tv Bloomberg Go Bloomberg September 6, 2016 7:00am-10:01am EDT
for bayer. is $56 billion enough to seal the deal? david: will the central bank extend qe this week? why am mario jog need to reconsider what he can buy. jonathan: clinton and trump prepare for a september 26 debate. i am jonathan ferro, alongside david westin. alix steel is off. we continue the central bank discussion, the countdown to september 21. david: we have five different fed presidents talking, ecb coming up, boj. focus in i think the japan is the idea that they may allow the yield curve to steepen and that could be quite pivotal. david: they stopped buying the 30 year bonds which was controlling the yield curve. jonathan: that has films
wagging. wagging. kit juckes will join us in a moment. jonathan: looking at the msci world index global stocks, and august 2015 hi. 600 aope, the stoxx january 2016 high up one quarter of 1%. the story in the fx market is a little bit of dollar softness. we come in 2/10 of 1%. the cable rate pushes up to one point at 133. a fifth straight day of gains. the discussion for this program in the next 10 minutes, are the bears in the u.k. starting to capitulate? in the bond market, the bulls are not capitulating. crude gets back to work with a
little bit of rally and russia joins the output. in the bond market, the story of last week, the long end of the jgb curve, the worst week for 30 year japanese government bonds, yields coming in three basis points from the session. the focus is whether the boj and governor kuroda allow the yield curve to steepen and hopefully assist the banks to make a little bit of money. david: they have been waiting for that in japan and it has been tough. let's check in with our bloomberg team. -- + danhyde is in kennedy in london on what is the actual brexit plan. we will start with caroline in berlin. they increased their bid but not
by much. caroline: they are not really listening to the market and we are cut of worried that bayer would be paying too much for monsanto so the eat out a little bit of a sweet deal, $127.50. that is about $56 billion when you are taking the debt out of the equation. it seems as though there was much optimism about the price point certainly coming for monsanto. you need $130ht if you are going to get monsanto to say yes. david: a raised the bid but the market does not seem to be believing this deal. i think it is a 90% premium. what is going on? caroline: we are seeing way off the current market price. we are seeing currently trading at about $47 billion market cap for monsanto. $56 billion is where this deal
currently is and the market does not buy it. why the risk? agreement,do get an what about the regulators that come in? what about the lawmakers? are we going to be able to get a feel through those regulatory hurdles? we have do pound down going for regulatory approval, syngenta being snapped by chem china. berlin,aroline hyde in i do not think that story is over yet. jonathan: monsanto probably once a little bit more money and you have the regulatory issues. that is a big question for the corporate world. let's switch to central banks as the ecb meets paul gordon. he joins us now.
the ecb decision on thursday, a wide consensus is at some point they are going to extend the qe program until her nose when. i guess they have some problems and they have to widen the pool of available assets. paul: that is the key. most economists see an extension of q8. 0.2%, 1/10 oft the ecb goal. it might not happen on thursday. split, it isly going to happen at some time. if you do extend qe, what do you buy? a lot of bonds are ineligible because of rules. it could be time to send a signal that you are about to do that. jonathan: a question about how did they do that. you could tweak the rules on the deposit rate or the share limits. the politics around the p, talk
to me how controversial it would the politics around the capital t, talk to me about how -- key, talk to me. paul: if it was a move away from buyingital key you are about one quarter of your qe purchases in german debt, a good chunk of france and italy. if you move toward outstanding debt than you are financing italy and that will raise some concern. paul gordon joining us from frankfurt. let's can tend to the congress -- continue the conversation to switzerland. prime minister may, a tough time at the g-20, a lot of people going on and on about what brexit actually is. what have we learned? simon: a lot of talk in china at
the g-20 and yesterday at brexit negotiations with david davis speaking in the house of commons. we are still without many details of what the plan is to get out of the european union. we know a few things. theresa may does not fancy a point based system for controlling immigration but she puts that ahead of other issues. talking about access to the single market also remains cloudy. the government intends to use that is a bit of a bargaining chip and not seek the full -- see the full access that banks and others would like to see. not much meat on the bones. for the an issue lawmakers on the opposition side yesterday when david davis polk. -- davis spoke. and a lot oficism platitudes. they want to know what brexit means.
jonathan: we always tune into parliament for the waffle but as for the market, the conviction around the u.k. and sterling bearishness, or the bears capitulating just a little bit looking at the latest data and may be realizing this is not going to be as bad as the doomsday scenario that was painted ahead of the actual vote? simon: absolutely. a good story on the terminal showing some of the pessimist like deutsche bank are pulling back against sterling against the last morgan stanley shelving. you are certainly seeing some data and market moves that perhaps brexit will not be quite as bad as once thought. the key thing to note is is it still early age -- is still early days. jonathan: simon kennedy, bloomberg's brexit editor. the bears are capitulating just
a touch, a fifth straight day of gains for the cable rate. futures marginally positive. let's look at the stocks on the move with julie hyman. latest profit is that volkswagen is buying a share in navstar, specifically the truck and bus unit. you can see the shares are higher 26% in the premarket. this is thinly traded and these were earlier trades. they have not crossed since these headlines were confirmed earlier by reuters and the wall street journey. they are confirming it again, a 15.6% stake. that is about 12% higher than the close on friday for navistar. we will see if it does come down a little bit. earlier reports said the state would be 19.9%.
volkswagen shares up by about 1%. we have a deal in the medical advice -- device area. a $4 billion deal overall. steffi it does molecular diagnostic testing and you can see those shares are higher, danaher shares are little changed. spectra energy and enbridge largestg for the infrastructure company in north america. spectra holders are getting 43 point 33 a share -- 43.33 a share. providera natural gas across the country. not much trade in enbridge. expect shares higher by about 6%. get an update on what is making headlines outside the business world. emma chandra is here.
emma: rodrigo duterte trying to mend fences with president obama. president obama canceled a meeting after an excellent -- explicit filled tirade. duterte says he regrets his comments came across as a personal attack. a preliminary attack -- account on a emirates airline crash, the pilot tried to touch -- take off again as the plane touched down. a headwind started to shift to a tailwind and back again. all 300 people on board escaped. china is considering a wide-ranging overhaul of taxes. finance ministry officials broadly support tax cuts for less expensive toiletries and are considering raising taxes on alcohol and tobacco. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120
rule is that they can by any sovereign debt with the yield above its rate. german debt currently trades with a yield below that deposit rate making it unavailable for the ecb. the ecb cannot buy it so how do they change the rules? i want to bring in kit juckes joining us from the city of london. you know this problem well and it was predicted by many, and here we are. are we at a crucial juncture and you expect the ecb to make a tweak at this meeting? what will it be? kit: i do think they will make at least a tweak in extending the bond buying program for longer, extending it through later next year to avoid having a conversation closer to christmas. they are going to have to make the announcement about how they are changing their buying. they could just turn around and say, we will sort it out, there are a lot of things we can do.
i would have thought the easiest single solution was to be able to buy up lower yields just because that is less contentious and changing the t -- changing the capital key so the ratio of bonds they buy around the system, that is the most difficult thing. it gets them some time and that is an option. going even lower in yields is the most efficient thing they can do. wesense is that they think have got this under control, we can go on buying lots of stuff. jonathan: that is the message. the market has not been buying it for a while. everyone has done the research and estimates. seems to be the most controversial. talk about the issue of raising the share limit, is that not controversial as well? kit: i think it is much less
controversial. story, you arer scraping the bottom of the barrel. which corner and i scraping first? this is when you start pleading with your fiscal masters to do something on their side. possessionsing the of each issue they can hold is less contentious because there is a lot of politics involved. i would do that before messing around with the capital key. anyd: is there any way -- reason to believe a different approach would have an effect on the economy? is one of those methods better or worse? kit: i am not sure. the bond buying program anchors yields, helped anchor the currency to some extent. what europe needs is to boost credit demands.
the lending programs, we will loan you money for less than the banks, all of that kind of funding is much more effective. anything they could do to revive the asset that market would be more helpful on pushing on that bit. i think this is a deeper issue. i do not think that any of this makes a ton of difference to the economic outlook going forward. the single best thing you could do is turn around and say, we are having easing of fiscal policy across the euro area right now and these rules around fiscal debt is going in the been. jonathan: there is another option, help the banks. i want to bring up the shape of the jgb curve because we are seeing a steeper curve, and tongues have started wagging.
the boj came in to the market but did not buy 30 year debt and 30 year debt got hammered in japan last week. are we about to see the boj embrace the steeper yield curve and is that the right thing to do? and should others follow? i certainly think those are two ends of the yield curve and at the front and i think it is important that they do something if they are driving yields ever lower to deal with the fact that that is costing the banking sector money. a steeper yield curve exit easier for the banking sector to make money to compensate for the fact that if you have negative rates they cannot make any money. that is not a 30 year yield story. allowing normalization of the long end of the curve, that tells you something about we cannot just drive 30 yield -- 30 year yields lower month after month unless we assume we are stuck in deflation and no growth
forever, just think is a stretch. a steeper yield curve, in a sense it is healthy and i would encourage it if i were a central banker in that regard. jonathan: kit juckes, thank you for being with us. we are wondering if we are seeing a shift in thinking. at the ecb it has all been about go hard and then worry about the banks. up in the banks out and enabling them to finance the economy. david: the banks have gotten hammered, particularly in europe. can you grow your economy without healthy banks? is the fed trying to get investors ready for a rate hike? we will preview john williams' speech from reno, nevada. this is bloomberg. ♪
am david westin. what are the fed presidents trying to tell us? let's go back to kit juckes. after janet yellen's jackson hole speech the market still do not believe the fed will be raising rates in september. will the fed speakers be trying to convince us otherwise? kit: i do not know how much they should be pushing september. i think they want to make clear as a message that september is to see whatre going the situation is, but the rates are going up. i am less bothered by market pricing over whether the next hike is in september or december. the market more or less prices a 1% fed funds rate in 2018. if the fed wants the market to price in higher rates, i think what the fed needs to do is push us into a situation where, if we think the economy is growing at
a rate of a little over 2% in 2017, we're going to go on hiking rates slowly but going to get higher than you think, as aboutd to over worrying whether it happens to be september or december, which will depend on the economic climate at that meeting. see ifbe interested to they try to push september harder but i would push the longer-term message. erik nielsen from unicredit out with his weekly note. the fed increasingly resembles a boat in choppy waters without a compass and without a captain but with plenty of crew members only to be over by people yelling their good advice from the shore. the market still seems to be in control. ande is the fed's captain what have we learned from janet yellen in the past week?
analogy inlike my terms of, i definitely need to lose some weight and i should go on a diet. at some point in december i will probably get around to cutting back on the carbs or the beer. it is really easy on any given day to find a reason not to act. 100 50,000 payroll number, is that a reason to wait ? my sense is that they have good intentions but they have got to be a bit tougher and equally, it is the same debate as the fed. let's have a big conference to discuss new ways of thinking about fed policy and ultimately conclude we are going to keep the same old toolbox we had all along. we need new thinking a little more background. david: i am not sure about you losing weight but i do worry about those people on the shore. if they need to raise rates they have to have the markets so they are not to disrupted, don't
they? kit: absolutely, and that is my concern. how can you ever get rates up without is causing another meltdown in emerging markets? david: kit juckes, thank you so much for being with us. jonathan: the s&p 500 has not had a 1% move in over 40 days. our next guest says that is about to change. from new york city and viewers worldwide as wall street gets back to work, futures positive. this is bloomberg. ♪
bid fors taken its monsanto $256 billion in its attempt to become one of the largest producers of seeds and insecticides. enbridge will buy spectra energy in a $28 billion stock to stock transaction that will create the largest energy pipeline and storage company in north america. jonathan: thank you very much. wall street gears up and gets back to work. you come in on a tuesday morning and get to see the faces that you have missed so clearly. stoxx 600 positive for a fourth straight day. gains, ay streak of stronger cable rate. 1.3347, the longest streak we have seen since march
of this year. the potential that the sterling bears could be capitulating on the backside is some surprises as far as the u.k. data. ,ussia joins the party cooperating with saudi arabia. for me, the most interesting moves over the last week have come in the bond market at the long end of the jgb curve. 30 year yields pushing much higher, and ugly week for the long end, the worst since april 2013. pointsld around 50 basis but the question of course is whether the boj is beginning to focus on allowing the yield curve to steepen and supporting domestic banks. times are at least wagging and it is fueling speculation. bloombergre is a
report this morning that is fascinating on what might be going on. we are not going to turn to the subject of infrastructure -- we are now going to turn to the subject of infrastructure. in a bloomberg piece, matt an experience at the denver airport should make us all stand up and take note. "we should all be able to angry on smart investment works. look at colorado where it elected officials of both parties traced and economic boom to a decision 27 years ago to spend more than $2 billion on a 2 billion airport." dollars does not tell my cap much money but the consequences have been remarkable. a hugehe time it was amount of money and the project was assailed by local businessman. there was a campaign against it but denver voters by a 65% vote
said yes to this. even though the initial. treacherous, it has been a fabulous investment that transformed colorado. david: i remember all that problems that all the problems with baggage handling. let's look at some of the consequences you layout. economic impact, over 26 billion .obs -- billion dollars matthew: colorado went from being in the united states to a global destination. it is one of the few, fewer than 20 airports in the united states where you can travel on a daily basis to asia, europe, and central america. it is very difficult for a landlocked location but colorado has pulled it off. in the course of doing so, it has transformed the state economically. david: a transformed
homeownership values. we have a chart to show the average price went up over this period of time. over 137%. matthew: what is even better than that statistic is when you adjust for fluctuation, the growth has been fast but it has also been steady. there are very few cities in the united states where you can say that about housing. david: let's talk about your quote which was smart infrastructure investment. 2009d the stimulus act in where there was a substantial on money. another $50 billion for education which some think of as infrastructure, and economists are divided on whether that is worse the money -- worth the money. when do you invest and how? matthew: clearly the emphasis on rescuing the automobile industry which was part of that, was a
huge benefit to the american economy. it was not just the automobile industry, it was all the jobs secondary jobsf, and housing and construction and everything else. that was a huge benefit. that will be a legacy actually for the obama administration. as far as education, that is where you were going to get the debate. on the other hand there was in fact in that stimulus bill, a project to build a second tunnel under the hudson river. the governor of new jersey said no. i think everybody looking back on it thought that was an amazing time to invest and it would have been a huge benefit to the northeast economy. that was another potential legacy that was part of the legislation of the time. david: you layout the case compellingly for infrastructure spending and both presidential
candidates have said they would like to do that. as the country ready politically to put money down on infrastructure? matthew: if you look at american history, it has gone both ways. abraham lincoln was probably the greatest infrastructure president. he was responsible for education, for transit, just about every part of american life. he was there with infrastructure commitment. more recently, franklin tosevelt using the new deal vastly improve our infrastructure, whether it was and electrification and world parts of the united states , those were huge benefits for the economy. david: this was a time when money could be borrowed at on unusually a low rate -- an unusually low rate. matthew: the fact is that investors worldwide love
infrastructure investment. there is a whole history of high returns the go with infrastructure. david: you point that out with your piece about the denver bonds. matthew: if you look at just the past five years, they are in the top six or seven performing market in the u.s. winkler,tthew bloomberg editor in chief. 2016han: a rocky start to followed by a series of record highs and subdued volatility but has it been too good for too long? valuations, high expectations for growth, and increases in bullish positioning point to a complacent marketm rife for disappointment. marc joins us now. why now?
c: if we think about where expectations were, they have risen quite a bit because the positioning has changed quite a bit. jonathan: give me some color. c: the market is looking for its cake and eating it. same time, they're saying we should see economic growth recover so it is going to be one or the other so you could have a surprise on one side or the other but i think these expectations put together too much. i do not know where it is going to come off of a market that was 0% last year. jonathan: we are going to get aps growth and the market will be stimulated. you can take the word count of stories produced with the words fiscal stimulus and put it up on the chart, you see this
explosion of mentions of fiscal stimulus in the last couple of months. is that part of the story for you? marc: exactly. this is a great chart. over 800 new stories in the month of july about fiscal stimulus which was the highest post crisis. economists are looking at only 10 basis points of growth from fiscal stimulus. nothing ok year but spectacular, especially when you look at a market that is trading in its cycle highs 17 times and looking at 14% eps growth. jonathan: when we talk about little price action we are talking about 1% moves. where are they? going 40 days without a 1% move. you say the breakout is coming and it will be to the downside. marc: the risks are definitely
piling up for the breakup to be the downside -- breakout to be the the downside. if you look at the correlation versus equity, we are at about a 25 year low. story after story, it looks like we are heading, we have an enormous amount of new flow. if you look at the risk reward and what the market is expecting in your risk is probably to the downside. jonathan: when you are giving advice to clients, it is tough to tell them to turn around to cash. bondems the utility and life proxies are looking like the most risky assets given the rally we have seen. where do you go in the equity market? marc: we kind of like a more balanced portfolio because for
example, the markets just a week havehat we were going to an imminent rate hike and now we are backing off of that view. you want some yelled at a reasonable price because we are in the slower for longer environment. we want growth also. we like health care and tech and also energy for structural reasons. jonathan: s&p global ratings out last week pointing out quite clearly, you take the lowest junk rated companies with a negative outlook, the number of companies has exploded. , 25% chunk of that boom has come from energy. why are we more constructive on energy? marc: you are right and that is one of the reasons we are cautious because you see default rates in high yields are starting to move higher -- continuing to move higher. energy investors are still underweight for the sector.
we are looking at the market going into a deficit now. forre expecting a deficit next year about the same size as 2011 when you saw the huge run-up in the price of oil. hassector historically rebounded quite significantly on the back of it. we are looking at mid 50's this year, mid to upper 60's by july of next year. does the fed story play into this whole story of the equity markets and subdued volatility, so to speak, how does that you've all? -- evolve? marc: i think this last data point put september off the table and the most realistic expectation is for december. we have to see how we manage until that point but that is why you want to have a more balanced portfolio, some yields and some growth.
you still have about 25% of global bonds in negative yield territory. the equity market is a good place to get it but we are just cautious in the middle term given where expectations and valuations are. jonathan: thank you. the equity markets rife for some disappointment. david: coming up, it is the home stretch for the u.s. presidential election. will donald trump make it a competitive contest -- contest or will hillary clinton builds on her lead? this is bloomberg. ♪
alex molina really is here. ."vid: this is "bloomberg i am david westin. labor day has passed mating we are in the home stretch of the presidential election, 63 days and counting. set the stage on the polling, where are the two candidates? steve: we saw hillary clinton got a convention double digit. we saw donald trump losing ground a lot of ways. day, we see today the first signs. by has donald trump leading two among likely voters.
they are basically tied when you look at registered voters. he is leading among independents by 20 points, among some of his major categories like some of whitesong points like with non-college degrees by like 40 points. these are huge deficits clinton needs to make up. david: is this a surprise to the clinton camp? a lot of the media over the summer was that she was ahead. steve: i think they expected it to tighten up and they knew that what happened in the summer would not last. once the fall started and was voters start turning their attention more toward the race, things will tighten up. i think they are still seeing -- feeling con -- confident with a look at the electoral map. there are still feeling pretty confident. david: take us through the next 63 days, is it really all about
the debates? steve: it is all about the debates. we will see day-to-day campaigning, ager speeches. we will start to see the candidates hone in on their strategies for the final stretch . of course they will go to florida and ohio but they will hit major other states, particularly in the rust belt which are key to clinton holding her lead nationally. , historically we do not see them completely change the outcome of elections but they move poll numbers and perceptions and have an effect. trump,if you are donald what do you need to accomplish over the next 63 days? steve: what is interesting about this race is that most -- both sides are trying to make it about the other candidate and have been, but we will see more of that. it is going to be nastier.
clinton will keep hammering away , everyp's temperament storyline she can whether it is in russia, his taxes. goes for trump, he is going to keep harping on e-mails and talking about transparency. yesterday clinton rolled out her plane and she will take the press with her. trump takes the press with him to youngstown, ohio and has a 30 minute interview. neither of them want the other .o win the perception battle it is like a game of hot potato and whoever is left holding the voters' attention loses. if this election is about hillary clinton, she is at a disadvantage and if this is about donald trump, he will likely lose. hillary clinton's
e-mails, could that be a major factor in the closing days of the campaign? steve: there was a news don't just a couple of days ago. i would not say they are worried about it. they are keeping an ionic. it is -- and i on it. the slow rollout of these documents is not good and i think they would like to put this to bed. i think voters have heard so much about it a lot of them have made their mind up. andt of them do not like it have said she has a huge problem among honest and trustworthy numbers. trump is beating her by double digits pressure -- for sure. these voters have made up their mind but i am sure anymore documents will change that, that it is not something she likes or wants. david: that is steven yaccino, bloomberg's politics reporter. toathan: the ecb might need
jonathan: this is "bloomberg ." i am jonathan ferro and it is time for off the charts. as the ecb decision approaches this thursday, they have reached a milestone. spp hit one trillion euros in the last 12 months. the goal is to hit 1.7 trillion euros. was march 2017 but as we approach the meeting this thursday, the market widely expects them to push back that and line by at least six months. the problem for the ecb is as follows. if you want to buy more bonds, where will you find them? the ecb can only buy bonds with
yields above the deposit rate. this,xcludes all of almost two thirds of german debt. over 30% of french debt. theou want to extend program beyond march 2017 you may need to change the rules before you run out of bonds to buy. what can we a do as we approach this pivotal meeting? there are three main options and each has its own code little -- political complexity. currently the ecb has a qe program and can buy respective debt based on the capital key. the bulkany, that is of the bond buying program because that is the bulk of the eurozone. ,f you change the capital key that will allow you to buy more italian debt. that is the most politically contentious issue.
the other one is increasing the issue share limit. currently it is 33%. ecb can buy up to 33% of any given bond. if you were to take available assets from 33% and increase it to 50%, that is one option. another option goes back to the previous chart. -40 points where the deposit rate is, just scrap that role and it would allow you to buy all of that debt, the two thirds of german debt that you cannot by and you would be able to circumvent the political complexity. wantoal may be that they to increase the amount of q8 and extend the period of time beyond march 2017. extend thef qe and period of time beyond march 2017. the market is expected and the
broad-based consensus is that at some point this year the ecb has got to tweak the bond buying rules to increase qe. david: anyone of those options has political complexity. if you remove the deposit rate floor you are losing money on every single bond you buy. can you imagine how the germans would respond? jpmorgan's chief global strategist david kelly will be giving us his outlook for united states growth. this is bloomberg. ♪
bayer. the sweetened their bid for monsanto but is $56 billion enough? jonathan: we will explain why president draghi may need to reconsider what he can buy. david: russia and saudi arabia pledged to stabilize the oil market but failed to agree on a freeze. what does it mean for the big opec meeting? i am david westin with jonathan ferro live. steel is off but the central banks are not. jonathan: it seems we did not learn much from fed chair janet yellen. what i find fascinating is how things evolved for the bank of japan. david: it seems to be all about kuroda as we sit here today. they are reintroducing the yield curve. jonathan: they came into the by the long end in
tongues started wagging that maybe that will be the tweak later this month to allow the yield curve to steepen and help out the bank. david: you can see it graphically and we will be talking rates all day with pimco's global strategic advisor richard clarida. first we are going to take a look at the markets. futures marginally positive throughout the session is wall street gets back to work. market is up 0.2 8% and the stoxx 600 gains for a fourth straight day to a january 2016 high. to the fx we go, a marginally week dollar story but a stronger pound is where the conviction is for the moment. to cable rate getting back 1.3352. there capitulation perhaps.
russia joins the opec party talking about the party of cooperation for stabilizing the market. 44.67.ding at the focus as we talked about throughout the day at bloomberg is the long end of the jgb curve. japanese government bonds, 30 years coming in at about three basis points that was not the story last week. it was an ugly week and the speculation is that there could be a tweak of the bond buying program to help the banks out. now let's go round the world and check in with our bloomberg team for in-depth coverage from our top stories. caroline hyde is in berlin, paul gordon is in frankfurt, and michael mckee is in new york looking at a big week for the fed. bid. has increased the is it enough to get it done? byoline: it does not look
the moves of premarket trading, that it well, to end a half dollars more is what is being offered. that is to and a half percent on the overall price point. least thathe $130 at the likes of commerzbank and bernstein have been saying you need to give to push this over the line and get monsanto to agree. as could be third time unlucky and indeed the third time that bayer play nice but it could go hostile. david: there are various hurdles as reflected in the marketplace which does not quite believe it will happen. caroline: precisely. but the market capitalization. 56 billion dollars is what is on the table from bayer this morning. that is equivalent to the likes of $127.50 per share. that is currently well below
trading at then red circle at the end. the market is not buying it and the monsanto share price is not moving higher amid this new offer. the reason, the issues. you have to agree on price and get it through the regulators and lawmakers as well. many feel this would not be a done deal because there is too much of a giant pair to become the number one maker of seeds and pesticides in the world. you have dow and dupont going for it and the likes of cam china eating up syngenta in switzerland. caroline hyde, thank you so much joining us from berlin. jonathan: another story that evolves this weekend is the ecb's latest decision on
monetary policy. paul gordon joins us from frankfurt. what the ecbn is might do around the qe roles that are this week. what are we expecting? just under half of the economists we have spoken to are expecting some sort of stimulus. that primarily means an extension of q8. it is supposed to run out in march 2017, inflation is at 0.2% and the goal is just under 2% so we are nowhere near it. that means buying other bonds for more assets and how do you do that? there are various options, issue limits, deposit rate flaws. if it seems that the ecb will extend which economists predict, it will have to tweak the rules. jonathan: they are nowhere near 2%.ing their mandate of
is the thinking evolving at the ecb away from doing more and maybe doing something a little more targeted? they have introduced targeted measures, the targeted long-term loans which are aimed at getting credit for the economy as opposed to flooding the area with cash. the bottom line from the ecb is it will continue to take steps and do more as needed as long as necessary to get back to the .nflation goal of just under 2% the message to governments is that this will go a lot easier if you help us out and right now you are not helping us out. jonathan: paul gordon leads our bloomberg central-bank coverage from frankfurt. michael mckee, bloomberg economics editor joins us now. , maybefull of fed speak i should take a vacation again.
are we expecting anything to change? michael: investors have written up any kind of september move from the fed and the fed has failed to challenge the markets. we start tonight with john anliams from san francisco, influential voice who has been in favor of an -- of a rate hike. tomorrow, two hawks go in front of congress. dovish the dev rish -- -- dennis lockhart from atlanta is a voter and neel kashkari from indianapolis. a lot of data between now and then, including the cpi report. will that trump all of that data and keep the fed from acting? jonathan: i want to go back to a quote from erik nielsen from unicredit. the fed increasingly assembled a
boat in choppy waters without a boat and without a captain but with many crewmembers opining what they should do and many people yelling with advice from the shore. the fed captain is expected to take control and dampen the noise we have had from other federal reserve issues but she did not do that. when will she? michael: it does not look like she will before september 21 and that could be a problem. if people are looking for guidance, it is a little bit next. we saw janet yellen take a neutral view, stanley fischer say they could do two rate rises this year so we do not know. the august payrolls report is somewhat disappointing at 150,000 but it is what you need to keep the unemployment rate from going down. recovery again, the number has been revised by 100,000.
the fed knows that but the question is do they act on it? janet yellen providing no guidance. jonathan: michael mckee, a busy man. as wall street gets back to work, futures are widely positive. let's get some movers with julie hyman. julie: i want to recap all of the deal headlines. we have a few as we kick off the school year and the end of summer. spectra energy and enbridge combining in an all stock deal. owners will own about 40% of the combined company which be a -- which will be a national gas pipeline. a $28 billion deal overall. up about 9%spectra and enbridge trading down just slightly. buying cepheid.
you can see cepheid shares rising by 2%, danaher little change. cepheid is a provider of diagnostic testing so that is what danaher is giving -- gaining. 30%star shares are gaining as volkswagen takes a 16% stake in the maker of heavy trucks primarily centered in north america. vw gaining a hold in the heavy truck division. millione on this, $256 or 15.76 a share, only a 12% ofmium but the shares navistar might be a greeting because there is speculation that vw will acquire the entire company. update one to get an what is making updates outside the business world, emma chandra is here. obama is in laos where he is pledging $90 million
to clean up unexploded bombs and other munitions dropped during the vietnam war, and the money will pay for those injured when the devices explode. regions of then united states -- two nationwide polls in the u.s. show the nationwide -- the presidential rates tightening -- race tightening. cnn survey has the two poling's within a margin of error -- air. is considering a wide-ranging overhaul of consumer taxes according to people familiar with discussions. finance ministry officials expect -- support tax cuts on things like toiletries and are considering raising taxes on tobacco and alcohol. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. verbal intervention
is quite as it seems, at least as far as talk of an oil output freeze is concerned. joining us is paul mcnamara. the idea that russia has joined a verbal intervention around the commodity market, do you see signs of stress feedthrough into russia or have they coped relatively well with that story? think the russians have coped relatively well with the weaker oil price. after the big crisis at the end of the 1990's, russian policy tends to be very proactive. they cannot budget expenditures a lot. they cracked back and have very little debt so they are in a fairly strong position. they do prize political stability still restricting their ability to spend means they would like to make the oil price a good bit higher. david: is the larger story in principle the allegiance of
russia and saudi arabia? if they are going to get together on anything, does that affect the oil market? .aul: talk is cheap it is fairly easy for them to talk but to further restrict output with the aim of driving the price higher, especially with other marginal producers iran, which i and know the saudi's are very concerned about, it is a little bit tricky to see if they can actually do that painlessly to themselves. i think the suspicion would be that the reduction in output would be quite painful to them. jonathan: if you looked at the oil price, where we have come from and where we are now and if i told someone who is not familiar with russian assets that it has hit record high after record high they might these surprised. are you saying the worst is over? the micex is hitting ruble
highs -- highs in rubles and not so much the dollar. the rubles enabled the economy to cope with the weaker oil price. they are restricted by sanctions . there is plenty of upside for russian assets but they need the oil price higher or better relations with the outside world to see that happen. we think russian assets could still move a good bit higher but dependent on conditions. you say crude higher or external relations improved. what are me -- what are we more likely to see, the former or letter? paul: i think crude higher. the russian seems -- the russians seem to take pride in an annoying the rest of the world so i think crude higher is more likely. david: i wonder whether the
brexit phenomenon may help russia in the sense that some countries such as germany will need closer relations with russia. clearly a mess in its own right. it is not clear that push has come to shove. ahead of article 50 being invoked, i think it is mostly talking shop and certainly we do not see this as a priority in terms of what the germans are discussing in german politics. i think the election results over the weekend showed that populism is alive and well in germany as much as anywhere else . brexit is going to be a big issue at some point but i do not think it is on people's minds at the moment. jonathan: the story is the equity story, fueled by the depreciation ruble. it seems like the most -- the least ugly story in the emerging market sentiment. you say the worst is over for
russia. if you are looking at corporate credit, sovereign debt, corporate bonds, talk me through that story. paul: for us it is very much a local currency story. the lastave seen over few years has been a steady reduction in credit growth. there is less credit flowing into the economy every year and all these countries have seen a huge adjustment. russia is a good example but there are plenty of other countries. if growth picks up, risk reward favors local currency debt. anm not sure there is astounding amount of mileage ,eft where is equities i think i am not sure we're quite there for that level growth to get equities in motion. debt inlocal currency russia and around the world is probably where you want to be investing. jonathan: that was paul
david: this is global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. this is: ." "bloomberg the question that some of raised is whether the e.m. bond market is being overbought and paul mcnamara follows this closely. rem bonds still attractive and which are the better investment at these prices? paul: i think they are still attractive. remains a very solid story and we think growth is going to pick up. they do not have as much debt as the developed world and it has
got yield and growth in a world with neither. there is an awful lot of money coming into the asset class, especially into etf's which makes us a little bit nervous because those are the sort of funds that can be forced sellers if we get a correction. they do not hold a lot of cash. they are kind of mechanical vehicles. e.m. debt, especially hard currency , i do not think is sufficiently liquid to make etf's an ideal investment vehicle for those. we prefer e.m. debt because it has more growth and more yield but it is understandable that people are sticking with what they perceive as the safer part, which is the hard currency. david: emerging markets covers a lot of different countries. what are the best opportunities right now and what would you stay away from? paul: the ones we like or the countries which have learned to cope with lower commodity prices.
they are seeing demand shrank and they have cut their imports. we like russia, brazil, indonesia. we are a lot more cautious about places that have not adjusted. stands out, huge external borrowing by the local really standsy out, huge external borrowing by local banks, as well as south america. one of the things that helps e.m. at the moment is it has always been regarded as being a bit flaky and where is now you have stuff like brexit and the trump candidacy, i think e.m. in comparison probably looks relatively healthy. talk very briefly about the potential for forced selling. talk me through these funds and do you just need a place like turkey to get the forced selling elsewhere? should you risk, the risk you
assume around him stocks do we shake that around one particular country? paul: i do not think it is a one country story. is markets seem certain it pricing for a default in venezuela. turkey is a bigger issue. we have warned default in the past and the asset class has rumbled on. a more generic risk episode, if get 25, if we we start talking about a sustained hiking cycle, if we have renewed recession in the eurozone, if we got a political accident, i think a generic risk off event which it would affect high yields and equities is a bigger worry than anything happening in the e.m. because if turkey defaults, with that affect brazil that much? we do not think so. david: you hear about indonesia.
why is it not getting fully valued at this point? paul: we are not entirely clear either. stock tends to become fully valued sooner or later. it seems a reasonable control of its credit cycle. growth is reasonably strong. it has got a dedicated investor base and we also see some upside. there is a tax amnesty that is likely to bring a lot more money on shore. i do not have a lot of answer about why it is undervalued but i agree with you, it is. jonathan: johnson controls closes its deal with tyco. the ceo joins us to break it down. ♪
positive, the equity market gaining in europe yesterday and the gains continue today for a fourth straight day with the dax up 4/10 of 1%. five days of a strengthening pound. look at the cable rate, 1.3347, positive one third of 1%. the potential the bears begin to capitulate around the doomsday scenario that it is a post-brexit world in the u.k., the data has not been that bad. in the commodity market, where are we? crude has decided to roll over a little bit. in the bond market, it is the core government bond rally, gilt positive. jgb positive as well. 30 year yield in japan coming in
at about 3.2 basis points so a decent day for core government bonds but that was up the story last week as we keep things up for another week of central bank speak. activity is not limited to the united states. a $6.4 billion hospital deal is moving shares higher by 4%. $6.4 billion deal. privately owned by management and cbc capital. we are watching a couple of 3-d printing deals. general electric making these acquisitions, $1.4 billion advised -- combined. both are trading sharply higher because ge is showing relatively higher premiums. ge shares are little changed but they plan to 3-d print some of
its aircraft parts in going forward. it is helping the u.s. 3-d printing companies. they are getting lifted on further takeout speculation. earlier we talked about the vw-navistar deal. shares are trading somewhat lower, the engine maker down by about 3%. wells fargo says the company may be hurt over the medium to long-term by this vw-navistar and allistar against 41 the time could be gradual. now, let's get an update of what is making updates outside the .orld of business >> trying to mend things of president obama.
on monday, thursday, the u.s. warned against interfering on rugs in the philippines and today, he regrets his comments came across as a personal attack. the backlash against fracking and no, may get worse and a record-tying 5.6 the state over the weekend. the latest authority been using the disposal of oil [indiscernible] in hundredost earthquakes in the chrome luster and only two in 2008 for the fracking boom began. in venezuela, the opposition looks to build on lasix demonstration against president nicholas medeiros. they are planning more protest this week outside caracas. news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. david: thank you. the largest company in wisconsin
is going under the translation. in has completed its acquisition of tyco just last week and on the process of spinning off its automotive business. welcome to bloomberg. thank you for being there. you set the course for your company to move out of automobiles and to go into buildings. explain why that is the right thing. >> buildings and energy, we are also the largest battery money archer, also, but if you go back three years when we started the transformation, not as easy as you said it, we decided to look at our portfolio and that we were not only able to focus on what we could do well, but that the markets were large enough to do with one set of resources and allow our resources to be focused and the merger tyco allows the system to be a real
player in the market and a larger player in the market for commercial buildings. security, one of the largest for each category. david: when you look at the strategic vision, how much was driven by present profit margins for the business and future growth? alex: it is all about growth. profit margins are all part of how you reinvest in your business, but the opportunity and platform, look what happens around us. technology around us so be no different than technology in your pocket, home, house, and the ability is to take it vantage is something we saw. of people are talking about the internet of things, from general electric to companies over china. defend?ave something to and: we are the physical
patricia, whether cameras, systems,ctures, hth we are in the building. our challenges come how to take advantage of that? david: where are we in terms of time and that conversion? where are we in that? alex: i think in this market, we are in the early inning. the reason you don't see the scale, the same reason of scales you seen on mobiles, residential markets, it is a different level of the scale so it will adapt. it will get there. we'll be right there in the middle of it. david: you are big in china. china is important. is that in terms of manufacturing in china or selling in china? alex: we do not manufacture in china to serve anything other than the chinese market rate they cannot place in this markets. david: what set of market share
do you have? alex: our overall market share to 20% ify 15 percent you look across all categories, but each one of our categories, we are the leader. david: talk about batteries. you said you are a leader. what is going on with electric vehicles? i just got back from china and the talk was all electric vehicles. i was at a gm. what role to play in the development of electric vehicles? position is not really changed over a long amount of time. we believe the adoption of electrical vehicles will come, alternative powertrains will come and not as quickly as people think. technology toat support it is about when decade away before receipt must market adaption without incentives. and now it steel prices, even longer. taxd: one of the topics is
versions, deals made with relocating in ireland. you have been involved in that. would you have done the deal you had done if you had not the tax benefits? was with deal we did every strategic opportunity we had a bite of us. tyco is added to the value, it is not why we did it. david: tell me about the integration process. experience,, in my failed because of the failure of integration. the strategy is fine but what are you doing to integrate these companies? alex: we had over 900 folks over the last six months to get together a plan to make sure we do this possibly and not only possibly but in order that make the it does value that shareholders are important. ultimately, it is about our customers. i feel confident we will be a little pull this off because we
have a measured approach and it makes sense. our employees tell us in makes sense. our customers tell us it makes sense. and a strategy makes sense comes labeled make it go easier. david: how many employees from the old johnson controls and tyco? you take out automotive, about 60,000 employees for each company. david: roughly equal. alex: roughly equal. david: i really chatted employees from tyco who feel they have been taken over, because they have? alex: that is not really are approaching it. this is a merger, and that includes employees from tyco. we have done a lot of work to make sure that is the approach and how we are handling their communications, and that is how with people. it is a new day for johnson controls and a new taper tyco. david: operational headquarters will be in milwaukee and not new jersey, right? alex: that is right. david: will there be integration of senior management.
alex: there will. george oliver, the ceo of tyco will ultimately the taken my place 1.5 years from now and when you from that, i will be retiring as chairman. david: talk about the spinoff. adeant? the new company. it is not growing as fast as most and you have loaded up with a fair amount of debt. is it going to be able to survive on its own? alex: if you look at the credit ratings it as cotton, it will be fun. would we have done is we have set it up to be successful. it will be a powerhouse. i am really excited because think about it, this has been fort with johnson controls 30 years. these are my colleagues, friends, the people we have worked up forever and i think it will be incredibly successful. david: will they be in a position to have both acquisitions given their balance sheet? alex: they will. they will have when you're or so to make sure to be in a position
to do that, but they have a great backlog and they're making good investments. they are set up. david: thanks. that is alex molinarli, johnson controls ceo from milwaukee. jonathan: coming up, draftkings gets the capital boost before the nfl season kicks off. we will speak with the ceo, jason robbins, unhide puts that to work and how legal headwinds unpack his business model. this is bloomberg. ♪
will be here. ennal here chip -- emma: here is your bloomberg the flash, the stocks of transaction is valued at $20 billion and this bump in oil and natural gas prices have added the shares of pipeline operators. to $56as increased billion. they are in talks for what would be the biggest agriculture related takeover. monsanto'ss above closing price. about $6.5 billion with the [indiscernible] vietnam is expected to be one of the 10 fastest-growing aviation markets in the next two decades. that is your bloomberg business
flash. i'm emma chandra. david: thanks. this week marks the beginning of the nfl season and that means one thing. fantasy football is back. online fantasy sports has become a big business, but new york and other states have raised objectives. i talked with the owner of the washington capitals and lizards about what would happen with state regulation obama fantasy sports and here's what he had to say. -- regulation of online fantasy sports and here's what the episode. ted: lotteries, sometimes school systems, and sometimes attacks on people. it is regulated and generating revenues and i would expect that is what will happen immediately in new york and work its way .hrough once new york doesn't come up the dominoes will fall, and to have a driving, regulated fantasy gaming business. david: we are joined by the ceo and cofounder of draftkings. welcome jason.
tell us about your business. it has changed a lot because of state regulation. where are you right now? aids states have passed regulations, most recently new york and massachusetts, to put where we are right now and the regulation has been pretty consistent, which is important for the product week as you want to create a consistent experience across all the states. what we decided to do is implement almost all the regulations across states, regardless of its states have passed them yet. david: what does this do to your business model? investor. an since we did that interview in draftkings, but it has to affect your business if you have to pay taxes. suddenly the taxes, and some other states have chosen
theto put g the -- put fees in another place, but the regular term requirements are all things we're doing are in the process of doing anyway, so those are really things that were important and necessary and positive on our business. i think a lot of people before were hesitant to play because they did not know there was oversight. now that people in other money is protected, he was to more people adopt the game. david: what does it do to probability? the startup phase still, so i do not believe you have turned a profit yet. will it extend before you get to profitability? not think so. i think that taxes have some impact but they will not change the economics of the business. the other are engineering resources and other products we to features, but there is a cost to implement and the taxes, and the long-term, without a minimum effect.
has been so close to the some of the reputation of fantasy sports and reports about the equivalent of insider and you changed your policy. has that hurt your business in terms of people dissipating? are people more -- people participating? our people are very? -- our people more leery? jason: there is a lot of information that has come out about impropriety and we have focused on the problem is that whether something happen but the issue at hand is making sure people feel safe and that we do, not today, not tomorrow, but forever, will create an environment that allows people to do that. i think dress embracing regulation, making sure that people know that there is oversight and whether or not they that there was something happening that they did not like before and it did not matter what happened and there would be protected and overseen by the government. david: looking at the overall business and its growth, how
much room is there for competition? how many players can be in this market. they're up and examples that register biggest rival. is that and the cards in the long-term? jason: any competition is in the cards. these are the beginning days and you are seeing the go from unregulated to regulated, i huge transition, that will create a lot of interest amongst players. yahoo! enter the market last year. they will see other large companies that have played in fantasy sports in the past and have watched as carefully and they will take a hard look at it. the competition will intensify. david: so he will not see a fan duel? jason: week. compare the business -- toid: tripp at the business one week ago. what is the level of dissipation and revenue this week compared to this week last year? jason: this week is a tough week right now because so many of our
players did not actually come into line up syntel days before the game. i think we will learn a lot the next few days. by nfl come at the preseason tells is a much, but it is up 70% year over year, so that is a good test it when you can start. face thew do you challenge of the business that a visit the people making all the money and they're benefiting off at the retail participants, the more casual participants? if i casual, how do you assure me that i am not [indiscernible] jason: the key is to make ship people feel it is a transparent similarent and that is to golf tournaments and stock markets in the best of the best when the most. if you are a casual player, you do not have to play against
tiger woods, you can play in the or buddies. we just launched a new feature that allows you to form groups of friends and just make sure you know who exactly are playing ath and i think anyone can be friend, whether or not we can is a different matter. david: this is at the greek for your. jason: best time of the oppressed. david: thank you very much. that is jason joining us. jonathan: thanks. billion., $56 battle of the charts is next. this is bloomberg. ♪
having to do it bayer, who has raised its they took $56 billion. we're talking about $127.50 a share, 2% higher than the prior bid and a premium from what monsanto posted but it is near the mostly have seen during the city profit. let me walk you through. the white line is the spread of premium between the price that baye is offering and monsanto's last quote and it has gotten smaller and smaller, the gap between the two. the blue bars of the trading volume. they have spikes when they can you offers and the purple line s stock price. one of the reasons the premiums has been shrinking is because the stock price has been going up but it is far below where bayer is pretty $100 -- $107 a share. the bidding price is $127.50.
there are skepticism to the deal getting done but analysts are saying they expect monsanto to demand $130 a share and maybe it will get done at that price. david: great chart. ryan, what do you have? ryan: your writing in that rates would stay lower in the united , buts after expectations what you may not know is that emerging-market stocks are the most expensive they have been at any point relative to the mature market tiers in three years. i have a three-year chart for you. andhows that pe value emerging market index over the world index. they are mature peers. if these numbers on the top, if it was 100, valid mean the pe as high as that term markets, but right now, there is only a 27% discount on emerging-market chairs and pe terms. they have been getting more and
more expensive, but we have reason. you look at emerging markets, thissci a.m. index year, returned 50%, and the world index has returned 4.6%. the s&p 500 6% and monsanto on if you, a lot less than are fine emerging-market you could of gone. david: [laughter] jonathan: the big question is the world of m&a and white does not trade and you and you that price of $127.50? david: julie has a great chart, the winner. cheapan: jp morgan strategy will way and on the u.s. ♪
."is is "bloomberg i am david blessed them with jonathan ferro and alix steel is off this week and we had been talking about jgb's all week. they are talking about whether they could allow the curve to steep and support, but the other one is really monsanto and the bayer's winning the bid. it is good to who will pay between $127.50. david: i love these stories because negotiation plays out in public. bayer clearly wants the company. jonathan: they're just cannot wait to try this thing but i do not believe the story. david: speaking of regulatory problems, hurdles the matter what. we have great test this hour, including rich clarity, strategic advisor, and david kelly, jpmorgan's asset managers chief global strategist and they
will be weighing in on how the u.s. should prepare for the next recession. let's get a check on the markets with jonathan. jonathan: coming back to work on wall street, largely positive. yesterday in europe, the four straight game with the dax up by .41%. the ftse a little softer and the fx market not helping. equity over in the united kingdom with the pound stronger for a fifth straight day, the longest stretch since march. we are positive 5.33 of 1%. in the commodity market, crude just rolling over, even with a backdrop of the intervention from the lack of saudis and russia and the idea they will cooperate to stabilize markets. the markets taken some enthusiasm out of the session. in the bond market, along end of the yield curve, vista classic, ugly, last -- worst one.
the long end alone, it allows the curve to see been helps the bank story. in today's session, it is the rally of the longer the jgb, the longer the guilt and you see them come in with a focus in mexichem in this central bank, central-bank and central-bank. there are so many m&a stories out there. julie: there are many. not just monsanto, but navistar has been a focus, and that is after volkswagen is taking a stake in the company for $256 million. et al. percent premium to navistar close lost it. scherzer up by more than 30%. earlier, the story had been reported in the wall street journal and the person had told the journal that this could provide the steppingstone for volkswagen to buy all of navistar, a heavy trust maker in central not america, so that could explain what is going on. we also have a deal in the energy, spectra energy being
acquired by ambridge, all stock deal, $20 billion value and this creates a big energy of the structure parkland player in north america, spectrum of about 9% and ambridge trading lower by about 2%. also watching the bookselling industry with barnes & noble up by more than 6%. stock could be worth $17 a share, trading just over $12 this morning. profitable,y despite competition from amazon. it could have 50% upside. speaking of the m&a activity, bearing speculating -- baron beedict in it could good for a more strategic buyer like starbucks. interesting. david: thanks so much. abigail doolittle is that the mark barton in london. abigail is covering more m&a at
the nasdaq. abigail: welcome back. that's keep the m&a theme going. shares of them in a clear diagnostic -- shares of the molecular diagnostic company is more than 50%. for $53 inying them cash from the largest acquisition for data her -- dan aher. wells fargo is saying they will likely close [indiscernible] shares are essentially on sale, down more than 46 percent from the peak last year. trading lower in the pre-markets, marvell technology group after the chip company did offer third-quarter guidance that was below the street. adjusted earnings could come in elow as much as 43%. on the year, it is up more than 45%. it is unclear whether this will truly determine the bulls in the long run. david: thanks. let's go to london for a check
on the european markets with mark barton. mark: we are out for the fourth consecutive day. longest winning street. we hit a speed bump is still at levels that we have not seen since january and end is the best performing industry group. talking about bayer. how much is bayer willing to pay for tom monsanto? is it $130? that's what they are telling us. bayer share price getting up on percent and all shareholders getting nervous around these levels, surprised that bayer may have to pay to take out monsanto . the biggest publicly traded health care provider in europe, it is going to pay almost 6 billion euros for private hospital company.
it is also known as [indiscernible] look at the shares up by 4%. this is a company making the acquisition and the shares of the best performance in europe. it should resolve and savings to about 50 million euros a year and the company says it will be highly accretive to income next year. look at this was the conley because gdp rose 6% last quarter, up from 4.2 -- 4.2%. this is held by foreign trade, and this bounced back from the shocker that you know that took place last january, when we had andscrapping of the euro the economy is certainly coming back off its knees. .6% peru's that. bigger than eurozone, which started at 5.2% today. jonathan: it is tom keene's biggest currency, he likes to measure how dennis obey.
mark barton, to our. [indiscernible] on a share to host buying program. words of european think tank, check this out. when markets have trust in central bank's ability to deliver price stability, the central bank needs to do less to deliver it and not more. our investors questioning bank credibility? joining us now is global strategic advisor. i think it captures the debate perfectly. if they go out doing more and marcus to not buy it, why not? by this clever parody gets the the essence of expectations. people believe central banks create inflation, they need to do less. you can interpret the fact that they do a lot and they are fighting against the lack of faith in central banking right now. jonathan: how will they change essential banking and balance change the markets after that matter?
richard: we had a couple of things in the last years, the big decline in oil prices, the surge in the dollar, and that lowered inflation in the u.s. i think now that they have written much fun to out, underlying had impatient pick up that think central banks are inflation expectations that will rebound. david: our markets as insensitive to central-banks today compared to one year ago? richard: i think they're less sensitive, and the less sensitive in the fed because the fed has been all over the map. i think markets are on a mode to essentially ignore the fed, not completely, but i think essentially you are looking at low rates, supportive monetary policies and spending less time reversing engineer states. depending on reaction, models, elin has been passes lose the, and if you
market and you are the federal reserve and you want to do something, how dangerous is that? richard: i think it is dangerous on the fact that markets are doing well by ignoring the fed may feel good in the long run but it is a terrible strategy to have financial markets taking control, so there is a price to pay if it follows in uncertainty. there is growing criticism on janet yellen for being somewhat indecisive. in fairness, part of it is data dependency because the day that does not really points in one crew direction, or is it a problem of not trying this the day to follow? richard: i think both, and the challenge for jerry allen is that she says certain things [indiscernible] she is offering time, guidance and giving yourself the actuality to do nothing, so it is a complex message and i think that is part of what is going on. jonathan: fed chair janet yellen
was previously in charge of the committee of the federal reserve of communication and to set up the whole communication policy in the post crisis or at the federal reserve. that was great. now, they have to rethink what is going on, maybe put a subcommittee and medication and rethink the communication strategy. richard: i do think they need to communication. jackson home was a lost opportunity. there were calls about the new framework and that is in shock. the is not just a matter of the fed governors indicating different things about what they might go with the race, but the overall structures. have heard of the people who come out and i guess we should. thing in the framework. where does that process stand? richard: i think it as an early stage from jackson hole in nothing seems imminent.
they send the next downturn, whenever it is, and it's not think it is coming, eventually, there will be a session but it is fair to say that within the fed, we saw this from john williams, and they realized he needed to begin rethinking the framework in place of. jonathan: it used to be that the policy,as on monetary economy and tiny rates and not on financial stability. there was a huge debate in the u.k. and larry not seen that in the united states? .ichard: excellent points we are in a stage when the fed ignores it. a couple years ago, it was more front and center, but look at where we are now. the chunks of the global market trading and you see headlines in bloomberg that we could have high-yield bonds with negative or secondary yields in some markets, so there are distortions globally from negative rates comes to the extent two years ago, there is more to be concerned about now.
david: please, stay with us. we have a lot more time to talk very big go over to emma chandra with first word news. emma: president obama assures asian allies of our commitment to the region. the president is in laos, or he alluded to growing his term over china's presence. we will uphold fundamental interest, among them, freedom, navigation and over five, unlawful commerce that is not impeded, and that is the security that we seek. emma: president obama pledged shellslion to clean up stopped in laos during the vietnam war. the nbc serving monkey weekly poll has hillary clinton leading donald trump 48-42. leads 45-43 and one.
investigators came out with a report in the crash and dubai last month. the pilot tried to learned to fight and the renren in a tail wind and when he tried to take off, the wind had shifted. all 300 people on board the plane managed to escape. global news 24 hours away powered by more than 2600 journalists and analysts. this is bloomberg. jonathan: thank you. the discussion at g-20 was around protectionism and measures to slow global growth. we discussed that next with john, head of china research and richard. -- and lost it gets back to work. this is bloomberg. ♪
."vid: this is "bloomberg the g-20 meetings have concluded in china and the talk was about trade. christine lagarde and others expressed growing concerns that globalization is on the wane and reductionism on the rise. i spent last it talking with chinese business leaders and i can say trade was on the mind of everyone i talked with. joining us is donald from los angeles, ever corseted china research and still at this is pimco's richard. coolingeeing this showing up in growth in china? are, or tradek we numbers, exports and imports out ,f china for the last two years have been weakening. they have been far below their internal domestic growth. i think this is simply consistent with the slowdown
that we have seen in growth around the world. most forecast over the last two years have been down and not that. not a very good environment for trade. david: talking to people over in government officials particularly, they emphasized the need to structure globalization so can force and that we have not been a good job in regulating it so everyone feels they are participating. they may progress on the? cash did they make progress on that? ronald: i do not think so. for me, to 20 meetings of the talking, not for agreeing. if you believe as i do that the global economic situation is weak, not strong, you have simply wo that -- to diverse of interest of various countries around the world to reach big agreements. i do not think it is a surprise. i think it is simply the reality of weak growth and the difficulty of getting people to follow some greater good goal.
david: obviously, china and its growth are critical to all around the world. how important is the trade issue to chinese growth as opposed to other factors, for example, credit? richard: i think trade is essential to china and as don indicated, they have been trying to pick it away from their old lies and the re economy has slowed substantially. china is raised in a range of 6% growth and the term outlook that is probably in the same dimension. i think we have seen the big slowdown in china. china and all caps's benefit from an open trading system, but the g-20 was right to point out there are threats to globalization right now. jonathan: i want to talk about pictures are committed of you are, the president getting out of the back of air force one, no red carpet. was acision was it
calculated snub by china. talk to me about the pr and read arguments resonate with you. read theircannot mind, but time is usually pretty careful in the way they withstrate these events the visiting heads of state. in this case, the lack of a red carpet and a stairway for air force one, it could not have been an accident. is a boldif this confident display by china, what does this mean for china-u.s. relations in the years to come when we see a presidential race dominated and paid trade policies from both sides of the aisle. ronald: china is surely concerned about what they hear the u.s. parties and election campaign. my own view is that u.s. china economic relations and even more
gotdly found, not good. we the whole china sea issue come which is not about to the results i do not think. the have trade issues, massive excess capacity and industry after industry made in china. there are various cyber security throughout, so let's hope that these two countries can reach accord to stand back a little bit, but the prospects for a real uptick in the short run i find quite frankly remote. david: it strikes me that president obama has had his last trip to china. he was the author of the patent to asia. how much of the problems are our own fault or saying it was made and not made in the right way?
richard: the gamble was to try to empower the nonparty -- the non-china part of asia by the .bp process that agreement was reached and the president got the authority, the so-called trade promotion authority to challenge right now . it is unlikely you'll be able to get ms. [indiscernible] if that is the case, you will have had a pivot to asia that did not deliver on the biggest promise. the pivot to asia was a challenge to china because they were excluded from tpp. wonder if you have a reaction to the perception that , theconomic level relationships between our secretary of treasury and their minister of finance are quite good. in theblem was more foreign policy in the military area. is that consistent with what you have seen? extent i think so.
quite frankly, the economic interest in america and in china i think our more divergent now then they are converging. president obama and his people have a few months in office. has a six years in office. it is hard to imagine any kind of agreement on anything given that time horizon. jonathan: the discussion politically, when is it captured by the markets, when and how? richard: i think the markets have already -- not much of it done. this a for markets will be in the lame-duck session. if tbp gets through, that would benefit some industries more than others. i will not go into that, but right now, markets are not assuming any progress on the comes of relationship the prospect might be for a positive surprise. jonathan: great to have you at
."vid: this is "bloomberg a few minutes way from the opening and we are feeling minutes from david kelly, j p morgan's chief global strategist and he'll be talking about why the u.s. should prepare for the next recession. first, check the markets. jonathan: as roster gets back to work after a long weekend, futures margin -- marginally positive. andl on the move in s&p 500 the equity market in europe,
january 2016 high, and the stoxx 600 and dax leaving the stoxx 600 and actually do begin by about .5 of 1%. inill show you the same asset classes. and we tried to wonder at the .56, .41%. the potential -- is up one point -- it is stronger and up 41%. at 1.6%, we are busy. a couple of weeks of central banks become a lot of bets began discussion as well. it rolls over. next, we counted down to the cash open. this is bloomberg. ♪
pressure on producers like the saudi's and we know that the sound is coming to the debt markets for significant amounts of money in at least the new month. we have been reporting that at bloomberg, but saudi arabia looking out to cancel $20 billion worth of projects. we will get you up to speed as the news comes in. for now, austria back to work. opening bell rings, futures why the positive and switching the board quickly, the fx market is softer and the dollar-yen down about 32 and the cable rate pushing up. yields unchanged but it could roll over to 44, $44 almost flat. 25 seconds into the section and here is julie hyman. julie: we do see a boost as a get out of the gate this morning. we have been talking about federal reserves and the speakers to come. also, adam parker from morgan stanley has raised his s&p 500
target to 2300, encouraged on a number of different brands. we are a far cry from that. 2183 israeli trade right now and high closing. all three averages are gaining a little bit of steam. there is a lot of activity this morning. spectra energy and enbridge one of those having to do it infrastructure product lines, a share for should deal, but the $20 billion value and the specter 40% of the combined company and shareholders up idge is nowd embr higher by nearly 1%. r come watching danahe after the agreed to by the maker of molecular diagnostic test, for about $4 billion. it is a 54% premium on a per-share basis, $53 a share and
down just slightly. now the stock rises after folks find an said it was -- volkswagen said it was fine part -- 15.76 1576 a share dollars a share. they are rising even more than the 30% and the rap in the premarket on speculation that this may open the door to an acquisition of the entire company. finally, a quick check on what is going on in the gold market as gold prices by nearly 1% and bringing the miners along with it. even though we have seen oil goes up this morning, turning pricing,ter earlier oil prices had gone to gain. david: thanks. we will turn to that bayer and monsanto deal, they race their offer for a second time to not $56 billion and bayer offered 127 $.50 a share but investors are not buying it.
there will above monsanto's share price. return to global m&a editor justin. explain this. i think it is 19%, substantial difference. the market is not sure whether a deal will happen and we reported last rate that they're making a lot of august. i would not be surprised that the deal got announced last week or the week after. they are board meetings both companies next week, so a lot of decisions will get made. i think there is another bump that could come. we knew that they started at 22 and then 125 and then $127.50 and they went public this german mr. percent they had gone to $130. the applicant more a takeover in germany and they want to go out and clarify when there is a bump . the other concern and what the havings down, center is regulatory concerns. even if the deer was announced, will regular there's -- will
regulators approve it? david: this is under the european commission, is that the issue? justin: the feeling that there will be almost a monopoly and such a dominance in the ag eight it is hard to know how the regulators will come at on that released tough to predict how regulators in europe or the u.s. of come out of the big deals. jonathan: the personality story is another. , is therensanto speculation amongst the basic it will be blocked for the deal going through? jeff: a lot of people made calls and we do not think there is anyone else out there for monsanto. hugh grant is the reason the consolidation goes down. he is the guy who tried to buy last year and the a before and got the ball rolling. is in play.monsanto i do not think there are a lot
of options for monsanto to get out. they will not do the deal comes i do know who us they will go to. jonathan: they began out waiting for another buyer but that is how it started, is there a say,t that monsanto could look, here's the potential for a deal and here's what we will do for shareholders or have you not really got a game to play? is there no message to say i can get you to $135 on your own? jeff: they are pieces of bigger companies to buy when they spin things off, but it is highly unlikely that he has an escape plan. if he gets an offer of 130 come i think the deal is done. david: if regulatory constraints are the biggest in terms of issues, is there a way to get past? they say, we will sell that or so that to get past. jeff: no one has given us insight on to what bayer is willing to sell, but if you look at what dupont said they would
do, they will break the company up and merge and once they -- company up and once they much, they will bring it back. david: thanks. managing editor jeff mccracken. jonathan: i want to turn to global banks, with a focus on the bank of japan. maturity transformation. you borrow short, land longer and they often profit from the steep yield curve. where theyor koroda, allow it to strengthen as thanks in japan rally? joining us is david kelly, chief global strategist at great to have you on the program. bank of japan comes into the market, normal operation, and they do not buy -- is there a story there? the support the banks in a significant way? onid: there is a lot going
in global and central banks about the efficacy of negative interest rates in all their attempts to push on rates. i think they're beginning to recognize for a lot of people that yelling -- that they are suppressing the banking system and a lot of the programs we -- problems we have are getting banks to lend. it may be hard of a general pattern from extreme forms of negative interest rates and trying to help the economy. about it in a broader sense and how to get back to that. saw the: recently, we spread and the banks rally. it is in the european central bank going to be looking and saying, it seems to work and maybe we should do the same? david: i think they will be more thoughtful, but all along, that problem has been every time there is a weakness in the or europeannomy
economy, the knee-jerk reaction has, we will do more on quantitative easing. i think they're beginning to learn the lesson that they really are hurting the bags by doing so. or european economy, the knee-jerk reaction they have got to make it profitable for banks to lend. david: is it a matter of quantitive easing or how you do it? true inyou have held europe, presumably much less difficult to bank and it should help banks because to give them an incentive to loan money. can they present those routes in the bank? could, but in some ways, we do an awful lot of the mechanics of pushing down rates without hurting the banks and missing the big picture. the big picture is that all these operations are very complicated and it is not clear in terms of incentives. if you make something complicated enough, everyone wait to see. the words of economics that are dangers is wait and see, so it is really important that the central bankers they give themselves as coaches and they are going to say, we will win this game, be optimistic, make
loans and we will be encouraging your. if you want to make a loan, you have to have someone who wants a loan. there is a demand-side problem and how does one address the demand side other than fiscal stimulus? david kelley: you try to reduce and increase optimism and reduce uncertainty. around the world, they are huge competitions in tax code. date would certainly help encourage investment spending. i also think global trade is really important. the biggest problem i have with all of this talk about increasing tariffs and reducing trades, that kills investment spending. if i accompanied the united states and i want to grow my business. if i think i can get to a worldwide market, then maybe i do investment, so that the increase global trade, you will increase investing. bottom line, as you say, when the late in the into expansion,
and a lot of people, the economic expansion cannot go on forever, so it is smart as an investor to read over all of the central banks, but you know that you are in that latter stage of an economic cycle what do you do? kelley: if you imagine a baseball game and you leave your starting pitcher in the six innings or seven in ms. ntu's doing wind, but the later innings, they rotate them in and out, but the real question is, do we just sort of slide and cool down into the next recession? i think we are more likely to over heat, and if we do, that would be old weight equities and commodities right now. we'll keep a close eye on the behavior and reaction a central banks to see if they overreact and enclose the recession. david: you are concerned about overheating. there is little in the record to indicate we are in danger of that. underappreciated
and the possibility. david kelley: i believe all the central bank stimulus is not that at all. the u.s. is poised for shia labeouf in the second half of the year, but as the federal reserve raises rates, that will encourage spending, encourage borrowing and i will cause it to overheat a little bit. i think that is really are headed. david: we should come back and talk about what the fed should be doing to simulate the economy . we'll keep you at this. this is bloomberg. ♪
hewlett-packard enterprise greenroom. coming up, aaron leavy, ceo and box.nder of jonathan: wall street gets back a work, up about .4 -- .2 for 1% on the dow jones, similar on the s&p 500. the nasdaq getting off to a little bit of positive tones. let's get over to the nasdaq without the of the little to go through the soft movers. abigail: we do have movers on the open for the nasdaq, and shares of the fiber optics now and company are nicely higher. the company's fiscal first quarter, look for it on thursday. people upgrading shares and start to buy on the likelihood of a raised quarter. thatasking if they believe if facets are conservative for the corridor and also, we have
been raising their target to $28 a share. they believe the company is likely to put up a strong inrter, seeing 20% of upset the potential shares. another stock trading higher, when we do not talk that much about, goodyear tire shares are up at deutsche bank and we had the analyst saying that there is a number positive things, including the likelihood that the company is poised to make for increased cash payments to shareholders. last, she also thinks the company will benefit from a number of factors, including costs, reduction and finally, it thinks the company offered an incredible forecast that supports more than 10% growth for goodyear tire and this has led him to believe that there's more than 20% upside on the shares. david: thank you. we are back with david kelly, chief global strategist at asset management. you have a bullish outlook in the short-term.
as you mention, the expansion we see right now is like waiting innings in the baseball game. how long can this global extension keep going? david kelly: we have seen soft landing. unemployment has come down from point to a better the last year, and that is a good thing because 4.9% in employment is good, but it looks at we could stretch it out. even baseball games come to an end, so i think we can go into without aibly 2018 recession. i think alex pretty good. the real problem is long-term growth. we are not seeing enough growth and labor force. because of that, u.s. labor will slow down and there is a town simulate and demand -- and there is simulation of demand, -- jonathan: how will we move away from low rates being a solution
and figure out a problem if the argument at the moment as it relates at the problem and not the solution? generally, i believe that you do not artificially set an important price at the right level if you have a good reason -- unless you have a good reason for it. u.s. interest rates of the most important price in the global economy. what it is doing is pushing abbasid prices, and the problem is that if you normalize interest rates, you could cause a recession. i think it is harmful because i think [indiscernible] we do not need to stimulate the economy. why to get this idea -- 20 years ago, people do not think that the government had to stimulate the economy. jonathan: why do they now? recognizeey: when to
the private sector is not as powerful itself. what we should do is do better trade policy, better corporate tax policy, more immigration reform. these kind of things you try to help. david: isn't this reaction that after the 2008 crisis, we takata prescott private balance sheets and put them on public talents shoots around the world and that leads to an answer to jonathan's question. the government hasn't stepped on around the world and taken so much off the shoulders. david kelly: the governments in many ways caused the problem, too. by allowing to spend so much, they said that the conditions to the european debt crisis, and by not regulating who is the growth or housing crisis and that is part of the issue. the government should be like an insurance company. the federal reserve is good at dealing with disasters and i think they did a good job when it occurred.
you do not need an average sunny day, where we should be [indiscernible] this and try to up the economy grew by itself. jonathan: david kelly, go to the events page and you get this list of fed steaks this week and we can put it up on the screen. this david kelly read every single one of these speeches and the q&a that comes up from the fed officials or does he say, it is better to ignore these guys and do what i know as i have done? kelley: not a has worked very well. i feel like i am charlie brown waiting to play football. every time i wait for the market not.ise rates, they do i do think it is important to listen to these speeches, particularly after the last job support because there is no further until recently normalizing rates right now. we have heard that opinion a lot in the week or two, and it went
if it forgets -- to see gets reinforced. if they say it again, we are serious and we might do at this time and they do not, they will shut the last remaining stigma of --segmented credibility they have. david: there you have it. thank you for being there, david. jonathan: i am not sure how much credibility i have left. would be haveit credibility and there needs to be less and not more. david: maybe they're communicating too much rather than too little. jonathan: we will discuss central banks. we will be talking apple, as well. we will discuss that, next. this is bloomberg. ♪
habit. the company's newest iphone is slated to debut at an event smile and they will not be a major departure from previous versions. we explain why apple fans of have to wait another year for that "wow" product. ♪ it has been an awful year for apple, at least by the company's high standards, and i have an uninspiring message for the company's fans and investors wondering when apple's title turn -- wait until next year. apple's revenue has declined for the last two quarters and will probably continue to fall for the next six months. the last time apple sales dropped for two months straight was 2001. mark zuckerberg was still in high school and apple stock has dropped 26% from an all-time high in february 2015. the wizards are keeping busy but next to a not be a blockbuster. the newly updated iphones that
will be shown off on wednesday, no matter what they are called, will be like three versions of breaking apple's patents of having it -- updates -- breaking apple's patents of having updates. bee of these products will full of surprises but they should help apple sales grow modestly after this holiday season. majorg hope is for a sales rebound and it is riding on 2017. expectations are building when apple pull out a dramatically different iphone with a new type of screen that could spark a new wave of iphone sales. it has been five years since tim could took over as apple ceo and the company has become even more run and shoot successful but it does not have a breakout new category under his watch. wait until next year and the great rallying cry, but it is the best apple can do. i was in china last week.
i met with some companies who manufacture components for apple iphones. jonathan: how are they doing? david: they are looking for to this and hope it will turn things around. they really need it. jonathan: they say that the iphone seven product will likely be [indiscernible] in 2018. comes i wonder if the only significant thing that comes from the iphone is no headphone jack and wireless headphones. david: is that it would to get them to sell more of the beats headphones? jonathan: i don't know if it translates into a boost in sales. david: exactly. coming up, several peter economic events. in a few minutes, u.s. nonmanufacturing isn data comes out at the top of the hour. later tonight at 9:15 eastern, san francisco that president john williams will be speaking in reno, nevada. the first of several, five, actually, said speakers. jonathan: a week full of that
state trait i can hardly wait. here's your picture global financial markets. of said speak.l i can hardly wait. here's a picture of global financial markets. stocks of center dot 2016 january high, and the category counted by the moves since it all again and euro-dollar, but 18335 -- but the pound at 183.35. bloomberg markets continues. that is up next with vonnie quinn and mark are in. from new york, this is bloomberg. ♪
we take you from san francisco to london and tell the stories of australia and germany in the next hour. tuesday after a long weekend in the u.s. the pursuit to become the world's largest feed producer. vonnie: the deals keep coming across the globe. anhad to germany for interview with the chief financial officer of that shares surging today after it agreed to buy spanish hospital group for over $6 billion. vonnie: volkswagen buying a stake in navistar.