tv Bloomberg Markets Bloomberg August 19, 2016 10:00am-11:01am EDT
♪ vonnie: we take you from washington to london, then conquer stories from china and brazil. presidentserve bank john williams saying that waiting too long to raise the rates would mean the opportunity for bubbles. nejra: new clarity on the timing of brexit. news reporting that prime minister theresa may is leading -- leaning towards the first part of 2016 to triggered talks. vonnie: oil slipping today but still headed for its biggest weekly gain in four months.
morgan stanley calling opec comments the spot behind price gains to put it back in a bull market. about 19 minutes until we close trading in europe. we saw a movement in the pound this morning. probably off of the brexit news. nejra: yes. we were seeing a weaker sterling anyway, but it has moved even though were about -- after the news of a potential triggering of article 50. sterling down 9/10 of 1% at the moment. also seeing the ftse 100 down 3/10 of a percent. a number of the equity indices moving lower in europe. i want to switch this too sure mosttaly's ftse down a 2.7%, leading the losses in western european markets. spain and france down lower all is well. the stoxx 600 intraday, down more than 1%.
these losses have accelerated a bit since the brexit news. whether it is down to that or not is the question. but we still see the losses. the stoxx 600 leading for a weekly loss. the rally yesterday, the first in five days, short-lived. most industry groups heading lower on europe's equity benchmark. so not a happy friday for european stocks. if we look at this chart -- i wanted to highlight this 10 year yield spread between italy and spain. this is the widest in 18 months. this is basically about clinical divergence. spain has moved closer towards forming a government, while italy faces increased pressure on its banks and a referendum in the fourth quarter, that may cost the premier, matteo renzi, his job. we will come back to that over the show. and i want to show you sterling. it is down today, but it is
headed for a weekly gain. almost 1% on the week. a little resiliency, because we have had data suggesting there is resilience in the u k economy post brexit -- in the u.k. economy post-brexit. inie: stocks pulling back the united states as well. a little bit of a deeper decline than yesterday, with the dow leading the drop. down nearly 100 points. around 95. the s&p off 10.5. the nasdaq down about 16.5. the smallest decline of the three. we do have pressure from currency, but also from the energy complex. at least that was the case earlier. look at the imap of the groups on the bloomberg. only a couple of subgroups in higher.t is doing viacom doing the worst as we see
a bounce in bond yields. utilities typically bondin reverse to those yields. speaking of energy and bounce backs, take a look at what is going on. look at oil. we have seen a higher much of the week. , bouncingn gyrating between negative and positive. it was negative earlier in the session. asis interesting that even oil bounces, energy shares remain lower. as for oil on the week, we have seen a big weekly gain. we have been talking about how oil is back and a bull market after recently entering a bear market. it is up 8.5%, on pace for the best weekly performance since april, perhaps march, depending on what happens in today's session. what else putting pressure on u.s. stocks -- we still have disappointing earnings news, including that the center for
medicare and medicaid services is seeking comment on some health care providers possibly screening -- steering people towards eca exchanges. davita may be at risk because of that. gettingelectric downgraded. and estee lauder coming out with an forecast below estimates. vonnie: breaking news. trump's campaign manager paul manafort is said to resign from the campaign. this is according to the "washington post," which is citing a close friend of manafort's. he had been under allegation of receiving $30 million from a theet account working on half of the toppled pro-russian ukraine president. donald trump now confirming that paul manafort has resigned from
the campaign. manafort, the campaign chair, has resigned. other first word news -- > chinese officials say 's meetings of g-20 leaders should avoid political issues, like beijing's territorial disputes. a way tochina proposes revise weak global growth. the gathering will take place in the eastern -- in an eastern chinese city. german chancellor angela merkel says the conditions to lift sanctions against russia have not met. and she sees no reason to remove them. russia's annexation of crimea a breach of the peace order in europe. expert searching for a lost airline are hoping to define a new search area.
hisnew search leader says team wants to study where in the indian ocean the first piece of record -- wreckage recovered from malaysia airlines flight 370 was a covert. -- was recovered. and long awaited weekend night service coming to the london underground. it starts today, almost a year after plan after wrangles with unions the late the project. the mayor's office says six trains and our will run on the central and victoria lines overnight. the expanded service is expected to boost london's economy and support about 2000 permanent jobs. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. this is bloomberg. you.e: thank fed officials have gone out of their way to stress the market is underestimating the odds of a rate hike. speaking in alaska yesterday,
san francisco fed chief john williams says he does not want to get behind the curve. >> we have to get back onto the path. can change the flow. if we wait too long, we will not have that. we may have to move more abruptly. that is a potentially risky approach. vonnie: in one week, another big chance to gain insight from said officials. fed chair janet yellen's will speak at jackson hole. joining us is steve would -- st eve wood now. fed speak, dide you feel there was a shift in fed thinking? steve: i think there is increasing disharmony.
i do not think it is likely the fed will move right before the upcoming presidential election. i think one and done, in december, makes the most sense. that said, it will be a long, cycleshallow rate hike that will take place over a number of years. is not thinking about the u.s. elections necessarily. many things records thinking, primarily the direction of inflation. also, international developments. what makes you think we would not have one in september? steve: i do not think they want to be perceived as being political. back thato hold perception. but inflation is doing ok in the united states. the economy is doing ok in the united states. the earnings cycle in the united states will improve. but if it were not for
international affairs, i think the fed would be more hawkish. so you have what is happening in europe, the boone yield curve. it limits the flexibility the fed has. and also, issues like brexit can stay the fed's hand. right now, they are probably on course for one and done by the end of the year. view onted to get your some comments we got from alan onenspan in an interview bloomberg radio. him saying interest rates have to move up, and when they do, they could surprise us with the degree of rapidity that may occur. i know you're talking about one and done. but let's say the fed ends up being more hawkish than markets expect. how do you compare for that, if you are? steve: first, i do not agree with that perspective. dr. greenspan is obviously very informed, but i think that may be premature. this is that said, in terms of
formal guidance, will be very communicative. willnot think the fed allow itself to get that far behind the curve that they will have set have a significant spike. i disagree with the assessment this is like 1994. i think it will be more drawn out. income, itr fixed seems to be flat. i do not think there is a lot of jews left in fixed income -- a lot of juice left in things income. an investor perspective, look at all time high valuations in the states as an opportunity to sell equity space. i would look in europe, where they are beginning the easing cycle. the earnings story in europe. from a global and multi-asset perspective, you can use this opportunity to look more global. >> i am glad you mentioned europe. i am wondering where,
specifically, in europe you're looking. you are right when you say the valuation for the stoxx 600 versus the s&p 500 is looking lower. but we have seen the dax and turbo territory. the ftse 100 move overboard. worstis one of the performing indices in the world this year. so where are you looking for opportunities? steve: in equity space in europe , north of the alps. we are also looking in sectors tied to a weakening euro. the euro at 111 will be healthy for exporters. german pharmaceuticals, chemicals, automotive's. those look to be doing well. and if you look at where german and european trade goes, it goes to china. and china, which is fixed to the u.s. dollar. those are the dynamics we are looking at. and let's not forget japan. when one looks at asia, the wildcard could he in japanese
opportunities. there is a lot going on in japan that was not going on 5, 10, 15 years ago. to germany,o back does that mean you are positive on the dax? you think the reality -- the rally has further to go? steve: we think there is further to go. specifically within the dax. europeanid, northern versus as well. the zika will be stimulative for some time. people might misunderstand the nature of problems in europe, which we stipulate, but it is the nature of structural problems in europe that will necessitate an accommodative european central bank, which can be good for these banks. >> very briefly, we have this news about exit. that article 50 could be triggered -- about grexit. -- about brexit. we have been cautious for some time.
the odds of a u.k. recession have risen significantly. when we talk about europe, we are talking about europe ex-u.k. the dollar looks to be stabilizing at the higher end of the strengthening range. from the fed perspective now, if i can go back to vonnie's points, a lot of the heavy lifting is being done in the exchange rate, as well is what is happening with central banks globally. i do not know if the fed will find itself in a hurry. chief market, analyst at russell. >> up next, trump campaign manager paul manafort is resigning. what it means for his presidential bid. this is bloomberg. ♪
nejra: live from london and new york, i am they were che pitch. vonnie: i am vonnie quinn. this is "bloomberg markets." donald trump has confirmed campaign manager paul manafort has resigned from the campaign. frome joined now washington -- how surprised are you? megan: never a dull moment, particularly this week. there were a lot of rumors after the trump campaign brought in steve been in -- steve bannon and kellyanne conway. paul manafort also faced severe
scrutiny and criticism for his past dealings, in terms of how he was involved in elections in europe. and tremendous scrutiny about whether money he had been -- he had accepted had been properly disclosed. i would not say it was a surprise. the friday -- a friday morning in august about 80 days from the election. this campaign is undergoing a tremendous attempt to rebrand with out a lot of time left. statement says that he was appreciative for manafort's great work, particularly guiding them through the delicate process. whose decision was this? bannon's? was not thatjust much room left for paul
manafort, in terms of the direction he wanted to take the campaign. he was brought in at a time when toy thought they wanted reject donald trump as a more establishment figure, as a figure who could consolidate republican support across job to freeze and voters. but he is dealing with a candidate who refuses to be his most and believes powerful message is when he speaks off-the-cuff, when he's unreined. he is authentic and the way trump is known, including appealing to a deep bass in the republican party that feels disconnected from the american economic and national security landscape. paul manafort had a difficult task. he was trying to rein in what h as proven to be the unreinable. >> do we have any idea of how
this might affect lynton's campaign? megan: they have been watching the development of interest, in terms of how they expect the trump campaign to shift. there is talk about how bringing moreeve bannen would have -- he is known for unleashing tremendous attacks, personal attacks, on hillary clinton in the past. lastld like to point out night, we saw a different kind of trump on the stock. we saw a trump who was more contrite. a trump who apologized for what past rhetoric may have caused in sun communities. so it is not clear what kind of trump we will get. hillary clinton will have to predict the unpredictable. >> megan murphy in washington, thank you. weing up on the program, will talk etf's.
vonnie: you are watching "bloomberg markets." i am vonnie quinn. nejra: from london, ima were che pitch. time for our weekly etf's let's get the julie. julie: all of the attention is on low volatility. dividend etf's have quadrupled in size and become king of the smart beta hill. here with us is eric balchunas. if you think about it, it is not a huge surprise. everyone is looking for yields. one basic it is high dividend etf's. julie: --eric: it is not a surprise, but given the media attention, there is volatility.
taken inn't etf's has $6 million quietly. as an analyst, dividend etf's are a bit boring. that they are taking in the cash. dividend etf's now have $122 billion. fromis a 300% increase five years ago. if you look at all of the smart-beta factors -- value, momentum, etc. become thef's have highest value in smart-beta. these things are soaking in cash. if you look, there are 122 dividend etf's. 64 have over $50 million. that means half are profitable. there is a lot of room for success. julie: let's talk about some of the ones having success. then card -- vanguard king of etf's. what is their offering? eric: everyone knows big, the one looking for companies
increasing every year 10 years. the one everyone is using is the vanguard high dividend etf. that yields 3%, because they only look for the high dividend yields. that is taking in $2.6 billion. versusu talk about 3% 2%, percentagewise, that is a big jump. 2% is a wash,ng because the s&p yields 2%. what is the point at that point? julie: and another thing we talk about is this low feed competition. you would not think anybody undercuts vanguard. dividend etfigh space, there is another company undercutting vanguard. eric: going in low does not always work, but it is working for swap -- schwab.
seven basis points is the cheapest, and it has gone from $2 billion to $4 billion in the last year. schwab alone is one of the fastest-growing etf firms. julie: we have to leave it there. a good seem to leave it on. vonnie: thank you. selek still ahead, by the column's -- viacom's board has reached an agreement. this is bloomberg. ♪
newsroom and new york. from a ryan lochte has apologized for his behavior surrounding a late-night incident at a rio de janeiro gas station, saying he should've been more careful and candid about how he described what happened. lochte said in a lengthy post on instagram friday that he was apologizing for his role in taking the focus away from other olympic athletes. the 12 time gold medalist reiterated his view a stranger pointed a gun at him and amended money to let him leave. paul manafort has resigned. trump says in a statement that manafort offered and accepted the resignation from the campaign. the move follows a major shakeup among trump's campaign staff. manafort is under security for his work in europe, especially ukraine. trump's campaign is spending nearly $5 million on television ads. they will air in the next 10 days in ohio, pennsylvania, north carolina, and florida.
andhe first ad, trump clinton are contrasted on immigration, border security, and syrian refugees. clinton reportedly told fbi agents that the former secretary of state colin powell adviser to use a private e-mail server. "the new york times" reports the information is included in notes with the fbi shared with congress earlier this week. news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is "bloomberg." vonnie: for corporate story grabbing -- grabbing headlines, viacom has okayed in agreement ending a months long legal dispute between viacom ceo and controlling shareholders from the redstone, paving the way for the exit. hn is written exclusively about.com and joins us now lost up this is turning between sumner's
daughter and karen, her granddaughter, right? it is giving ever more concentric circles. >> that's right. that piece of the dispute continues to live on despite the settlement, which is very surprising considering that karen is sumner's ran daughter and sherri is her aunt. story is bothman incredible and inevitable. thinking adible that little more than a year and a quarter ago when i first wrote girlfriends's two in "vanity fair" it would inevitably lead to philip d auman's departure. stunning development. he decided to take on sumner after years of being his and signatory. it is shakespearean and you just
can't make this up. vonnie: i remember when the reporting came out, it was phenomenal to read about the two girls. they are out of the picture it seems. the conciliatory tom dooley. >>tom dooley, the chief operating officer of five, and the right-hand man of philip da uman will remain as interim ceo through september. he will remain nonexecutive chairman of five, through september, giving him a chance, interestingly, i think to convince the reconfigured board of viacom, try to convince them about this idea that he has to sell a large minority stake in paramount pictures, the film studio subsidiary of viacom. that was one of the things that
set off sumner being so angry at philip, among other things, the share price falling nearly 50% among them. for some reason, as part of the settlement, he gets a shot at the new viacom board, the newly configured viacom board of this idea. i suspect it will not work in that will be the end of philippe once and for all. tom will probably not last long, in my guess, as the new interim ao of viacom while they find permanent replacement. or it may, in fact, lead to an m&a situation because there's a vacancy at the top of that business, a voter ability. the stock is down nearly 50%. if i were interested in buying viacom as an acquisition, this would be a great moment to pounce. vonnie: the shares are up some 2.9% at the moment. bloomberg intelligence saying
this is a good outcome for shareholders because the company "needs to move past this silliness and focus on the business." do you think this will have a good impact on the share price going forward? yes.think, the market is anticipating a revamping of viacom, which is -- fully was very good of being consiglio ari to sumner for a long time. he is not necessarily a media aficionado. he was a lawyer. what viacom needs is a reinvigoration of this media assets and a new direction, a new leadership. and i think that is what shareholders are anticipating and philippe's departure is long overdue. the question is whether this will lead to a potential acquisition of viacom now that ands essentially rudderless leaderless. that might be driving the stock price as well.
it is a collection of assets that have been under managed for a long time. a new leadership could come in there and resurrect the access and create a lot of value for shareholders. >> there is actually a leadership vacuum. did sherri try to get someone appointed? if so, who? >> she's in a powerful position both of viacom and cbs. she obviously is back. she has passed up her relationship with her father. she is an incredible force now in the media landscape. she will have a big role in selecting the new ceo of viacom. or it affecting some sort of deal for viacom is it comes to that. i mean, one possibility that has been rumored is that cbs now comes in and makes a different viacom unless men's runs both companies in effect, once or both together -- less moon runs
.oth copies together sherry is in the driver seat. a total victory for her. completely unanticipated a year and half ago when she was on the sidelines and things seem to be run by sumner's two girlfriends. >> there is a trial symptom or 17 that will decide whether sherri is manipulating her father or not, i guess. do we have to wait so after that? it could drag on for long. >> it could drag on for months. one thing at a time. i think karen probably once some money here. drag on and that could prove embarrassing. i think they are in settlement mode and getting this behind them. you read that that one shareholder said, get the silliness behind them. it is long overdue. it should never have gotten to the public realm in the first place. as soon as they get this down them, the better things will be for viacom and i come shareholders. >> exciting times for that company.
losing ground in a key market. we will hear from the ceo and where the company is looking to grow its business. thee u.s. is falling behind rest of the world when it comes to building out and maintaining its infrastructure. what is being done to improve highways and bridges? we will explore in today's quick take. >> smartphone maker may be losing ground in china according to new numbers from idc. elsewhere, india, gone from the complete unknown to the one of the top-selling smart phone brands. vice president of global operations told betty liu about the growth of xiaomi's business in india. >> we have grown to be essentially a house brand in india when you look at the online market. those customers that are reading tech blogs, making her buying decisions on the internet will step which is very good positioning for us to have because it is a really good future proof model, given this is a direction in which retail -- in fact, anywhere around the
world, is heading is online. expects the approaching season in india to drop a sequential growth in sick -- shipments of smartphones and feature phones for the third quarter. atvolkswagens production four german factories is at risk of disruption. the reason? a payment dispute with the supplier that makes seat materials and physician parts. so far has been mum about the severity of the slowdown. vw is struggling to resolve its 11 month emissions cheating scandal. a former risk officer who blew haswhistle on deutsche bank received an $8 million recent -- reward. he says it is disappointing that top executives retired with multilane dollar bonuses in the sec imposed fines on shareholders instead of the managers responsible. posting earnings that topped
estimates. driving results in the fiscal third quarter. cost cuts as demand for tractors and combines grew weaker. per share.was $1.55 $.61 better than expectations. the world's largest agricultural equipment maker also raised its full-year earnings forecast. >> time for our bloomberg quick take. crumbling hows was should be fixed, but no one wants to pay the bill. engineers say u.s. highways rate + great. rows are still better than in sweden, u.k., new zealand, and australia. germany where the audubon was born, western highways are in poor shape because the government invested billions of euros to rebuild roads in the former east germany after reification. the u.s. pays for highways in part by charging drivers a fuel
tax and funneling the money to states or national highway trust fund. in 2015 as the find was a most out of money, congress voted one extension in july and another in october before it agreed on a plan in december to provide $281 billion over five years for roads, bridges, and mass transit. both major party u.s. presidential candidates donald trump and hillary clinton are calling for even more infrastructure spending. here is the ground. by 1980 in the west, 40,000 miles of interstate highways were open and this has grown to about 47,000 miles. the highway trust fund which began in 1956 set money aside for roads, bridges, and transit systems. fuel taxes made up all its revenue. now they contribute about 65% with congress usually making up the difference out of the general budget. here's the argument, some nations have shifted highway cost to drivers. china institute of big taxes on new vehicles.
france privatize highway operations in 2005. in the u.s., higher fuel taxes are not on the cards were people drive long distances and vote for republicans. meanwhile, with cars and tracks becoming more fuel-efficient and americans driving less, people are not buying as much fuel as the less fuel means less fuel tax. less fuel tax means more pressure to find a solution. you can read more about infrastructure and all of our quick takes on bloomberg. go to bloomberg.com for more stories. nejra: let's move to oil which has entered bull market territory, pushing higher after u.s. data showed crude and fuel stockpiles are declining. to announce a freeze. javier, we are moving a little bit lower, wti.
tell us about the dynamics that have led to this bull market and also, is this the best we are going to get for the foreseeable future? at least for a few weeks. off latet really fell july. there was an intervention is saudi arabia saying it will open to come if needed, take actions when opec members meet at the end of september in out years. .t is a very vague statement so far what we have seen is opec and saudi arabia, talking a potential freeze. what we see in reality, every country is trying to increase its production as much as they can. for the highs for the month in june since we have records started more than 50 years ago. at some point a disconnect is going to the market. i want to bring up this
chart. it is showing wti, the bull run here, but on the other hand, what we're saying is it is all at the surge, none of the drama. you have the oil in etf, volatility index actually coming down. does this mean that you think we will see less volatility in the coming weeks? >> i think we will see probably oil prices staying close to $50 a barrel mark for two reasons. one is because the market is below $50. significantly below $50. onlyintervention, maybe verbal intervention, but opec tries to drive the market up. if we move the on $50 when we approach the $55 mark, we will start seeing signs that u.s. hedge ands could hence we could see higher production. theat the moment seems equilibrium price. i do not think we will see much deviation from that level, at
least until we go to that meeting of the international energy forum in algiers at the end of september. ,> i want to point to a chart 2833. it shows fluctuation in price and not even the last year, down 47%, of 95%, down 23%. these are phenomenal moves for oil. clearly, there is momentum happening. past $50 for a while until this meeting? have been the traders riding the momentum for sure. if you look at the longer-term picture of the market and you do that chart for a longer-term picture, you go all the way back to 2014. current prices remain quite low. the beginning of 2014, the market was between $120. despite the big rally over the last four weeks, we are still around $50 a barrel.
probably the market, the momentum of the market is clearly diminishing. at the moment we approach the will fade.he mentum the market is taking some profits as we speak. you.vier blas, thank still ahead, the pound drops on breaking news theresa may might trigger brexit by april of next year. we will speak to the story -- journalist who broke the story, next. this is bloomberg. ♪
joins us on the line from london. the key thing here is that trees that may seems to want to get this -- teresa may seems to want to get system before elections in france and germany. >> yes. i think the concern here is that if you wait until elections in france and germany, you have to wait potentially for the administration to be set up. the problem with that, you may end up for the end of next year creating more uncertainty and also potentially sending a thatl to the brexitiers you may not be that willing to actually leave the eu, which is not what theresa may wants. >> that is only leaving her, what, six months or so to get the whole strategy in place? in other words, have everybody working together and have already pretty much agreed with at least the european leaders, what is going to happen post triggering, right? >> yes, pretty much.
that is what they would like. they would like to have a deal in place. once you trigger it, you only have three years. the other problem is, you have expertise, the eu trade experts, to create what the european union is dealing with. that is going to take some time. it is a very tight deadline. politically, there is a strong will to get it done in the first part of next year. >> sterling dropped the most in two weeks on the news that you broke. what is more problematic here? the fact there is this tight deadline that you talk about or is it delaying that triggering of article 50 beyond the beginning of 2017? >> i think for the government, a delay would be problematic because it would be both problematic politically because of sending signals that perhaps it is not so willing to connect
the british public, but also problematic for governments in france and germany who don't want to be seen todither. any don't want to make example at a britain. i think the mood has shifted. they want to be seen as decisive. got merkel, hollande and renzi to hold talks on monday. is this timely, do you think, this news has come out today ahead of those talks? >> well, i mean, it was certainly going to be on the agenda next week. i mean, i think it is at the forefront of almost everyone's minds whether you are in the u.k. or in continental europe. i think at the moment, very little is known after the
detail. i don't think there's a very firm consensus on the key red lines as yet. i think these are all being thrashed out. in terms of the timing, one thing theresa may has made clear is brexit means brexit. that implies she wants to get on with that job as soon as it is sensibly conceivable. svenja o'donnell, thank you. the european close, we will look at a big week in u.k. data and what it means for the market. let's have a look at how stocks are trading 30 minutes or so from the close -- the rally yesterday was short-lived. ftse and dax lower.
cac 40 down as well. look at how currency and bond markets are shaping up. sterling dropped the most in two weeks after that news about the brexit article 50 being triggered the start of 2017. a little bit of a weaker euro. by the way, both sterling and the euro headed for a weekly gain. sterling weaker against the euro as well. this is "bloomberg." ♪
trading day in europe and you are watching the european close on bloomberg markets. we are going to take you from new york to london and cover stories out of brazil and russia in the next hour. here is what we are watching. of alarity on the timing briggs it. bloomberg is reporting prime minister theresa may's team leaning for the first part of 2017 to trigger the start of talks over the referendum. >> that news of the brexit timing sending the pound lower after trading higher on positive you go data. the latest moves in the currency as well as numbers on inflation, jobs, retail sales, and today's public finances. oc