tv Bloomberg Markets Bloomberg August 19, 2016 2:00pm-3:01pm EDT
vonnie: we are live from bloomberg had quarters, covering stories out of chicago, brazil, washington and the united kingdom. u.s. stocks slipping for the first time in three days. it appeared earlier losses banks to that unexpected result from d eere, applied materials and foot locker. vonnie: could the rally keep going to opec's informal meeting in algiers? vonnie: paul manafort resigns from his post. is the trump team staying on message? lisa: markets close in two hours. julie hyman has the latest. julie: stocks still trading lower here.
set for the first weekly declines as well in several -- the first down week in three. for the nasdaq, the first down eight. the defensive groups doing the worst today. take a look at the imap for the map of the groups on the move. utilities and telecoms the worst performing groups. like telecoms and utilities are down because bond yields are up. we tend to see an inverse relationship there. but the 10 year end to your yields up by five basis points today. this is a reversal of what we've seen this week. two-year yields up by five basis points today.
the market is not accurately estimating the number of interest rate increases this year. seeing a bump up in yields following that. vonnie: what are the individual movers catching your attention? julie: comcast come as we are looking at the ratings from the olympics committee are not so great here. comcast down 1.4%. the owner of nbc, showing the olympics. we are also looking at emerson electric today, buying a valid anves and controls business. downgradedresearch the stock, saying it adds risk to emerson's earnings. also looking at steelmakers today. they were downgraded at keybank.
down, u.s. steel and steel dynamics also selling up today. vonnie: time to check in on the first word news. trump praising paul manafort as "a true professional." he announced he is resigning as trump's campaign chairman. donald trump and his running mate mike pence are in baton rouge, louisiana for a firsthand look at the damage. hillary clinton reach out to the governor via telephone. has beendent criticized by some for vacationing at martha's vineyard during the historic and deadly
flooding. the city manager of miami beach linkedo zika cases are to the popular tourist area. one case involves a tourist, one involves a resident. after hours service finally arrives for the underground. workers andtween political red tape. the expanded service is expected to boost the uk's economy. their plans to expand the service later this year. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you -- ramia sense inocencio. h
this is bloomberg. in the lastsurged three weeks, volatility stagnated. is there drama ahead? this plenty of drama behind. joining us to break down -- you are basically looking at oil as a leading indicator as opposed to something like the federal reserve or growth in china. >> for us, the recent rally off of the low was frankly not as that mayt the talks occur in algiers but more about what happened to the dollar. dollar commit if you look at the dx wife for a proxy for the y for the dollar
berb was that oil would around $40 this year and the new supply would come on in the low 40's because inventory would come online in the u.s. and iran and saudi arabia had incentives to continue to produce. that has actually happened. when they were talking about a priest back in april, we have a million barrels per day more online -- i don't think it's about the freeze talks as near-term dollar weakness. vonnie: what does that mean for the equity market going forward? peter: oil and equities have traded to some extent in lockstep when energy names were being taken down. that correlation is a lot less important now than it had been. and breaking down.
the implication for equities more broader is less clear than it would have been six months ago. expect the high-priced to be 50-55 dollars a barrel and then going down to $30. what will trigger oil to drop? ther: just to clarify target we have, whether it is right or wrong, who knows, but based on our analysis, we think it is somewhere between $35 and $40. the other big force we just talked about, dollar weakness leads to stronger oil. dynamics aremand that midpoint 40 dollars target. what goes on in algiers, for example, we don't think it will make much of a difference. non-u.s. producers have the
incentive to take market share and continue to produce. oil come keep a lid on as will the incentives for u.s. production to come online in the low 40's. lisa: do you think enough people faith in oil have prices rising above where they a call to actually cast over markets or is it a specific oil story? peter: the narrative we were dealing with nine months ago will be a narrative again. we will continue to see defaults thatistress -- the hope people had that we would have this broad-based energy led rally will fade. it's the convexity of the initial move when oil went from 60 to 30 that caused most of the stress. these companies have adjusted operations in their structures to account for this. away from oil, a lot of
retail investors will not have much oil in their portfolios -- what else would you be recommending? peter: we are very cautious and we been too cautious for the past few months. i think in a warranted way. almost everybody has gotten this wrong over the past year. i'm not sure what the fed does, talkere's the dilemma -- about the fed not raising rates has led to a pretty tremendous rally in emerging markets, risky assets. there is a feedback mechanism. emerging markets and whether we drivingor not is the force for world growth. rates and raises capital flows out of emerging markets and back into developed economies, that engine gets shut
down to some extent. lisa: black rock an interesting post about this. one rate hike this year would not make a difference for demand or emerging markets. do you agree? peter: i don't think i agree with that. the reason why a quarter percent matters is because of what it feels to that does to the yield curve. bank profitability is a very -- is very important in terms of the stimulatory impact it has on the economy. you think one rate hike would have an effect generally on dampening appetite for risk assets? peter: i do, because we are in such a low rate world. in this particular cycle, given bankspendent investors, and the rest of us have all become on the rates come i think it is more important. lisa: thank you for being with
us. that is peter cecchini. coming up in the next 20 minutes , the foodborne outbreak at chipotle began over a year ago. we examine what's going on behind the scenes. vonnie: a blockbuster drug has -- to tons of m&a p.m. it is now 2:11 majors down across the board. down .3%. less.0 down a little this is bloomberg. ♪
lisa: this is "bloomberg markets ." vonnie: time for the bloomberg business/. .- bloomberg business flash star board selling its european -- $15 billion of real estate loans in 15 countries. one ofcutting ties with the world's biggest textile manufacturers. sheetsailer discovered labeled egyptian cotton were actually made with another type
of gotten. -- another type of cotton. the world's largest exchange operator is going back to school, setting up shop at illinois university as it searches for the best young coders. wall street firms are fighting the likes of google for the best hires. could help. flashs your business update. lisa: one year after a series of bacteria outt outbreaks can much -- series ofares bacteria outbreaks, to quote lay shares -- chipotle shares are down over 50%.
craig: the numbers were up and up, there were some things unusual about how they ran the company. ,very hedge fund was in there it was popular with millennials. vonnie: anybody can be unlucky. sickenedpeople were mobile companies have recovered from this and have recovered very well in the past. jack-in-the-box had a terrible e. coli outbreak in the 1990's. it took several years for them to get back. quartersn three of declining same-store sales. this brand was built on healthy, fresh, good for you -- this struck at the heart of what made that brand popular.
have any of their efforts been successful in getting back a bit more traffic? craig: the short answer is not really quite yet. sales are down 23% last order. they've done a lot of promotions, they say things are starting to pick up again. colleague was looking at how the free giveaways of burritos had absolutely no measurable effect they could track. are they giving away free does to people who would be coming anyway? they need to get their loyal customers back. did they come back again and buy something? are they putting away for legal costs in the future? craig: the legal thing has been quiet lately. nobodyre subpoenaed --
knows what exactly they're looking for. these food safety cases take years. things could start to pick up and all of a sudden, there's news about this subpoena, it puts the e. coli back in people's minds. lisa: are there other things about their business operations that has some on wall street concern? craig: there were concerns about the supply chain -- this is meat raised in different ways about how manyns restaurants they can have and whether they can continue to get the chicken and pork and beef the way they like. it is all company-owned. vonnie: are there procedures put toplace for somebody there
pr the idea this is happening -- maybe they are just employing the wrong pr firm? craig: the guy running their marketing was caught in a he's not with- the company at the moment. you dealing with consumer psychology. there's a bit of the fashion business and restaurants. chipotle was hip with millennials. this hit them right at the heart of that. it's not as simple as just saying were safe thus we are saying, we-- just are safe, guys come back. helped bolstera western universities endowment to the eight largest in u.s.
vonnie: this is "bloomberg markets ." lisa: we were cut is a drug used to treat pain and teachers, but it's had one unusual side effect, helping northwestern university build the eighth largest college endowment fund in the u.s. that's in this week's issue of "bloomberg businessweek." i think of america as the drug that is advertised online order. -- on law and order. >> and the olympics this week. it was developed in a chemistry lab at northwestern.
it became a bestseller years later for pfizer. northwestern decided to sell some of the royalties. what would happen if a competitor came along or if there were side effects? they got $700 million for selling that share of the royalties, in addition to other royalties coming in. ago because of its creation on northwestern's property, they got the rights to it? jenna: absolutely. one of the professors develop the patent. because of a law congress passed in 1980, it allows you to keep the proceeds and share it with the inventors. northwestern and that getting about $1.4 million in royalties from the drug -- that is not unusual.
their former president decided the best decision to use that money would be to put it in the endowment so it could grow. and it did. they got that initial big check in 2007. , putting that in the endowment, plus the additional royalties, they were able to they are using the payouts for other things such as financial aid for students, giving grants for students to take unpaid internships. in addition to helping keep star faculty. lyrica became pfizer's top-selling drug. the university got $700 million in terms of royalties. that is all great.
how did the drug become pfizer's? janet: it tackles a persistent type of pain -- it is also used for fibromyalgia. it has a lot of other uses -- seizures. it has become quite popular. the idea something like this could come up and university doesn't happen every day. royalties generated by all universities in the most recent year that we had data, there were 70% coming from just 15 universities. this must be the biggest one ever. , thank youet lorin for joining us. you can read her story in the latest edition of "bloomberg businessweek."
julie hyman has been keeping an ion commodities. on commodities. julie: some key reversals from trends earlier in the week. the dollar had three down days, now rebounding today. up .5% in part because we've seen a drop in the british pound. may is sticking with the plan to trigger brexit in the spring of next year. what is the ripple effect in commodities? declined evengold as we are seeing the dollar gain, down about .75%. day,as had a bit of an odd bouncing around all over the place, coming into the commodity close here, took a late higher, up about .5%, above or the eight dollars a barrel.
-- $48 a barrel. the decline in the dollar -- the advance in the dollar today has not really put that much of a dent in oil demand. here's the weekly performance, up nearly 9% and the best week for oil coming all the way back to march, as we've seen a reversal of the bear market that oil recently entered, now back into a bull market. countker hughes rig coming year to date, now the eighth straight week we've seen in advance in rigs. there had been optimism that those were declining, but now, with those up, one would think that production would be trending. a lot of contradictory signals there. thes get a check on headlines. i: u.s. politics, donald
trump's campaign chairman paul manafort has resigned. trump said that he accepted his resignation from the campaign. manafort had come under media scrutiny because of his previous work for the former prime minister ukraine. hillarywell advised clinton's use a private e-mail server. the information is included in notes the fbi shared with congress earlier this week. the blaze is now 26% contained outside of los angeles. it is unclear when all areas will be cleared for people to return home. some 82,000 residents were ordered out of the area when the fire corrupted earlier this week. vladimir putin is blaming
ukraine for sabotaging peace accords in the eastern region. the russian government accused ukraine of sending agents to crimea to carry out attacks. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. up about 12%nd is since the u.k. voted to leave the european union in june. the sterling still deserve safe haven status -- it doesn't sterling still deserve safe haven status? some currencies became havens if you need liquidity right
now, sterling will provide it. currency --nternal i think the post brexit model shows that. fundsovereign wealth will continue to be happy to finance the current account deficit. that is not the view in london right now. finance, you want to the current account deficit, for what reason? if you want access to the eu, you don't want to be in the u.k. are not here just because of eu access, they are here for the u.k. institutions. secondly, of course, the price issue. sterling is already adjusted. it is looking quite cheap as
well. financing payments, and yields in the u.k. are falling. income balance can stabilize and you can turn around. jon: could we really basic situation where bank of england stimulus become sterling positive -- face a situation? >> if you see bank of england withlus complemented fiscal stimulus come if growth surprises to the upside next ber and beyond, that could conducive to the currency and two other u.k. assets as well -- to other u.k. assets as well. do see the u.k. is under position right now, growth surprises to the upside, the flow will come in this direction. >> more foreign capital coming
in at sterling rises. that reduces pressure on the boe to continue easing. >> i think they will be a bit more careful here because yesterday, we do believe inflation is going to spike in the coming quarter. so overurrency remains a two to three-year horizon, the boe may have a bit more problem compared to other asset markets and the government. on: chancellor hammond has called for a fiscal reset. reset when thel budget deficit is already 4% of gdp? governments are being paid to borrow money. thissn't been an issue at point.
requirepackage will outside financing. we want to see the right next when it comes to fiscal packages. combination of tax cuts, but also spending increases. it is the demand element at the end of the day. you can keep lending rates at zero, pay banks to borrow money, but if there's no end demand, it's useless. the government must deliver something that generates demand and that will kickstart something within the economy as well. too much spending could be a problem as well. too little spending, we don't want to see that come either. i want to turn to currencies outside united kingdom. devaluation ----
-- the valued the evalued by 40%. businesses.oon to i know it's just one small country in the world, but there's lots of emerging markets that are watching these moves and currency markets around the world. a lot of emerging markets have experienced the exact opposite trend. foreigning at the currency central-bank reserves. they were climbing until 2013, then started to settle the --
steadily go down. the dollar is weakening, you are seeing that some emerging markets are reservesto rebuild the , which is good for their economies, frankly. the major economies like china are the most included in the chart you just showed. does not look more impactful, but look at my weomberg, you will see that have reserves diminished to almost nothing from a very healthy 320 -- lisa: i'm struck by such differentials in the data. it really shows how different each individual idiosyncratic story can be at this point.
vonnie: much more ahead in the next 20 minutes. paul manafort resigning earlier today. capping a week of dramatic changes for the republican presidential nominee. the olympics has generated a ton of public interest, but it did not translate in the ratings. primetime broadcast viewership has been down 25% among a key group of viewers. vonnie: let's check on the u.s. the s&p 500 at 2182. .1%.asdaq down this is bloomberg. ♪
vonnie: time now for the bloomberg business flash. world bank of scotland will charge more than 60 of its biggest trading clients as a consequence of low central-bank interest rate. those claims will pay interest -- theateral for trading lender has already informed clients about the move. -- dalio's hedge losses to 9%.its the fund had lost close to 12%
through july. d --and for f discussing conducting a strategic review. it could result in a sale. let's turn to politics now and get another reset for the trump campaign manager paul manafort has resigned as campaign chairman, following reports that he helped the u.k. and then pro-russian government. steveomes just days after bannon was named ceo. 's then he helped ukraine pro-russian government.
is sahil kapur. il: let me step back for a minute and say this is the third major shakeup the campaign has had this year. usually, the way trump deals over with by layering someone else. this happens two days after hire and that promotion and steve manafort that's paul manafort decided he did not have -- promotion and paul manafort decided she did not have much of a place in the campaign. what happens next?
many see it as a pivot, a shakeup -- he is sinking in the polls. ship.ds to right the lisa: a pretty sensational story. it's like something out of a spy novel. why isn't hillary making a meal of this? has a couplempaign of months now highlighting campaign ties to let it rip bruton and the russian government. paul manafort was a big part of that. campaign ties to vladimir putin and the russian government.
the clinton campaign put out a the campaigning -- manager put out a statement saying this is not the end, this is just the beginning. he said donald trump has a "b romance" with vladimir putin. we really noticed a pretty dramatic shift in donald trump's behavior. overnight, he came out and apologized for the way some of his remarks have come across. his campaign started in adver sing -- and advertising campaign. sahil: it does sound like an attempt to right a ship currently moving in the wrong direction. he talked about how he regrets some of his rhetoric in the past
that may have caused personal pain. this sounds more like the work , a well respected pollster and republican circles -- in republican circles. , oneis just one evening speech that donald trump made. i would not extrapolate too much from this. he's had a stretch of controversy, tried to right the ship i trying something different and he doesn't stick to it. an ad campaign keyh $4.8 million in four swing states he needs to win. that is a shift that a lot of people said needed to happen a lot sooner.
vonnie: is there something that could catalyze him higher again in the polls? sahil: the two most important things my president obama's and the state of the economy, economic trends. economy, of the unemployment and most important they, the direction it is going. if that continues to go reasonably well, things are looking good for hillary clinton third consecutive democratic term. lisa: you can follow all the political action on elec . olympics ratings
vonnie: this is "bloomberg markets." lisa: is nbc universal having second thoughts about the olympics? comcast pay $12 million to broadcast the games in the u.s. through 2032. lucrative primetime viewership is down 17% for the rio games. the problem here is the big ad revenue comes from broadcast. toare joined by gerry smith break this down. how important is olympics viewership and the ability to attract as to nbc bottom line?
gerry: hugely important. billion toabout $12 secured exclusive rights to the olympics since 2032 -- through 2032. the landscape is changing and we are seeing that in the ratings this year. vonnie: these days, what do we mean by a ratings split? gerry: the summer olympics' ratings had been increasing years since 2000. this is the first time since then we've seen a decline. watchingeople are television is changing. morennials have a lot payment options. , netflix had12
half the subscribers it does now. lisa: why can't they capitalize on these venues? buzzfeed runet their snapchat channel. they put more than 6000 hours of -- olympics online do the advertisers have their ads displayed online? gerry: nbc sells advertising as a package. they tell advertisers we will reach a certain amount of people. it could be on television, could be online. the vast majority of the audience is still on television and the advertisers are spending the bulk of their money on television. that's where a lot of the money still is.
presumably, they will be some form of linear television in four or eight years time. can they get these people on -- have and have been them go over to watching regular tv? to findhat is the goal, these viewers on the platforms they are on and entice them to go onto their television or watch it online. lisa: do you have a sense of how much they plan to get back to advertisers? gerry: they have to make goods -- if you don't reach as many viewers, you get back some ad time for free. vonnie: we need a second super bowl. that would told everything, i think.
new york. i'm vonnie quinn. lisa: i'm lisa abramowicz. welcome to bloomberg markets. live from new york for the next hour, covering stories from rio de janeiro and washington. toing earlier losses thanks earlier results from foot locker. lisa: outflows in july deep into a six-year low. we will talk to a guest from credit suisse about the demand for equities. supply declines and inflation slows. first though -- we are one hour from the close of trading. let's head to the markets desk.