tv Bloomberg Best Bloomberg June 4, 2016 8:00am-9:01am EDT
coming up on "bloomberg best", the stories that shaped the week in business around the world. from draghi's latest declaration to opec's long-awaited meted to flash crashes in china. we will revisit all. >> got swore in. >> being in and saying he supports management does not mean he is going to want -- anna: have we got data for you? so many economic indicators out this week. >> the ecb decided his stimulus is starting to work. >> household are spending at a decent clip.
>> in a word, meh. the big names discussing big challenges. >> institutional investors are trying to deal with volatility using etf's and sharpening volatility. people out ofake their walks of life and say i am going to turn you into a political operative. >> the window of opportunity is closing. we need the resources so we can protect american women. anna: how china's economic a celebration is driving a new car culture. >> 40% a year. anna: all straight ahead on "bloomberg best." and welcome. i'm an edwards. this is "bloomberg best", your weekly review of the most important business news, analysis and interviews from
bloomberg television around the world. let's begin with a day by day but look at the headlines. with markets closed monday in the u.s. and the u.k., the biggest news to start the week came from asia. the singapore listed commodity noble group is making headlines with the resignation of its ceo. what happened. it happened quickly. >> here is what we know from the statement today. he decided the time was right for him to move on. been ceo for four years. noble says he will be replaced by two co-ceo's. rendell has been with noble two decades. an old hand in the company. the's where we are with company. even with the recent rise in commodities prices, noble shares have continued to drop. noble says it will stop the sale
prices of some of its u.s. operations. that will help prop up its balance sheet. the company has been under attack, allegation against its accounting practices coming from resurge.of -- vw shares falling 447% earlier after quarterly profit at the vw brand declined 86%. revenue slipped as well. the chief executive says the " received respectable result under difficult conditions." wjhy did shares fall? was it just the decline in profit of the namesake brand? >> that is certainly a big reason for it. like the headline figures rose slightly. due to some one off charges, 309 million euros. they got some currency tailwinds from the 6.2 billion euros they
are set aside for the scandal. the volkswagen brand is critical, so core to the identity of the company. with the profits falling as 86%, and the profit margin is minimal 0.3%. that is a big problem for them. in addition, they have suffered from a decline of profits in china. that's not reflected in the operating profit results. china is the biggest market. if profitability starts to slim there, that is going to be a headwind for volkswagen. the prime minister, this is a big deal. he will retract a national sales tax. much of this was foreshadowed when he was the president and leaders in g-7. madet hiroshima where he very clear he was planning - playing to a domestic audience. some of this is a delay of a national sales tax. quite an abrupt blow to the
fiscal side of abenomics. how will japan respond? >> first of all, i will expect he will do pretty well in the election next month. we think he is going to call a double election, so that will be perfectly timed. notice what he is saying here. a a few months ago he was saying he would not postpone the sales tax hike, unless there was another lehman like event. now he is blaming the world economy. he is saying the world is at risk. not japan. japan is doing fine but the external economies are at great risk, so he has to do this. need you to give me your opinion as an economist but when i look at the data, i have trouble saying that japan is doing fine. >> you are right to not see it. this is clearly, the virtuous cycle that abe has talking about -- been talking about where corporate profits rise and that spurs more consumption. that is not happening.
this is his attempt at kickstart that with a boost to consumer spending. >> the refinancing rate staying unchanged at 9%. 0%. the deposit facility rate -- remains unchanged at -40 basis points. and the marginal lending facility, the third rate hub of the ecb staying unchanged. the ecb to start a corporate bond purchase plan on june 8. we have got the date, june 8 will be the date. the news crossing the wires right now. before today, all we knew is that it would be in june, 2016. we do not have the color on the size, but we know it will start on june 8. >> the one thing opec ministers did agree on is a new secretary-general. that is a positive.
they have been bickering about who should get that pose for four years. they decided that was the nigerian front runner. he will be the new secretary-general come august. n down thed the ca road when it comes to policy and intervening on the markets. they are still going to let the market "fix itself." laterhen they do convene in the year, at least they will have a new secretary-general, some fresh blood, and maybe we can get some more unity out of this organization. >> less than three weeks away from that crucial brexit vote. some big names are speaking up here we have jamie dimon and the prime minister weighing in. >> jamie dimon in the u.k. after being in new york yesterday flew in to talk to his employees with the chancellor of the treasury. >> it is my opinion it is a terrible deal for the british economy and jobs. >> he says they may have to cut thousands of jobs in the
u.k. if the brexit happens and move those to the continent, both for business reasons and if other countries require it. >> your jobs report now. >> 38,000 jobs. that's the number created in the month of may. more than 120,000 below the median estimate. and the lowest job growth in this country since september, 2010. tom: is this a report on enough of a shot to alter fed action? >> i think it is enough of a shock to delay june into july for sure. the fed has tried to convince us that one or two hikes this year is in the cards, and i think they want to re-normalize the yield curve and normalized short-term rates, but a number like this certainly cancels out june in combination with brexit.
we will wait for another one and look for july. the number is so low that they have got to take pause. has been a week full of reports for economist, investors and policymakers to chew on. later we reviewed data from around the world, including more u.s. numbers. icahn's latest display. -- latest play. and the latest job cuts for investment banking. you are watching "bloomberg best.:" " ♪
>> the chinese futures market, at 10:00, the market plunged 10% and a minute and then it snapped right back up to where it had been. so, something of a bit of a flash crash. >> does this raise basic questions about the markets and how they are functioning? >> it was a fat finger trade rather than something more structural. the market was up 3.5%. the biggest gain in three months. there seems to be sentiment that the msci is going to include china in its emerging markets indices. >> by one single trader who put 398 contracts. that brought the selloff we saw. the busiest minute of the session. 1500 contracts changing hands. tiffany says it may take legal actions against china's
theme park after he claims that snow white and captain america look-alikes were seen at the opening of the complex. how did a conflict between wanda and disney start? a it started week ago where famous man in china when on a national tv program and samong some topics, he talked about how disney should have -- should not have come to china. these are the opening shots. and disney has stayed quiet till then. they did want to respond to what wong had to say. over the weekend, when wong opened the first of 15 three and part -- theme parks, there were characters there that simply put were dressed up as characters register to disney. >> wonder if disney is likely to take action against wanda. is this a warning?
>> they have made clear that they have not gone so far as to take legal action. it's more like a warning shot, i think. >> shares are higher after it iss hna group says buying 30% with plans to improve the state to almost 20%. hna runs more than a dozen carriers including hainan airlines. singapore airlines is cutting its stake to 20%. why hna? >> i think they are a perfect partner. it opens up china for us. and china is the biggest source of inbound tourist for australia. as you know, it is now over one million chinese visitors come to australia every year. and it is growing at a rate of 18% for five years or so. a very important market for us and very important and good partner. >> so then why is singapore
airlines paring its stake? >> singapore airlines is a very important partner and we enjoyed a strong relationship with them. but their stake with the placement of the 15%, to hna, the singapore stake and other people's stakes will drop a percent or two. a byproduct of the mathematics. miguel is selling its telecom business to two companies in a deal worth $1.5 billion. they hope it will improve their service. the chairman says that two will work together. >> this deal, s what is it mean for san miguel? >> what you have as a sellout of $1.15 billion. is they havemean
been precluded themselves reselling is to get into the telco market. that money as the chairman talked about earlier in an interview was going to be focused on other infrastructure plays. from roadway, tollways, ports and even power. that money may be used to pare down debt or or expand their warchest into their sectors. >> carl icahn has taken a large position in allergen. he's very supportive of the ceo. helped place in their. bige's bet on a lot of companies, whether it is apple. and he pushes the one he thinks will raise shareholder value, what does he have in store for elegant? -- for allergan? he put out a statement and he does take pains to say that
brett saunders is a great guy. these guys ogo way back. a bunch of years of icahn believing in the sky. take a look at apple. he said he likes tim cook. then he came in and demanded they start using some of their cash to repay back to cash holders -- to stakeholders. mean heing in does not is not going to want something or have a role that he thinks he can play in the company's future, especially since allergan is at a pivotal point. >> we should not assume it is a from a situation. >> friendly with some tension is always a possibility here. i think there is a broad spectrum on how active carl icahn can be and could get in a situation like this, even when he supports the company. asia's biggest aircraft leasing firm native hong kong listing debut. shares of boc aviation trading
1% higher. now this ipo raised over $1 billion, making it asia's second-biggest share sale this year. this is been a project years in the making. because as you told me before, you really kind of created the regulatory landscape for this to happen. >> yes. the first spin offs of a company like our own. being owned by a highly regulated mainland chinese bank that is listed in shanghai and hong kong stock exchanges, we've a lot of approvals to go through. with help of our advisors, we have navigated those and have-- are listed on the hong kong stock exchange. >> a lot of investors have been going to the bond market for liquidity to finance. how is that going to change or ismore -- seince the fed looking to raise rates?
>> we do not see that as an obstacle. as a company, we balance our books in a way that six to percent of our leases are floating rates. -- 60% of our a leases are fl oating rates. the largest investor in alibaba group saying they would sell seven point $9 billion and its stake in the chinese e-commerce giant to bolster its cast position. alibaba falling on that news. nk roy main the largest shareholders with 28% after the sale. it is divesting $5 billion in the company's adr. and selling some stock back to the company. the rest of the members of the partnership as well as the sovereign wealth fund. the company has reported holding 8.5 trillion yen of debt. $77 billion.f
they are increasing this liquidity cushion for the company right now. >> goldman sachs has cut dozens of investment banking jobs in the last few weeks according to people familiar with the matter. jobs were a limited across mergers and equities-- mergers and acquisitions, the latest in a string of job cuts. hsbc cuttings of dozens of senior jobs and now you're talking about goldman doing the same. the thing to keep in mind is this is over and above the annual 5% cut of jobs every year. so this is over and above that. we saw them do something similar in the trading division where they cut up to 10%. ofdon't know what percentage jobs this is but we do know that the job cuts were in the key cities globally, hong kong, london, new york and you know, we know it's dozens, at the managing level, the executive director, vp level.
if you look at how deal volumes are this year, that gives you a kind of indication of what the banks are going to not just goldman, the banks across the street. >> uber got a big vote of confidence from saudi arabia. the wealth fund investing $3.5 billion in the start up and will get a seat on the board. will help thesion company fund its costly global expansion. this is a huge cash infusion for uber. how are they doing to use this money to expand? >> it does seem like a massive amount, $3.5 billion, the biggest single investment coming into uber, and bringing their billion. to $11 they are going to need probably be able tohat to realize their plans for international expansion. uber, the world leader in car hailing applications but if you
look around the globe you will notice they have very strong competitors emerging in countries like china and countries like india and across europe as well as in the u.s. thatis going to need money. they do not have factories or direct employees as much as they do need that money for marketing purposes. i think that china is the key piece, especially when you look at the investment that apple didi just last month in i in china. $1 billion coming in from apple as part of a fundraiser. that is going to be a key market for uber. where a lot of funds will be needed for expansion. ♪
anna: you are watching "bloomberg best" investors had a feast of economic data to digest this weekend with the backdrop of thursday's ecb rate announcement plus the fed's upcoming meeting and the brexit referendum, these reports took on extra importance. here is a look at the weekend data. >> japanese retail sales growth has stalled adding to the case from prime minister abe to delay a sales tax increase planned for next are. newl also be proposing a stainless package to put -- to give th economy shot in thee arm. >> as we were talking about when the numbers broke, a beat for japan. eco-goes to show how low expectations are and how weak private country remains. those sales unchanged in the month of april still a b. economist were expecting a .6%
drop. the on year figures falling .8%. after march figures were revised upward slightly. theame out of g-7 with prime minister sounding some dire crisis. this may add the case for further boj stimulus. jonathan: paul gordon joins us live with the latest on inflation and jobless numbers. forine, but still not great president trotted. -- draghi. paul: on a plummet just about 10%. a slight improvement for sure and reason for the ecb to say its stimulus is starting to work. but a long way to go. a big question is where does the inflation come from? it has never come from and vaginal -- industrial goods. it used to come from energy. that sustain.see services inflation is where the ecb needs to see prices increasing.
that also is a hard stretch in this climate. jonathan: april was a strong month. spending climbed by the most in seven years. will it impact the fed debate? >> that is a great number but not quite so great if we take three factors into consideration. spending was flat in the prior month. there was a little bit of a catapult effect there. increased, gas prices significantly in the month. part of that spending increase was households pay more for gasoline. and three was the savings rate coming down, which is good news. consumers became a bit more optimistic in the economic outlook, so they loosened the purse strings. are unlikelyactors to be repeated on a sustained basis going forward. yes, income looked decent. household are spending at a decent clip, which means that the current quarter of growth is
going to bounce back from that lousy number we saw in q1. let's not get to out over our skies, too excited based on this number. the fed likes this number. yellen and company are going to go into that june 15 meeting saying one-month does not establish a trend. prices and 20 american cities climbing more than forecast in march as the busy spring selling season began. the s&p case schiller index of 5.4% in march, at into signs of healthy demand. housing data showed purchases of existing and new homes based, they strengthened more than expected in april. peak pointt the in the recovery. are we seeing the second breath, the second life and housing? >> the economy has been recovering. employment growth has been solid enough. people are needing houses.
they're buing th -- buying them. the inventory is low. so they push the price up. it is a modest price increase. nothing scary or exciting. this could go on for some time. >> china's official factory gauge has signaled improving conditions in the country's manufacturing sector for a third month. pmi at 50.1 in may. to recent evidence of stabilization in the world's second-largest economy. what does this reading tell us? help us work out where we are in the china story? east, is a very -- at the l adding to the narrative that the economy may be stabilizing. we had decent figures out of march and a few wobbles in apirl. -- april. seems things are finding a footing.
no real evidence the economy is getting momentum either. that is what is coming out of these numbers today. along, nothobbling getting any worse. but when you consider all the money the government has spent, the channels they have opened to get credit into the economy, we know there was a wreck at like -- a record level of credit. all the actions the central bank is taken, throw it all together and we still have a picture where sure, conditions are not getting worse per se, but they are not taking off, either. not much to write home about. book contains information about the current economic conditions in each of the 12 federal reserves. >> the book is published two weeks before the next fomc meeting. erik schatzker is live in washington with breaking news. erik: in a word, meh. that's how you might
described the latest beige book. the latest reports from the regional fed banks. yes, the economy is still growing but at only a modest pace. that is the word the fed chose to years. the fed use that same word modest to describe wage increases and job growth since the last beige book. in other words, this is not the kind of assessment that turns hawks into doves. there is little that suggest an urgent need to raise rates at the next fed meeting on june 15. the one area that stands out is labor markets, which the fed described as "tight." difficulty hiring should translate into inflation pressures in the months ahead. as of now, the fed reported only slight growth in price pressures. anna: next, we will take a step beyond the numbers.
."na: this is "bloomberg best it is time to replace some of the week's most interesting interviews. we will start with erik schatzker, the exclusive sitdown with mark -- who reflected on crucial changes in the banking system. theold days, banks would have access to deposits and capital from the fed and earna a spread and makea loan. with all the regulations, the banks no longer make loans. they do not hold inventory or make loans anymore. i'm making a point by speaking broadly. to some extent but
they are tightly regulated. so, the market no longer look to banks to make markets. and so, you have to have a match of a buyer and seller. if you want to sell, there is nobody there to selsl to. what do institutions do? they turned to etf's. an easy way to add data. so, paradoxically, and etf's, $1.4 trillion. if you wanted to look at the 3%e of those etf's, they are of the market. we do not have as far as i know any evidence at how much trading activity they provide in the market, but it's 10%, what we are hearing. and etf flows on a daily basis
do move the market notably one direction. of have the advent institutional investors trying to deal with market volatility using etf's and etf's are sharpening volatility somewhat. so, what i think that's a lot of -- detailed, but what -- erik: where does it leave you? mark: you need more and more portfolio managers have to set their course and stay on their course. >> let's take an example, apple. phones should be made in india if they are allowed to open their own stores there. now do you agree with that? that raise the barrier very high for a company like that? policy is a pre-existing that already exists for the last
several year. the policy has been if you have single brand stores you must have some local sourcing. the rational behind this has been that every person who looks at the indian market must also invest in the direction of creating some employment opportunities in india. now, logically, it is a rational policy. stray products you're there, it must seem a little odd, but it's a sound rationale, when you are looking to capture 1/6 of the world's population, a larger market, and a very large middle class, which andiquid in these areas, products are going to be purchased on a massive scale, help us in creating job opportunities in those countries as far as manufacturing is consecerned. the matter inne cases because cases where there is high technology involved,
an exception.ut we will always be open to look at these areas. why do you do -- think that the republican leadership is having a hard time getting behind donald trump? >> i think rightly so. they're unsure. they are uncertain and it is threatening. so, if you think of politics, i do not think there has been a a payrollwho's made or received a payroll since herbert hoover. i mean, president bush on a baseball team. thein real times, organizations of politics are political. ke people out of their walks of life and say i'm going to turn you into a political operative. you are a political operative. it is what you are. so, by nature, these organizations have bred overtime, it is like we are talking about grapes.
they bred political candidates up through the ranks for years and years and years, and everybody is invested in that. so, when something from the outside comes and challenges that, it's frightening. end, congress did the right thing with ebola. they funded it to stop it. i'm hopeful they will do the right thing with zika but the window of opportunity is closing. we need the resources so we can protect american women, protect people from zika. that can only be done with a long-term commitment that start soon. >> what is being delayed at this point, research on a vaccine, spreading against mosquitoes? what is not happening because commerce has not taken action? >> we borrowed money from one part of fighting emergency to fight zika. we have to start long-term activities to understand the impact of zika on infants and families, to better stop
mosquitoes. this is a difficult mosquito to control. we don't have good ways to do it. to better develop tests to diagnose his infection and vaccinate against it. >>, schlanger can you shuffle funding? -- how much longer can you shuffle funding? >> every day that goes by we are not starting programs that can protect americans. the sooner congress acts with emergency funding bill that restores the money we borrowed and allows us to move forward toh multiyear plans protect american women, the better. >> your optimistic about the risks at the moment threatening the global economy, or are you more risk to the downside? >> frankly, it is going to be 3%, vis-à-vis last year. 3% 2015. 3% 2015. a little bit of an improvement in 2017 but very moderate.
overall, a rather mediocre, a dismal outlook because no surprises. is engines of growth, trade growing at 2%. it should be growing at seven. only five times in the last 50 years has trade been growing below the rate of growth of the gdp of the world. hase five occasions there been a very serious deceleration, even a recession. i am not saying there is going to be recession. conditions are very difficult on that score of trade. investment. investment today, growth tomorrow. that is growing at about 3%. should be growing at 7%. credit is not flowing. the banks are saying there is no demand. the small and medium enterprises saying conditions have titans very much. so, they are not getting a. engines of growth in the last 10
years -- china, india, south africa, indonesia, brazil, russia -- right now second year in recession for brazil. second-year recession for russia. and very flat growth for, in indonesia or let's say less growth in indonesia. less growth in south africa. the growthout half of a few years ago in the case of china. so, basically, that fourth leg of the growth engine, the fourth cylinder of the growth engine, is also at tough speed. ♪
car culture. stephen engle took a ride at a beijing auto racing circuit. ♪ day, anyonetrack can spend 1200 renminbi, $185 to have fun at the track. is tryinggolden port carut china's emerging culture on a new track, offering an alternative to dragracing on the streets. bloomberg obtain this video of teens being busted after illegal midnight racing in underground parking lot. >> the consumer market -- basically, we are giving them what they want. it is their needs. they want to go somewhere to drive fast. this is a safe environment for them to do it. port is planning
an ipo as it accelerates into a more assetlight licensing model. they are franchising racetracks nationwide. 7 are built with more on the drawing board, including -- a nascar track. growing up 50% year. with so many cars being sold in china, with the young kids as you can see today. they spend money on cars and grils. --girls. stephen: not all girls are along for the ride. spenttimates she has $30,000 on gas, tires and tricking out her nissan skyline. here we go. [engines revving]
♪ pretty rare to have a girl here in china. it's cool. the smoke. it's just like a big show for everyone. stephen: never mind she studied financing college. she wants to be a professional. you are racing against guys? >> 40 guys. stephen: girl power. ♪ >> the giants like amazon and ebay dominated,. tom hope for any start up beat them. it can be profitable to join them the becoming a seller and the online marketplace is run by larger companies.
that approach has paid off for pharmapacks a company that sells health and beauty products. the ceo explains how it has grown from small to big. ♪ we're actually started out as a branch of a retail pharmacy in the bronx. had access to different merchandise, health and beauty products four our -- from our distribution. we wanted to sell the merchandise online. from friends0,000 and family, relatives. thatat point we did see retail was on the decline and e-commerce was on the rise. another vision we had that many people did not see is that marketplaces would be the malls of the future. we thought that amazon would lead that charge. our goal was to become one of their largest retailers and build a brand within a brand. we were burning through cash the first couple of years and trying to build our technology. one of the things we did not want to use -- to do was use
thatde software, because would create a level playing field and we know we needed an edge. own software and we also built warehouse fulfillment and logistics software. one of the keying factors was building out software that allows us to dynamically price. shopping pattern characteristics, rankings, weight, dimensions that allows us to change our prices across the board every 45 minutes. we let the metric speed for themselves to at least a have an 89% rating and now we are at 99%. amazon is happy. other partners are happy. we're shipping out 130,000 packages a week. o, we weres ag shipping out 150. we went from a 3000 square foot facility to a 32,000 square foot facility. we are moving to 142,000
anna: >> it is very very busy. we just talked about the inflation numbers are trading -6%. exports, simple function. asia-pacific. that is today, june 1. have a look at everything coming out today. >> take a look at the bloomberg. this is seag. it looks at the seasonal moves underlying security. this is the average over the past five years. then here's 2016.
three blocks are green. three up months. anna: they are 30,000 fountains on the bloomberg. we enjoy showing our favorites on bloomberg television. maybe they will become your favorites, too. quic go will take you to our quicktakes or you can get fast insight into timely topics. brazil is the focus of the quick take this week. ♪ in recent years, brazil has gone through a roller coaster of turmoil. between economicw oes, corruption scandals and impeachment proceedings, brazil is in a deep crisis. many blaming fingers pointed president dilma rousseff. but this has been a slow unraveling for the world's fifth most populous country. here's the situation. in order to understand rousseff you need to start with president
lula da silva. aka lula. a rags to riches story, he was wildly popular and became the symbol for brazil's economic ascent as one of the top exporters in the world of commodities such as oil, soybeans, corn and iron or. his protégeff was and became the first woman elected president. during her presidency, prices for roma to ariel dropping and a corruption scandal parlayed many the structure -- delayed infrastructure projects. how bad did it get? theeconomy shrank 3.8%, most in a quarter-century. the credit rating was downgraded to junk, and business and consumer confidence levels fell to their lowest on record. her president has been strained by the massive scandal involving petrogas. wash,vestigation dubbed car
revealed a corrupt organization and on earth this scheme starting a decade ago and involving collusion and ografacks indicating petrgra officials. rousseff has not been named. there are claims that she doctored accounts to cover up the government's deficit woes. in march, more than 3 million brazilians took to the streets calling for her ouster. senate voted to put her on trial. found guilty, she would be removed from office permanently. rousseff denies wrongdoing. here in the anti-rousseff, time is over. even if she survives her trial, a fragmented government will prevent her from accomplishing anything. the pro-rousseff camp says that temer isn't much better. last year, he tweeted that impeachment is unthinkable. since then rousseff has accused
of them attending a coup. members ofil's 594 congress are currently under investigation for corruption. brazil's future is uncertain right now but whoever rises to power faces a tough task of stitching the country back together. anna: you can find many more quick takes on a range of subjects at bloomberg.com, along with all the latest business news and analysis 24 hours a day. that will be all for "bloomberg best" this week. i'm anna edwards. thanks for watching bloomberg television. ♪