tv Bloomberg Markets Bloomberg August 22, 2016 10:00am-11:01am EDT
this is bloomberg "markets." david: from new york to london and cover stories from frankfurt and rome. buy medivationo in a deal valued at $14 billion. we will discuss obligated gaining of blockbuster prostate cancer treatment. then come the bloomberg dollar index climb to a one-week high after the fed vice chairman sally fisher said the u.s. economy is already close to meeting the central bank goal and growth will pick up. we will get an investor take this hour. david: why gdp is so 20th century. we look at why the measure is increasingly struggling to keep up with the pace of economic change.
we are about 30 minutes into the training day in the u.s. we are right now on the second day of losses after friday's losses. that is happening in part fisher of vice chair saying potentially there may be a rate on the table for later this year. we are seeing this waiting on the boards right now. the dow is up i about a third. the nasdaq is closer to the zero line. rate on the table for later this year. we are seeing this waiting on the boards right now. the dow is up i about a third. ae nasdaq is-- the dow is off t third. we do want to talk about mergers and acquisitions because it is a true m&a monday. talking about visor and it bid for medivation. this is on track for a record close. look at the function. it looks like it is at the
highest jump since march 31 or so. billion,valued at $14 $81.50 per share. a are gaining a prostate cancer drug. analysts are predicting by 2020 will pull in $20.3 billion. cst, canadian tire up with brands, up by about 10th of a percent. this is in regards to a convenience store chain in canada. ard is interested in buying the texas gas stations. also, taking a look at what is happening with the bloombergs dollar index, especially after what happened with the most recent fed comments. the recent mark is up by about a quarter of a percent. it had been hire earlier this morning but it is offered that after stanley fischer, vice
chair hanley fisher saying that potentially growth will continue. -- vice chair stanley fischer. fed funds futures, we move see how it is impacting their. we are seeing a pop by a couple of percentage points. 26%, had been down by 24%. over to you. we are about 90 minutes from the european equities closed. here the markets have been fromted by the comments sally fisher -- stanley fischer. we are seeing the ftse 100 off why .6%. it had the worst week since the pre-brexit last week. the euro pretty much unchanged now. the sterling down against the dollar. the germany 10-year yield, down
four basis points. if i take you to the stoxx 600 and how is great -- different industry groups are performing, .xporters benefiting we saw the dollar strengthened on fisher's comments. the gains in the stoxx 600 , it was a bit of a short-lived rally. market pretty much flat right now. why? commodity producers really weighing on the benchmark, producing a big downward told. we are down 2%. --producing a big downward pull. chemicals at the moment leaning the gains up for person -- up .4%. risen as much as 13%, heading for the biggest one-day jump in more than a year. receivedr chem china approval for the takeover of
syngenta, seen as one of the biggest hurdles to the deal. finally, one to show you what is happening in emerging markets, because the stronger dollar has been waiting here. last thursday we saw emerging markets hit the highest level in more than a year, but down for a second day on both of these asset classes. now checking on the bloomberg first word news. emma: russia will quit using bases in iran for strikes on syrian rebels, at least for now. the russians began the attack last week. the defense minister criticized russia for saying it is using iranian faces calling it an gentlemanly -- bases, calling it lemanly.
among concerns, the eu deal with turkey because of last month attempted coup. south korea and the u.s. began the annual military exercises today, and north korea is morning in may launch pre-nuclear attack. south korea says the drills are defensive in nature. tourist ship sank over the weekend. only two of the 17 people on board were killed -- were rescued after it capsized in seas. the search and rescue efforts involved 20 ships and 50-ish in both that it been hampered by highways and strong currents. the summer olympics in rio are over, and yes, this is the prime minister in japan guest as super mario. was at the closing ceremonies to preview the 2020 summer olympics that will be held in
tokyo. checking the final metal scoreboard, the u.s. one the most, followed by great britain and china. 121 metals for the u.s., 26 gold. third.ritain -- the u.s. with 46 gold medals. this is bloomberg "markets." david: getting back to the latest hawkish comments from the federal reserve over the weekend. fisher signaled a rate hike is still on the table. -- hanley fisher signaled a rate ike is still on the table. -- stanley fisher. he has set the stage it seems. now investors are waiting to see what janet yellen have to say when she's weeks in jackson hole, wyoming, when she speaks saturday.
-- when she speaks. we look for reaction and indication this ill may be on the table. what did you hear when he spoke yesterday? >> i describe it more as an aggressive talk and an ill tempered does. dove.l tempered david: do you think a rate hike is on the table? >> i think without question they should be considering a rate hike. the conditions in the u.s. warrant one. the real question is how can the global economy cope with this? have notomething they previously looked up at something they're much more attuned to today. >> what a rate hike make any difference to the bench we have seen in credit markets? -- the binge we have seen and markets?
>> no question he would make a difference. we have seen central banks are becoming key. we think a surprise rate hike would have a negative impact. david: there was a pre-tagore at the end of the speech that stanley fischer gave. we have heard that from many fed numbers. do you sense that there is motivation for it to change? >> we think there is desire for that to change. how quickly and where it will occur will be the real question. changek it is tough to quickly across the world. look at japan to see where changes first. we have been talking a lot about how foreign investors investing in treasuries are really not getting a return based on currency effect. i have a great chart to show you entitled stretching your dollar.
this will quadruple the yield of u.s. debt. wesley what this is showing how negative -- really what this is showing is how this is turning the bond market upside down. also, complicating long-standing investment strategy. my question to you, what about uncharted territory could the negative interest rate push this this represents one of the biggest opportunities from negative interest rates. investors historically have not looked at global bonds from a hedged perspective. they u.s. investors hedge foreign currency. you can generate a pretty attractive return in the form bonds that are negative yielding. >> a lot of this is about dollar strength as well.
this is already priced in. what does that mean for fixed income market? >> we have seen the dollar's day in a range over the course of the past 6-12 months. that is because we saw a big move in the dollar about a year and a half ago as we went through taper and the first rate hike. i think given the pace of the should not be expecting a rapid move in either direction. toking the tightrope tightening policy and not derailing the economy. that represents an opportunity for investors to go into hedged global bonds. i know investing in the oil and gas set of business. where do you see that heading? >> we see a significant need for capital. it used to be it was almost free in that market. investors were falling over
themselves to invest. now it is really tough, even if you have an attractive project to go in there and get the capital you need. we think you can find double-digit returns and the energy space, but you have to be really selective because there a lot of public bonds that do not make a lot of sense. other are there any sectors that are attractive to you? we are seeing attractive opportunities across the real estate sector. particularly u.s. residential real estate. you think about the challenges we had 10 years ago and that market. they are being really disciplined. and vesting in that part of the market represents real opportunity for fixed income investors. >> just looking at u.s. treasuries, how do you see the 10 year yield ending the year,
and given what you think about that policy now, what do you ask that to happen to the yield curve? we would expect, given a non-aggressive fed, that you should see further steepening in the yield curve. will they be a tremendous amount buter? we do not expect so, there is that risk. we think it makes a lot of sense to diversify your portfolio. look for central banks that are being more dovish. look for more hedge opportunities. look across treasuries as well as credit in creating fixed income portfolio. about the comments from the bank of japan earlier today? is that making any impact on how you view the u.s. credit market and the markets locally? we have not seen a material impact. one thing that has been weighing
on our mind in terms of investor moves, japanese investors have -- coming to the u.s. and giving negative interest rates there, u.s. investors as they are going from active to passive investments, they are expending -- extending duration, which is quite dangerous considering how low interest rates are. >> thank you so much. the italian oil firm says a balance between oil supply and demand will be reached by the end of 2016. more of the exclusive comments next. this is bloomberg. ♪
>> live from london and new york. david: i am david gura. you are watching bloomberg "markets." buying the gas for nearly four billion dollars, expanding the footprint in texas in eastern canada. the offer valued at $4.4 billion. including debt. this is before the company takeover speculation by saying it would explore .trategic alternatives rowland smith is retiring after replacement he found. this comes three months after rivals drop the $6.3 billion buyout. it was blocked by a federal judge. smith expected to remain as chairman. crashing at the box office, taking in less than $12 million.
production costs topped $100 million. was first place for the third week. " sausage party" number two. ar dogs" number three. ti and brent starting the week sharply lower. opec talks may lead to action of stabilizing the market. the ceo of italian oil firm shared what he asked x from the opec talks. start.ge
i find this a wise decision to have stabilization production. the ceo also discussed talks with iran. we are always in there. i don't know exactly when. possible talksme that are still in discussion. that was the ceo of eni speaking exclusively with bloomberg television. still ahead, janet yellen aces high expectations in jackson hole this week. we have your etf playbook ♪.
>> live from london and new york. i am david gura. you are watching bloomberg "markets." >> we are seeing pictures arriving and maples for a discussion about the future of the european union. you can see them arriving, stepping off the plane. david: the fed is meeting in jackson hole, wyoming, this week. this could trigger currency exchange rates. joining us with more is ramy inocencio and michael regan. before we get into the currency and terms of expectations for jackson hole, what are we
thinking that the dovish comments from the fed and bullish and hawkish comments. what are your thoughts? beach, it seems to change. stanley fischer seems to be laying the groundwork for a rate hike. in general, i think the general idea is most people believe they will stand packed, at least through the election. the action in the dollar is really backing that up. people are pretty confident they will stay where they are, at least through the election. david: fed futures are pricing in a 28% chance in september.
the currencies, the u.s. dollar is up about a quarter percent now. talk about currencies and the etf now. what are the best performing so far the sheer >> they are the ones tracking the yen. yen is up about 40%. the currency shares etf is the fxy up about 9%. the dollar weakness has been good for some of the funds that are basically tracking other foreign currencies. david: if an investor wants to get in, talk to me about writing strategies. -- buying strategies. >> a lot of them, especially from guggenheim, the strategy is to track the currency, whether
it is the british pound or the euro. they have one for most of the major currencies. some of the other ones did a little more asked her to eric. play thethe futures currencies. there is some with leverage. anything with altra will be a leveraged fund trying to double the return of the currency. with three times it will be triple leverage. the best-performing of the group , that is obviously a leveraged fund. david: talk to me about volatility as well. currency etf's versus stock etf. >> it all depends on the product obviously. and generally a are not more .olatile you have to come at them with a bit different strategy. this can be your typical buy and hold. for these, it is more you are
buying to protect against currency swings and holdings bet onu have or to events like the fed coming up or the british referendum earlier this summer. that type of thing. with currencies being as zero some investment, it is not something you can necessarily buy and hold for a long time. is something you have to be hedging against some fluctuations in the currency based on your holdings elsewhere in the policy -- in the portfolio. david: a massive deal in the world of pharma. 14 billion dollars leaving santa fe in the dust. this is bloomberg. ♪
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world headquarters in new york, i'm david gura. >> checking in with the bloomberg first word news. of thehe president philippines is threatening to withdraw from the united nations over controversy concerning his war on drugs. he took office in june, hundreds of doubt -- hundreds have been killed. the u.n. has called for an investigation. around 100 american troops have been deployed to a southern city in a guinness and for the risk of falling to the taliban and. the soldiers are in the provenance of hellman providence . hellman is strategically important to the insurgents because the opm crop produces most of the world's drugs. produces most of the world's drugs. mr. obama will spend time with aids trying to determine what
they want from congress before the lawmakers shift to campaigning for reelection. he will also campaign for hillary clinton and other democrats in the fall. . powell is pushing back against hillary clinton's testimony that he pushed her to use a private e-mail server. a federal judge in texas is temporarily blocked directly from the obama administration on transgender students in schools. federalmay the government told the schools transgender students made -- must be able to use bathrooms and locker rooms consistent with their chosen gender identity. i am a mets chandra, this is bloomberg. david: pfizer snaps of medivation in a deal valued at roughly $14 billion.
pfizer gains a blockbuster drug in the lineup while santa fee is less jilted after months of talks. the deal will help improve innovation. >> together we will be a strong force in making meaningful advances with innovative treatments that can improve quality of life. david: starting with the deal as we see it today, $81.50 per share. all cash. how did this fit into what you ? >> this is at strong bid from pfizer. definitely outbid santa fe's previous bid. deal.s a very attractive if you look at it on the estimates out there, the upper around $77ave been per share. clearly pfizer coming in with a very strong offer. david: pfizer has a very
cancerful breast treatment. what is the motivation to acquire medivation? >> a lot of things going on. there is a lot of money to be made. drugr has a relatively new that is doing fantastically. we are talking a lot of physicians and oncologists who love the drug. when they go to see the doctor they want more than one key drug in the lineup. medivation trading at $80.49 right now. what does that say about the likelihood of a counter bid? >> i am very skeptical. theynk in the pfizer offer have a decent sized walkway clause. santa fe themselves bowed out quite extraordinarily.
they had the chance to speak to medivation. this is pretty much a done deal. >> an interesting approach from santa fe trying to force the deal at one point. think they have lost in credibility because of that approach? >> right now prospects are -- leak.elatively be this was a great opportunity but they lowballed it. they should have gone a bit more aggressive. especially with santa fe. this has been a great way for them to reestablish. i think investors would be a little bit upset by this. >> where do santa fe go from here? >> the company has capital. it can leverage the debt structure to do some deal.
they have other companies they can look at. shortage out there. companies in biotech alone. about bothous comments ian reid made saying it is good for innovation. gotten fda approval. it is a profitable company. how does this fit in the plan buying a drug ready to order? >> this makes it very attractive. also, they are getting to other drugs. it has had some hiccups, and they were not sure what the mechanism was. is a big drug
potential drug and ovarian cancer and breast cancer. it is a new space. we will see some details in the next couple of deals -- years. medivation paid up front. that has pfizer quite excited about it. been one ofhis has the most active drug makers in terms of dealmaking. what does this mean for that side of the story? >> investors have been focused on this for quite a while. there was a sense for when you would be able to do the tax structure that would put something into the deal. they are very focused on reaching the deadlines. the company has said this does not change expectation.
i am not readjusting my intentions on that. asthika goonewardene. howard merck says now is the time to be cautious. highlights from his conversation on the market and portfolio. later, we will be talking with another big investor. mario cavalli will sit down with betty liu today at 2:00 eastern. be sure to tune in. this is bloomberg. ♪
bloomberg. i am david gura. here is what we're watching, the follow-up of the contract dispute with the supplier for is widening. they have shut down production of the best-selling car. >> lyft may be putting itself up for sale. arrival may be interest did but for far less than they think it is worth. david: is there a downside to them? begin with oil. talk about a potential deal by causingfreeze output is prices to climb $50 per barrel. number countries producing maximum capacity and ahead of italy's eni company is saying a deal is needed to stabilize the market. start that we have for the next month.
>>. thehas halted production of best-selling golf hatchback as a follow-up from a legal spat with a major supplier. the supplier of seat and transmission parts is claiming breach of contract and has suspended delivery. negotiations resume monday. they started the deal with that the thought. in now impacts 10% of the workforce. that the largest real estate critics thee u.k. london housing boom will come to an end at next year. housing prices will drop a little more than 1%. that would be the first decrease in 2009. countrywide has said the vote to leave the european union has unsettled the economy. executives from uber have said
the executives would not pay more than $2 billion for the main rival, lyft. interestbeen gauging from prospective buyers. said he would not buy it at any price because of antitrust concerns. timeout for a bloomberg quick take. we provide background and content on issues. circuit breaker has triggered a timeout from trading after place it -- prices tumble. addresses the risk of erroneous trade in an area of high frequency trading. the situation. circuit breakers lasted four days in china. it is blamed for deepening the selloff and deepening the panic as investors dumped their shares. this is a direct response to the so-called flash crash of 2010.
this is part of a broader effort to control systemic market risk. hong kong's exchange introduce large stock from moving more than 10% in a five-minute period. former u.s. treasury secretary nicholas brady brought them to the stock market triggering a 15 minute positive and trading. other countries can employ them for the overall market, including japan, brazil, and south korea. they are widely used from singapore and india. to restoreakers help calm and can even restore confidence. the main concern is how to threat -- set thresholds. academic studies offer little evidence that they cut panic driven selling.
even skeptics of greek circuit breakers conserved to counteract erroneous trades that risk setting markets into a tailwind. you can read more about this on the bloomberg. that is your global business report. head to bloomberg.com for more stories. the markets,ack to lower returns bad if you are playing a safer than average portfolio. howard marks says now is the time to because this. he describes the current market conditions to erik schatzker. the normal yield spread has been between 350 and 550 basis points erik:. erik:we are now around 500. >> we are in the upper portion of the historic rate. historically, if you bought
high-yield bonds in the upper portion of the range, you did quite well relative to treasuries. with theroblem is not relative return. one of my favorite sayings is you cannot eat relative return. the central banks have brought all interest rates so low that even if we have a nice spread on high-yield, it is still a low. erik: this shows the point you have been illustrating. again, let's remind everyone with interest rates almost at zero, interest rate that euro in aren negative, investors being incentivized to chase field. how does that investor prepare for calamity? it is very challenging today. we are in a low return world. those are the three most important words to remember. how do you go about doing your business in a low return world? you can settle for a low return or you can pursue a high return. how do you get a high return in a low return world? the answer
is, you have to take significant risk. erik: are you comfortable taking that risk? >> i am a professional. don't try this at home. what we have done is we have operated under a mantra, move forward but with caution. oaktree is a cautious investor. that means more caution than usual. we have amped up the caution and the skepticism -- all of the things that i said earlier were in short supply, we have increased. erik: oaktree is willing to sacrifice return? >> yes, we have a safer than average portfolio, which means normallyverything goes , we will make a lower return than the average, but that is the price you pay for having a safer than average portfolio, which we think is important at when we sayecause
we cannot predict but we can prepare, one way to prepare is by increasing representation of caution in your portfolio. if you look at the credit market right now, is there anything that is attractive on an absolute basis or relative basis? >> high-yield is attractive on a relative basis. if you bought high yield today, i'm highly confident on a multi-year trade you will trade up. that is attractive in relative terms. there is nothing that is absolutely cheap. there are noanything that is atn an absolute basis or relative bargains and absolute terms. nothing is being given away for less than the intrinsic value. when the central bank brings down what we call the risk free rate, the base rate, that is like pending the tail on the donkey. all returns proceed rationally low that base, but at a
rebel. i wrote this memo in november 2004 called risk and return today, the first cautionary -- memo of the last cycle. i said then we were in a low return world. i just arrived the steps one would take once one recognize that. >> that was howard marks and an exclusive interview with erik schatzker. is gdphead, if gdp -- losing its standard as a main gave? struggling to keep up with changes in technology. what may be the new yardstick next. this is bloomberg. ♪
david: in new york, i am david gura. you are watching bloomberg we will get a second reading of u.s. second-quarter gdp this wednesday, just as whitening inision and changes technology are undermining confidence in the accuracy. jet black joins us from frankfurt. black. this gdp debate is an ongoing one, so what is new at the moment? what is new is nevada where you look around the world in major economies, there is a discussion about how little we establishedthe procedure for doing calculations of this sort, and an environment where policy, central bank and fiscal policy is increasingly
directed at trying to target nominal gdp growth. that is a very difficult thing to do when you cannot measure of the economy very accurately. >> what sort of alternatives are people looking at then? on where you look, but we have everything from things like well-being a lightly more pen dime concept of essentially happiness of how well the society is doing. that can be requested by income, , health, longevity, and other types of indicators. are ways to plug goes into gdp statistics. the distribution of income is increasingly important. we are missing is -- an important societal factor. david: there are people the
satisfied with the measure, but it is still hugely important. of the the nine pages , stillare devoted to gdp something incredibly important to central bankers and long-term investors as well. how would you gauge the appetite for changing the metric, how we measure growth? ask think no matter who you , there is appetite for improving it. appetite for improving different types of indicators into the economic model. being able to make them more accurate and more timely. what we do not see is any readiness or appetite for completely starting again. going back to the drawing board, saying how can we best gauge the success of the economy? what we seeing is more tinkering around the edges. david: we will get the revision later in the week.
isnt you make in the piece revisions have become so radically huge. is that the essential points of the argument for changing it, the merits of the data are not that strong? >> absolutely. as our economies to come work , we find the initial reading very more greatly from what the final ones are. the whole recession got revised away in 2013. 2014 in japan something similar happened. investors are making decisions ace on the first readings. central banks often make decisions based on the first readings. if we know they are most of the time wrong, i think the requirement is for the work to go on. >> another thing you point out is gdp as it stands is not changes inwith technology.
how can that be brought into the mix? >> this is a problem that there is not any great breakthrough yet in dealing with -- we mentioned a thing like music streaming. a price of the cd previously, you can have a product that is vastly superior. gdp does not take account of that. it just looks at the price at the current moment in time. people'smy and experience is vastly different. we have no breakthrough yet in being able to tell how technology is changing the economy in that way >>. i am sure you will report on it when we do. bloomberg's jeff black, a wonderful story you can find on the bloomberg. it is a big day for m&a. one group of officials gives the chem china.e with
pfizer snapping up medivation for $14 billion. taking a look at european markets. 30 minutes or so from the .uropean equity day this is bloomberg. the stoxx 600 pretty much unchanged. we were seeing some gains in european stocks earlier, but those were short-lived. .3%.ax down we are looking at a stronger sterling today. the 10-year yield down five aces points. this is bloomberg. ♪
you're watching the european close on bloomberg markets. ♪ we will take you from washington to brussels and cover stories in the next hour. here's what we're watching. shares of swiss chemical companies jump in today after your security officials gave a merger with -- a green light. pasteal, can it make it worldwide? >> 2016 is under consideration for a hike and the economy is close to being -- picking up speed. moving the dollar higher. ubs visiting as soon as next year. why everyone from investors to wholesale traders