tv Bloomberg Markets Bloomberg June 3, 2016 12:00pm-2:01pm EDT
from bloomberg world headquarters in new york, good afternoon, i'm scarlet fu. and u.s. stocks sliding after mays jobs report shows a drastic slowdown in hiring. the disappointment implement picture bolsters the case or the fed to leave low rates for longer. walmart executives tell shareholders that they are making big changes to compete in a tough market. and they bloomberg inclusive with the chilean finance minister. can they restore confidence to customers as political unrest spreads across south america? in with julie hyman who is checking in on the markets after the jobs report disappointed. i guess it is like the calm after the storm. julie: the drop right now is lower.
even the initial drop was not a huge one, not even 1%. all three major averages are down. the dow is down 30 points. at one point, it was down about 100 points. iscould be worse, i guess, the way to look at the averages. this is despite the job report coming in much weaker than estimated, and on top of that, we got a services report that was weaker than estimated, showing the slowest expansion last month going back to 2014. interesting phenomenon we are seeing. take a look at the groups on the move to see what is supporting the gains we are seeing. it looks like it has to do with the drop we are seeing in bond yields. utilities are up and telecom stocks are up, and those tend to be the groups that benefit when yields are lower. consumer staples also representing the defensive groups.
financials are far and away the worst-performing group. look at what is happening with the banking stocks. a big drop here in companies like jpmorgan, wells fargo, bank of america, and citigroup. the perception was that when rates went up, it would be positive for these companies. on the flipside, some of the stocks going up 92 -- limited to utilities and telecom. it also has to do with gold rising. as people move into the more risk-averse trading today. scarlet: i like the way you put it, it could be worse. when you look at other asset, it stayed where it was. julie: interesting that we have seen this bounce off the lows with stocks but it has been stable in other assets. we saw-year yield, where the big drop after the job report came out, is now pretty much where it was after the
report. the dollar, similarly, when down, and stayed down. looks like we have a glitch with that one. oil and gold, hopefully that one is working better. oil went down and stated down. so stocks are really the outlier in that respect today. scarlet: we will explore that further, thank you. let's check in on the first word news. mark crumpton has the latest. trump will continue his swing through california today with a rally in writing. last night, things got ugly in san jose, gallup on your. supporters were attacked by protesters as they left the event. at least a dozen people were hit and car windows were broken. hats grabbed by supporters -- from supporters were set on fire. critical ofton is
donald trump in the state of california. both candidates have high unfavorable ratings in the state. 53% view trump unfavorably. 47% said the same of clinton. the suspect in the fatal shooting of former new orleans saints lawyer will smith is back in court today. several issues around the agenda, including a motion to reduce a suspect class $1.75 million bond. cornell he ran his hummer into smith's suv and then shot the player in the street april 9. hayes is also charged with second-degree murder in the wounding of smith's wife. without power in paris as the biggest floods in 30 years hit the french capital. the louvre museum, home to historic pieces of art, closed
its doors today. the high water is also disrupting travel on roads and some train lines. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. i'm mark crumpton. back to you. scarlet: let's turn back to today's disappointing jobs data u.s. employers added 38,000 workers in may, the fewest sits september 2010. on top of that, i is coming in lower as well. so what does this mean for a data dependent fed? here is the initial reaction from mohamed el-erian. mohamed el-erian joins me now live from irvine. julie was giving us the market reaction, and yes, a swift reaction. stocks fell,nked,
but then they came back a little bit. a big move in the german 10-year. the yield hitting a record low. right now at a low of 6.5 basis points. of course, you have the yen gathering a lot of strength here. these are outsized moves. are they simply following the nonfarm report, the gains of the fed, or does this directly influence the federal reserve and what they decide to do next? mohamed: the direction of the moves makes sense. at face value, this report means the fed is less likely to hike rates in june. in fact, the probability, the a hike probability of has gone from over 30% to below 5%. you see the currency markets moving as a result of that with the dollar weakening. the direction of the moves makes sense. scarlet, i'm not sure the magnitude makes sense. that is a massive move.
as julie said, the two-year moved by 10 basis points on that report. i think that tells you something more about liquidity in the market. the direction makes sense. the extent of the moves on the fixed income side brings questions about liquidity. scarlet: what does that tell you about the positioning of investors before the job report? have been all over the place. earlier in the summer, the probability of a hike was very low. fed rhetoric changed, the minutes came out, and the next thing you know, the two-year was at 90 basis points. now we have moved back 10 basis points. it has been all over the place. it shows there is not enough conviction in the markets as to what the outlook looks like for the economy and the fed. the magnitude of the fed surprising investors. if you were to look at the japanese yen, it is a violent chart. the dollar has appreciated in
value, but in the last 12 months, what you see is the dollar grinding lower steadily, the yen appreciating. broughthat has him back to two standard deviations of trajectory. at what point does the bank of japan intervened? bank of japan has already gone negative on interest rates and they are getting the wrong market reactions. they want the yen a lot weaker, but instead, it is too strong for that economy. the euro is no better, by the way. i don't think the ecb will be very happy. nor will it be happy to the fact that the u.s. has pulled down there yields in the eurozone. all of this speaks to a bigger issue, which is we have a very unbalanced policy mix around the world, in japan, europe, in the u.s., with way too much reliance on central banks.
scarlet: that is something the oecd warned about earlier this year. what does this do to japan and stimulating? .ohamed: it complicates it it makes the bank of japan less effective, if not ineffective and counterproductive. needs to move on the third error on structural reforms. in europe and in the u.s., you have calls for physical expansion, but that also has to come with serious structural reforms to enhance productivity. scarlet: one area where you are seeing optimism today is in emerging markets. stocks and currencies shot up after the disappointing jobs report. the rationale is it delays the fed hike. if it delays a hike because the economy is fundamentally weaker, how is that a positive for emerging markets that need a robust u.s. to absorb their exports? mohamed: it's the same reason
that stocks have fallen and come back. is goods the bad news news, if you are worried about global liquidity. the argument in emerging markets ed rate all make a f hike less likely, therefore, we should worry less about liquidity. therefore, stocks could do better. but i am with you, scarlet and it is about fundamentals. also, there are three different interpretations of the report. one is it is about weak demand and the fed will not hike. the second is, no, this have to do with the supply side. we may be in a situation where we are at all employment -- and that is completely different for the fed in terms of policy locations. the third is this is simply an outlier. there are three different interpretations, which is why the direction of the move makes sense in fixed income, but the scale of the move is something i
would be careful about. scarlet: you point to the different interpretations. we can look at the labor force participation rate. the fact that it started to recover last year was good news to a lot of folks. yet, we have turned the corner once again. what is it about the labor economy that we cannot get back to the previous levels before the financial crisis? mohamed: that is the most worrisome number in the employment report, much worse than the 38,000. lowse now back to historic , near historic lows, on labor participation. it speaks to people leaving the labor force. in this case, it was the older workers who left. is really problematic because it means there are fewer people working to support the economy as a whole. part of that has to do with structural issues, and part of
that has to do with some cyclical issues. but it is a real worry. the fed will probably spend a lot of time analyzing that number. scarlet: is the fed still looking for reasons not to raise rates rather than looking for evidence to justify an increase? mohamed: what happened today, alongside the concerns of a brexit referendum means that a june hike is less likely. july is too soon to rule out. june, a lot less likely. july, still on the table. scarlet: mohamed el-erian, stay with us. we will be taking a look at brexit after this. this is "bloomberg markets." ♪
scarlet: you are watching bloomberg markets. i'm scarlet fu. a brexit would be bad for , according to jamie dimon. >> i cannot and will not tell the british people how they should vote in this, but i want to give you some of my opinions, and it's important that people make decisions with their eyes open. it is my opinion it is a terrible deal for the british economy and jobs. scarlet: still with me is mohamed el-erian. you heard what jamie dimon said with the fed now unlikely to move in june, possibly july, the u.k. referendum will be driving a lot of the market reaction between now and the end of the month. the pound swings to every new movement in every poll. do you see the risk of brexit priced into other assets?
you see it in the foreign exchange market, but not elsewhere. that is because most people believe at the end of the day it will not happen. in the short-term, jamie dimon is right. if that is what the british citizens decide, brexit would be disruptive. how disruptive is dependent on what kind of alternative could be, but quickly. you would have to replace it with something else. if you replace it with nothing, it is really disruptive. term, there are two fundamentally different visions of the european union. the british vision, about a super free-trade zone, a destination. if you ask germany or france, they say it is much more than that, it is about the ever closer union, economic, political, social. that difference has not been resolved for decades. eu,he british remain in the
that is a difference of vision that will continue. scarlet: a difference of philosophy and it is all coming to a head right now. given that a lot of the market participants do not believe a brexit will happen, what can we learn from the scottish referendum, the lead up to that, where there was also a lot of handwringing, but ultimately was much a do about nothing? mohamed: i think that is why the equity markets are so calm about this. the message from the scottish referendum, when push comes to shove, people would rather opt for certainty, even if it is not great, rather than uncertainty. calming the is equity markets. that allust caution you need is one big shock on the immigration front or something else, and voter sentiment could move quite a bit. the polls have moved quite a bit
in the last few weeks, so this is much more fluid than the equity market would suggest. scarlet: voters proving that they are willing to flirt with the idea of unconventional ideas. how do these verbal warnings influence businesses and the consumer? is there a direct impact on what they do on animal spirits? big issue think the is how they impact the voters. part of the problem -- and you just said it, scarlet -- we have seen a massive rise in anti-establishment movements on both sides of the atlantic. that tells you trust in the establishment, being a private or public sector, that trust has come down quite a bit. part of the problem is when figures from the establishment say something, it gets interpreted quite differently from people who are dissatisfied with the establishment. it's interesting to see how
these anti-establishment movements impact the messages of how they are received. trustt: s trust and -- as deteriorates, are central banks less likely to be a driver in the markets over the coming months, as opposed to political noises? mohamed: yes. i think the word you will hear a lot of people say is exhaustion. the central banks are getting exhausted. they have been carrying a very heavy burden for much longer than anyone anticipated. they cannot carry it and be highly effective. if they try to continue while they are getting more exhausted, they will become not just ineffective, but as the bank of japan has discovered, could become counterproductive. the phrase you will hear over and over again are the central banks are getting exhausted. scarlet: are we moving away from
an era where central banks are dominating the market? we are slowly and in different ways. in terms of influence, the big story has been the ability of central banks not to deliver the economic outcomes they want, but financial asset outcomes. they have been good at delivering. repressing interest rate, boosting assets. i think we will see them become less effective in delivering that. the bank of japan is a signal of that. they never thought that by taking interest rates negative, the yen would appreciate rather than depreciate, but that is what happened. today.: you can see that even as u.s. stocks have recovered most of their losses. mohamed el-erian, thank you for joining us today. much more coming up on bloomberg markets. walmart is holding its annual shareholders meeting.
scarlet: this is bloomberg markets. i'm scarlet fu. walmart just wrapped up its annual shareholder meeting in danville, arkansas. shannon pettypiece is there live. give us some of the highlights from the meeting. we heard there were some votes taking place. shannon: things are just wrapping up. all of the 14,000 people should be filtering out any minute. they are listening to katy perry right now. company proposals passed, shareholders voted on those. none of the shareholder proposals passed.
after this, doug macmillan will be doing a q&a with an esters. i will be updating you on that throughout the day. mostly an emphasis on technology and the company reaffirming its commitment to employees, talking about the wage increase and how that translates into better customer service. jobs reporthad a here, which was disappointing, only 38,000 jobs added in the month of may. walmart is america's biggest private employer. what does a week jobs report in for a company like walmart? shannon: obviously, not good for any company when they are not seeing their wages grow, but historically walmart has done good in a down market. we can look back to january when there was talk of recession. they were one of the best performers in the dow when there was all of this economic turmoil early in the year. that a possibility slower economy or recession could be good for business as
customers trade down. maybe the whole food shopper goes to walmart to get organic products. it is not necessarily doom and gloom. you can see that in the stock price which was down earlier today, but certainly not as much as the overall market. scarlet: walmart is so big, what does it do to move the needle on growth, in what areas are they planning to ramp up growth? shannon: technology is a big tool. their groceryn business. more than half of their revenue comes from groceries, so they have to win in grocery. they cannot lose in that area to amazon. one of the key things they announced today was doing a grocery delivery program using lyft drivers. you go online, and then a driver drives from the store to your doorstep. they charge seven dollars to
$10. that is one of the things they are testing and could possibly be rolling out nationwide. us a sense of what doug macmillan will be telling investors. what is the number one thing they want to hear from the ceo? shannon: walmart just came off of a good quarter. investors want to know, can they make that last? is there really change, is there really momentum in the company? scarlet: shannon pettypiece, thank you very much. coming up, we have our mystery stock of the day. future order plans are up in the air. ♪ okay, ready?
marketsad over to the desk we have the big reveal on the ministry stock. when twoa stop headsets are better than one. it sounds like there is something to do with an airplane. ramy: i will give a hand that it is losing altitude year to date. the big reveal. it is go-go, the provider of wi-fi in the air. it has basically been on a downward trajectory of her since .he year to date if you want to take a look at what is happening just today, this is of course why we are talking about it. 15%. down by about this is the biggest fall in 3.5 months. the big news here, american airline said that -- excuse me, go-go said that over 500 planes at american airlines are due for
the us to him -- the deinstallation, and they are heading planes to buy a set -- viaset. look at where go-go kids most of its revenue. we can see right here, 20% goes to delta. look at that. american airlines is number two. drop coming for go-go because of this split coming over the next two years. scarlet: have you ever used it in an airplane? have, but it is kind of expensive, and i appreciate the quietness of airplanes. scarlet: the fact that you cannot stream movies very well over gogo makes it a nonstarter for me. let's get you some headlines
from first word news. mark c.: army teams and emergency crews continue to search along a four foot, texas creek for four soldiers who went missing after their truck overturned on thursday. five soldiers were killed and three others injured. it overturned during a morning training exercise. the three injured soldiers are hospitalized and in stable condition. donald trump says that the judge of trump over the case university students has absolute conflict because it is a student. there was a reference to mr. trump's proposal to make a wall between the united states and mexico. hillary clinton continues her
campaign swing through .alifornia before the primary appearance comes after mrs. clinton, on thursday, delivered a blistering critique of mr. trump's lack of foreign policy experience. fee for lawyers say that three former officials, including a former president awarded themselves pay raises and world totaling 80 dollars over five years. evidence will be given to american and swiss prosecutors who are investigating corruption allegations. this appeared dollars over five. after swiss police ifa to seize evidence. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. back to you. scarlet: thank you so much. the big news of the day, the
jobs report. this is the final picture of hiring. does this mean the fed will hold off on any tightening? analyst withtf those as well. you take away from the jobs report? >> disappointment, confusion. took out of the enthusiasm for where we are headed. it has created confusion about central bank speak and what the various members will think about this. we were thinking that maybe july, they might go and do a hike. july might still be on the table depending on the brexit outcome. scarlet: stocks are still negative, but have steadily come
off their low. meanwhile, the dollar tumbled. continuing to hold on to strength. why the divergence? >> i think international flows -- when you look at 40%-50% of the gdp, the markets are sitting on negative interest rates. there is attraction to coming to the united states. they are looking for positive yield. we are the high-yield alternative. also, from a safety perspective, u.s. market still have a corner in terms of quality. flows here are still good, even though, by your reports, we're at 14 year highs by valuations. you wonder how much further we can go without some sort of correction. we are getting close. scarlet: especially the ones through credit, very active.
bob'sooked through filing, some investigative research. is of the funds that he owns usmv, the hit of the year. $500 billion inflows. everybody wants low-volume. when you look at bob and other people, you're getting to a percent less volatility. you get the stock market, but take some fall until the off of it. had ad to be when the fed bad number, they would highly in but it seems to be much more tepid this time around. scarlet: what is your read on the performance? the 7% gain this year. >> we felt, coming out of the end of last year, if there's one thing that will be a lot of in the next 12 months, it is going to be followed to the.
volatility was here to stay, and you were going to get a lot of it. what is the one way to get out of it, go into lower volume structures. we have built up an advantage over the s&p. quite frankly, we think it will continue that way. we did the same thing on the international side. for us, this year, we are managing against fun until the, not necessarily levels of crisis. that has been extremely rewarding for us. scarlet: if investors were to use that in an inopportune way -- .> complacency is here even though we have had a great was low -- ay, six
vicks was low. the last time i will fade low volatility is when the market is measured by vix. we know that will go up at some point. >> another ticker that bob owens i..i.e. normally you see a lot of money short-term or long-term. this year, intermediate has taken an about four times more than any other maturity band. i would be curious about that. what were you thinking? there is a natural inclination to say, i intermediate maturities. institutions, no problem. the stretch for yield has stretch them out for a bit.
what we want to do is continue to come in on the curve. this is the time when you do not get both a beautiful on duration. you start coming in on the curve. you start saving the high data credit risk. at this point in time, savior risk. look for a better day, that is the message. scarlet: i like the way you put it earlier. active management is not dying, just changing forms. have 350ock says they billion.
incentive stock pickers, they .re etf pickers blackrock expects them to double in the next five years. etf's are passes. even though they are passive, they are used very actively. they are not an index fund, per se. trading volumes are very high. scarlet: what is your response to accusations that etf's suck up liquidity and create problems for investors who are not going true? >> their taxes a secondary market. the fact of the better it this is a wonderful technology. it has allowed the smaller investor to enjoy cost efficiency and allow them to see a relatively non-transparent market alive and real every day. that is a very good
characteristic for any investment of the investor. thenything, it advances ability for investors to move around the market in what has traditionally been an opaque market. scarlet: thank you for your time. thank you, scarlet. scarlet: we have some headlines crossing on the bloomberg. ise most dovish member of -- making some comment at the council of foreign relations. she says there are some benefits to waiting for the fed. risk ifts to additional the u.k. votes later this month to leave the european union. you can watch her comments on lies go pick -- live go.
largely explained by the waiting of the biotech shares game. the index down more than 1%. plus, technology shares. many of them trading lower, including microsoft, alphabet, and amazon. as for the nasdaq itself, any people wonder what is next. we see a lot of follow toady something making this a bit more bearish is something telling us the nasdaq may drop back down. that is the market report. i am abigail doolittle. now more bloomberg markets. scarlet: you are watching
bloomberg. i am scarlet fu. this is a global business report. u.k.g jamie dimon, chancellor calling on jp morgan to send a message that brexit is bad for business. bayer not giving up on their bid for months and what they are doing now. oin is back. bitc is this rally sustainable or is it another full's gold -- fool's gold moment? jamiert in europe where dimon is helping to back up warnings about the risk and cost of a brexit. this after recent polls suggest that the government is failing to get that message across. financialact on the markets -- and we all learned
during the financial crisis how that could affect -- things would be more cautious, the value of things like shares would likely fall. has selected five bank of america, credit squeeze, goldman sachs, hsbc, cheese. if the deal happens, it would create the largest provider of fo farm chemicals. bair said to raise loans to $2 billion. and, saudi arabia's energy minister said that they won't need that -- meet the end of keeping production capacity idle.
buy shares and must accept the policy in place to inhion any disruption supply. oliver: time now for our bloomberg quicktake, where we provide context and background on issues of interest. bitcoin emerged in 2013 with a lot of interest. now, there is a new wave of excitement for block chain. you know what it is? has the potential to reshape the global financial system. more than 40 banks including barclays and j.p. morgan are part of the consortium which works on ways to use it for money transfers, record-keeping, and other backend functions. chain is winning converts, bitcoin is proving to
be a controversial currency. there have been arrests for ponzi in supply. schemes using bitcoin . for early reputation was selling drugs -- software salt one hurdle for digital money which is how to money'sng any unit of currency twice. here's argument. entrepreneurs say waiting for a new currency that is not rely on government and ranks. a medium foras
scarlet: the oecd this week warned of slow global growth and set the countries must spend to escape a low growth trap. the chilean financial minister spoke exclusively with bloomberg this morning. one, we should run the stuff -- the policymaking. to tackle more forcibly what is going on. they are pushing for more fiscal, extracted spending,
probably taking away the weight that monetary policy has had. we were president of the council. we had the opportunity to to pick a theme for the discussion. >> what was the theme? >> productivity and inclusiveness. we should inc. of it as squeezing the limit. i want to put them both together. being more productive is good for inclusiveness. many things are important to grow with more equity. >> you have been an international economist with the imf, with the central bank in chile, as well as the private sector. why are we not seeing bigger gains in productivity given the fact that it is expensive to invest capital? >> that is a very deep question. there are two things happening. the only is capital --
speed, the ideas, have been slower to die fuse. many firms in many countries are very slow to catch up. is second big thing for me education. people right now are not up to speed in general in the world economy to be able to take advantage of services. inneed to work much more preparing our people. let's turn specifically to chile. chile has been one of the bright spots economically in latin america. things are slowing down a bit and unemployment is creeping up. what is happening in the chilean economy? >> two things in my view. we are adapting to commodity
prices. when prices10 years increased. that had very deep effects on the economy. that is over. we are undoing what happened. the mining boom, the real estate whom -- like what is happening with oil in the u.s. south. you have a but happening. the second thing is there have been some political troubles over the last two years. i have had some effect on the economy. lastly, we have a very eight an important agenda in chile of social reforms. it leads to more dialogue so that people get more used to the reality and have more confidence to invest. >> give us a sense of how
dependent the chilean economy is on commodities? is that basically copper? >> it is mainly copper though other commodities are important to us. commodityt, with low prices, we were very successful. like chilen economy .- it is very open if you are very open, you have to find new sect is. -- sectors. my take is that service exports will be very important. ♪
from bloomberg world and --rters in new york, which world headquarters in new york, i'm scarlet fu. gain in normalbs six years. complete coverage to the data. including from bill gross, who tells us what he thinks the jobs report will influence the fed's decision. is a rate hike a possibility,? and a lawsuit focusing on new regulations for financial advisors who handle your retirement accounts. first, to the markets desk where ramy inocencio has been tracking the fallout from the jobs report. u.s. stocks are trying to make a comeback, trying to mount a recovery. ramy: we are definitely off of
session lows after we got that payroll number of this morning. we are just meandering someplace in the red right now. this is where we stand, the dow was down by .4%, the s&p down .5%, the nasdaq down .8%. the follow-up from those payroll when the38,000 expectation was 160,000 when it comes to growth. , and assector health has been throughout the course of the day, financials continue to be the biggest laggard. 1.7%, followedby by consumer discretionary as well as energy. on the flipside, as is usually the case, in the inverse relationship, utilities climb the most. consumer staples being defensive as well as telecommunications also being defensive of 5.3%. with all the downs we are talking about today, there are still some winners, at least some positive stocks moving higher. about five andby
one third percent. they provide wi-fi chips to apple. broadcom is saying it is seeing a 20% growth in terms of forecast for its wi-fi chips. amarilla is a supplier for gopro sports cameras. -- cooper companies is up now it's flat, it had been a pirate leader. cooper makes health care lenses, like contact and sales for the second quarter beat estimates that is boosting the full-year eps as well as the revenue forecast. i want to take you over to the minors, getting above. from threehe order to as much as 10%, generally speaking because commodities are on the up and up from aluminum to copper and gold. scarlet: still looking at the losers, you also have other
catalysts. signet, downly, to two days in a row by 11% right now, continuing to fall after he was accused of switching customers jules during checkups. also, come wars, a similar today story, down by about 6%. by shorting panned sellers, who said it's going to go to zero. and finally for valeant, getting more default notices today a late financial filings in the past two days, down by nearly 2%. scarlet: ramy inocencio with the latest markets. head over to bloomberg's first word news. mark crumpton has those headlines. mark: chicago's police department is releasing videos from 100 incidents. the department will release any and visuals with the police encounter within 60 days of the incident. it's the latest attempt to
regain public trust in its beleaguered police force. the police union opposes the policy, saying the entire story. nearly the entire eastern half of texas is under a flash flood watch her warning. days of heavy rain is lingering and creeks and rivers, and storms off the coast of mexico are threatening to worsen flooding near houston. greg abbott is visiting the area today. meantime, army teams and emergency crews continue to creek along a 400 texas for four soldiers who went missing after their truck overturned thursday in swift floodwaters. five soldiers were killed, three others injured. the 2.5 ton truck overturned in a creek during the morning training exercise. three of those injured soldiers are hospitalized in stable condition. more voters say hillary clinton has the best experience to be president. 62% say she has the experience needed, 31% say that of donald trump trade at the corn to a
gallup survey out today. 51% say mrs. clinton can work with the opposing party, but 39% say that about mr. trump. strong mr. trump is a and decisive leader, but only 51% share that view of mrs. clinton. bills and officials say a judge may decide next week whether to terrorist. he has been linked to the attacks in paris. he admitted to being the so-called man the hat pictured in surveillance video footage walking alongside two suicide bombers minutes before their attack on brussels airport. global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton, scarlet, back to you. scarlet: let's go back to the markets. investors made to tear up their playbooks in the wake of that may jobs report.
learn that u.s. employers added the fewest workers in almost six years. we getting the case for the federal reserve to raise rates in june. joining me from minneapolis is jim paulsen, who helps oversee $350 billion in assets. also with me as mike regan. thank you for making time today. why is it that we have seen stocks mount a comeback, they are dithering right now, but they attended a comeback in the wake of this disappointing jobs report well all the other asset classes, whether it's the dollar has stayed where they were following this number. jim: i do think when you step back and realize the job numbers payroll friday is always a volatile number, subject to quite a bitter vision -- a bit of revision down the road. if you look at the gamut of jobs reports, from the adp report to the claim numbers, to the national foundation of
independent business job surveys -- you get a sense that this job number is probably a one off on the downside, that growth in the economy is probably still around that 2% that it was before. i think when the violent emotional reaction of the open selloff, we may see this again, i think for a lot of investors looks more like a buying opportunity, as the motions may be calm down in the next few weeks. and the fact that the fed has been backed off for little while might be a good opportunity to buy some stocks or sectors you have been looking at, maybe buying on a panicky day to the downside. scarlet: when you look at the revisions, for the prior two months, the three-month average for jobs and it is now just 116,000, the six-month average is 170,000. there's a lot of questioning about whether the fed misjudged and waited too long to continue with its left off.
mike: you mentioned equities not being -- not having the drastic moves we are seeing in the bond market. yields are down dramatically, the dollar index is down about 1.5%. at least for today, there is sort of a mini rotation going on. you have people buying banks and insurance companies -- stocks of people that would benefit from a rising rate environment. as the movers that he was showing earlier -- is the reversal. we're going back into the dividend stocks, utilities, telecom, staples, getting away from the rate sensitive banks and insurance companies. it more to rotation than a massive selloff like we are seeing in the dollar. scarlet: if you come inside and look at the rg function on the that rotation see you're talking about.
have consumer staplers -- staples, telecoms were in the leading category, but they are now weakening. and you have the financials and the improving category, mainly on the increased hawkishness by fed officials over the last couple of weeks until this job report. when you talked your clients, what is the biggest question you are hearing from them following this jobs report? there might be a case of this being a one-off, but he gets people wondering whether there is something more pernicious going on in the economy. jim: it certainly does. within a matter of minutes around this report, we went from the most market adjustments believing the fed to be raising rates in two weeks to all of a sudden thinking are we headed for a recession? the fact that the isn service sector number came in disappointing just about hour later after the jobs report piled onto the idea that there was a major momentum loss in the economy -- a think what we are
going to see in the next few weeks is a big scrutiny of u.s. economic information, to see if this was a one-off, or to see if there is truly a continued loss of economic momentum. maybe that was reflected by the blowout in bond yield spreads we had earlier this year, sort of as a precursor to weaker momentum. i think most of our clients are worried about exactly that potential scenario. i still think this is a very volatile report, he probably overstates the weakness, and we're going to find out that we are still probably growing 2% or more, and the fed, although they won't tighten this month, may well still tighten in july or later this year. i do think eventually we get back to a more cyclical , and maybe just the opposite of the type of leadership we see today. from the last note of yours that i read, i believe you were saying basically the s&p could set a new high this year,
may be near 2200, but ultimately, you think it's going to be a flat year. is the temptation really growing to be a market timer at this point? is that something you are hearing? is everyone turning into a market timer? jim: i think that is true, michael. what happens after a couple of years of going nowhere, of bouncing up and down and literally going nowhere causes all of this to lean a little bit with the abs and flows of the market, to try and add some value. it might make some sense. i have a flat target all year for the s&p 500, a range from 1800 to 2200, with a dropped 1800, got more aggressive. if you were to race ahead in the upper 2100s towards 2200, i would get more defensive again. in,uldn't advocate 100% 100% out market timing.
a little bit at the margin i think make some sense. the best of this bull market is behind us, we're probably not going to do 10% to 20% by low returns anymore. really do more like mid single-digit. if you want to add some value to that, maybe you have to add some risk on, risk off timing around the volatility of the marketplace. scarlet: jim paulsen, walking through time. and mike reagan, you can read all of his commentary on the bloomberg. a quick programming note for you. we have been discussing the fed all day, and we will have live coverage of janet yellen's remarks at the world affairs concert -- council on monday. join us for postgame reactions for her speech. ♪
scarlet: you are watching "bloomberg markets," i'm scarlet fu. ramy inocencio has been checking on financial stocks that are gained a lot of momentum heading into this jobs report on conviction that the fed would move soon. ramy: the conviction did not pan out. we are seeing a broad loss among the financial sector, right now financials are down the most, considered the s&p 10 sectors down by 1.6%. the mostindex down since february, paring losses from earlier. in cyclical the majors citigroup, bank of america, bank of america, jp morgan all down on the order of 2% to 3%. and fall the most since a look atalso taken what's happening with the online retail banks, schwab's down by
5%, it has been testing the 200 day moving average, along with atrade, for schwab is $29.32. trade, the 200 dma is 2625 come also getting closer to that. for td ameritrade down by nearly 5%, $31.30 already now below the 200 day moving average. the singer look at originals, right here, for regions bank, it's been the slowest in four months, down across the board, 3%. generally speaking, down across the board. scarlet: ramy inocencio, thank you. i'm looking at the s&p 500 financial ratio to the s&p 500. if you were to look at it, you can see that leg lower, that indicates financials are lagging behind the s&p 500 very underperforming relative to the broader market.
earlier, a broad uptrend. there were bumps along the way, is largely been on the back of the hawkish tone from fed officials. this jobs report is changing that a little. the financials momentum turning after that may jobs report. let's get you to the bloomberg business flash, a look at the biggest business stories in the news right now. international's rebranding its monte carlo resort and casino on the las vegas strip, which will send $450 million to renovate the property to create two hotels. once the park mgm hotel with 2700 rooms. the other is the nomad las vegas. seekingation brands is a valuation of roughly $770 million for the initial public offering of a canadian wine business later this year. this is according to people familiar with the matter. constellations working with goldman sachs and bank of nova scotia on this offering. the new company is expected to list in toronto as early as the fall.
signet jewelers as it denies switching customer gems for lower quality stones. the remarks follow buzz feed story about customers complaining that their diamonds have been unknowingly replaced with lesser quality gems. sigman says it's service centers more than 91% of transactions have no negative feedback. cigna is down about 4%. that is your business flash update. much more coming up on "bloomberg markets." turning big data into smart data. we hear from charles phillips, the former president of oracle, who is now ceo of a software maker. ♪
salesforce made its biggest acquisition yet, scooping up demand where for $2.8 billion. the ceo helps this will help his company battle its rivals. for more and what's ahead for the industry, we hand things over to carol massar and cory johnson. carol: this is the bloomberg advantage. our next guest is with us to talk about big data, he was the president of oracle and a member of its board, charles phillips, and we do want to talk about big data and how it is being incorporated into planning what's goes on and businesses. charles, it's nice to have you with us. big data, what do we understand about it and what don't we understand in terms of harnessing it? charles: the use cases. what do you do with the data and what do you want to happen after you have it? people are searching for ways to use it. that's what we do as an applications company. we take those analytics and say what problem can i solve with it?
we take different industries, pick problems, and make them better optimized. we talked about nike is a company that doesn't make sneakers anymore. maybe you can use that as an example of a company using big data to help run their entire business, since they're not really in the business of making shoes, they are in the business of selling shoes. charles: that's the commendation of big data and a network. we connect them to their suppliers and logistics companies, so when there is an order, they have to send that over to someone else, because they outsource things. the 5000 factories in china, we generate the and ship notice some another product is on the way. you tell them what on an ocean carrier, we generate the customs documents, it's happening real-time. everyone can see where their product are. that date is invaluable, because you can't see your products, you tilde buffer inventory.
+++ social media to create buzz, everyone who is involved in the infrastructure of her product you are making or what have you is able to see what's going on at the same time. charles: that's what's happening. think of the internet, it's obvious that we are all consumers together, but that didn't happen in companies. it's more congregated, there's more constituencies, a lot more processes. over time, the last 15 years, we bought a network that has 28,000 businesses on it so they can share and collaborate orders, change the order, all of it has to take place. how do you do that in a high-value situation where you have to get it right? the software has involved very industry-specific. there's a certain kind of software for financing, it's
very different. if you look forward into the world of big data, they have similar vertical specializations, or will there be tools used to cross industry in a platform way? charles: they become algorithms, but that's many by use cases, retailers like target and home depot, the way they plan their is usually by estimating what they sold last year. it's very error-prone, people can only manage so much. you want a use science to look at all the attributes around the product. things help you predict what to put on the shelf better. carol: i hear a lot of retail applications, is that were you see this most coming together? charles: they are high-volume and under pressure. really tracking where people are buying things, and it ends up with them creating their own products,
whether it's khakis were assured that they see people are buying a lot of from other manufacturers and retailers that are on the site. charles: is a huge advantage. not only can they see what people are buying, they are seeing with a bot across multiple categories. what music they buy, for history of all of that. retailers don't usually have that data. they want to get as sophisticated as amazon. and economics of the platform than amazon is on -- we run all of our software on aws. we are bringing that to retailers. cory: the fundamentals is the notion that inventory is the rock that can kill a business, and that maybe big data can save companies -- retailers in particular -- from having too much inventory. charles: it's the number one decision that makes them successful. having the right product on the right shelf at the right time. five winter coats on the shelf in july, going out of business.
carol: what other industries. of households, a huge opportunity for patient engagement. carol: charles, thank you. charles phillips, joining us here in new york. thank you, carol massar and cory johnson a bloomberg radio. just ahead on "bloomberg markets," the latest jobs number medes the fed needs to take a pause. ♪
let's begin with the headlines. mark crumpton has more from the newsroom. : the world health organization is putting together an expert committee to consider whether the real olympics should proceed as planned, given recent concerns about the zika threat. a group of 150 public health experts last week called for the summer games to be postponed or moved because of the virus. says that was no public health justification for such a move. political conventions just weeks away, organizers in philadelphia and cleveland are working to hit fundraising goals that top $60 million each. republican organizers say they have raised $56 million of their $64 million goal. democrats are about 9 million short of topping $60 million. muhammad ali is reported to be in fair condition at a phoenix area hospital. the associated press is citing two people familiar with the matter, reports his condition
may be more serious than his previous hospital stays. the 74-year-old boxing legend is said to be fighting respiratory issues that are compensated by the parkinson's disease he was diagnosed with in the 1980's. one game down, three to go. on thursday, the golden state warriors opened the fence of their nba title with a 104 to 89 win over the cleveland cavaliers in a rematch of last year's finals. shaun livingston came off the bench to score 20 points. steph curry and clay thompson combined for just 20 points, the warners reserves bounced. game two is sunday and oakland. global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. scarlet, back to you. scarlet: market reaction has that's the fewest
numbers of workers added in the last six years. we saw the dollar plunge to a two-week low following the labor department report. he also saw gold shoot up as investors flocked to the safe haven. holding onto the gain of 2.5%. equities -- futures tumbled, certainly. the cash market, we have seen a steady grind higher. bill gross, on bloomberg earlier today, tom keene asked gross to comment. he highlighted asset prices. interesth negative rates in 40% or 50% of the developed market world, there is no doubt that there's -25 aces points, and in a five-year, it's -28 basis points now. to the extent that that market
bubble is almost undeniable. to my way of thinking, markets have had a long time to adjust to these interest rates as they have moved lower. equity prices in terms of p/e ratios, cap rates in terms of real estate -- it all has to be connected to some extent. it's more difficult when you get out into equity risks, because there's no doubt that there are bubbles and financial markets, it's distorting the real economy, and that at some point, a normalization is going to begin to affect us all in terms of total return. tom: bill, what will janet yellen focus on? orthodoxfocus on the of economics, that she focus on new economics? does she focus on your financial system as she tries to get not only to june and july, but frankly, to get into the third and fourth quarter this year? what should she focus on? bill: i think janet yellen is very conventional, and that's unfortunate. we are in a new financial era that requires a different type of adjustment bullard in south
korea, only a week ago suggested a one-time price shock, whatever that means, in terms of how you do it. a one-time price shock is better than qe normalization of rates on a gradual basis. we have different fed governors in the debate, she is in charge. and she has made it clear through the press conferences, i think she is conventional and probably will continue to believe that low interest rates stimulate the asset prices, and that the trickle-down from asset prices stimulates real growth. it's been a failure to my way of thinking, but i think she sticks to that and i'm just going to have to see in terms of policy going forward. i think something new and different is required. mike: is this a dangerous time timee markets, a difficult for the fed to interpret what the markets are saying because
they are distorted by the fed, they have to react to this number. you have the brexit debate coming up. -- sorthe fed short of of shut off the noise and make a decision without looking at everything? bill: i think to the extent that there are a number of dissonant informative. but nonetheless, it's confusing to some extent. i don't know how you shut it down once you turn it up, but to some extent, they should coalesce on a standard messaging go forward from that point in terms of market information. tom: last time we had an abrupt market movement, i don't see that time around. what do you do when the bond market, with prices up and yields down like this -- does bill gross get off the television and radio with tom keene in mike mckee and go to cash? bill: i think you begin to reduce duration. that was one of the points in my
investment outlook, and talk about the penthouse in the occupants changing over time. we had a four-year higher prices and 10% on stocks and 7% on bonds. at these levels, with lower levels today, i think at some point, and investor has to begin to recognize that these are levels, and it's not only implicit in longer extension on the yield, but also in terms of credit spreads or in terms of volatility. i think an investor must begin -- cary byhe kerry selling some bonds, as your question suggests. and ultimately trying to time reversal. i don't think it's at this point now, but at some point, we are
get there by selling as opposed to buying. scarlet: that was bill gross on bloomberg with tom keene earlier today. let's get more insight on the big plunge in the dollar following the jobs report, and what it could mean for the fed's next rate decision. is the me from new york head of currency strategy. nick, we've seen defend governor's sound a more cautious know, sing the latest data suggests that the labor market has slowed. how do you think janet yellen will adjust her tone when she speaks on monday? nick: that probably is the $64,000 question. it's going to be interesting. maybe she will add a note of caution, but i wouldn't expect her to deviate too much from what she said last week, which is that is a data dependent outlook, and it may be appropriate to raise rates in the coming months. my feeling the federal reserve is going to want to keep some flex ability with respect to its policy actions, and at least keep the idea of a rate increase
over the next few months as a possibility. note about this particular report is it was extremely soft. it was rather disappointing. it wasn't a particularly clean report either. there was some strike activity that impacted it. heart of it is to wait and see on the brexit vote to see what happens with the next jobs report and take it from there. tone may be softened, but i think it will keep them play the possibility of a or september movement. scarlet: the movement has been violent and reaction. if you were to look at the dollar yen over a five-year span, the dollar gained strength. months, dollar2 has been grinding lower, the yen appreciated. today, it brought the dollar yen back to two standard deviations of a 12 month trajectory. it is not good news for the bank of japan. what does the central bank do?
at what point does it need to intervene? littlehey are still a ways for intervening. if you look at the type of economic conditions -- they do have some positive inflation. if you look at the more traditional food and energy measures. i think intervention from the bank of japan is a more serious threat. the closer we get to the 100 level or slightly below. i think these kinds of levels -- we're still not at a serious threat of a central bank acting. especially given some of the types of comments we've seen at the various g7, g-20 meetings. i think there would be some international pressure as well to dissuade the japanese from the coming particularly active in terms of foreign exchange and intervention activity. scarlet: the fed was looking carefully at what kind of expectations they were pressing in in terms of a rate increase later this year.
they were looking presumably at something like the interest rate probability, the work function on the bloomberg. right now it shows a 4% possibility of rate increase in june, a 29%, that's already a stark change from where it was 22% yesterday, which was odds for rate increase in june, 54% for july. that has changed. to what extent does the fed look at something like this, the market reaction it generates from the jobs report, as opposed to waiting for the actual data come in. are they going to react to this? nick: this is certainly part of the equation, and to your point, i definitely believe the 4% figure for june is very relevant and kind of important. assessment,accurate i think the chances of a move in june are effectively zero at this point. longshot such a
scenario at this point that i don't think the federal reserve would want to shock the markets too much with the move in june. and we can wait for the next jobs report of the brexit vote to get out of the way. the more just in question is what is probability and what's pricing for july and september. those numbers are 30% to 40%. a move by the fed in those particular months would not be a complete shock. i would also argue and suggest that less than a week ago we saw janet yellen saying it might not be appropriate to raise rates. that had been part of a fairly consistent pattern. figure didn't happen by accident. it was almost by design. i believe that the fed policymakers have essentially been actively trying to talk up the possibility of a rate increase. i think the kind of probabilities we see here, if they roll out june, i still
think what's the strategy of the fed and how they manage excitations as they relate to the third quarter. the head of currency strategy joining us from new york. we want to remind you that bloomberg will have live coverage of the fed chair janet yellen speaking of the world affairs council of philadelphia, so join us at 12:30 p.m. on bloomberg. ♪
financial professionals handle trillions of dollars in retirement investment. regular to say the rule change requires brokers to ask in the best interest of their clients. but the securities industry and financial markets association disagrees, and has joined a lawsuit opposing the rules. joining me from washington is ,he ceo of that organization ken benson. action? legal ken: our members felt the department of labor created a new construct that was really regulatory and legally untenable. it would impact our abilities to serve clients, and what's already a highly regulated area of finance. and furthermore, this isn't really about the best interest standard. our members have been in favor of the sec promulgating and it it's aboutrd, but
all of the prescriptions and legal liability risks of cost action suits that the department of labor put in, and the confusion and impacted going to have on our members abilities to serve their clients. scarlet: things like the private right of action mechanism that's been added in. why do you think you will be able to win this lawsuit? ken: we believe that only congress -- only congress can authorize a private right of action. we don't believe a regular can do it through promulgating a regulation. second, we believe that the department overreach in trying to impose themselves as the enforcer over individual retirement accounts, congress established the internal revenue service and the treasury department to do that. the addition, we believe the department overstepped their authority when they took -- they interpreted -- misinterpreted how this works and used exemptions to create this new contract.
while we think the department was well-intentioned with what they were trying to do, we think the sec is the agency that convert he re-tasked with this authority, is the agency that should be doing this. he will impact the ability to serve member clients and raise their cost. in many cases, cut off advice that many clients need. scarlet: you mentioned overstepped their authority couple of times. how did department of labor overstepped its authority? judicial review of regulatory action goes back hundreds of years in the united states. we believe congress is quite specific in what this covers, and what authorities it grants. we think that the department misinterpreted that authority, and furthermore, we think that the law has been settled that only congress can establish a private right of action, and yet the department in effect created a private right of action
through the contract structure they use in this. we believe this is something that the courts need to review, and that's where we joined our plaintiffs in bringing the suit. the legalell us about strategy behind filing this lawsuit in texas. this is an issue that affects clients and their advisors from maine to california. it's a main street issue. it encompasses many hundreds of , in the tens of thousands really, about 300,000 financial advisors across the country. scarlet: so why texas? ken: you could do it in any one of the 50 states. we had complainants who were chambers of commerce, and a number of smaller chambers of commerce. this rule negatively impacts the ability of employers of small employers to set up plans for their employees, which we think is not good public policy. we could have filed any state, without taxes was representative of the fact that it has the
third highest number of registered representatives in the country in the country and the fourth highest number of brokered dealers, and among the highest numbers of small businesses. scarlet: final question, within rule, there must be in parental improvement sold in their for investment professionals that are worth saving. what might those be? ken: we have always been in favor of a best interest standard. we think what they were trying to do was admirable, that we believe will be better to have it apply across the entire retail marketplace, not just over the qualified retirement space. then you have multiple standards on top of one another. if we could get to a uniform best interest standard that applies across the market, we think that would be beneficial. the department made their attempts, really believe the department should have stood down and let the sec go forward. the sec says they intend to
scarlet: this is "bloomberg markets," r.i.m. scarlet fu. after falling oil prices and decades of corruption, nigeria is on its knees, forcing the president to possibly throw in the towel on a central pillar of his economic policy -- a currency peg. we spoke with a strategist from a consulting firm who asked blamed -- who explained the challenging situation. >> if you look at the three month, 12 month forwards, you're
implying a 40% to 60% evaluation in a very short time. the government has indicated they are likely to move away from that. they want to use capital controls and peggy currency, but now the president -- the pressure is too much. --what does that, which accomplish, and what's next? >> as oil prices have dropped, and production is dropped due to terrorist activity in the south, it allows them to have more flexibility in terms of paying their own people, and in terms of bringing dollars back in the country is the competition increases, and unfreezing a lot of the dollars that are stuck in the country, which is causing a lot of business to pull back from nigeria because they can't deal with nigeria. >> this is different then we see a currency devaluation for competitiveness. it's really about creating physical moving room. >> is a lot of fiscal breathing room. they pegged to the currency to
such a degree that the comments -- commerce is almost stopped. the market just doesn't exist. asrlet: all of this comes you wonder who is really in charge, whether it's the president or the central bank governor. the president made some inflammatory remarks, something the level of murder. >> what is the political situation right now in nigeria? >> the president is definitely in charge, and that's why you haven't seen anything move, but he's run out of options. the progress over the last year, it's better than a year ago, but it's been so slow and so incremental that nothing has changed. rom,ow, you're seeing boko wanthe nine to -- he may this to appreciate as a sign of strength, but he can management, so he has to devalue. taking it is really
from two angles. one is the military of disrupting production, and you had oil prices. if oil continues to rebound, will that provide relief? moore's production getting hit so bad that they have to resolve that issue first? >> nigeria lost 600,000 barrels of production. that's a huge barrel. -- it's a huge loss. they need to sort out the attacks first, but even if they do, the budget is a big deficit. $38 and 2.2 million barrels production. either supply needs to go up a lot, $50 on average for the remainder of the year, or they have to bring back some of this production, which has come off-line because of the attacks. all of the fighters they give amnesty to in 2008 paid $5,000 a year, about three times the average salary, none of them are getting paid that much anymore. they slashed that budget completely. so now they are disrupting oil production. that was the strategist
joining us from london. coming up today, we discussed the disappointing jobs report with the chief u.s. economist over a barclays. he has been saying that the labor market indicators are certainly a signal of recession or expansion in the economy, and perhaps today's dissuading jobs report points people more towards the possibility of a recession, even if one is not forthcoming. on monday bloomberg at 12:30 p.m. eastern, when janet yellen will be speaking at a world affairs council luncheon event. any hints she does give is of paramount importance. this is "bloomberg markets." ♪
from bloomberg world headquarters in new york, here's what we are watching this hour. the jobs report shocks to the downside, the u.s. adding only 38,000 jobs in may. : what happened today, along with concern about brexit referendum means that a june rate hike is less likely. it is too early to rule july out. let's see what the data -- june a lot less likely today. july still on the table. shery: stocks falling today, but paring earlier losses after that weak jobs number. the dollar is plunging the most since february. what oil prices will look like