tv Bloomberg Markets Bloomberg June 2, 2016 10:00am-11:01am EDT
engage. technology. production so we lessen the cost of production. to e high prices -- we have get investors to the point it is so busy forhe journalists. that is it for "bloomberg ." thank you very much. bloomberg markets is next. betty: welcome to "bloomberg markets." i am betty liu. mark: this is "bloomberg betty, let's start with the markets. we are 19 minutes away from the close of the thursday session. draghi's news conference is finished. opec is finished as well. a big day in vienna. unchanged, slightly lower by about a 20th of 1%.
that is the longest losing and gas. oil down by 8/10 of 1% after opec did not to reinstate production quotas. unchanged, he tweaked some of the forecast. hasbalance of risks improved. let's get to some of the big stock movers today. sharestrian steelmaker, rising as much as 7.8%, the most since february. it announced plans to invest. annual earnings approximately in line with the previous year. shares have rebounded at
39%. steel prices recovering. money supermarket.com shares have been hammered today, down by 6%. it is the u.k. price comparison website. that is after jefferies caught the stocks. recent data, some meaningful in the u.k. competitive landscape, but the company is no longer leading the pack. , showingn old favorite how the euro has fared since mario draghi first implanted or announced qe last year. qe began in march last year. 108.uro fell to
the euro was at 106. at euro was at 110 and today 111. -- below wheree we were last year. it is targeting the credit and lending. more in a few minutes with david tinsley. betty: let's head to the markets desk with julie hyman. market reaction here has what do with oil prices, that is what it has come down to. we heard ryan chilcote speaking with the nigerian oil minister. he expect oil to be at 60 by the .nd of the year take a look at the major averages, they are all down.
a lot of that comes to energy . energy down 1%. tech is down nearly as much, three quarters of 1%. health care is the only group on the rise. individually, a mixture that helps explain why tech is underperforming today. target was cut over goldman sachs. they are cutting iphone estimates, that is where the price target cut comes from. exxon mobil falling along with oil prices. employee by a farmer alleges -- former employee alleges she was asked to essentially cook the books and change accounting at oracle. oracle shares are down 4.5% as well. we are at the 10-year note as we watch the actions of the ecb here. we are seeing the yield go lower.
the ecb announced details of its corporate bond buying program. we're not looking at this at the moment, but wr ap, interest-rate futures, are showing a lower of an increase rates in june. people are looking ahead now that opec has failed to come to an agreement and the ecb is done, evil are looking to the jobs report, the next pivotal event. betty: thank you. let's get more on the opec leaders fail oil to agree. ryan chilcote is in vienna with the latest. we have seen the market reaction to this failure to agree. tell me, you are just speaking with a representative from nigeria, what are some of the other reactions from opec nations? ryan: the nigerian oil minister
is delighted because the one thing they agreed on was appointing a new secretary-general and the new secretary general is from nigeria. he is mohammed barkindo. been bickering about who is going to get to that for four years. is ata sign that there least some unity. they are able to decide something. and the other hand, they did failed to get any agreement on production target, the most basic will opec has been using for the last 35 years to influence prices. they got rid of it at the last meeting. aople will see that as weakness. it is one of the reasons the price of oil fell on the back this meeting. i think it was a bit of a mixed kicked the can
down the road to the next meeting. betty: thank you. you are going to stay with us to give us more updates t on the meeting. emma? emma: families are trying to get away from the fighting in falluja. y's advanceilitar was met with fierce resistance. germany's parliament voted oman toverwhelmingly killings the ottoman as genocide. the u.s. state department's chief cyber diplomats as it is
too early to proclaim a u.s.-china agreement a success. the u.s. is closely monitoring carrying out is any intrusions or theft of internet property. nine months ago, president obama and the chinese ambassador said they would not condone hacking to steal secrets. airobama addresses the u.s. force academy. the president speaks at noon. global news 24 hours a day, powered by our 2400 journalists in more than a 150 news bureaus around the world. mark? mark: let's get back to the ecb decision. the central bank has been struggling to stoke inflation despite multiple rounds of stimulus. mario draghi addressed the
dilemma earlier today. onio draghi: looking ahead, the business of current prices for oil, inflation rates are likely to remain very low or negative in the next few months before picking up in the second half of 2016. it owes to effects in the annual rate of change of energy prices. here,david tinsley is hello. no change, but some excitement. the tweaks the inflation forecast this year by a marginal amount. 2017 and 2018 stay unchanged. mario draghi said the balance of risks improved and we have not seen the full impact of qe. slightly bullish. david: i think the fact that the
central inflation forecast in 2018 was unchanged, you could have seen it moved up, given that they announced using in in march.asing the fact they did not means that when we get to march next year, they will carry on with qe. mark: this chart pretty much shows the problem that the ecb has. this is the balance sheet, the white line has risen from 2 billion to 3 billion. david: what that shows is the madness of letting the balance sheet run down. if you think of the balance sheet on that chart, it stayed he was a lehigh that he was
high.y -- it stayed seamless stayed ind we have the position if they had maintained the chart? activity would have been a bit stronger, it would not have changed the complete landscape, but it would have made some positive impact. we heard mario draghi say that governments need to take stronger action. we have seen central bankers say continuously until they are blue in the face. what kind of action might he hope until the end of the program? david: we are all seeing action, in spain and italy. it seems to be what he was alluding to today was more on
the infrastructure, almost talking about fiscal policy type arenas. when it comes to supply type reform, what gets overlooked is that policies need to be accompanied by demand site. i really think you could argue even now that euro area monetary policy is not loose, even for the average position of the euro. it is not loose for italy or spain or portugal. betty: there could be room for even more of a loosening of the policy. david, on the european corporates, earnings have not been able to really repair themselves among european companies because inflation is so low. are we going to see a continued deterioration on earnings out of european countries? growth, kindl gdp
of a proxy, is edging higher. i don't think from here it gets worse. but really, when you look at the forecast mario draghi was talking about, it was a slow grind for a marked improvement. graded the unconventional measures since they were first announced in january of last year. how successful have they been? how successful will they be? david: that is a good question. what other central banks have -- youif you do have to do it for quite a long period of time. success,een tentative figures were not bad. there needs to be an ongoing assessment. it will work, but it will take
sustained effort. mark: economists we have surveyed to just more stimulus, possibly as early as september. is that too early? maybe they will telegraph it this year. david: that is right. there will be a debate about whether they taper from march and sustain purchases at the current run rate through the whole of 2017. they might do the latter. whether or not they increase the size of purchases is a slightly more difficult question because obviously you have the german constituents. mark: now we know corporate bonds kick off the buying program. some have said equities, do you push it out? or not? david: overtime, there is enough sovereign bonds to buy, you carry on buying those because your adversaries on the council
and political voices against doing this kind of stuff will get much louder if you start taking on risk on the central bank's balance sheet. mark: david, thank you for joining us and giving us your thoughts. david tinsley. betty: much more ahead, global airline earnings are said to be over $3 billion higher this year. ♪
grater.e cheese who chooses these names? betty: it is time for the bloomberg business flash. johnson & johnson buying folk international, a haircare company that prices $3.3 billion in cash. the deal is inspected to close during the third quarter of 2016. elon musk has never been shy about making bold predictions. he is offering two new ones, most cars will not have drivers in three years and people will arrive on mars by 2025. he made the comments at a conference in california. no drivers in three years.
i went ahead to the markets desk where julie hyman has a look at airlines and other companies. julie: i want to start with another company, it is falling sharply. we're talking about cigna jewelers. it is down by nearly 8%, after reports of an observer mentioning the stock. we have not been a hold of the it is.to sa see what ofaccused employees switching out diamonds with lesser quality and demand made stones. we have not verified the details. we have not heard from the company. we will continue to reach out to them and to get details from the reports. we wanted to draw your attention to the fact that the stock is most definitely reacting.
coming around to airline stop, declines there as well, not across the board. delta said his passenger revenue per available seat mile fell, even as capacity grew. global airline earnings are going to rise by 3.1 billion dollars even though demand is going to be slightly lower at 6.2%.e calls a robust is $45 aassumption barrel. mark: european airlines are rising on the back of that profit forecast. still ahead on "bloomberg markets." cashgetting a massive infusion from saudi arabia. that is next. ♪
betty: you are watching "bloomberg markets." i am betty liu. mark: this is bloomberg television. just got a big vote of confidence from saudi arabia. billion inting $3.5 the startup and will get a seat on uber's board. it will help the company find it's costly global expansions. for more, let's bring in marie mawad. this is a huge cash infusion for uber. how are they going to use the money to expand? it does seem like a massive amount, three point $5 billion, the biggest single investment coming into uber, bringing their cash pile to $11 billion. they are going to need operably
at least to that to realize their plans for international extension. it is the world leader in car hailing applications. haveround the globe, they strong competitors emerging in countries like china and india and across europe as well as the u.s.. uber is going to need the money. they need the money for to get intorposes, consumer heads around the globe and expand into new cities from china to und india. expandthis money is to in the middle east. how is it going to use the money in the middle east? what is the market share right now? isie mawad: the middle east only one of the markets it is going to use the money to expand into. they are already into 20 cities
there. china is the key piece here, especially when you look at the investment that apple made just didimonth in uber's rival . that is going to be a key market for uber and where a lot of funds are going to be needed for its expansion. it is where our eyes should be riveted at right now. mark: does this fundraising from saudi arabia include the necessity -- preclude the necessar necessity to go public? marie mawad: it does seem that they are pushing back the prospect of an ipo. pileare sitting on a hefty of cash and probably do not need the ipo right away. when you look more broadly at the market, there are talks of the chinese competitor i mentioned going public, doing an
ipo. if that starts happening with its rivals, it might change things in the markets and it might be a reason for the u.s. company to look at the potential ipo. mark: thank you for joining us. betty? betty: still ahead on bloomberg as opecon, prices drop does not agree to a price target. we are going to take you live to vienna where they held a crucial meeting. ♪
markets." let's check in with first word news. ma: students are heading back to classes after murder-suicide at the ucla campus. a professorkilled and then himself and has been identified. investigators are looking at the relationship between the two men. say that classes in the engineering building where the crime took place will remain closed. a judge will appoint a special prosecutor to handle the case against a white police officer accused of shooting a black teenager 16 time. the shooting was captured on video and ignited protests. is set tointon
release a major foreign-policy attack on donald trump using a speech in san diego to cast the nominee as unqualified and dangerous. the former secretary of state has repeatedly called donald trump a loose cannon and plans to contrast her experience with his. she will try to make clear how high the stakes election. residents of the canadian town devastated by wildfires are returning home to assess damage. 80,000 people were evacuated from fort mcmurray after a wildfire. it destroyed about 10% of the town's structure. global news 24 hours a day, powered by our 2400 journalists in more than a 150 news bureaus around the world. mark: thank you. falling, ryan chilcote is in vienna and joins
us. is this a big disappointment or not? ryan: they are not saying that. the most important thing at this meeting was to show unity and that is what oil ministers say they achieved. the new secretary general, they have been trying to do it for four years. the nigerian that was the front-runner in the contest has been appointed and will take october. that was a job well done, they finally decided on some in. there was enthusiasm, at least on the oil market, that we might get the reduction target, the told that opec eases to influence prices. they often overshoot the target, they often do not pay attention to the target, but at the least of they had the architecture in place for 35 years. they got rid of it in the last meeting and there was hope they would bring it back, and they
did not. a lot of ministers said it was a positive meeting. the reality is, they kicked the can down the road when it came to policy and intervening and the oil markets until december, when they get together next. at least they will have a secretary general that will be able to navigate through the new realities of the oil market. betty: ryan, did you get the sense that -- you mentioned kicking the can down the road, where they anymore unified than the last time around or are the divisions bigger? and will this set the stage for next time? ryan: i think they are little bit more unified. there was concern about intervening on the market right now. i think they are a bit apprehensive and worried about the fed raising rates and the dollar getting stronger, eroding demand overseas for oil, for people buying oil in dollars
that are coming in from different currencies. they are worried that some of the reasons we have had supply disruption is not just the magic of letting the market fix itself. they like the direction of travel they have seen over the last 3-4 months with oil prices -- 45%from february lows from february lows. beforegs go south december, because they believe the oil price will go to $60 a barrel in december, you can expect more acrimony within the group again. betty: thank you for keeping us updated. ryan chilcote, in vienna after the opec meeting. frome joined by jan stuart new york. is this the end of the surge we have seen in oil from the 12 year lows?
stuart: no, i think the surge in oil prices are a fundamental improvement. it has barely begun. we are on the cusp of entering into deficits. we have not seen them for literally two years. most pressing fear was not about the economy, the economy is fine. member that opec could mess up this party and that is saudi arabia. it could decide to flood the market, for whatever reason. what comes out of this opec meeting for us is that it looks like the saudis are not going to do that and things are going to improve. mark: what happens when the outages come back on stream?
venezuela, canada, nigeria? jan stuart: you saw me raise my eyebrows on that one. venezuela production is going fine, down 81% year-over-year -- down maybe 1% year-over-year. nigeria is a very big deal. i don't care that the new opec secretary-general or opec chief of the delegation from nigeria says things are going to get fixed. barely begun. nigeria is a massive problem for oil supply in the making, i think, until the locals decide to again sit around the table and stop sabotaging things. we have it coming back fully online by the end of next month. that is somewhat arbitrarily.
even if the canadian outage completely resolves in the next week, which is in our balances, our balances still show a supply deficit in the second half of the year of almost one million barrels a day. we think 150 million barrels come out of the market in the second half of the year from inventories. even if the outage is returned to normal. betty: we are all reconciling essentially, we are being held at bay, wondering but opec is going to do, reconciling that at least they have not done more damage. at west point are they going to -- at weshat point are they going to agree? the surprise is that the saudi's rout of proposal to the meeting. nobody expected them to do that. it was a bit of a peacemaking
meeting, a start for the saudi's to begin to get along with lastbody after month. the iranian say no, maybe that was to be expected, there was very little diplomacy, unprepared would be one way to say it. the saudi's have always set for there to be a real production deal done, there needs to be cooperation from non-opec. russia was not even invited. there is the possibility of some sort of sealing in place if the market goes pear-shaped again. the saudi's do not think that is in the cards. bullish, to be more from what i can tell. the saudi's are playing nice. opec has grown by one member.
eventually there needs to be a deal. the architecture remains in place. wentopec meeting came and and has not done all that much harm. unfortunately, the raise expectations and then did not make the expectations. they said they were going to deliver a deal this time around. mark: many said that opec is dead. is it too soon to write its of the jury -- obituary? --n stuart: i was not righ would not write an obituary. we are cautionary. about $45. to
we have reminded folks there is a bullish scenario. actual prices seem to be tracking more closely than the central scenario. the bullish scenario has a fourth-quarter average of six dollars. -- $60. i think prices by the fourth quarter will be somewhere between $45 and $60. mark: opec is not dead. betty: much more ahead on "bloomberg markets." harder,ests are getting why they are facing tougher requirements. that story is next. ♪
♪ mark: this is "bloomberg markets." betty: i am betty liu in new york. how are we trading after the ecb decision? mark: little changed. we were earlier down. the stocks europe 600 up. a mixed message from mario draghi. he raised to the inflation forecast. 2 year horizon is not looking so hopeful because the inflation forecast was kept well below the ecb target of just below 2%. stocks are rising in london. look at the best and worst performing industry groups. among them, oil after opec decided not to reinstate
production quotas. auto and basicr, resources up. how is the euro responding? no change in rates. of 1%ro is down a fifth against the dollar. showing of polls renewed support in the leave camp in the upcoming referendum. spanish yields are unchanged. it's get back to the u.s.. abigail doolittle has the latest live from nasdaq. how is it looking today? we are doolittle: looking at another day of tight trading for the nasdaq. outperforming nicely lik.
paul singer must be happy about this. he said in march it was undervalued when the firm disclosed and 8.9% stake. even so, shares are down on the year despite today. laggers? notable abigail doolittle: plunging new guidance's could tip the hand around approval for a drug. rating andnderweight a six dollar price target on shares, suggesting the stock could plummet from here. mark: thank you. central-bank, on
the annual stress test just got harder for big banks. there will be stricter capital minimums for eight of the largest u.s. banks. regional lenders will see relief, according to the federal reserve governor daniel tarullo. daniel tarullo: we need to have institutions more resilient than other banks in the economy. you can have a smaller bank fail and the economy can absorb that. but with the largest institutions, there is much more of a systemic risk and we need to achieve that in a the stress environment as well as a prestressed environment. the second thing i would say is, as rigorous as our scenarios are in stress testing, we can't anticipate all things that might happen. there is the unknown unknown. for that reason, we need to be a little bit humble about how much makee predicting and
sure there is capital there to absorb unanticipated losses. already,ve a surcharge you're talking about a surcharge in unstressed situations. are you talking about something less than what you require in normal circumstances? daniel tarullo: what i would anticipate is that the surcharge addition will be the same amount that is required on an ongoing static basis. people should not jump from the conclusion to the proposition just, forhould example, take last year's stress test and add the surcharges. we will make other adjustments on the stress test. there are some things put into the stress test overtime that are really quite conservative assumptions that were meant to take into account the sum of the same factors, the fact that we needed more resiliency in the biggest institutions.
assuming we go forward in a more explicit way, some of those things that we put into place before might be adjusted as well. there will be a significant increase, but not dollar for dollar. betty: that was daniel tarullo governor of the u.s. federal , reserve. british retail chain bhs will be liquidated. jobs could be eliminated after the administrative -- outrage and alic parliamentary inquiry to establish how the retailer's pension was allowed to swell. plans are going ahead to shut down to nuclear plants in
illinois after the legislature did not act on its request for support. one will close a year from now, the other in 2018. theost $800 million over last seven years, about 1500 people work at the plants. snapchat has a hundred 50 million people using the service -- has 150 million people using the service every day. it is more popular by twitter. twitter has less than 140 million users interacting with the service daily. in business latest flash, you're watching "bloomberg markets." stay with us. ♪
where ryan chilcote is standing by with opec's newly appointed secretary-general. very special guest, the very first interview since his appointment just a couple of hours ago today here at opec. thank you for joining us, mohammed barkindo, this is a real honor. you are the incoming secretary general. take over in august. just the fact that you have been appointed is an achievement for opec. the been trying to pull this off for four years. we did not get an output ceiling. can opec be opec without a production target? mohammed barkindo: first things first, i went to thank you for organizing this. this is my first interview since the vote. i am really honored. it is a great honor for me and my country, nigeria.
-- by government, government, who decided in their own wisdom to put my name forward for this office. i want to use this opportunity, the platform you're giving me, to thank the president, as well .s his minister of state campaign all the through until today. not part of the negotiations on issues of supply management. you can understand why. i do not think it would be appropriate for me to comment on what they decided or did not decide.
there will be ample time for that. ryan: is is an acceptable strategy going forward to not use at will to intervene in the market when you are secretary-general? mohammed barkindo: it would not be appropriate for me to comment on decisions of this meeting except for the one that dreck we affected the election of the secretary-general -- that's a -- that directly affected the election of the secretary-general. ryan: look and you do to bring about unity in opec? we have heard so long about back money us meetings -- acr acrimonious meetings. mohammed barkindo: you have to
give opec credit for being an organization that witnessed the turmoil of wars within its members but survived. it has been over exaggerated. i am confident the future is right, that this organization will not only survive, but continue to adapt to changes in the global industry. ryan: you are no stranger to the oil market. nigeria state owned oil company in the past. what does does the market look like to you? : the market isdo gradually, but steadily rebalancing and the expectations
are that from the fourth quarter o q1, q2 of next year, we will begin to see some equilibrium in the market. ryan: congratulations to you, sir. we look forward to speaking to you in the future. the incoming secretary general of opec, he takes over in august. he decided it was important to give his first interview since he was appointed to bloomberg television. mark: well done, ryan. coming up next on the european close, we are going to have much more on today's ecb decision and the latest out of opec. ♪
you're watching the european close of "bloomberg markets." ♪ betty: we kick off this hour with some breaking news on the oil market. let's head to the market desperate julie hyman has the oil inventories in the u.s. julie: coming in with the decline of about 1.3 7 million barrels. the estimated decline was about 2.7 million barrels, smaller than estimated decline at leasing crude oil inventories and gasoline inventories seen a bigger than expected drawdown of about 1.5 million barrels. this is down 1.3 million barrels. back to larger than estimated. just to recap, a smaller than estimated drawdown in crude inventories. larger than estimated drawdown in refined products. also i see