week we have ahead for you. payrolls friday, and ecb decision and opec in vienna. the china csi 300 trading much higher, closing up 3.35%. a flash crash in the futures market having a lot of attention in china. that is the big event payrolls, it is a softer dollar coming off a two month high. as risk comes off the boil just a little bit, look to the commodity market, gold on a nine day losing streak. 1%.nap that, up 6/10 of .rent down about one half of 1% wti trading at a little bit of a premium to brent, down for tenths of 1%. what a week we have over the
next four days. david: we have a lot to look forward to. we are just under two hours before the opening bell. euro area consumer prices failed to increase for a fourth consecutive month. quite a day of trading in asia. chinese stock index futures plunged by the daily lannett before snapping back in less than a minute. the csi" 4%. profit at volkswagen crumbled 86%, highlighting the challenge the carmaker faces emerging from the cheating emissions scandal. , governmentraq forces are slowly making process -- progress in their effort to retake the city of falluja. they have recaptured about 80% they had started advancing into falluja itself where thousands
of civilians are still trapped. k a new poll shows european union supporters still lead those who want europe to leave. 46% want to pull out. 23.referendum is june the biggest business lobby in the u.s. is launching a campaign to keep the republicans in charge of the senate. it is being led by republicans who support donald trump and those who oppose him. froml news 24 hours a day our 150 bureaus around the world. tom keene joins me from bloomberg surveillance radio. tom: it is going to be an interesting summer. jonathan: is this the quiet
before the storm? if you look at volatility, euro-dollar one-month volatility and compare it to three months, one-month trading at a premium to three months. that near-term risk seems to be dominating markets. tom: and you wonder what it is. there is a conflating of events. michael mckee mentioned jobs could be light because of the verizon strike. you just wonder within these events what will be the thing the market will latch onto. i will be direct and say my experiences looking at the head lines, there is nothing like a draghi press conference. jonathan: i would say the ecb on thursday is slightly more predictable than what is to come afterward edges the potential for rate hikes and then a week after that we have the referendum in the u.k.. what happens next? tom: where do you stand on
central bankers will amend or it just to the brexit vote? will they? jonathan: the fed has got a .eeting a week before i imagine they will be looking to gauge the polls. if the polls are narrow, are you really going to hike rates a week ahead? tom: just a look at what the markets are saying, and i noticed the two-year u.s. yield at 0.293 with a bit of higher yields in germany. certainly the tone going into the series of events is, can i say june or july? yields are supported. jonathan: i would see in the fx but in the options market we see something incredibly different. if you look at cable and pound volatility, it is sky high.
you are trying -- seeing a lot of people trying to get downside protection. i will go with that, and then you get the strange word convexity or the pendulum going to far one way. i am not really worried about june 1 origin second. june 21, how 13 or the markets will adapt. jonathan: if i were to edit your bloomberg terminal, and i gave you one headline would it be the ecb or the payrolls? the miracle that is the boston red sox. jonathan: tom keene, bloomberg radio. what time? tom: 7:00 i believe we start. megan: the big event other than
the red sox is friday's jobs report. economists forecasting a gain of 160,000 jobs with the unemployment rate holding steady at 5%. let's bring in carl riccadonna. it is going to be an interesting numbers. what are you going to be looking at most? potential verizon strike impact, they have been on strike several weeks that covered the payroll period, so we have to isolate that impact. in thethis slowdown economy headed into the first quarter. as we saw last week, a lot of economic data series weekend over that period. if that number showed some contagion from the economic sluggishness. last time were saying
we were discussing this we needed to see 200,000 to ease the market scares. 160,000 andoking at we have missed last month, what is a number do you think would cause alarm? lower, i thinkr there is some doubt. megan: would it cause the fed to think about not hiking in june? carl: the hurdle is very high in june so way payroll number that i think justifies fed action in to 25 orhink they need better. better and even under that scenario, i think they will get cold feet. manufacturing and nonmanufacturing are out this week and they have been struggling to hold above 50, especially in the case of manufacturing. there are two interpretations of the data this week.
if we see a slowdown in the x inike number and a perk up average hourly earnings or wage pressures, we can sit back and say we have reached full employment, the price of labor is going up so supply and demand tells you that demand for labor should justify a slower pace of hiring in that environment. if we do not see wage pressures and you still get a slowdown it lends credence to the argument that the economy is being bogged down. david: it is not just how many people are working but how much they are making. what would be a robust number on wage increases? carl: i would say in the 5% to 6% affinity after you adjust for inflation, that should justify the type of consumer spending's we need over the course of the next couple of months in order to keep in line with the fed's
target. we have had some upward revisions to household income, putting the consumers on slightly better footing for stronger performance. jonathan: the bloomberg economics supply -- surprise index, a 16 month high. quite a remarkable turnaround. what is that telling you at the moment? economists have been extremely pessimistic over the first quarter. there was concern about that impacted a but it lot of other economic indicators as well so maybe we are on course for 2% growth or better. i would argue, this is year seven of the economic cycle and every year we seem to clock in 2% growth so why should we expect anything different going forward? the game changer is the fact that we are pushing through full
employment meaning more wage pressure and definitely on the back half of this year. the wage pressure give consumers the tailwind meeting we start to break out of this 2% band. megan: carl riccadonna, always fascinating. david: another big name in business endorses donald trump. capital founder tom there explains why he is backing trump. ♪
we willsive interview, hear how tts are affecting high-yield bonds. vonnie: here's your bloomberg business flash. airlines have a problem as they gather, there is a slowdown in demand. the iata meets this week in dublin and they report that global passenger traffic grew at the slowest pace since january 2015. year, -- this is according to honor consultants. the trend has continued this year with suv's accounting for a
quarter of sales and the biggest european countries. donald trump has found a way to cut his income tax bill. he trend more than 100 trump trademarks into a new delaware corporation. delaware does not tax corporations. name and trump towers among -- are among the trademarks. david: as donald trump begins to court deep-pocketed donors, one of those helping him as tom barrack. trump, heupporter of hosted an event last week in l.a. raising more than $5 million. erik schatzker said down with him and joins us. always interesting to talk to. he is now a noteworthy supporter of donald trump, one of the first of business leaders to get behind trump is the republican party candidate for the white house. i sat down with tom barrack
outside of santa barbara on friday, and we had a wide-ranging conversation. here is him telling me what he sees in donald trump, and you see the conversation progresses to this apparent standoff between trump and the rest of the republican party. the midst of the most complicated negotiations, the most difficult consensus, the. have, just asot an individual, these are not political in taking all of these political points of view. he is practical. what he will do is get it done. whatever the right thing is, he will surround himself with the smartest and best people and get it done. can his opponents do the same thing? sure. it is supporting athletes in the field and saying, i know a little bit about a side that
people have not seen. competency, tenderness, compassion, not this harshness that come -- appears. sharing my point of view may be helpful to people as they are deciding what are their options. erik: why do you think the republican leadership is having such a hard time getting behind donald trump? tom: i think rightly so. they are unsure. they are uncertain and it is threatening. you think of politics, i do not think there has been a payrollt who has made a or received a payroll since herbert hoover. president bush owned a baseball terms, then real organizations of politics are political. people out ofe
their walks of life and say, i am going to turn you into a political operative. you are a political operative. it is what you are. by nature, these organizations have bread overtime. it is like we are talking about grapes. candidates over the years and everyone has invested in that, so when someone from the outside challenges that, it is frightening. they do not know what it means for them. when i look at the republican party, and i have been kind of a lame republican my whole life. the republican party was that you ran a source rex. before -- to ran a source rex. terranasauras rex. paul ryan i think is absolutely
right, there is no benefit for .im up until now donald still is not the candidate, until he is at the convention and accepts it, he is not the candidate. erik: so paul ryan is right to take the standoffish approach? do the same thing because yes to worry about what is right for him and the constituency, and that is a trade in a negotiation. erik: but the candidate you support it offended by the fact that paul ryan does not want to get behind him. tom: he is not offended by anything. he is setting a negotiating posture and i promise you soon they will be bound at the hip and they will have made a deal, that things are important for paul ryan to have is part of the program and platform for the republican party. dogsare just like two big walking in a doggie park, they
are getting ready to have a serious conversation. erik: that is tom barrack talking about his support for donald trump. he does not strike you as the stereotypical donald trump supporter. david: that interview perfectly illustrated something i cannot quite figure out. successful business people to want predictability and certainty. they're willing to go with donald trump because he is not certain and he is not predictable. why are they willing to take what is behind door number two when they do not know what it is? erik: i think barrick admires trump's pragmatism. he is a deal maker and barrick has seen that firsthand in real estate transactions dating all the way back to the 1980's.
it is interesting to see is not anho extremist, who is not angry, who is not left behind, who is not a all ofsupports trump for these other reasons that other people do not see. how personal this connection seems. his trump missing a trick by not getting more friends and business people that know him as a man, no his relationship with his children, how he is still with his family. that interview was quite revealing of trump's personality. should he be doing more of that? erik: i suspect he is doing some of that behind the scenes but you have to believe there are more people like tom barrack out there that have dealt with him over the years and fined him to be a far more agreeable sort than most of us might see based on his public persona and the
hyperbole at his rallies. said, there are probably a number of people who feel like they have been burned by donald trump and they are not as likely to get behind his candidacy. david: erik schatzker, thank you for some -- inky so much for bringing that interview. jonathan: the un's role in global transactions is shrinking. we show you the charts and off the charts next on bloomberg . ♪
stunning data out of the labor market in germany, record low unemployment. we keep that 111 handle. treasury yields are a little bit higher to 1.87%, and wti trading at a premium to brent. it is time now for off the charts. the imf decision to include the u.n. in its drawing rights basket was meant to be a catalyst for an expanding global role yet the use of the u.n. is shrinking. abigail: we do have a bright and beautiful chart. what we are looking at is the onshore yuan and we see there is a big decline you just talked about from april last year to april this year, down 30%. one reason why could be decreasing trade activity for china in both imports and exports, and the white line we
have imports, the blue line is exports. that could be one source of weakness. usually currency traders like volatility but in this case because it could reflect the fixing of the government, currency traders may not like that artificial force. jonathan: exchange rate stability usually induces more trade between countries. we do not see that in china right now. the other story to talk about is yuan deposits. are the yuane deposits in hong kong, total deposits, and you can see the decline matching that year-over-year decline in the overall trade settlement. if we took a look -- take a look at our last chart that shows and , china'silar decline share of global payments has fallen over the last year and this could reflect reduced confidence on the part of
fiscal stimulus needs to be done now as the fed begins to tighten. >> emerging concerns. set for the biggest monthly drop since august. chinese equities are in the crosshairs again. yet another domino effect across the world? ♪ david: welcome to the second hour of bloomberg . another busy hour ahead of us. mark will reveal the impact of post crisis. -- jonathan.n pointsn: firmer up three
on the s&p 500. we go nowhere, unchanged, negative by about 16 points. the stoxx 600 could potentially snap a five-day winning streak. bloomberg dollar index are treating from a two-month high with the euro-dollar at 11159. about 111.yen at treasuries, this month, stagnating. little higher on the basis point , and ahead of the bit week -- the big week, we have wti crude up three weeks of gains. .5%.d some more of about abigail: we have a lot of stocks moving. shares sharply higher on the news that energy will be buying combined cash a
and stock deal. higher by more than 30% from that time. on the news that jazz pharmaceuticals is buying the company for one -- $1.5 billion. an experimental drug for a rare cancer disease drug. be pretty happy about the news. he is the largest shareholder. lastly, shares of photo stream popping and as well. it is called beer bar and it is to thepany's response beer market, with has caused a drop from its record peak back in 2011. david: chinese stock futures today, 10% in 60 seconds setting the stage for a major break in global markets.
mario draghi holds a news conference and friday, we get the job's conference -- the last before the fomc meets later this month. joining us now is kristina hooper, head of investment strategies. are comingese events up. i will put you on the spot it which of these are the markets most likely to be sensitive to? i will improve -- include china? china is likely to be the greatest risk factor in the short-term term but over the medium-term, the greatest risk factor is monetary policy. point ofe we to the monetary policy exhaustion? a: we are: -- kristin getting close. want -- if things go south.
up juneave they talked or july 2 much? --too much? think chair yellen'speech on friday set a good tone in that she pulled it back with little expectation rate hike beyond july, even though we heard some other fomc members talk more specifically about june in the most recent weeks. what would you think they would really need to see from that member to be totally confident the summer? kristina: they will need to see a level of improvement in wage growth. we could see inflation and that
would be moving toward the 2% target. they will be focused on the dual mandate. we got unemployment rate needs to be based on the target. we now look for weakness, those who are part-time employed but want to be old-time employed. the level of wage growth. we see a lot of difference by region and industry, by education level, in terms of wage inflation. jonathan: i was having a chat with our colleague tom keene a little earlier, versus the three -- we can put that chart up onscreen for our viewers at the moment. going forward, people concerned about what happens around the corner? risk willkristina:
remain high and volatility will remain high. there are still a lot of questions. some polls are suggesting the lead vote is decreasing, we do not know until the vote is actually taken. it's older people turn out in larger numbers, we could see a greater likelihood of these outcomes. there are a lot of variables that would contribute to volatility. jonathan: what are you saying to them? what is strategy around this risk? it does not mean we want to get out of risk assets to we have to be more selective with risk asset. easy mess about europe has created valuation opportunities in european equities.
for the most part, it is about recognizing that there will be greater volatility going lowered for a variety of reasons. david: when i think back to markets and january, got choppy. do you expect that again, if divergent? we do because monetary policy has been the only engine driving the economy for so many years. the reduction in that stimulus ever so slowly should create volatility. this would be the first rate hike cycle and a long time where we are moving from most central banks. cyclest four rate hike were accompanied by essentially tightening in other major central banks as well. of reason tot
suggest we would see more volatility going forward. where would you advise people to ashley put your cash? the story was on's overstocks. >> we do not think so. we think investors actually have to favor risk assets. we need to have credit exposure to stocks. we saw this at the start of qe were all the stocks and the rising tide -- we expect that there would be a lot of selectivity, that fundamentals would matter. to be riskould have assets because they need capital depreciation and they need that yield. we see some significant yield coming from stocks. of myspace,breach is as not affect any other system but they confirmed a breach of myspace. limited to a portion of
passwords and e-mails. bought myspace as i recall. head of investment strategies, you will be staying with us, i am happy to say. what isn update on making headlines outside the business world. vonnie quinn. vonnie: thanks. lifestream more data. investigators would not have to rely so much on the recovery of black ops flight recorders like the one still missing in the egyptair --. the strike against oil refineries in france is starting to hurt the construction industry. union workers began the strike more than a week ago. along -- francois president francois hollande.
details about u.s. government surveillance. eric holder says snowden performed a public service. holder says he should still return to the u.s. to stand trial. global news powered by 2400 journalists in more than 150 bureaus around the world. staying ahead of the rotation, that he does worst-performing of 2016 have rallied ahead. the energy sector goes from first to worse yet again. more is next. ♪
says -- kristina is still with us. when we have this low rate environment, and the fed potentially poised to move within months, where are you advising investors to go and where are the opportunities? kristina: on the risk side of the equation. investors need to invest in dividend stocks and not just the united states. they have got to find value opportunities around the world. they have to focus on certain sectors. there will likely be significant rotation through the course of the year. also, emphasis on new commodities like water. we would argue well diversified
overexposure as opposed to non-risk assets and focus on yield. that means looking unconventionally for yield. david: if you are looking for risk, what about emerging-market equities? they need to be selective. what we typically see is the emerging-market equity severed. a tightening cycle could create value opportunities in the world. megan: let's talk about where you see technology going. thought there was momentum there , one sector they might look at closely. we expect to see revenue growth coming. we're also seeing key drivers right now.
some level of capex increases and we think that would be centered partially on the technology center. we see the consumer improving. consumer sentiment is very strong way now. -- right now. that could translate to spending as well. jonathan: we have been doing this since the beginning of last year. you said tech, where else can you go that will actually read some rewards? this is a consumer that there is significant emotional scars. one other area they are spending on homes. greater investment. consumers are not spending willy-nilly. they are being thoughtful about
it. megan: on the flipside, what about places where they are not spending? will that actually ever be something where we really see a jumpstart consumer confidence needed to get those firing on also wonders? we could be seen the first sign of it. arguably, that suggests consumers are spending more on purchases, since historically, theye last two fears, focused on spending, education, homes, cars. that moved into greater credit card debt before shadowing some kind of increase in retail spending on items like clothing. becauseto be cautious this is a fragile consumer. what we are seeing underscores the asset inequality we are
seeing in the united states. keep that in mind when we look at consumer habits. david: one thing the consumer does not have a choice to spend on is health care. is their opportunity in health care and why isn't this already it is notristina: fully valued because there is so much confusion on the area. what we do know is health care spending, that is an area where we see price inflation. it is with investors focusing on it. quite how much of that is a concern growing with such unbeatable rates and such unpredictable matchup.
donald trump if he actually wins the presidency. onstina: you have the now the head. i cannot remember a presidential election when there has and so much uncertainty about what the candidate's real positions are and what they will be one selected. whatry clinton has stated her plan is. we know that could pull her to the left in order for her to see a compromise to get the democratic nomination. donald trump has been an enigma. he quite often changes his platform on particular issues and we could go through a laundry list of those here there is an enormous amount of uncertainty about what will happen not just in terms of who will be voted for, but what they will get in january, depending on who is elected in november.
a stronger euro unchanged by the end. up point 5% there all of this ahead. david: for more than 41 years, saudi arabia'stake was kept a secret. the u.s. government released , 117 billion dollars in holding spirit also revealed was the story of how an why this was granted. more, here is andrea wong, digging through this. take us back to 1969. richard nixon is president and wayne is our treasury secretary. why was the deal so important to the united states? >> was right after the oil shock to the opec nations put us on
oil embargo. the u.s. was in the deepest recession since the great recession. henry kissinger as well. it was quite clear to them that they knew to bring the money back. david: the united state needed the cash. what was the deal? what did we give up? government agreed to keep the buy-in secret in exchange for saudi money to come back to the country. >> we look at the number, that
117 billion figure, it is nowhere near where people think the true holdings rp or did walk us through what you think the chu number might actually be there -- b. >> right. a little less than 600. ims -- imf actually aggregates data and it shows around two thirds are usually kept in dollars. the u.s. treasury. 40% in treasuries. if you compare that percentage to saudi arabia, it is around $.20. it is low. david: what i find intriguing is the fact that it was disclosed now you they kept the secret for over 40 years and now it is disclosed. any information on why the u.s. government that now we will tell >> people have mentioned
the time and is interesting -- timing is interesting. january, it was like 100 p it we wanted to know whether buying or selling treasuries. request? they resist a >> put it in a way that maybe we just not on an open door. it has been 42 years. that agreement has been in place for 42 years and china and japan ase replaced saudi arabia biggest debt holder. we got lucky. megan: what has been the most fascinating detail on this for you?
>> you're right that in the late 1970's and early 1980's, a committee looked in to it, why is it secret, and that was very rigid and determined to not give it to the public. that is what is fascinating, became a legacy and it was ok for them. many thanks to andrea, great story. the rally is up, losing gas. stick around. our next guest is going for triple digit prices by 2017. he will explain how we get there and explain the meeting next thursday. that is next. ♪ okay, ready?
breaking data from the u.s. economy p or let's get to the market here futures higher and negative section in germany. down .1%. planning ahead of that economic data in the united states, let's skip to the economic classes, , yields nowlar higher by three basis points. 1.88 percent. as the data jobs, personal income comes in at 0.4%, in line with the survey. personal spending is positive. we are looking for 0.7% on the survey. 0.6%, the survey 0.5%. a lot of data to whip through. inflation comes in a 0.3%, in line with the survey done here at bloomberg. a survey of 1.1. you see core month on month, year on year, also coming in
line with expectations. futures stay positive. two-year is coming down a touch. yields are little bit higher, we stay there up three basis points. as thesurprises euro-dollar rolls on just a touch at 11150. crude, to the oil market we go. run of forth longest monthly gains in five years. nigeria to canada, it rocked the market are this is ahead of opec indiana. joining us now is the current senior contribution at oil price.com, also the author of shale boom, shell bust. there is a plug. that is enough of that. let's get to the week ahead. do we hit snooze button? >> it was the last minute scheduling of the opec meeting
and that was the major disappointment in april, when nothing could be done in terms androduction limits, ultimately al, the saudi foreign minister, was ousted because of the failure in april. i do not think it matters for the oil market personally. we are at the moment where oil is turning around and we have seen the bottom in prices. it is a little overheated. some rollover in production in what we have seen for sure is a rollover production here in the united states, which marks the end of the bust cycle in oil and we are trying to develop into a true boom cycle that will last for the next few years. megan: i heard you described that we could potential he be heading to the greatest demand acceleration in a decade. walk
us through the fundamentals. >> global demand has gone up 10 million barrels per day every 10 years. what we're looking at is that for the next two or three years, we will see significantly more than that. some estimates are for as much as 1.5 million barrels per day increase and another 1.5 million barrels per day increase in demand. that is not 10 million barrels, but 15 million barrels per day of added demand over the next decade. we are running into a production that is rolling off, here in the united states specifically to -- dropslso see rocks including russia and iran and iraq and nigeria. ,ertainly including venezuela and those kinds of losses do not develop the barrels that will be needed as this demand continues
to hit over the next four or five years. that is where i get my predictions on where price will go. david: some of that could be brought back online much more than years past. technology is definitely there and the efficiency and shale has on up almost 100%. it is an incredible gain in possible barrels per well that you could get out of u.s. shale. what has died is capital structure. the free debt available to all of the shale players, the high-yield bond market that tose players depended upon generate fresh wells and fresh oil, it is now gone. the high-yield market has collapsed. with it, a lot of the bond players have decided they will not lend any more money on upstart shale companies. despite the fact that efficiencies have done so well, $90 peroil reaches
barrel, the debt, the credit will not be there for these companies to reach up the production. that: can anything stop regression of pricing in your mind? china, or a were slowdown? >> that is the one thing that could but if you take a recession or global recession off the table, i do not see anything that stops the gentry of oil over the next years. in 2008, thed it same general kind of pattern. oil, if you follow it for as many decades as i have, you seem -- see's cycles come. this one is no different. investors need to be a little more forward-looking on where oil prices go and that should rectory of it in the next several years and position themselves now. function to get a forecast on brent and wti, here is the consensus total for your
and 2017. 5322 on brent. 2018, we not even north of $54. why is the market so out of flacco with what you are saying? has alwaysres market been out of whack and almost never right. be told, not to get too deep in the weeds, you have a preponderance of sellers, because if you are and oil company and you can lock in a very good price, you can generate the credit they need to drill those wells. monthsu have in the back are preponderance as of sellers. not any real buyers that go way back into the curve. senior contributor at oil price.com. thank you very much.
from oil to the cars that are fueled by it. cooper and lift, changing how people travel. morgan stanley municipal securities analyst believes this a fundamentally different mode of transportation in the centers. he joins us now for today's morning meeting for what this means for investors investing in municipal bonds. welcome to bloomberg . sol us about why this is profound and your view and why it would affect municipal bond investing. >> yes, we think policymakers at state and local levels will increasingly embrace share mobility as a solution going forward because of the ongoing development of technology like at based ridesharing and autonomous technology into cars. three reasons, really. first, we think share mobility actually complements rather than competes with it.
it is a lower-cost alternative overtime to expanding public transportation options. i think policymakers will have the opportunity to influence how share mobility is being used and harness the benefits of that via a number of reasons, one in particular being new and more efficient and fair options. will this happen? how soon is this? >> it is hard to pinpoint exactly based on the work of our autos team, we think it will become a major source of road usage in the next five to 15 years. we think along that timeline because cities in particular are a good improving ground for autonomous technology and share mobility in particular. we think those things grow coincidently. david: are there some cities
adopting this that are ahead of the curve in your view? not yet. i think that is probably in the not-too-distant future as the department of transportation is actually taking up competition for cities to become a transportation future hub and looking for grants. in this reportne is we tried to score different metropolitan areas based on where the greatest opportunity for usage of existing share mobility and autonomous technology would be and what the greatest potential cost savings would be. all the metrics we put into it, we think built cities in the u.s. are the most right for innovation around this. david: which companies are ahead of the curve? >> we think the real opportunity is in partnering with cities, about private partnerships. the conduit for how all this develops, it is hard to say exactly who will benefit first and profit first, but there are some companies that are better
positioned to harness the opportunity. david: give us a name. >> companies like tesla. david: thank you very much. very interesting. megan: let's get an update on what is making headlines throughout the business world. vonnie quinn. vonnie: north korea's latest attempt to launch ablest at missile has appeared to fail. the missiles in violation of united states resolutions. iraq, government forces are slowly making progress in their attempt to retake a city from the islamic state. they recaptured about 80% around the city. they have now started to advance . this in a sloppy in the u.s. is launching a campaign to keep republicans in charge according to the wall street
journal to the chamber of commerce is calling the campaign -- seen by republicans who support donald trump and those who oppose him. global news toy four hours a day powered by moore the 115 news bureaus around the world. in the last 10 minutes, slower economic data coming out of the united states. a big update to personal spending in the month of april coming in 1% versus 0.7% in the survey. that 1% number is the most in almost seven years. futures stay positive. we take it to fx with him currency getting trust. on.ging-market currencies for the biggest monthly decline since last august. they would only get worse if the fed prepares to be less supported. if you are a bloomberg professional client, you can find this list.
jonathan: i am here in the hewlett-packard enterprise green room. coming up, an exclusive interview with cofounder and managing partner mark. he will discuss impact on high-yield bonds. -- n: vonnie: here is your bloomberg business flash. great plains energy has agreed to buy westar energy for $8.6 billion. and rising operational costs. deutsche bank has said it will
soon be the focus of a u.s. investigation into rate auctions for government debt a coin to the new york post. investigators -- they focus after all 22 primary dealers and treasuries. cooperating and there is no reason to believe it is the focal point of the poll. together for their annual meetings. a slowdown in demand. fill a space since january. >> thank you so much. getting bruised by mountains -- mounting signs that the fed will -- at some point this summer. you can expect that according to the fed chair. joining us now, jeff. price andady in the it is set to continue the trend we see?
>> i suspect there will be a little more weakness over the rest of the year. weaknessto look at the in contests of the big selloff of the u.s. dollar earlier in the year. trade from late january to late april. we'll put since then some pressure on us this month. our view is from here, the currencies have dropped against the dollar since the end of the year. nothing like as terrible as it was last year. the highest six since early 2011. how does that story continue? it appears the nervousness is -- at least for now.
>> as ever, so much is driven by what the dollar itself will do. our view is the chinese currency and the year between 6.6 and 6.7. technically, we see a little addressed in terms of the currency here and at the end of the year. we consistently have the view that the chinese do not want a devaluation of the currency against the dollar. more importantly, they could invoice -- avoid that if necessary and they have plenty of tools. we get this concern about the chinese currency going again, a big rally in the dollar. we think we will get a miniature rally but not a big one. if you do not get a big rally in the dollar, we do not expect the sort of panic over the chinese currency we had a year ago or last summer in august. megan: how are you pricing now on the fed in terms of the likelihood of a june or july hike?
factoring in into how you see the picture? >> we still expect the fed to move in september and then again in's -- december. the risk is always that we can see the rate hike going forward. june to us looks most unlikely. it is frankly too close. we think what is important is the fed, even if they move later in the year, which seems likely, they will move continuously slowly in our opinion p we have already seen the longest gap between the first rate hike in december and the second one, whatever that comes, that we have had for nearly 40 years. the theme is not that the fed will not move, they will, but very slowly. the next one with u.s. growth picking up a little bit, i think that is essentially priced into the emerging-market equities at this point in time. pretty easy possible surprise on the upside? i'm thinking of brazil and india and russia.
>> so many differences across the emerging markets. the general theme is we see very little in the way of positive growth surprises are we do not look for major surprises in china in terms of growth. or indeed in brazil. quite negative about result. having seen a tremendous rally earlier in the year. a surprise to the upside, we think a major area, which is rather small within the context of potential upside surprising growth, europe, possibly turkey, and not entirely unrelated to that, possibly russia as well. when america still under pressure, particularly brazil. perhaps india where you may see some upside surprises to the growth story. jonathan: our colors in asia caught up with the indian finance minister and what is happening with the ruby. balanceve to maintain a between the strong rupee and a
realistic ruby, in which we can continue in the current export environment with the shrinkage of global trade not exactly doing extremely well anywhere in the world. jonathan: realism versus perception. it is hard to actually really draw it a station between the two. speaking of china, as you look at things, what is realistic for the u.n. versus perception that things are going wrong already? >> in terms of the chinese economy or the currency? jonathan: the currency. willth china, so much depend on what happens with the dollar. if you do not get a big dollar move this year, which is our view, the chinese currency will stay broadly under control. the panic that began in august and then followed through in january had a lot to do with fear of the fed and what the dollar was doing on the back of that. concerned,ndia is
the currency is behaving somewhat better today than it did three years ago in the tapered tantrum. once again india like other currencies are vulnerable to a stronger dollar, the currency is behaving very well. we think it will not prevent the central bank producing interest-rate's once again. jonathan: great to have you with us. up, how one chart will help reduce the pace at which the fed will raise rates. that is next. ♪
white line here. as high a 13.1, and then it fell toit and it is back up 11.7%. this line out here is the spread. it really tells the whole story. it was not long ago that italian unemployment was lower than german unemployment but -- post .risis, at one point, 6.5% still near five point 5% difference. this is really the story. there are two economies in the eurozone. those countries that are doing well, and those economies that cannot get out of the mud. you have policy that does not suit all of them, monetary policy that has not closed that gap here until that starts to close, i think you will have problems for a while. abigail: that is a pretty good chart. march. have data out for
i have put a chart together of the index from 2000 along with the 10 year yield. janet yellen's comments last friday were more hawkish than people thought and unsurprisingly, a huge decline in rates and that helps fuel the housing bubble and also helps reinflate the housing market out of those lows. the suggestion of this trend down is actually that rates are likely to back up to the overall downtrend. that would support fed yellen's suggestion that rates are likely to rise this year p rich you that should be done in a gradual and appropriate manner. looking at the index, we see that despite the rise, the neil turn -- near term uptrend has emerged suggesting the fed will have to be careful in how it takes rates up. i like your chart quite a bit but one of the factors in their to even get a bigger spread was youth unemployment. joe: that is true. it might even be higher. >> it is 36 .9, the most recent one. that is the thing.
there is a contrast with germany there as well. >> it is not just the current, but the future. -- ecbn: how on earth policy, with such a radically different economy. that chart is absolutely excellent, abigail. really interesting and something i have looked at four last couple of months. i vote for abigail. >> i have got to go with joe. you are the tiebreaker. >> i am going to go with abigail and i'm sorry, joe, i love your chart here at it shows if you charge little for mortgages, -- up, ann: coming exclusive interview with capital cofounder and managing partner mark. on highdiscuss etf yield bonds and the impact of post crisis regulation. ♪
three months of over 3%. a nine-day losing strake -- streak since 2015. a story for me, the global bond market. potential of possibility for the rate hike. treasury, lower. german boom, lower. yields on a 10 year up five basis points in the u k as we count them down to the market open. ♪ >> this is bloomberg . i am here with jonathan ferro.
breaking news. the case schiller home price index is out. somewhat better than what was forecast, which they little bit reinforces personal spending numbers we got earlier. strong numbers coming in. quite a blowout consumer spending number. >> we are really starting to see that pick up and it is starting to be a big factor. >> the three stories that matter to the market now, they are big events caps off by friday's jobs report, stock market rattled after a 10 minute futures plunge and oil is set for the longest running games in five years. with us to discuss it all is the chief equity investment officer at welcome and good to have you here. our first story is key global events. thursday, the euro central bank
the major support is released. a lot of things coming up. question i will borrow from tom keene p or which would you pick is more important? >> the jobs number will determine fed policy. it seems likely we will get an increase probably in july, a strong of jobs number in friday. it appears without a week jobs number friday night. >> we have got two data points out this morning, on the spending number, was there anything you could see that would stop at this point? what kind of bad jobs number would we see? >> 200 or north would probably pull things forward to june. low 100s, we might have to rethink it and wait for the june number in early july before we know what is happening in july. aret of the numbers we talking about, housing and consumer spending, it seems like
it is relatively strong. , we areal companies talking to management teams from the industrial side of the economy every week, we are hearing of the economy is relatively stopped. does that continue and how do you want to plan the markets? the other story is the fact that financials have outperformed. the markets recalibrated rate hike expectations. you expect that to continue? >> yes as long as the market is expecting higher rates, that will be good. the banks suffered from the low interest rates. out margins.widen rates are moving higher. that is good for banks stop -- bank stocks. for spreads to really move, a ,ot of banks have libor floors
so they do not get the benefit right away. there is a question of how much of the benefit passes through. the market moves first and we see what moves through. -- the ecbls must be moves on tour, opec on thursday. which one would you go through? is coming up. a month ago, we would really have been looking forward to this in the market seems to have done the hard work. >> a huge surprise for the market. production >>t in is mario draghi going to pull something else out of his endless bag of tricks?
>> central-bank behavior over the last several months, go back to february, there is the idea that there was a second accord and central banks have become concerned about the strength of the dollar. i am notion since then expecting the ecb to make a dramatic move this week. >> let's move to story number two. investors were rattled after a one minute, 10% drop in the chinese futures index. authorities are not sure why it happened here this is the second time this month markets have seen a swing like this. what happened. of just how a sign rattled investors are over china? >> i do not think it is just china. we have seen these things around the world in different markets. august with dow
futures opening lower, futures being down 1000 points back in august of last year. it is not just the chinese market. it is global markets and the lack of liquidity in the number .f market participants individual investors need to be careful about placing orders in any market around the world before the market opens. >> you mentioned lack of liquidity. i can bring you up the chart. 90% since the peak of last summer. that dropsreen line off the cliff and you see the blue line marking out were volume has been. that drop off is not an error on the chart. if we try to play chinese equities, we go to hong kong. side fold inerest
the last month. >> it is not priced in valuation , making investment decisions. money is coming in and there is often not a counterparty. liquidity dislocation. interpretink you can too much about market level or fundamentals. it is the technicals of the market environment we are in now. >> as opposed to the u.s. or europe, a very different clientele is participating in the marketplace. >> very true. economy.n runs the in china, it is a vast majority
of companies in the jet -- in not necessarily indicative of what is happening in the economy. >> set to dominate the headlines, crude is set for the longest monthly gains in five years, gaining 85%, output production cuts. my question is, we have a market turn around and look at where we are. let's look at where we have been. my question to you as an equity investor, what do you really want to loan? look at the producers spirit which one is favorable? and will favor the equities the better capitalized, higher-quality type companies, the innovative higher-quality companies with good balances.
you do not know where the oil prices are going. many put too much debt on the balance sheet. the longer term the out your price of oil, it has not moved as much. that is what matters. price for oil. he out your price has not moved nearly as much. we think at these are fairly rich given what oil prices are now. >> which one? we like petroleum, a well-run company. emp. sheet.g balance probably our favorite pick in
that space right now. >> abigail doolittle, some stuff to watch. >> shares are trading down in -- pe plunged down 86% year-over-year. shares are higher, ready to improve or sweeten its initial one hundred 20 -- 122 dollars per share. of the european apple suppliers trading down after the review reported apple could extend its iphone product.
those are a few steps we are watching right now. it could be september returnand barrio could in western canada. more than 80,000 residents have been evacuated because of the masses wildfire. the number of -- displaced by war has more than doubled over the last three years. ,mnesty international conditions for those fleeing war has been blocked by corruption and lack of capacity. former attorney general eric holden says snowden performed a
.2%. on the european stoxx 600. coming up, in the month of june, a number of risk factors including the fed, grexit, have been weighing on investors. considering the unknowns, the equity investment officer is surprised where the markets are right now. back with us for the top stock picks. surprised where the markets are, why? >> in spite of the fact we have , higherstment catalyst rates coming from the fed, the signsainty about china, in the earlier segment at the industrial economy is not a strong as perhaps the consumer side of the economy is. a political election in the u.s.
is creating a lot of uncertainty. yet the market climbs higher. the missing link is sentiment has been so poor and negatives that we have been climbing the , therbial wall of warning path of least resistance is where stocks go higher. wonder, in politics, you cannot beat somebody with nobody. it is hard to find good returns. negative interest rates and to some extent, is the stock market being supported by the fact that is better than anything else? >> you could have made that for each of the last several years. less so in the last 18 months where markets have been relatively flat with the occasional sharp pullback. is the best argument for equities. it is better than what you get in treasuries. a risk premium that quite attractive. yes. equities might be priced for a , but that isgit competitive. >> throughout some names. >> part of the trip -- the trick is not to take too much risk but
to look for value where it exists. sector that offers growth and yield is health care. i like within the health care sector, pharmaceutical theanies, generics company, largest generics player in the euro -- in the world, and a lot of companies have been hit recently. whirly -- worried about price declines in that sector. they manage the decline of pricing very well. it is only nine times forward earnings. a deal is pending with allergan, a lot of good reasons for stocks to be weak. that is one of my favorites now. kellogg is another defensive stock. earnings, not the most attractive place to invest -- increasingly snacking throughout the day. not just a breakfast food
anymore. -- theye been on the are starting to turn it around. there is a lot of activism and activist shareholders in the packaged food area. there are -- there is pressure on all these companies to do something about profit margins. teens profitid margin, pretty good by most standards. but they have embraced that and are cutting costs. we think they will move their margins into the high teens. >> they have had a great run up, up 22%, 21 times earning spirit what is the upside there? >> it is a multiyear story that they deliver on some of the cost savings as they drive margins do notand bring more, i want to overstate it, but product innovation around snack foods and that sort of thing. -- marginschance going higher over multiple years and it could be a tease and stock with a decent dividend yield and good growth.
>> any other names? david: what about transportation? i do not know much about it. why are you interested in them? let's it is a fantastic company. they are not a trucking company in the traditional sense. they are in middle man who sits and smallmpanies trucking companies, the providers of capacity, they quit the little bit like -- like any broker does. they do not have to own the equipment or put up a balance sheet. very high returns on investment capital. they are eight times as large as any other brokerage farm in the country. a heavy investor in the country. take them as over for the trucking industry. megan: betty will be staying with us coming up is volatility the new normal? advice onke mark's how to play the markets in a bloomberg exclusive. breaking news very
jonathan: a look at our again premarket, stocks high about 3%, that of a pop after the news. a hedge fund manager taking a large position and allergan. he has recently taken a large position in the company and very supportive of the ceo. one large means, i will try to get for you. that is his words. megan: the pressure of
regulation after a financial crisis. mark sat down with erik schatzker in a bloomberg exclusive at his company's's headquarters in los angeles, weighing in on how the banking system is changed. in the good old days, the banks would have deposits and other access to capital from the fed, and they would have a very low pattern and earnings spread. with regulations, the banks no longer make loans, so they do not hold inventory and do not make loans anymore. point by speaking broadly. obviously banks make loans to some extent, but they are tightly regulated. the market no longer looks to markets, so you actually have to have a match of a buyer and a seller. you wantirections, if to sell, there is nobody to sell to. if you want to buy, there is not
anybody selling. what do institutions do? they turned to an easy way to off, so,or take risk paradoxically, etf's are probably only 2-3. 1.4 trillion, and if you wanted to look at the size of those, they are 3% of the market. we do not have as far as i know any objective evidence of how much trading at a they provide in the market, but 10% is what we are hearing and etf flows on a daily basis do move the market notably one direction. you have the advent of institutional investors trying to deal with market volatility, is etf and etf's are actually sharpening volatility somewhat. that is a lot of detail,
but what it translates to is you need more and more portfolio managers, they have to set and stay on their course. we went to more of a risk off trade last year, which rewarded us for our performance last year in the first quarter into april. believe 90% of managers and the high-yield market were below the benchmark. in the first quarter. courseld need to stay on and not shift. you need to look for other ways to generate return with our private platform, the firm manages, the firm is now over $20 billion in assets under management. over half of that is in some kind of private lee originated transaction. to find better
better researched opportunities. and generally get higher yields. those into mix multi-strategy portfolios and find other ways to address the market backdrop, which i believe is the new norm. mark attanasio. jonathan: coming up, futures firm pointing to an open, the s&p 500 looking to extend it six week high. u.s.,er spending in the and almost seven years. the open is next. ♪
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welcome back from the long weekend. 38.futures up s&p 500 up 1/10 of 1%. in europe, the potential to snap the five-day streak. as you hear the opening bell in workork city -- i will through the other asset classes. euros stronger against the u.s. dollar. dollar/yen is stable. yields keep on pushing higher. up for basis points on the u.s. 10 year. up 1.89%. in the crude market with a $50 handle, 49.53. we add to that by one half of 1% ahead of a risk-loaded week, including opec, for the oil market. abigail doolittle. abigail: we're looking at a m moderately positive open. following a moderate -- a moderately weak lead in the
u.k.. trading flat in the u.s. open our shares of apple. down from the premarket point 5% following a bearish report from the reviews saying apple's iphone product cycle could extend to three years. apple down 5% year to date as use go from bearish the bullish. more of a switch up. the stories on the open are the shares of cliff natural after j.p. morgan upgraded it from overweight. raising steel prices should help near-term earnings growth. he believes that could move higher by 75%. of theof biogen and out trading higher. add the is down and biogen is up 1% after the fda approved a jointly developed in mass drug mstween that -- developed
drug between the two. jonathan: april was a strong month for the u.s. consumer. spending climbed by the most in seven-years. will it impact the fed debate? here is carl riccadonna and the chief investment equity investment officer. play the drama for us. : it is a great number, but not so great if you take three factors into consideration. spending was flat and prior months, so there was a catapult effect. prices increased significantly. part of the spending increase was households paying more for gasoline. 3, the savings rate coming down. which is good news as consumers became more optimistic so they loosen the purse strings. those three factors are unlikely .o be repeated going forward
income looks decent, households are spending at a decent clip, meaning current quarter growth will bounce back from the lousy but let's not get to out over our skis, too excited, based on the number. the fed likes the number, but yellen and company will go into the june 15 meeting say one month is not necessarily establish a trend. news. but, it is good for the bad news, the rest of the week? carl: we got through the good news with income spending and whatnot. the question of the second half of the week is the industrial side of the economy, especially the manufacturing sector. we have the chicago pmi, possibly dipping into contractionary territory. more importantly, the
manufacturing later in the week intentionally slipping -- potentially slipping into contractions. how long can consumer spending hold up as a strong economic engine if the industrial side of the economy is facing difficult conditions. do not forget the nonmanufacturing ism on friday .otentially decelerating hovering at 50 or slightly below is very difficult environments for the fed to make the case that things are improving and higher rates are justified. megan: you are saying anecdotally this when you talk to companies? year april was softer than the first quarter. still positive and growing, but soft. granger, the distributor of there is products, had 1% volume growth. there are antidotes that suggest the industrial side of the economy is still fairly soft. an equity investor,
what does it tell you? that the economy is strengthening, weakening, or humming along? eddie: humming along. we have to be realistic about what the sustainable growth rate .or the u.s. economy is probably closer to 2 then 3, and that changes the algorithm for the fed. look at: so after personal spending, oil effects, payrolls on friday, and i want to visit rate a change around the fed that has been so dramatic. the data has not changed at all. what are they looking at? we are seeing a modest improvement. around were focused on the q1 gdp numbers also apply to q2. there has to be payback later in the year. you have seen in the past several years with payback occurring in q2. at faceake q1 or q2
value. average them together to have a better sense of what is going on . there's a sharp turnaround in the fed narrative despite fatal economic data on an uptrend. policymakers were not happy going into midyear with the market saying no way, no rate hikes until year in. the fed to spend capital on the communications campaign to pull markets and him and -- market sentiment back to anticipating a midyear move. june is a live meeting come alive for discussion, not that a rate hike is imminent. july is a more likely candidate for rate hikes. david: the chair at harvard have to say this. chair yellen: i've said this in the past, it is appropriate for the fed to gradually and cautiously increase our overnight interest rates over time.
probably, in the coming months, such a move would be appropriate. david: there's your communications plan. and thatcoming months, is plural, i think july is likely. beyond july, you are trading in territory that begins to infringe on presidential election policies. megan: we have the referendum on the brexit on june 23. we have a presidential election, conventions, a candidate whom no what his economic plan is other than he has said he would replace janet yellen. what are the downsides in the terms of risks in the summer i had? problem.t is a big sayuch as the fed wants to the, the presidential election is not on our radar screen, they have to be sensitive.
the fed is very sensitive to political meddling. if you are raising rates before the election, and we are in a fragile market environment, if the market's wound a clumsy rate move, absolutely -- that could have implications for the election. the fed is not want to potentially have the finger pointed at them for influencing the outcome. david: do you see evidence in the equity markets right now that they are reacting to the presidential election? eddie: not yet. there are a lot of looming potentially negative catalysts but the market grinds higher contributed largely to negative sentiment. there is uncertainty about who the next president will be. that will be the talking point for the third quarter. we will see how it plays out. news.an: breaking the story in the bond market was an upscale $11 euro
offer from qatar. of 15 billion dollars. saudi arabia a bond sale as much as $15 billion. that is a big number. david: come on in, the water is fine? thank you so much for being here carl riccadonna. aree perkin come you staying with us. how likely is tesla to reach his production goals for the model three. and analyst reveals his forecast . look at shares of tesla. down 7%. the biggest yearly decline since going public. more "" is next. ♪
david: this is bloomberg "." i am david weston. later, talking about oil and opec. ♪ vonnie: rising 5% in the past year. this is according to the home schiller price index in march. the biggest gainer is portland, oregon with home prices increasing 12%. prices in cleveland fell 1/10 of 1%. americans have been shopping at a record pace. households are ready to jumpstart growth following a sluggish first quarter. 14,000 verizon employees heading back to work after walking off
of the job six weeks ago. raisin reached a tentative agreement with the unions calling for 1300 call centers and 11% pay raises over four years. health care changes will be made to save the company money. that is the bloomberg business flash. jonathan: saudi arabia, according to those with knowledge of the matter, set a bond sale worth $15 billion following last week's news that had an upscale bond offering. the country may replicate 10, 15 offering by 5, year maturity. the state of the kingdom laying a sale of $15 billion. the timing could come after the end of ramadan in july. no final decision has been made and discussions are in a preliminary stage according to people with knowledge of the
matter. it links back to the story last week. qatar comes to market with an upscale offer. 100% more than the market was offering. $9 billion worth of debt. thed: saudi arabia sought need to go back to the capital markets because they have budget deficits because of the price of oil. megan: it is an economy in the state of transformation. looking at oil and what they are trying to achieve company initiatives they are taking, to transform the economy. look at the demand. story in the last five minutes, saudi arabia sets away a bond sale as much as $15 billion. talks on bond sale said to be in the early stages in that decision. more when i can bring you more details. stocks opening marginally higher 500.of 1% on the s&p let's go to abigail doolittle.
mike run after robert baird upgraded sales to outperform from neutral. improving gross my gens and destabilization. upside potential is seen on last year's worst stock in the nasdaq 100. another stock trading higher, the shares of rolifta. ruling foster his recent on the potassium drug is a .ositive for the competing drug he reiterates his outperform rating and his $36 price target saying the stock could go higher than current levels. bigd: elon musk has ambitions for tesla, hoping to produce .5 million cars by 2018. and the company are selling stock. investors seem supportive. later, musk will meet with
investors at the meeting. carlore on what to expect, linkedin has a sell rating on the shares. thank you for being back with us . what do you expect from the meeting? >> the annual meeting does not have a major update. we remain cautious. i do not think there will be a positive catalyst, just very little news flow. we remain cautious. following the model three reveal, there is a lack of a catalyst for the next year until the model three hits production and the targets they put out aggressively. you gleamed more information on how they could ramp up to this high number? they surprised with how aggressive they were. we have indication on how they will get there? >> for an established automaker, the targets are putting out our aggressive. i do not have a strong sense of how they will achieve that.
i do not expect them to achieve their targets. megan: when we look at the of tesla, will this ever be a stock where the expectations match the reality? >> i'm a value investor. tesla is tough for me to like. it is pricing in the future, trying to anticipate what would come. the way the stock works over the if they can bring their technology and vehicles to the mass-market -- which is what they're trying to do david:. it is not only if they can produce the 500,000, but if they can make money -- particularly on the model three. you have done research suggesting they will lose money at the $33,000 price point. cost comese battery down, there is a risk the initial production will not be profitable. battery costs are coming down, be if the price will
download enough, it will be very challenging. itan: and i look at tesla, is supply and getting the vehicles in the hands of the consumers that want them. do you think they're getting enough information on how they will deliver the vehicles? >> the consumers right now, they signed up for the reservation. we will see when they get delivery. i do not think there has been much communication of when you will get your vehicle for the model three. x model youin a s or should get that within a couple of months. me as unlikelyes tesla will cause people to buy more cars. it has to come from someone. who would come from? in terms of the price point, it would be in the lower $40,000, going against luxury bmws and porsche. looking into late 2017, you will see new entries from all of
those players. the competition is ramping up. i do not think the luxury automakers will back off. that is a risk as they go full-scale production. david: it is true that you have a sell on this, but you have a robust rise target, 130 or 140 on the shares? >> 160. that is a fair amount of market value. you see real value in the company? it is a great product. they are pushing the industry forward. you have to believe a lot of positive things go right for this company for the stock to work at the current levels. i think elon has done an exceptional job. the question is, a lot has to buy the stock. ubs analyst and eddie
perkins, thank you for joining us. jonathan: coming up it is bloomberg "" -- bloomberg "markets" with mark barton. 23 billion dollars in oil, seemingly encouraging the saudis a little? mark: that was double the original estimate. the saudis have upped them. robert shiller, the professor at yale university, the economist, we have the s&p case schiller index showing a larger than projected increase in 20 u.s. cities. we have that whopping consumer spending figure, the biggest increase. hear robertit to schiller's view about that data and what he has to say about the fed. the cohead of emerging market debt has the rally we have seen an emerging market debt come to an end with the likelihood of a fed rate increase?
maybe probably in june, in july. all of the latest on volkswagen shares lower. profit with of the namesake falling 86% in the first quarter. the challenges it faces in emerging from the emmissions scandal continues. u.s. made chicago pmi, the business activity report, 49 point three. sub 50 contraction territory. we will talk more about saudi arabia next on bloomberg "." ♪
financial score, futures were firmer going into the session. 23-minutes and 1/10 of 1% higher . treasury yields stay higher at 1.88%. megan: time for bloomberg trends, looking at the top stories. you can find these on read "." we are talking saudi? jonathan: in the last four minutes, looking at saudi arabia with the potential to come to market with a $15 billion bond sale. a $50 millionway bond sale. it was qatar coming to market with a $9 billion sale. what strikes me is the appetite for debt, not just sovereign but corporate is well. we talked about companies on a worldwide bond binger. $15 billion of debt issued this month alone. david: if you go back to saudi it was above u.s.
treasuries, what they would get? qatar will be good for the money, saudi arabia will probably pay their bills. if you're looking for yields to get returns, it is not such a senseless thing to do. megan: looking for the money, i am turning to my story. donald trump has moved a lot of his trademarks, including his delaware inand to thoughts he would get a tax break. this is the guy who has trademarks on everything from hotels to brands. this will figure in the eight he is refusing to release his tax returns. be, it emerges he might doing things to get better treatment. david: you can go to delaware to figure out where they have registered trademarks and patents. delaware is a state that does not tax licensing of intellectual property. megan: delaware and ireland. trump taxes on all of the
put on hotels and golf courses. toan: it will be fascinating see how much disclosure we get. he would be the first person to not do it. david: he has been the first person to do a lot of things. let's look at what is coming up later. tesla will hold it shareholder meeting at 5:00 p.m. in the mountains in california. ceo elon musk announced tesla will be sharing shares to fund a plan to expand production. that does it for bloomberg "." thank you for joining us and we will see you tomorrow. ♪
bloomberg television. ♪ betty: we are going to take you from new york to london to berlin. here is what we are watching. we will talk with yale university professor robert shiller as the latest s&p schiller index shows home prices in the 20 biggest cities up more than forecasted in march. plunging 86%. highlighting the challenge volkswagen faces in emerging from the diesel emissions cheating scandal. transfersald trump his prized assets to a delaware to potentially result in a tax savings for the presidential front-runner. let's cut to the market