tv Bloomberg Markets Bloomberg September 12, 2016 2:00pm-4:01pm EDT
surveillance exercises, that was a risk we were picking up. we were seeing a lot of activity in that. not as leveraged as you would have seen going into the crisis, ,ut the capitalization ratios so we issued guidance at the end of last year. in collaboration with the other bank regulators come we have begun to see already the underwriting standards have tightened in response to that guidance. again, it is within supervised banking sector, but we have started to see some response already to the guidance that we are going to keep a close eye on the development's. >> so you are monitoring it carefully. just individuals -- >> a dovish speech.
there is some spec edition of when the speech was announced and publicized, lael brainard might later foundation for a rate hike in september. does not appear she has done that. in the speech she gave and the q&a to follow, she talked a lot about doing away with the old normal and looking to the new normal, sane policy must rely less on the old normal as a guidepost, noting that you have to be forward-looking and acknowledge that inflation has undershot the fed target of 2% for 51 straight months, and also giving indication that she does not believe that the u.s. economy is at full employment yet, saying perhaps there is more slack yet. a line that stood out to me is in the presence of uncertainty and accelerating inflationary pressures, it would be unwise for policy to foreclose on the possibility of further gains in the market. vonnie: entirely not what we
would have anticipated but there were a lot of people speculative she turned slightly hawkish. wage inflation in particular, saying that is very subdued. when it came to risks and and balances in the economy, ending on commercial real estate, saying it was not as leveraged before the crisis and in fact they had issued guidance seen underwriting standards tighten. we like to see a little more in a bit but first, let's get market reaction. julie hyman at the markets desk. julie: there was this expectation that brainard was going to be more hawkish, with the commentary last friday where he had been dovish and open to that thebility interest rate rise was warranted sooner rather than later. you can see all three major averages rising in the wake of her comments. interesting reaction that we are seeing.
not wiping out the losses from friday but making a little bit of progress in that direction. you can watch the two-year note and watch the bond market because there we are seeing a little bit of a drop-off in yields in the wake of her commentary. down the basis point to 0.77%. shorter end of the curve tends to be a little more reactive in these situations. was not therainard only person of note to speak in the last couple of hours. we heard from j.p. morgan ceo jamie dimon to said that perhaps a rate increase was warranted. j.p. morgan shares are up .3% as we see yields go down. actually, those have been moving in tandem more often than not. you see the banks bouncing a little bit. take a look at bloomberg. i was prompted as he talked about how the rate increase could be warranted to wonder, well, it might be warranted. bestght be in jpmorgan's
interests to let the rates go hybrid we tend to see the j.p. morgan stock price go up as well. here, by the way, is the correlation between j.p. morgan and the 10 year yield. it is not usually high. but it has been trending up. here's the correlation between the s&p 500 and j.p. morgan. on an absolute basis it is higher. but it i contrast has been trending a little bit lower. interesting that the banks come in at j.p. morgan, but many bank stocks have been benefiting when yields have been going higher when there is talk of rates rising. vonnie: julie, thanks for the update. let's check in on "first word" news. mark crumpton has more from the newsroom. mark: several members of hillary reportedly had pneumonia before the nominee became ill. "people" magazine, citing unnamed sources, says at least six senior staff members were sickened. a campaign manager was really
one of those with pneumonia. this afternoon the campaign said it will be releasing additional medical information about secretary clinton in the next few days and she will be back on the campaign trail by the middle of the week. donald trump was back on the trail addressing a national guard association conference in baltimore. he again criticized secretary clinton for calling his quarters "a basket of deplorables" during a fundraiser last week. these were lengthy, plan, and prepared remarks. it is the most explicit attack on the american voter ever spoken by a major party presidential nominee. peopleisrespect for the of our country. said suchtrump comments should disqualify clinton seeking the presidency. investigators believe a deliberately set fire in a florida mosque could be a hate crime. surveillance video shows someone
approaching the islamic center of fort pierce moments before a flas was seenh and the fire started. police say there was extensive damage. the mosque was attended by omar mateen, who opened fire at the pulse nightclub in june in a rampage that 43 people that and others wounded. it was the worst mass shooting in modern history. european leaders will meet in malta next week to discuss europe's future once britain leaves. that theoffice tweeted talks are meant to spur momentum for the new idea of your kid u.s. treasury -- new idea of europe. u.s. treasury secretary jack lew said that over time the brexit vote will be hard for the u.k. choice a is 2.5% more gdp growth, choice b is 2.5% less, no one in my position would choose less.
that is what the brexit vote means for the u.k. over time this will be hard for the u.k. all their planning assumes it will have that effect. euk: malta takes over the rotating presidency next year . i am mark crumpton. this is bloomberg. vonnie, that to you. vonnie: fed governor lael brainard is speaking at the chicago council of global affairs. she did this assessment earlier. ms. brainard: to the extent that the effect on inflation of further conditions is likely to be moderate and gradual, the case to tighten policy reactively -- preemptively is less compelling. is the lastspeech scheduled appearance by central banker before the fomc meeting. the blackout period comes after eric rosengren said the economy could overheat if policymakers waste too long. for more, let's bring in matthew
boesler. if we haven't been expecting september rate hikes, we might have said this is a very typical lael brainard speech. am i right? matthew: that is right. the remarks were a similar to the last time she spoke publicly, june 3, over three months ago. it underscores a lot of the things she is worried about our longer-term, broader issues that are not going to go away. that is really important. david: what explains the enthusiasm for this speech in light of the fact that we have gotten such mixed messages that policymakers over the last few weeks? matthew: i think lael brainard more than anyone else on the federal open market committee this year has clearly shown her influence over policy. slow pace ofg for rate hikes, caution, waiting to see data before they go again some that is exactly what they have been doing. all the other fed officials have
been talking about want to raise rates at various points and it just hasn't happened. that obviously raises lael brainard's profile because they want to see what she has to say and she is supposedly close to the thinking in the inner circle. vonnie: does this definitively take the september rate increase on the table? matthew: i wouldn't say definitively. there is 12% probability priced into markets after lael brainard 's speech but that is probably about right. we have not seen a lot of tends to get that higher recently. it doesn't seem like that is particularly frowned upon by the fed. david: looking at the probability of the rate hike, judging by fed futures at the september meeting, 22% now. how radical is it to think that when the policymakers gather around the giant conference table, there will be a robust debate about data? an indication of how the policy
makers have settled down on where they are at this point in time. is there much room for debate in this day and age? matthew: i think there is. clearly what is going on with these speeches is they are laying the groundwork for the debate table taken to the meeting and that is not necessarily obviate the need for the debate. eric rosengren has sounded a lot more hawkish recently and wanted to raise rates. there will be a lot of discussion and we will probably hear in the speeches that come out of the fed meeting little bit about what was debated. you get going into the meeting and a little bit coming out of the meeting. it is very important for the process. dig into the actual details of her speech, argue surprised -- are you surprised she things rate growth is and obviously she thinks inflation is quite a way off? is a wide range of views on the federal open market committee of how much slack is left in the labor market. she's clearly giving her hat the
possibility that maybe we are not as close as we thought and that is not as popular, not necessarily something you will hear from janet yellen in her speech or stand fisher. she is kind of the flag bearer for those kinds of ideas. very similar to what she said last time. one of the important things she said this time that maybe has a bit more recent flavor to it is she attributed a lot of stability in the u.s. economy in recent months to the fact that withed has gone slower raising rates that people were expecting them to just a few months ago. an in fact that aside on financial markets, the reduced -- the impact that has had on financial markets, to reduce volatility, that is very much should and it implies we not be quick to undo all of this using by going forward with rate hikes and be back in the same situation we were with the stagnant economy. david: great to talk to you. much more ahead. let's look at the major averages. all of them up by more than a
percent on the heels of the speech that lael brainard gave in chicago. s&p 500 up 1.2%. and the nasdaq is up 1.4%. vonnie: it is reversal from friday for most of the major asset classes. vix right back below 16. dollar index just above 95. crude oil futures are higher . 10-year treasury at 1.69%. that is elevated to make discredit it in an basis point -- make the spread at 89 basis points. not much movement after the lael brainard speech. this is bloomberg. ♪
vonnie: this is "bloomberg markets." i am vonnie quinn. david: i am david guerrero. he is behind some of the largest m&a transactions of all time. in an exclusive interview earlier today, executive editor of global deals jeff mccracken asked john reese if the chinese have gotten better at m&a. john: i think the biggest story or one of the biggest stories for global m&a this year and in the future years is the ability of asian buyers and chinese games to now play the m&a with great expertise, with expertise equal to any other player in the market. is it because they are
hiring different people? what is the language? john: all great questions. what i would like to say is they are hiring great importantdvisors are on the banking side and legal side and accounting side. when it is is you take one country looking to do positions in a lot of countries, a lot of other countries come with different practices, different procedures, and it takes time to learn about it it takes time to figure out how to do it. the m&a market globally particularly in the u.s. and ,urope is a very sophisticated finely tuned market, where the players all know how to dance in the orchid red -- dance in that market. you have got speedy transactions, limited due diligence. it is a sellers market. prices are high, contract terms favor the seller.
you don't have the same type of in person meetings you see. it is just a different way to buy a company. the u.s. in particular has concerns. it is a litigious environment it took a these years of people coming into the united states to figure out how to do it. jeff: of the chinese gotten more sophisticated? it seems to be one of the more ing factors in the u.s. have they and companies in general gotten more sophisticated in dealing with these national security issues? john: in some respects they have gotten more sophisticated but a more important factors they have become more knowledgeable. ,hen we used to travel to china these chinese corporations, six or seven years ago, the first question out of every client's mouth, everybody just assumed that it was going to be used as
a political tool, economic tool. it has been used as none of those things. on the other side of the fence, sellers were rat worried. if you were a u.s. company and -- 10 or 15 years ago there were bad turn downs that got people worried. but as -- deal inere was a ports 2000, 2006. that got everyone's attention. john: right, exactly. sellers got worried, too. why should i choose a chinese fire over a u.s. fire even if the chinese buyer is going to pay more? now it is not the same kind of worry. they publish data and it is a little bit outdated. the most recent year was 2014. about 147 transactions. voluntary filing regime. but to be safe you need to file.
, only nine ofns them got what was called mitigation. that is, it looks at the target, the u.s. asset. it doesn't have national security implications. jeff: basically, 95% of them got approved. few actually get turned down. in fact, only one got turned down in 2014. 12 got withdrawn. you don't know for sure unless you work on a deal and if you work on the deal, you can't talk about it. you don't know why those deals got withdrawn some get withdrawn for commercial reasons. some they may have decided not to fight. to answer your earlier question, as everybody gotten better? one, people upon much more comfortable with the absence of political considerations and making those determinations. secondly, in light of the fact
that you can believe you are being treated fairly when you ,re applying for approval people have learned the importance of transparency and cooperation. when you are transparent and cooperative and truly not a national security that, you will not be characterized as a national security threat. jeff: that is their focus, national security. john: absolutely. david: that was just mccracken earlier today with john reiss. vonnie: still ahead, credit agricole left the fed at the altar. we will extend why the decided against being a primary bond dealer, next. this is bloomberg. ♪
i am vonnie quinn. david: i am david gura. credit agricole come after clearing a number of hurdles, concluded that the most elite club was no longer worth it. let's bring in eliza ronalds hannon for more. they really wanted this. eliza: they did. david: what made them change their minds? eliza: two different things. the amount of regulation that dealers had to face from which the cost of capital for them. it makes it tougher for them to warehouse the bonds they are required to bid for an auction. it is harder for them to make any profit off of trading treasuries. in addition to that, they are seeing you are treasury buyers -- seeing fewer treasury buyers coming for them at auction. that used to be a big advantage for them, they could see the huge flows. even if they weren't making a big cut, they could read the and informed their
own trades. in addition to that, all this increased competition from high-frequency trading, electronic platforms. they are nudging the primary dealers out and the business is the kind of business where they rely on having a huge market share could when the market share decreases, it is harder to really get an edge with what they're doing. vonnie: to a certain extent even if the central gobbling up all that is out there -- even if the central banks weren't gobbling up all that is out there, you could say it is a good thing -- eliza: it is a hotly debated topic, whether this type of evolution is good for the consumer or not. i spoke to plenty of sources who argued that the primary dealers were not necessarily the best for the end-user and some of these alternative liquidity providers, high-frequency firms, are reducing costs and helping
to make things better off. david: you point out in your piece that contemporaneously, wells fargo was applying for the same rights and ended up going through with it. why did it make more sense for wells? eliza: what everyone told me about wells is as one of the biggest mortgage lenders and the country it made more sense for them to be the primary dealer primarily because that is how they can participate in the mortgage backed securities trading with the government, purchases from the government, sales from the government. that is such a huge part of their business that they really thatthe reputational heft comes with having that badge. vonnie: as i remember, they beefed up their primary dealer portfolio little bit. eliza: oh, the fed, you mean? vonnie: yes. eliza: the numbers have been all over the place. they were higher at a certain point. twice as many primary dealers in the 1980's. but they have waned a little
bit. traditionally it has been something where it was quite easy to find new applicants. it is really -- it has really appealing position to have, but only in recent years, the past year or so from our people really talking about how it is conceivable that primary dealerships might not be indisputably an advantage. it is only just starting to trickle down, the idea that it might not be -- vonnie: a lot more than profit. all right, thanks. david: still ahead, the commodities close. this is bloomberg. ♪
markets desk. julie hyman has been keeping an eye on commodities. julie: soybeans is something we are watching. an important report from the usda which said the u.s. soybean crop which was already expected to be a big one, will be even larger than previously expected. yields could reach a record 50.6 bushels per acre. that was according to the report today. that was higher than any other estimates in the bloomberg survey. you can see clearly on the screen when it is crossed, and you can see the big drop in soybeans, down 1.5%, the biggest drop in two weeks. speaking of agricultural commodities, we have to mention the big deal happening today i. combining.agri-and a fertilizer giant. mines the stop and agrium
will be selling them to customers. back to the other commodities that we more commonly look at, gold prices. we have to watch those in the wake of those lael brainard comments. she is still dovish, that is the bottom line. uptick in gold prices, but they are still negative on the day, down .2%. we are watching oil prices as well. oil had turned higher early in the session today before these comments came out having to do with the fed, affecting the dollar. there was some commentary earlier this morning from ,ociete generale analysts perhaps there could be a way for iran and saudi arabia to come to a production agreement. perhaps injecting some hope into the oil market, as you see the climate prices.
vonnie: coming up, we have a societe generale analyst right here. michael wittner is with us on the oil markets. he has more than 20 years experience in the oil markets. you are clearly well-qualified. you raised your targets despite $.50, so clearly not expecting a lot of movement between now and years and, even though we got a lot of volatility. our forecast adjustment, it is not very significant. perspectiveom our remains the same as it's been in recent months, which is the global oil markets is long, drawnout, painful rebalancing. it is taking a long time but it's on track. compared to the big stock build we have last year, first quarter of this year, we in for a few
quarters of broadly balanced, give or take. then we are going to see some significant stop draws in the second half of next year. -- as we get into winter, things get a bit more constructive. market willnk the start to see that and the markets will start to go higher. drop: data showed a previously. when did you make of that, attributable to the tropical storm lee saw? think the vast majority of that was the tropical storm. it was not even much about production. that was pretty minor. it caused a lot of the takers to hold offshore in safer waters, so you had a huge drop in crude imports into the u.s. that is a very volatile number.
that could bounce back in an equally big way this week. it will be an exciting become that perspective. ofnie: it is a small part supply and demand, but the baker hughes rig, seems pretty substantial. has that added a lot of supply? has not added a barrel of supply yet, but your point is a good one. clearly, we have bottomed out, we are starting to increase gradually. 12 months after the turnaround, we will see an impact on supply. our view is u.s. shale production and overall crude production bottomed out in q2, q 3, and then went sideways. that is part of the global rebalancing i was talking about, that's built into our numbers. it's important but it does not -- a crude production to tidal wave right away. it takes time. david: you say shale production
in the u.s. will bottom out in . why are you forecasting it will happen? the purse strings are slowly starting to be opened, most companies talking about, if we have $60 -- if they feel confident about that, they will drill a bit more. starting to see that. the other interesting thing, the average shale well as a decline of 65% in the first year, but in drilling has been at such low levels this year, when you look out there right now, almost all the wells in the u.s. are more than a year old. that means their decline rates are starting to enter this long, gradual tail, which will make it easier to see incremental growth. it does make a difference in the numbers. or worse, weetter
have spent a lot of time this summer thinking about opec and a freeze. now you are saying there may actually be a freeze. will that make a difference at the end of the day? we were not depending on opec to change the supply what were the other really. mike: that is the most important point. whether or not there is a freeze, it will not make a difference to the barrels. it is all about signals and market sentiment. second point is, i am still skeptical. i'm not saying there will not be a freeze, but don't dismiss it out of hand. it is a little bit more than a 1% tail risk. because iran has been producing at flat levels for the last or months. 3.6. all you need is one sentence. this is not a complicated negotiation. one sentence saying the rest of opec and russia will freeze at current or recent levels, and then iran will be allowed to
produce up to 4.0, or whatever the number is. iran saves face because they retain the right to produce more, even if they cannot do it. the saudi's would save face -- and this is really about the saudi's and iran. theirudi's would stick to guns and say we will not sign anything on last iran signs it. at the same time, the saudi said we don't think the iraqis can do anymore. why not throw them a bone on paper? and also the saudi's are at their summer high point. on paper, the air in a strong negotiating position. david: does this feel different going into the opec meeting? different.ackdrop is in march, april, we were overproducing by 1.1 million barrels a day globally. now we are balanced. iran is no longer a question.
they seem to have made a recovery and have come close to maxing out. countries where there is currently suffering, nigeria, venezuela, all of these emerging markets, do you foresee more pain for these countries? mike: things are not going to turn around quickly. rebalancing takes place, and whether or not there is a freeze, we think prices are going to grind higher. like i said, it is a slow grind. even if we go from 50 at the end of this year to 60 at the end of next year -- that is our 60 is better, but if you are nigeria or venezuela, still pretty painful. that means, keep an eye on the political risk in those countries as well. david: thanks very much.
now let's check the headlines on the first word news. mark crumpton has more. clinton plans to release more medical records this week after her apparent stumble as she departed a 9/11 ceremony yesterday here in new york. thatampaign later revealed and had been diagnosed with pneumonia. her press secretary and others say they made a mistake in handling the situation. david cameron says he is quitting parliament immediately. today's announcement comes less than three months after he resigned as prime minister following the brexit vote. i think everything you do will become a big distraction and diversion from what the government needs to do for our country, and i support theresa may. i think she has gotten off to a great start, she can be a strong prime minister for our country, and i don't want to be that distraction. mark: his departure will trigger a special election for his seat. in theecial forces
philippines must go, according to the country's president. president to tear dave says that differentplore strategies. as many as 1400 americans have been on the island since 2002. ifrand jury will decide chicago police attempted to cover up the shooting of a black teenager by a white officer. a grand jury is the fairest way to handle the case, according to a special prosecutor. officer jason van dyke and has been charged with murder for shooting laquan mcdonald 16 times. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. thank you. coming up in the next 20 minutes , it was radio silence from donald trump yesterday, but he was back on the campaign trail
saying, clinton looked down on ordinary americans. the breakout feature for facebook. we hear from the vp of messaging from the tech crunch conference in san francisco. and tomorrow a big focus on the economy and finances of argentina. with the interviews president of argentina and the bp ceo. coverage throughout the day. this is bloomberg. ♪
some of the best-known hedge funds are having problems holding onto clients capital. atce 2008, perry has only for winning years. paulson's assets have also been tricking since 2011. the biggest funds have been hurt the worst. democraticeral senators are pushing for hearings on the wells fargo pony accounts candle. by sixter signed senators calls for the wells fargo ceo to testify. senators also want to probe whether the bank's and compensation structure encouraged employees to engage in deceptive practices. startupslicon valley are getting into the high-end electric bus service. the catalyst series offers a high-performance electric bus
that can serve long routes. that is your business flash update. baltimoremp is in today addressing a convention of national guard officers. he went after hillary clinton for calling half of his supporters a basket of deplorables. these were lengthy, planned, and prepared remarks, perhaps the most exposed to attack on the american voter ever spoken by a major party presidential nominee, total disrespect for the people of our country. of thehe steered clear political story of the day, hillary clinton's health, following the pneumonia diagnosis. fenton's team says that they will release more information about her health in the next few days. joining us now is kevin cirilli.
people close to donald trump campaign is saying he is not going to make a big deal out of this, yet he says he will release more details about his health this week. oz onl be speaking to dr. thursday. approaching this from a sideways angle, i would say. kevin: the people i'm speaking with tell us that they will not have donald trump directly attack hillary clinton's health. of course, the circuits and operations around them are raising questions, but the measured calculation that the campaign is making is they don't want to overshoot this. they don't want him say something that will overshadow the questions that hillary clinton will have to answer this week. on the issue on the basket of deplorables comments, trump is ticking off the gloves. he clearly took issue with his opponents attack on his supporters, half of them, she said are that basket of
, and he noted this was a remark that she had made before. the campaign out with a new attack ad against her for the common earlier this morning vonnie: if she wins the election, she will have to do with that part of the country. let me ask you about the health question again. theyople get affected if think a potential president has health issues? kevin: i have been covering this campaign for over a year. folks on both sides and undecided voters really believe part of the criteria they need to make up their minds for whom to select is an accurate depiction of a candidate's healt h. if you would have asked me last week, i would've responded that the democrats are attacking conservatives for peddling conspiracy theories, but what , when hillary
clinton was leaving the 9/11 memorial service, was to elevate this from the conservative blogosphere to a mainstream story. you alluded to this, trump will be on dr. oz this week, but he himself has also not released a full display of medical records. both candidates are breaking with traditional form here, not being as transparent as past cycles, in terms of their health and medical records. david: what is the clinton can going to do for the next few days? off,s taking a few days not doing the california swing she had scheduled. saying, lookle are at the grueling schedule she keeps. she has gotten sick. there are critics who say, if she was diagnosed on friday, why wasn't the campaign more upfront about it? there is no question this
was a mishandling on behalf of the clinton communications team. i was at the 9/11 memorial service covering it with dozens of other reporters and we were positioned in the back of the service. for a good half hour, there were several questions about where hillary clinton was, why she escorted out, when she going to come back. no one knew her whereabouts. questionhat immediate as to why the campaign did not clearly articulate where the candidate was -- that will come back -- and will have to answer to that. when you talk about the immediate response of them blaming overheating, and that turning into a diagnosis of pneumonia, clearly, they're just does not seem to be a cohesive message that we have come to expect from the clinton political machine. vonnie: thank you, kevin cirilli.
david: this is "bloomberg markets." i'm david gura. vonnie: i'm vonnie quinn. david: facebook is seeing the growth and its messenger service with over one billion users and over 300 million users use their calling and video features every month. emily chang said that when david marcus, the vice president of messaging products. here is some of their interview. facebook is making money out of as that you see taking you to
messenger. we are rolling out the new format that enables advertisers to buy an ad that will get you inside a thread with messenger. we are grading more demand for newsfeed. as we bill the ecosystem, we will create more supply on messenger. right now we are focused on creating the ecosystem. emily: will we see you take a cut of e-commerce transactions? our goal is advertising. if we can help businesses grow, that is what we will focus on. we feel there is more value for everyone there. emily: you added new ways for developers to share their bots with their friends on facebook. are you fearful that this will turn into a spammy experience in which a gaming? david: we have clear rules for what you can and cannot do. the ability to
block or not hear from people that you don't want to hear from. emily: will there be a bot store ? david: what we want is really fluent conversations, experiences between people. when we add more discovery services to enable brands to get their experiences to the right users, probably at some point, but right now, we feel we have the greatest service on earth to get discovery, which is newsfeed. we are going to leverage that product to bring people over to the experience. emily: what is the next up for monetization of facebook messenger, isn't always going to be some form of advertising? david: yes, but it should not feel like advertising if you are communicating. that would not be good. is,way we are building this
you are brought to messenger, and then some more capabilities inside that will allow brands and developers to show the types of experiences they can deliver. .lso, sponsored messages those are the things that we are working on now. emily: you have how many users now? david: one billion. emily: chart the path to 2 billion for me. we are still growing aggressively, building more capabilities. one of the things we did this year that has helped with growth is enabling people who share a device to have multiple accounts on the same device. -- don't think people here we don't think people share a phone, but actually come in a lot of places around the world they do share a device. making the product more accessible to more people, continuing to invest in messenger only accounts.
if you don't have facebook, register with a phone number. those are some of the different vectors that we will continue investing in to get to 2 billion. david: that was david marcus. you can see more of the interview on "bloomberg west" later today as well as our other interviews from techcrunch. that is at 6:00 p.m. eastern time. quick look at the major indexes on the heels of that lael brainard speech. u.s. stocks near their session highs. this is bloomberg. ♪
we are live from bloomberg world headquarters in new york. we are covering stories out of san francisco, washington, and china. david: one hour left in the trading day and u.s. stocks are in rally mode. we are covering about half of friday's loss. vonnie: sparking the rebound, dovish comments from lael brainard. she urges caution on raising rates, saying the odds of a hike this month -- causing the odds of a hike this month to drop. withdrawals at the highest level since the financial crisis. we are less than one hour from the close of the u.s. session. julie hyman has the latest. julie: stocks keep making new highs in the wake of these lael brainard comments, the expectation that she would shift to a more hawkish stance.
that did not materialize. stocks have moved to highs in the wake of that, the nasdaq in particular has been leading all day, now a by 1.6%. the big swings in stocks are back. friday was the return to 1% moves for the s&p 500. now the second day we have seen that. this is the second largest range in stocks going back to june. after friday's movement. over the course of the day, you can see the trajectory. a little bit of often done when she was speaking as people try to tear out what to make of it, and then more of a direct line upward. a broad-based rally on high volume. volume running at about 30% above the 20-day average. here you can see all of the groups of stocks higher. telecom, consumer staples, utilities, even financials, which had been the lone holdout
earlier in the day. some of the usual suspects among the large caps hoping to lead the gains by market weight. apple rising. according to analysts, they have been capitalizing on some of the galaxy note 7 woes. microsoft and at&t also gaining steam. if you look at some other asset classes, the 10-year, a delayed reaction here before it started to go dramatically lower. now bouncing off the lows. 1.627%. as for the u.s. dollar, there, we see some choppiness as brainard was speaking. now down about .25%. david: julie, thank you. let's get more insight on the markets. joining us now is like reagan. going back to friday, we had just begun let, mario draghi,
rosengren. when you look at this reversal, how much of a surprise was it to you? >> at least stocks are exciting again after a summer of going nowhere. it is almost a mirror image today of what we saw on friday. only recovered a little more than half of the losses on friday. the sectors that were leading the way down are now leading the way up. as julie pointed out, dividends, telecoms, verizon, coke all having big moves. it is all back to this defensive leadership. the interesting thing about lael brainard's speech is how much anticipation there was going into it. she had not spoken in a few months and the market was really inferring a lot about the timing of the speech. she is the last one to speak for the fed members enter a quiet period before the meeting at the end of the month.
the thinking was, she has been dovish. if she is the last to speak and is a little hawkish, the thinking was, is that why they are sending her out at this time? lo and behold, she is very lot aboute speaks a esoteric things like the phillips curve, which is the relationship between unemployment and the inflation rate. as anna fleming goes down, you would expect the inflation rate to go up. that is not really the case. that curve is pretty flat. it really hammers home the notion -- and other members have theed about this, too -- neutral rate of interest rate can be lower than where we have been in the past. vonnie: is this the market cleaning up positions now that everything is set out on a table? the bond market did not reverse so much. bit, it came down a little
the two-year came down a little, not a huge reversal compared to last week. the dollar weakened a little bit. to me, there is still an open question about what exactly caused the carnage on friday. eric rosengren was out being hawkish, but also this notion that the market was throwing a tantrum over the ecb, their decision not to signal more stimulus coming. a general notion that the ecb and bank of japan have maybe done what they can to stimulate growth. a big backlash against negative interest rates. i'll be interested to see how european markets react to the speech tomorrow, and whether angst about the ecb is an overhang there. the markets are closed before her speech, but you had benchmark stock index is down 1% across the board. vonnie: as you keep talking, the market keep getting higher. mike: i should keep talking.
vonnie: thank you, mike regan. gadf re commentary, go to go on the bloomberg. now let's get more on first word news with mark crumpton. mark: donald trump says the health of candidates is now an issue in the presidential race. his comments on fox news today came as the democratic campaign announced that hillary clinton has pneumonia. the clinton campaign says it will release additional medical records this week. mr. trump says he will release detailed health information from a new exam in the coming days. nearly a quarter of americans say candidates performance in the presidential debates may be the deciding factor in how they vote. that is according to a poll from abc news and ssrs.
20% say they expect at the base to have a major impact on their choice of donald trump or hillary clinton. 74% say they are likely to watch the first debate on september 26. immigration and economy top the list of the most important debate topics. a u.s. russian brokered cease-fire for syria is in effect. the cease-fire marks the latest attempt to end the five-year conflict which has killed more than a quarter million people and driven some 11 million from their homes. u.s. secretary of state john kerry spoke short time ago in washington. > there will be challenges in the days to come. everybody expects that. that, this plan has a chance to work. secretary kerry also said the u.s. and russia could approve strikes by bashar al-assad's government against front as part of
the cease-fire. japanese prime minister singh cabin has had a new all-time high. 57% support his administration, up 4% from the previous month. support for the opposition fell six points to 26%. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. mark, thanks. let's get back to the fed rate debate ahead of next week's meeting. governor lael brainard keeping a dovish tone in her remarks in chicago today. >> the experiences of the japanese and euro area economies suggest prolonged weakness in demand is very difficult to correct, leading to economic cost that can be considerable. this asymmetry in risk management in today's new normal councils prudence in the removal of policy accommodations.
vonnie: let's get more insight from gennady goldberg. wouldg in the comments lead you to believe that we may see an increase next week, would it? fix for having me. the markets were hoping for more of a smoking gun. comments did not give us much. if anything, the market was over excited the statement to begin with. there was some talk that the speech was inserted -- that she was inserted into the calendar for the purpose of swaying market participants. i think that is a little bit overstated. lael brainard has been on the calendar for two weeks now. the media advisers only one out last week, and people run into that a little too much. all in really does is show you the market is still searching for that next smoking gun that will tell us september is either on or off the table. i know that you are
paying attention to what she said about asymmetric risks. what did she say today? they were in line with her speech from june. they want to align the markets for a rate hike probably over the coming months, but they don't want to push the gas pedal too much. brainerdd of the day, ard does favor keeping rates higher longer -- lower longer. she noted labor markets like, inflation slack. there thatthing favors a september rate hike. maybe not even december, even though that should not be off the table yet. vonnie: what happened to the curve on friday, basically today , holding a new regime at this point, 1.6% on a 10-year? gennadiy: that is a combination
of several factors. the more hawkish fed, with their , i thinkrom rosengren that was one impetus. at the end of the day, i think one of the things that did influence long and rates was foreign demand. you had the ecb meeting and doj meetings, where they made some purchases at the end of the week. i believe that drove the selling to the longer end of the treasury curve. on a hedgencreased adjusted basis, they became attractive to investors. it really does take out the marginal buyer of treasuries. david: i want to ask you about what we saw last week, a reaction to central-bank policy making as we have seen it. what is the legacy going to be,
is this a moment where people are worried about what is next in light of that, or is this merely a blip? gennadiy: i think it is just a blip. i think the markets are searching for direction. everyone is hoping and praying that the next signal we get will either tell us that we are on or off the table for every hike. and you are not getting that. if you look at the last payroll report, it was middling in the range, if you look at growth, relatively middling. inflation middling as well. has enought you get for both sides to talk of both arguments. i think the market is really hoping for a little more clarity. unfortunately, communication does not equal clarity. the fed is looking at the same data we are and they cannot make up their mind just yet. david: thank you very much. up next, starbucks is
vonnie: this is "bloomberg markets." i'm vonnie quinn. david: i'm david gura. it is time for the bloomberg business flash. tara postell has won approval from bankruptcy court to sell $240 million worth of assets. that is after both landlords for the clothing retailer joined forces with liquidators in a bid to save stores and jobs. the judge approved the sale after being told the arrangement would save at least 7000 jobs.
the swift transportation ceo may be on the way out, but his new gig at the company he founded will earn him more. is december 31. the two point $4 million in annual fees will top the $2 million in annual compensation he received last year. david: the samsung electronics air apparent is the rare for a bigger role in south korea's largest company as they struggle e during a recent call of the galaxy note seven phone. there were earlier warnings about the batteries catching fire while charging. that is your business flash update. vonnie: sticking with news out of asia, starbucks is looking for a new way to grow in china, and they are betting the answer is coffee. betty liu joins us now.
a new strategy on the part of starbucks. betty: some may have compared this to selling ice cream to eskimos. well, they are not big coffee drinkers, so why is starbucks going into this mature market? yes, it is a mature market but it is growing at a rapid clip. not as much as before. inhad seen 20% growth rates the teen market in china, now closer to 10%, but that is still a big market for starbucks. they will be increasing their global tea business through teavana, which it acquired in 2012. investing $3 billion in the next five years. they are opening up 500 stores year, which is crazy. they will get to about 3500 2019. by a big growth market. completely
ludicrous, at least we know they like tea. we buy coffee. we can make it at home, but we buy it because it's easier. what will the pricing and marketing strategy be? somebody saidber to me earlier, when he was first approached to invest in starbucks decades ago, he thought, why is anyone going to invest in a company like starbucks when we have a coffee shop on every corner in new york city? he was dead wrong. that did not really answer your question, though. what was your question? vonnie: you have to have a market before you can sell something. that teavana is selling is very different from aretraditional teas which popular in china. these are more premium flavor teas. teavana -- are you familiar with them? they are kind of quirky with
flavors, you get more flavor without as much calories. they will sell, black tea with ruby grapefruit and honey. green tea with aloe. and prickly pear. vonnie: you are supposed to drink that? betty: that continues to reinforce that premium feel of starbucks, that you are drinking something different. david: why are they doing this now? when you look at the time it, there is a decline in a number of people drinking tea in china. betty: you are right, it has decelerated, but it still represents an opportunity. it has been a decline in overall tea consumption, but that does not mean there are not pockets of luxury consumption. a rising middle class in china. they are much more brand sensitive.
i'm david gura. vonnie: i'm vonnie quinn. time for options inside with julie hyman. julie: joining me today is jim strugger of them cam holdings. we have been talking week after week about the return of volatility potentially coming in the fall. on friday it came back with a vengeance even if today it is dipping back down. as we were talking during the break, you think it would be a mistake to think that this was just a one-off, what we saw on friday. >> what we have talked about for a few weeks is that seasonally the fall is the most volatile time of the year, specifically the structures we have talked about in option land, stock replacements, strategies that can keep people along the market will mitigate risk. three things we take away from this volatility spike on friday. it emanated from the treasury markets in the u.s. in the most interest rate sensitive etf's. the highest implied volatilities. pre-friday, cross asset, cross geography volatility near its lows since early 2015. ultimately also but we have referred to as epic complacency.
vix futures, net short position in the market at historical lows. that is still pretty much in place. what it all comes out to for us is it is a little dangerous to assume that bout of volatility we saw on friday, given what the market is doing today, is a one and done. julie: so still buy protection. .im: we like collars those risk mitigate and trades, if you are not up for buying ut spreads, where you could be giving up that premium. julie: let's get to your trade today, amd. last week, a big movement downward after the company said it would be raising some cash, not an unusual move. but you think a temporary one. beforeat was
friday. you throw in friday when the market melted, and the stock is down 22% from its highs in august. what is important here, you look up to the beginning of 2017, a new product line comes out, narrows the architecture get to intel, a significant event in the company. we have an eight dollars target. we think it's a great opportunity to take advantage of the selloff because of the offerings and really aggressively get long. julie: you are getting aggressive by buying a call spread to january, but you will fund it by selling a put? that is 25% lower where you commit to getting long. the stock was higher than that a few weeks ago. you do that whole package for a small credit. you are being paid for the
position on, as long as you are willing to go along at 4.5. you are directionally long, which we think it's the setup for amd. jim strugger, thank you. covering the return of volatility and amd. coming up, note megadeals in a while, no problem. the dealmaking outlook for the rest of the year with john reese , in an exclusive interview. our deals report is next. this is bloomberg. ♪
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matt: let's go to mark crumpton in the newsroom. mark: hillary clinton's super pac will ramp up spending on advertising this week. ies usa will spend millions on ads. donald trump has been making up ground on mrs. clinton in the polls. the first debate is september 26. mr. trump and secretary clinton are in a virtual tie in four battleground states. according to the latest nbc news /washington journal poll, trump ands clinton in arizona georgia. clinton leads in nevada and new hampshire. he iscameron says quitting parliament immediately. today's announcement comes less than three months after he as prime minister
following the brexit vote. mr. cameron: i think everything will become a big distraction and a version from what the governor -- diversion from what the government needs to do for the country. i support theresa may, and i don't want to be that distraction. cameron's departure will call for a special election for his seat. carrying refugees were intercepted off the coast of the a g and c. most were from syria and afghanistan -- agean sea. syria andfrom afghanistan. i am mark crumpton. this is bloomberg. scarlet, back to you. scarlet: are gets have recovered from friday's selloff. stop -- markets have recovered from friday's selloff. abigail doolittle has more.
abigail: a rebound from friday's selloff. since july 8. it is a broad-based rally, all sectors trading higher. in fact, on the nasdaq 100, only two stocks are trading lower, to give you an idea of how strong this rally is. as for the biggest boost, it's all about apple. it appears different analysts are really influencing the stock. we had bullish comments that apple has a big opportunity , andd the samsung note this could really help numbers. a team of analysts told our team that they have taken numbers above consensus. they see shares of apple around theg
all-important 10 year anniversary of the iphone next year. another positive comment from piper jeffrey -- piper jaffray. company is on for sales of the iphone 6 to surpass the iphone 6 us. is the: clearly, apple biggest boost to the nasdaq, as it is to the tech sector. abigail: we have a lot of big tech names, but health care is actually the best are on the nasdaq. this is actually the best sector. names are big biotech trading higher. amgen in particular is second behind apple on the nasdaq. one analyst told bloomberg he thinks a couple of key catalysts
could be driving the stock higher this week when they release clinical data on a headache drug. on sunday, they released data on an osteoporosis drug. mixed signals in biotech. we take a look at the bloomberg. we see that the biotech index is trying to reverse the long downtrend. do that toing to some degree, but on recent weakness, it is stuck in a near-term range, suggesting we could see it trade back down toward the range in yellow. needed or ifion is we are going to see a little bit of a downturn or continuation, i should say, of what happened on friday. scarlet: that is the theme not just for the nasdaq, but for the market at large. abigail doolittle, thank you so
much. matt: you could say he is a doctor of deals. he has been behind some of the largest m&a transactions of all time. interviewusive earlier this week, bloomberg's executive editor of global deals asked how dealmaking -- him how dealmaking has been since the u.k. voted to leave the eu. >> the first half of the are been quite busy. people looked at the first half it2016 as a slowdown, but was really just a slowdown of deals. brexit came on june 23, and there was a lot of consternation, a lot of commentary that m&a was going to be dead. less then a lot people were worried about. softbank announced the
acquisition of a u.k. tech company. >> a huge deal. >> exactly. all being said, july and august have seen a noticeable slowdown from the first six months, but i don't think that has anything to do with brexit or the u.s. election. normally, you see summer doldrums. be more doldrums than normal. had such asaid, we busy two and a half years, people need to take a breath and digest a little bit. we expect a very busy september through the end of the year. >> like you said, big deals are where we have really seen the slowdown. at dollar value, it's close to 15%-20% off from 2015. big companies like pfizer
perhaps have to digest or be a little slower in doing these acquisitions. >> i think that's absolutely right. also, if you think about it, if you have just two less 100 billion dollar deals for six months, that is going to dramatically impact the total value. and some of these megadeals are of course sui generis in some ways. had 10 deals above 35 billion in the second half of 2015, which is what people remember in terms of big deals, it you come into the first half of 2016, and you probably have for 35 billion dollars, but you still saw a lot of activity. >> you said the rest of the year looks good despite the election, turmoil in the markets, china
and the u.s., you expect the rest of the year to be on par? >> we're all really guessing, right? we had volatility up front. ,reat volatility in august january, and february. each time we had that volatility, everybody started saying the stock market is going to crash. m&a is going to die. it didn't happen. it didn't even happen after brexit. why do i think this will continue to the fourth quarter? because all of the conditions we have been talking about for three or four years, tons of cash, tons of strategic ,mperatives, low interest rates all of these things are great in -- great indicators of continued m&a. the acquirerses
in these deals will see their shares spike. that can't hurt. >> absolutely. i think there is a lot of strategic imperative, a lot of lead big reasons that corporations to want to do acquisitions on a global basis. matt: that was jeff mccracken earlier today with the head of m&a, john reese. joel: coming up, hedge funds have suffered their biggest losses since the financial crisis and investors have pulled about $23 billion so far out this year. we speak about hedge fund outlook next. this is bloomberg. ♪
scarlet: this is bloomberg markets. im scarlet fu. time for a look at some of the biggest business stories in the news right now. too tall is considering selling gas fields in norway. l is considering selling gas fields in norway. they are offering smaller producing assets to potential buyers to sweeten the deal. silicon valley startup of terra is jumping into the race for the --ure of transportation otera is jumping into the race for the future of transportation with its own version of the bus.ric known hedgebest
funds are having problems with capital. capital has fallen from $10 billion to $4 billion. and assets's stocks have been shrinking since 2011. this year, hedge funds have suffered their biggest withdrawals since the financial crisis. the biggest funds have been hurt the worst. for more on today's hedge fund news, we bring in five be a. io.hear the -- fab we hear these stories. goldman sachs china fund set shut down recently. we hear more and more about hedge funds being out of favor, and then we hear about one lastng $22 billion in the
couple of years. what is going on? the menust seeing sorted from the boys? >> i think there are a couple of things going on, one at the investment level and one at the fund level. , ifhe case of richard perry you ask investors what are the most important things, they will tell you it is people, process, performance. when people leave, it's a big personnel change when your name is on the door. cake thataked in the he was going to leave. with respect to the rise in assets -- and interestingly, it was down around 9% this year, but he still brought in about $11 billion through different strategies. i think that has to do with the fact that dalia, unlike many of will ride thends, interest rate environment.
one of the things you hear from hedge fund critics is that been fund performance has mediocre. say that'sdefenders not how you measure the industry overall. you look at returns across the cycle. wequestion is, how should measure hedge funds as a nasa class or group overall to tell people it is worth it -- as an or group overall to tell people if it is worth it or not worth it. >> if it is having a five-year downtear without a single quarter, everyone is worth it in that. instance, i think the right way to look at hedge funds is on how much correlation you want to the regular asset
classes and how much volatility you are willing to put up with to obtain that. more volatile strategies that are uncorrelated or less volatile? does the fund meet your objectives? s&p has met everyone subjective, but looking forward, which strategies will do so? people like me spend a lot of time looking at what strategies are going to do better going forward. >> we spoke to matt vogel, the founder of vanguard group, the index fund giant. here is what he said. >> there are more and more of them. and there is only so much undervalued security in the marketplace. so much price discovery to take place. it should the, if you look at the economics of it, the more participants in the hedge fund area, the more difficult it is to differentiate yourself in a positive way.
so, he democratized the market. is there a way for etf's to come out at a fraction of the cost funds are charging? >> a don't think etf's are comparable. around the thanksgiving table, it's going to be a lot of fun at the bogle residence, since his son runs a hedge fund. scarlet: he didn't mention that. >> he left that out. matt: but two and 20 is the question, and is he making money ? >> i am very confident that bogle is. are his clients? >> overall, the question of crowding things, when you look at stocks coming under pressure, the utility stocks we see going up, the other defensive stocks, look at , andther funds set up
these are the darlings. if you run a long run statistical analysis, you are going to favor stocks that have a low interestin rate environment. what you will find in etf's is a in ale that can reverse or hedge fund, a vehicle that can short. differentmentioned hedge funds performing differently, macro hedge funds performing better than others. is there a strategy that's going to be in vogue at any point and time? the ones thatre looking forward i feel will be the winners. -- >> these are the ones that, looking forward, i feel will be the winners. they move when inexorably u.s. interest rates decouple from
european interest rates, for example. whyink one of the reasons you are seeing -- and this goes back to matt's first point -- why are you seeing these outflows out of big funds? because people think i will give money, givehe them the keys, and let them drive. they are leaving the whole space in general. isn't it unfair to try to allct the same results from hedge funds? shouldn't some be alpha and some be hedge hedge funds? >> when you have a low beta to neutral hedge fund, your return expectations should be lower and different than when people have a leveraged bet. driven funds are perpetually
leveraged. scarlet: how do we know that this withdrawal is not cyclical, but structural. >> it comes from the fact that you are seeing larger funds, the institutions can dance with -- elephants like to dance with elephants -- so the big pension funds were going there. others said ok, i don't know who to give it to, so, you never got fired for buying ibm. you never got fired for buying paulson. but paulson became a macro genius in 2008 and hasn't been able to keep that up since his assets have plummeted from their peak. similarly with perry and others who had a bad stretch. is gone.d forget it
and mexico. will offendmp mexico. trump had a good weekend with hillary's health. we saw the dollar rally against the peso today. for most of the day, the peso was the weakest of the currencies. it has come back quite a bit. i think it is hard to draw to title line -- tight a line and the peso, but on a day to day basis, it moves a little bit. scarlet: this is something we will talk about later on in the hour. absolutely. i want to take a look at something we can take a look at any time, but since she came out and was as dovish as she usually than theay more dovish markets needed her to be, i thought it would be interesting
to look at where the markets are. prudence is warranted. they should not be raising rates yet. may be in december. at the top of the panel, you see inflation in blue. , justelow, unemployment the regular rate in purple. the u six rate is the one that means you hate your job or you want it full-time instead of part-time. it could be even lower for full employment. i wonder if that means that three handle. that would be crazy. on friday, the s&p 500 dropped 2.5, the worst one-day drop since the brexit vote. but in context,
the s&p was trading in a pretty tight range this summer. it has not moved more than 1.5% going all the way back to july. panel shows that the s&p 500 is now below the 50 day moving average for the first time since june. we did not follow up friday's selloff with more declines, but we broken trendline that might -- we broke ae trendline that might be significant. that does it for bloomberg markets. .hat did you miss is next this is bloomberg. ♪
scarlet: u.s. stocks rebounding after the biggest rout since june wiped out about $5 billion from equities. joe: but the question is, what did you miss? before thee calm storm. the lead up to next week week's fomc meeting. is the quest for transparency leading to too much turbulence in the market? joe: plus, we have the charts you can't miss. and if you want know-how donald isdoing, all you need to do check the mexican peso. we will check how these assets are linked. thelet: we begin with markets. selloff. what selloff? the dow up by better