tv Bloomberg Markets Bloomberg September 2, 2016 3:00pm-4:01pm EDT
vonnie: we are live from bloomberg world headquarters in new york from the next hour, plus covering stories from san francisco, texas, and russia. the u.s. economy added 151,000 jobs in august. the jobless rate in the labor participation rate held steady, --gnaling continuing holding study in the face of global growth. and more from our exclusive interview with vladimir putin, russian president, ahead of the annual g-20 summit in china. highlights include his outlook on the ruble, later this hour. one hour from the close of trading in the u.s. session. let's go to the markets desk, where abigail doolittle has more.
vonnie ando everybody out there, happy friday. modestly off the highs. we did see a spike in the nonfarm payroll boards, but these split the major averages good split the major average -- split the major averages. dow transports, this index is up 1.5%. this point.% at 17 of the stocks within the next are higher. from the macro standpoint, we go 3295.loomberg and look at aqua, we have the dow. white, we have the transports. the transports are in a correction from the all-time high all the way back to november. the question is which of these 2 equity indexes is the tell on
what could be next for u.s. stocks? as for the week it was a data-ridch week. will the fed the raising, once, twice? when we look at the asset classes on the week, the dollar is hybrid that probably supports the idea that they will be racing. oil is lower on the dollar strength, probably supports it as well. one of the biggest boosts for the s&p 500, in fact the biggest boost, coming from financials. it includes wells fargo, berkshire hathaway, and jpmorgan. these stocks were all higher on the week. investors probably anticipate there is going to be a rate hike, which will help the cubbies make more money when they lend berkshire hathaway has stakes in wells fargo. vonnie: that's great.
we will check back with you in a little bit. let's check on headlines. taylor riggs has more from our newsroom. taylor: economic sanctions are limiting trade between russia and the u.s. and the eu. vladimir putin is looking to china. the russian president spoke to bloomberg editor-in-chief john micklethwait. president putin: we have to move to a new level of preparation. we are developing production of a heavy helicopter. we are working on a long-haul airplane. we are working in machine building, high-speed rail, timber processing, atomic energy. we have already built a nuclear power plant. taylor: tune in to bloomberg all day for more of our exclusive interview with russian president vladimir putin, and don't miss the special report monday at 12:00 p.m. eastern.
the fbi has released details of its investigation into hillary clinton's use of private e-mail while secretary of state. among the findings, at least 100 state department employees on clinton's private e-mail address. the investigation found that former secretary of state colin powell told clinton her e-mails could become part of the record. clinton denied she was using private e-mail to use federal records laws. "nbc nightly news" anchor lester holt will monitor the first presidential debate after university in new york. raddatz andrtha cnn's anderson cooper will moderate the second. chris wallace will moderate the third. is tropical storm hermine
having less of an impact on the state than expected. inage has been reported counties under emergency declaration. the storm is battering the carolinas right now. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. vonnie: taylor, thanks. let's turn back to our top story of the day, jobs friday. the economy adding 151,000 jobs last month, missing estimates. we asked mohamed el-erian with a report says. have a listen. mhoamed: clearly, job creation fell short and more important in my eyes is wage growth. i would caution, be careful because the participation rate signals there is not much slack left in the labor market. this is going to put the fed in a tricky position when they next meeting in september.
vonnie: let's get more insight on what the jobs report says about the economy. isning us from uc berkeley professor harley shaiken who specializes in labor relations. the federal reserve is of two minds about how the market is doing. janet yellen thinks there is still slack, mohamed el-erian says there is little slack. from your vantage point and how healthy is the u.s. labor market? harley: i think the labor market is healthy. recent job numbers essentially say we are cruising along. that is good news. but the jobs numbers aren't sorry. that would be -- soaring. that would be much better news. i tend to side with janet yellen and the public remarks she has made. the labor market remains uncertain. the job numbers alone don't tell the full story. the participation rate has more slack in that it is significantly lower than
historical levels. part of that, of course, is demographics. even in prime working age people , 25 to 54, we have a lower than historic registration rate -- lower than historic participation rate. there are signs with discouraged workers and people marginally attached to the labor force, 1.7 million there, people working part-time who want full-time jobs. in all there is some slack in the labor market. vonnie: from your work, as a labor relations economist, how much slack is there and how many percentage points structural change has there been, if you can equate the 2? harley: part of the problem is we tend to reflexively used simply the unemployment number as the overall -- the unemployment number is 4.9%, very good by historical standards.
but when we take those people who are marginally employed or who are working part-time for economic reasons -- that is, they want full-time jobs -- there is a lot more slack in that labor market. we have seen a lot of apprehension and uncertainty in people's behavior. if we couple that with the slow economic growth over the past year, i think we can see inflation is a long-term threat. but an immediate reality for many working americans is uncertainty about the job market and economic future. ratee: the underemployment .t 9.7%, as forecast there are things like average hourly earnings, month over month, up .1%. we are seeing a little bit of growth in the average hourly earnings. the work week, though, is down as well. is there concern that jobs being created are very awake sectors ?ack -- very low-wage sectors
harley: i think that is a very real concern. as you pointed out, wage growth was anemic. when we look at where the jobs were created, the largest creator of jobs in august was restaurant and drink services. 34,000 jobs. the second-largest, social services. 22,000 jobs. these tend to be lower paid occupations without a particularly large multiplier -- that is can each of these jobs created don't create all that many jobs throughout the economy. vonnie: where is the tipping point, professor? that can't carry on forever. services outstripped those who can pay for them. and we are not seeing demand pickup. harley: that's right, and i think these are really long-term concerns could even medium or
short-term concerns -- in august, for example we saw the demand for automobiles drop a bit. that is the first time in many months that has happened. it was ultimately inevitable, but it does indicate a bit of weakness below the surface for consumers. that reflects some of the uncertainties of unemployment. we know we have lost millions of jobs in manufacturing. that is the hot issue in the presidential race. but 14,000 jobs were lost in the august numbers. that might sound very modest gains for june injured -- that wipes out the very modest gains for june and july in manufacturing. vonnie: so your prescription, then, for venture janet yellen and her excellency colleagues? -- said it share janet yellen and her excellency colleagues -- fomc colleagues? harley: i would wait.
the risk of creating more downward pressure clearly outweighs just waiting. vonnie: our thanks to harley shaiken, professor at uc berkeley who specializes in labor relations. much more ahead. let's look how the u.s. markets have been trading today with about 60 minutes to go. majors first.the s&p 500 is up .4%. nasdaq holding onto a gain of just about one third of a percent. marginally positive in this session in september. let's look at the dollar index. consolidated further after the jump -- really neither here nor there. two year yield, 79 basis ends. still trading in that range today. crude oil futures bouncing back after an 8% decline or so this week. this is bloomberg. ♪
vonnie: this is "bloomberg markets." i am a vonnie quinn. companies biggest oil operating in the mac of shale oil, its shares of more than 50% faster even as oil prices drifted lower. talked, alix steel to the pioneer chairman and ceo. she asked how the company made money during the oil bust. >> with it out of production profile 18% per year and we are adding five to six weeks per year at a minimum basis. alix: amazing to me, reduction
versus. after dark -- production versus capex. this is relatively unheard of in the industry. what is the key that lets you do that? scott: one is that the service industry has lowered costs. the other reason is we are optimizing and drilling wells in 18 days, 20 days, versus 35-40 days. we're optimizing our completion. reducing space in and adding more spaces and getting tremendous performance out of the wells. alix: part of what shale oil has been benefiting from his lower costs oil services. usually costs at 35% over the past few years. the other part is the own efficiency gains.
how much of the cost savings that you have seen are sticky? scott: at least half. as the oil prices start moving towards $65, the service costs will start going back towards reduction of costs. but not the optimization. optimization will stay there. we are making better wells and that will stick in the next upturn. alix: even if you have the oil services guy calling you, that doesn't change the 12% production profile. scott: no, exactly. it is 15%. years, 15%xt five growth on average. alix: interestingly enough it feels like shale oil was a victim of its own success could the better you get at producing, the more oil you can produce in the lower prices can get. how do you see the dynamic? scott: i was speaking at the l and s conference just recently and we laid out our growth
profile from the entire permian basin. it goes from 2 million barrels a day to 5 million barrels a day. that is in a $46 price environment. next year, $56 in the next 10 years. is the highest margins, lowest cost, and it is the best rock. 75-80% oil. n and theserms bakke other plays. alix: you also came out in the last two presentations and said that operating costs were two dollars a barrel. that is a saudi arabia kind of operating costs. scott: yes, operating costs are down 26% this year. it is due to more efficiencies. alix: that is sticky. scott: electricity costs are down significantly. we have two dollars taxes on top of that.
when you take out the state taxes and county, school, hospital, two dollars per barrel of oil equipment. alix: some of the criticism of shale in general is that you have high initial production rates and then it slowly declines but you have to drill more and faster. what is the counter to that argument? scott: there are some zones in the permian basin that do not drop off 75, 80% per year. we are trying to break up all the rock. we are not seeing the declines we used to see. ist is why the permian still flat and i expect with the recent rig count increases by various operators will start growing again in the next six months. alix: wow. so the composition that conversation that it hurts revenue over time is no longer an accurate statement for oil should -- shale oil?
scott: especially in the permian . alix: that is an incredible statement. i know you are retiring. you sold everything in 2010, 2011 and focused on the permian. what is the next permian? istt: the permian going to produce for the next 100 years. vonnie: time for the bloomberg business flash. ceo plans to sell more than 2 million shares of the sportswear company he founded. the stake is valued at $72 million as of today. enteredmour says he into a range deal starting nine months in october. my line executive's on capitol hill next week -- mylan
executives are on capitol hill next week to discuss epipen prices. mylan also plans to address the house oversight committee next week. that is your bloomberg business flash update. optionshad, inside. yum! brands includes taco bell, kfc, and pizza hut. it has big plans for operations in china. we will discuss the strategies related to yum! this is bloomberg. ♪
senior market strategist at trading advantage. welcome, scott. thank you for taking the time on this friday, long holiday weekend. really appreciate it. big week from the data standpoint. does this do around the probability of the fed rate hike this year, in your view? >> september looks like it is off the table. december is still on. will we are seeing where -- what we are seeing where i am standing is coming your term, there is a lot of put-buying. thinking of the market is still going to go up but we are starting to see some call buying further out. even if you january of next year. it suggests a little bit of a inket fall and rate rise december. to me it is still a 50-50 shot
for december but september looks like it is off the table. abigail: pretty interesting when you just mentioned about call buying later in the year and we could see a correction pen. august is the best monthly performance for the vix since april. we see a big decline. however, being near the lows, in your view, does that set us up for a spike higher? further out? yeah, i wouldn't say a spike higher, but going into the election. getember expiration, as we to october, we will see the vix increase. i wouldn't be surprised to see it in the upper teens by then. as we get closer and closer, maybe, to the december meeting, we will touch 20 again. abigail: relative to the 10-year yield, the decline, it went lower, suggesting investors
really think there is going to be a rate hike further out. do you think that supports the view that september is off the table? or is there something else that you see? scott: no, i think it definitely does. even without the number it would have been very, very difficult for the fed to come out and do anything before the election. together-- make them mix them together. any chances anybody saw for september. abigail: i hear you are bullish on yum! brands. scott: i was bullish before the news came out this morning. i think it is positive, spinning off the chinese part of their business. and from the technical standpoint, very bullish. i'm going to go out not near term like september options but go out to october. a good 6-8 weeks on these options.
october, 95, 100 call spread. even with volatility so low, the option market is predicting a seven dollar-a dollar move in yum! before the october expiration. the targets around the $99 mark or so. i can buy that call spread for a dollar -- abigail: brady, scott, that is very helpful. we have to leave it there. vonnie, back to you. vonnie: abigail, thanks. still ahead for more from the rare and exclusive interview with russian president vladimir putin. this is bloomberg. ♪
matt: i'm matt miller. let's look at the headlines with taylor weeks. taylor: at the end of world war ii, the soviet union occupied 4 small japanese islands. in an exclusive interview with bloomberg editor in chief john nickel three -- john micklethwait, president putin said ms. lumley the conflict should be part of the long-term relationship. we did it andn: parted ways. in the past couple years, not by our initiative but from the japanese side, it was proposed. but now our partners are showing willingness for discussion of the topic. somee talking about exchange, we're talking about finding a solution where neither
of the parties will be defeated or a loser. taylor: tune in to bloomberg all they for more of our exclusive venue we with russian president -- exclusive interview with russian president vladimir putin. hillary clinton used a blackberry during her tenure as secretary of state but the fbi cannot get any of them during the investigation. the fbi said there were at least five additional mobile devices they sought as part of their inquiry. one person interviewed by the fbi recalled 2 instances where the devices were destroyed by breaking them in half or hitting them with a hammer. donald trump is meeting with african-american leaders in philadelphia today a day before he visit a black church in detroit. business ande with civic leaders comes as the republican nominee is working to appeal to minority voters. emanuel's party leader in the chicago city council says he
plans to hire more police officers after the deadliest month in years. global news 24 hours a day, power by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. >> let's go i thank you mastec where courtney collins standing by. courtney: the nasdaq is paring gains in afternoon trading. it was of as much as .6% at the session high but now trading at .3%. it is having its best week in nearly a month. another winner on the nasdaq is apple and that is moving on 2 pieces of news. ireland's cabinet came out and said it was a apple -- it would support apple's appeal of the money the commission said it
would need to pay ireland in back taxes samsung his recalling its tablet after faulty components and reports of exploding batteries. this news is likely to ease competition for apple ahead of the release of its likely iphone seven stay fit stocks are not doing so well at the nasdaq today. lululemon is down over 9% and having its worst day in nine months on its forecast that missed estimates. aboutsparking concern slumping demand and competition, especially in yoa -- yoga wear. foot traffic has been poor this quarter. if you look into the bloomberg, you can see the year-to-date chart of lululemon versus the competitor nike. the white line shows lululemon
stock up 46% before today's plunge. that is the picture today from the nasdaq. matt: i will take it. courtney collins at the nasdaq, thank you very much. >> now two more of bloomberg editor-in-chief john micklethwait's exclusive interview with russian president vladimir putin. want to turn to the reserve of cash piles. john micklethwait asked putin if the central bank could move to boost the currency reserves more quickly. i knownt putin: you and about the necessary central-bank reserves and the goal is well known. for the general public, we can see that it is not to finance the economy but to guarantee foreign trade and for that we need a level that is capable of supporting foreign trade for a
least three months. we are at a level that can support trade for a half a year or more. if everything stops working and we can use the golden currency reserves hit that is more than enough. from the point of view of sick running stability of the economy -- safeguarding stability of the economy, everything else, buying and selling of currency, is connected to the regulation of the currency market. how the central mike reacts to leads to anr it increase of reserves from is difficult to say. we have two governmental funds, the reserve fund itself -- they make up about $100 billion. matt: president putin there in an exclusive interview with bloomberg editor-in-chief john micklethwait. as far as the market is concerned there has been a lot of good news. stocks have seen volatility ease to the lowest levels of the annexation time you -- since the
annexation of crimea. the second big spike in volatility with interest rates being raised to 17%. channelhe trend therefrom abigail doolittle. we have come back down from that level. you see easing as far as the bonds are concerned because the yields have come down substantially and a lot of different banks are recommending buying the ruble now, including toronto dominion and citi. very interesting turn of events for russia. 2, john micklethwait and follo vladimir putin, discussed the u.k.'s recent brexit vote. putin: i hope so. i hope so because, first of all,
we believe in the fundamental basis of the european economy. we see that western european , despite disagreements -- i can't maintain say right or wrong, depending on what side you look at it -- their present approaches to issues. strife virtual changes that are no -- strife for structural changes that are no less acute for our economy. , theeferring to a problem dominant role of the oil and gas sector in russia. also -- the structural reforms long ago came
and the economies have a pragmatic approach to resolving the problems facing europe. that is right we hold -- that is why we hold 40% of the revenues in europe. john: two you think britain might be more compliant or more likely to do a deal with russia now that it is outside, leaving the european union? president putin: it has not as exhibit special relationship with -- has not exited special relationship with the u.s. if it conducts a more independent foreign policy, perhaps it will be more possible to do that. if britain is guided by commitments to allies, then let it be that way. it is not our choice at the end of the day. it is the choice of our british partners.
in any case, we understand that in light of the reliance on the special relationship with the u.s. to take into consideration key partners. you can hear much more of president putin's interview online now at bloomberg.com. we will have a special report with an expanded version of the interview featured on monday at 12:00 p.m. eastern, noon here in new york, 5:00 p.m. in the evening in the u.k., 12:00 a.m. tuesday in hong kong. midnight, but it is worth it. >> [laughter] just saying on europe, there is a chart i wanted to bring up. the stoxx 600 has been in a bit and has been slow to recover from the post-brexit losses. but if we look at the reaction to the jobs report, the s&p 500
is up .4% at the moment. the stoxx 600 rallied almost 2%, the most since june 29. the gains gathered pace after the jobs report. if you look at my chart on bloomberg, the stoxx 600 closed and 10-dayay moving averages. at least in europe we've seen bullish reactions in equity markets to the report. joe: this morning we saw the dax had been gaining, even prior to the report. ftse 100 doing well. -- then the jobs report rate hike and the nice pop thereafter. >> the dax came close to your racing the drop. joe: coming up, how the bond market is digesting the numbers. this is bloomberg. ♪
is bloomberg markets. time for the bloomberg business flash, the biggest business stories in the news right now. delta airlines says it lost more than $100 million last month because the massive computer outage. the airline was forced to cancel more than 2300 flights. the equipment failure caused the outage of the airline's computer system, leading to three days of heavy cancellations and delays. to help end the search for parking spots are crowded city streets, mercedes-benz will start giving each other a heads up when the space is free.
when the drivers are not looking to park they will share information with other cars on the cloud. bill gross says jobs data ensures the federal reserve but will it raise interest rates this month. pimco says the central bank will wait. on traders are on the fence. -- bond traders are on the fence. flashat is your business update. joe: the long-awaited jobs report did nothing to break the current path of the market in august. the notes were stuck in the narrowest trading range in decades. our next guest says you can expect some volatility this fall. camp.g us is james he joins us from st. petersburg, florida. james, interesting action in the job -- bond market today
following the jobs report. two-year yields dipped but erased their losses. maybe the jets report was in a game changer, but the 10 year yield not only erased losses, it climbed. it is so hard to get higher yields these days that the higher yield on the 10th-year is kind of a head scratcher. what is your interpretation? well, i think first and foremost the jobs data wasn't good enough to really move the needle for the fed it if you look at, as was alluded to, the market is not priced in. since 1994, 33 fed moves, each one is priced in so i take it off the table. 145 range,he 140, definitely at the lower end of the trading range. this sort of very to move on the long end is not particularly's rising. rish move on the long end
is not particularly surprising. joe: one popular theory that is going on around to explain today's action is that traders were betting on a flatter yield curve and the sooner hike wouldn't -- would induce flattening and if the fed is going to let it go for a while now, that reduces the risk of the premature hike. does that ring true to you as being a possible explanation? james: you have the flattest purview of had in a couple of years. pricedly it is almost for perfection on the long end. to the extent that monetary accommodation continues domestically and globally, if there is inflation percolating anywhere in the economy, this gives it more of a chance to show up. the long-term selloff is not particularly surprising giving the continued -- our view that the continued stance of the fed is accommodation as far as the eye can see. nejra: james kumar you taking
any new position after today's numbers -- james, are you taking any positioning of today's numbers? james: over the past few months it is credit at the expense of treasuries. credit has taken the lead this year. even though we see long-term secular problems with corporate credit with the massive on issues and the real averaging a balance sheets, the near-term is going to be productive for risk assets because central banks are still in charge. matt: will there continue to be massive bond issuance? it doesn't look like interest rates anywhere are set to go up. james: the calendar for september is full. m&a activity is peaking, eclipsing 2007 levels. the fed is basically told american corporate cfo and ceo don't invest in equipment or rmb, by act shares of stocks and paid of it -- increment or rmb, buy back shares of stocks.
inis all being captured financial engineering, at least to us at this point. joe: we got a little bit of a pickup at the long end but rates are incredibly low. very few people are predicting anything for a sustained bear market in treasuries. what would have to happen to get a meaningful upward move? james: great question, and i think normalization overseas. we are starting to see that. usc not in the 10-year japanese -- you have seen that in the 10-year japanese on. from the very negative to the almost zero. if you buy overseas or any of these negative rate regimes, you are expecting an even lower negative yield to make any money on the trade. once sentiment changes that that is no longer going to be a trade that is profitable, it would still over to the u.s. treasury market.
that is the near-term risk we have. at thelooking, then, japanese yields, which you just mentioned, people -- well, i was reading this morning that people were saying they don't know how much higher those yields have to go. do they have much higher to go, do you think, or is this just a bit of a move ahead of what we are expecting from the boj? matt: by the way, i've got your chart, nejra, japanese bond chart. james: certainly uncertainty about the moves in japan, no question. at some point -- that may be close to now -- when i mentioned volatility, the negative yields are going to get pushed back. when you have somebody to take you out of the trade at still lower yields, i think there's going to be velocity and some momentum. i see the upside of yields globally. the fundamentals of low core inflation in monetary accommodation.
certainly i think vulnerability for the treasury markets and the risk-free assets is to the upside in terms of the yield over the next six to eight weeks. joe: the market is still pricing in a 30% chance of a september rate hike. not totally off the table. what are you going to be watching? i have the work function on my terminal. what are you going to be paying closest attention to over the next 20 days, or 19 days, to try to ascertain? will you be looking at specific data, fed speak? what are you paying must attention to? james: i will start with the latter question first. i give no credence to fed speak. it has been so disjointed and they continue to try to push the market and allow permission, if you will, to raise rates. it might as well be zero.
it is a binary function. 97% ofare not a 95, 96, ability this close to the meeting, it is essentially zero in our eyes. data,l look at economic the notion of data dependence from which i'm not so convinced israel. most important -- not so convinced is real. most of what really, macroeconomic -- the fed has been beholden to the market in terms of their policy and communications. if we get exogenous events between now and december, i'm taking september off the table, the fed will move further and further out. it is not only the fed rate moving once but the trajectory. the slots are considerably higher than any that i see. holds for the next couple of quarters. joe: james camp, thank you very much for your perspective. fixed income managing director at eagle asset management.
joe: this is "bloomberg markets ." i am joe weisenthal. there is nothing that gets me more excited that a good depth cross in the chart. this is a fun chart that goes all the way back to 1990. what we're looking at is dollar-yen and when the 12-month moving average crosses the 24-month moving average. there are a lot of different definitions -- matt: yeah, it seems like you can pick whatever definition you want. joe: what happened with the
lehman collapse, japanese financial crisis, the bursting of the dot-com bubble. the last four times this has happened where we saw this kind of deceleration of momentum has always been around some major risk-off environments. keep an eye on the long-term trends in dollar-yen. matt: that is sick! joe: that's a fun one. nejra: i'm looking at dividend yields, the s&p 500. , chief david rosenberg economist and strategist, saying that the dividend theme has yet to run its course. to show why, what we have on the chart, the dividend yield on the s&p 500, 10 main industry groups, or some of them rather, against treasury notes the low yielding we are focusing on. the lowest yielding, even they at least match the 10-year treasuries. it shows you why some people
still think the dividend yields still in play. matt: everything is down with treasuries and i think -- what is that in pink? joe: i love that. if your benchmark is treasuries from literally everything is a treasury clay. matt: that is it for "bloomberg markets." "what'd you miss" up next. less than four minutes to go for the close, and for most of you, the work week. up across the board after the goldilocks number. this is bloomberg. ♪
>> stocks ending the week higher after a lackluster jobs report. >> the question is what did you miss? is just right. the question is whether other labor market measures will warm up. vladimir putin sits down for exclusive interview with bloomberg. has a marks, head of the meeting of international leaders in china on the g-20 agenda. terrorism, trade and global growth. let's kick it off with our market minute. after that goldilocks number.