tv Bloomberg Markets Bloomberg September 23, 2016 10:00am-11:01am EDT
vonnie: they went to take you from the to london and cover stories out of washington, turkey and ireland. here is what we are watching. every got an global market sputtering as they slide around the world. we get perspective from and market's and what's keeping them up at night. mark: and excessive interview with editor-in-chief. the turkish president this bride -- describes their move to cut rates as careful and balanced. more on his unorthodox views on lower interest rates. vonnie: saudi arabia has an opportunity's reduction if iran agrees to freeze its oil output. we will bring you the latest in oil markets as opec meets next week.
about 30 minutes into the trading day in the u.s. lets her to julie for the latest. julie: lots of it. the downdraft today after we had an up week for stocks next to the federal reserve and technology stocks. tech shares have been accounting for a lot of the gains we have been seeing. not just this week but ever since the uk go to exit the eu that is changing a little bit today. we have been seeing increase in tech shares. they are mostly down. with the notable exception of twitter. the company is close to a sale. these the reports of surfaced before, particularly recently after the company held a board meeting. nothing materialized after that meeting and the shares fell. now that talk is back again. the shares are up in a big way. why do we have salesforce.com and alphabet on your?
these were two of the potential bidders. morph -- more specifically google. salesforce down 4.5%. how that close at a record yesterday, down about two tens of 1%. twittered out was standing, we are seeing is so often tech today. that is accounting for the bulk of the decline in the major averages in today's session. i want to take a look at a couple of other tech shares. facebook and yahoo! both of those stocks are trading lower after facebook revealed it gave inflated your data to advertisers, and particular a french advertising giant. for inflation of 60% to 80%. facebook says advertisers were not overcharged. add revenues were up 63% year-over-year in the company's latest quarter. yahoo! getting more details of the company's hack attack. ineffective 500 million accounts. analysts say it will not affect
verizon's acquisition of yahoo!'s core assets. a look on a new ipo. valvoline, the maker of valvoline automotive lubricant and motor oils. $660 million raised in the ipo. this year's are up more than 10% on that first day of trading. mark: 90 minutes left on friday, the last session of the week. the fed inspired rally is petering out. basic resources went down 1/10 of 1%. they rose by the most in three weeks yesterday. we are set for a weekly gain, the first in three. friday certainly is petering out. shares 15% lower. earlier, the biggest decline since 2003. the danish drugmaker said it's alzheimer's therapy missed its
secondary goals at the final stage study. shares getting hammered. the therapy is likely -- unlikely to get to market approval, fda approval. he said it was widely considered one of its most promising pipeline products. this one is down in your 5% now, those the uk pharmaceutical company with a treatment for opioid addiction. it was sued yesterday by 36 u.s. states that claimed it ripped off consumers by blocking a cheaper generic version of its drug. new york attorney general eric snyderman accused this company .f abusing its monopoly toidior says it intends continue to figure it --
vigorously defend his position. these are the homebuilders in the uk. one of the big homebuilders here today reiterating its rating on its major peers it says uk homebuilders trading. is holding up well. in prompts an upgrade of sector estimates, partly reversing cuts made in the way of the brexit vote. the shares got absolutely hammered. some lost 40% of their value in a matter of days. they have come back, well, 30% or 40% of those losses. most are down between 10% and 20%. vonnie: it is still early when it comes to market reaction. mark, thanks. let's check on the first word news. lisa has more from the newsroom. lisa: the president of turkey will work with whoever wins the u.s. election. he set them of bloomberg editor-in-chief in new york.
he noted he started his presidency working with george w. bush and then president obama. >> from the new year, we will see. accordingly we will continue our work with america. it is out of the question for us to break from america. continuity is fundamental in politics. vonnie: he blasted the u.s. for not extraditing islamic cleric, who turkish authorities blame for the failed coup. he dismissed u.s. arguments annexation request must work its way through the judicial system. in egypt, 148 bodies pulled out of the waters off the coast three days after hundreds of refugees heading to europe drowned. thousands more are feared dead. egypt has been a traditional route for people seeking to reach europe by sea. john kerry has abandoned efforts
to salvage the cease-fire in syria. he told reporters in new york it was pointless to move ahead without a major gesture from russia to end the violence. the u.s. accuses russia of failing to use it influence over syria's president to stop the fighting. assad blames the u.s. for the truce collapsed. the brother of bernie sanders says he's running for the seat in parliament vacated by former prime minister david cameron. larry sanders says he was inspired by his brother's success and is the green party candidate for the whitney constituency in oxfordshire, a conservative party seat. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries.. on the lisa parenti, this is bloomberg. vonnie: lester back to mark on the economy. stocks in the u.s. and europe turning lower. investors moving some of the exuberance from the fed meeting. data shows an economic slowdown in europe. yman joins us now.
dying to know if you think the fed should have moved. ed: i am ok with what the fed did. i don't see of the cost of waiting. you have the election coming up, which isn't talked about a lot. but if they tighten and the dollar spiked up, it's gone down and emerging markets get hit. they probably regretted that. i think it is ok to wait. while we get to december will look again. i don't have any huge anxiety we are missing the boat by being a little slower here. vonnie: in other words you think the economy could've taken the hike? ed: i think the economy could take a hike, but i don't think there is a problem with waiting a little bit to make sure of that. and you have the other factor, the election coming up. to wait till after the election is probably ok. vonnie: just to let you see into
the bloomberg terminal, you can see for next year there are two hikes priced in his terms -- in terms of the median forecast. ed: that sounds reasonable. i'm sure the economy is doing well. i travel around the u.s. a lot. i was just in dallas and houston and austin this week. they are definitely doing well. in seattle, chicago, to hear, to miami, the economy is clearly doing a little bit better. hikenk they will probably a couple of times next year. mark: we are having a bit of a chart-off, and this is a chart in for components. -- four components. it is based on etf's that track stocks, bonds, oil and gold. through yesterday they rose for
a third session in a row. it's very rare and in fact so where this stretch only occurred one set in the last decade. february, 2014. how difficult is it one and everything is moving in the same direction at the same time? does that cause you scratch your head at all? ed: i make more charts than you can possibly imagine. i'm happy to go at you chart by chart. period had a goldilocks with the fed with what you mentioned. oil wasore the fed, about to break down. it has come back up. the dollar was about the spike up and it has come back down. the stock market was rallying back with that. the gold price doesn't work in my mindset so much. the other three iwatch as a hat
trick and they are acting ok. the price of oil is a little weaker so the stock market is down. mark: what about the bond market? many talking about the b word. ed: bond market, for it to have a higher yield, it needs to go above 170. they traded at 170, 171, and now they pulled back from that. a lot of the attention from higher interest rates, from lower oil prices or the dollar spiking, that has moved out of the system. vonnie: are financial conditions to tight? in spread between the yield december 2016 and 2018 is only about 28 basis points, which doesn't seem like a lot. ed: i think financial conditions are very easy. start with u.s. bank loans. they are up 8%. go to another cut.
i looked this morning it balance sheets for the day central banks. they are up 22%. the money supply in the u.s. is up something like 7%. i get the impression financial conditions are pretty easy. i saw that janet yellen said they were mildly accommodated, which i thought was an understatement of what things are with interest rates had basically zero and bond yields as low as they are. vonnie: i want to point to viewers again to bloomberg to show the yield curve. --the u.s. you would have to you look in comparison to japan yield curves, they were obviously a lot flatter. the japan government in the last couple of days has been interesting. background of minus five basis points. the you feel like it's working these days? ed: it is working some, but it's not working clearly enough that
they are not thinking about the next step which is fiscal policy. i would think the odds are almost 100% that in 2017 we get some fiscal policy. i do think that we don't know what the counterfactual would be if they did not do it. in the u.s., the u.s. economy is much better. unemployment is 5% and the financial markets, the stock market is up, etc. i think it's had some impact. everybody agrees frankly that we need to push on the fiscal stimulus to augment the monetary stimulus we've been having. there is a lot of stimulus which is giving the bond yield down so much. mark: one of the more interesting surveys they came out recently was the poa one, the fund managers one, that talked about the biggest tail risk. the top of the chart was eu disintegration. followed by a trump presidency.
big riskyour top three and worries right now? ed: my first foray is i'm beginning to see some weakness in the euro economy that i think is election-related, for trump related. the uncertainty surrounding that. second, we will have to get into the december rate hike. that will present a challenge to the financial system. and longer-term, i worry about how we get out of all of this. zero interest rates, qe. that is what keeps me up at night, or a little bit awake. mark: is the beginning to the priced in, the possibility of a trump presidency? i know the odds are barely one in four if you look the bookies,
but is it going to be priced in? what junction do we see investors seriously pricing this in? ed: it is now. there is hardly a thing we can think of that isn't priced in like a failed rate hike possibility in december. the market might be that's the s&p might be 5% or 10% lower today than it would be otherwise with the election coming up. with that sort of odds it is high enough to be a risk factor in the market. i think it is already priced into a certain extent. if it looks like trump will when, -- win, they will be more pressure on the market. vonnie: you will have to come back and give us an update. ed hyman, they for joining us. mark: ireland's finance minister is speaking out about the european commission's apple ruling. they will explain what you think an appeal could take years.
♪ mark: live from london and new york, i am mark barton. vonnie: you are watching "bloomberg markets." time for the bloomberg business flash. the irish government is confident it can win an appeal against the european union's ruling on apple and back taxes. they are recouping a record $15 billion from apple. the finance minister says the legal battle will not be quick. >> there are two phases. the european court first, and then the european court of justice. it will probably take four years or maybe more. vonnie: apple calls the figure
completely made up. marriott international closing on a $13 billion acquisition of starwood hotels & resorts. 30 hotel brands now fall under the marriott umbrella to greet the largest hotel chain in the world. challengeended off a from a chinese group that ignited a bidding war in march before walking away later that month. don't miss next was it interview next with the ceo of marriott international. a german newspaper reports commerce bank may cut as many as 5000 jobs. that would be about 10% of the bank's workforce. it is germany's second-largest lender. the ceo will present his plan to boost profits to the bank's board next week. that is the business flash. mark: still ahead in the etf segment, a shift toward
♪ mark: you are watching "bloomberg markets." now for the etf friday segment. let's go over to julie hyman. julie: i have eric. everyone talking about the trend from active to passive. there was a trend from high cost of low cost that could reshape the financial industry. hit it took -- here to talk about this is eric boltounis. flowsok at the fund categorized by the types of etf vehicles. talk to us about what you found.
eric: most people talk about the 500 billion that is gone to index funds and etf's. that's definitely a migration down the lower costs. when you isolate individual buckets like active mutual funds, you find something really compelling. outperforming mutual funds are seeing outflows. a used to be if he outperforms, the flows followed. but if you look at the fidelity international fund, it is beating eefa by 7% over three years, but saw $7 billion in outflows. and a symbol from delaware beating the emerging markets index. $2 billion in outflows in that one. you look at active mutual funds taking in money. they are two companies that have inflows to their active funds. what today having common? they are cheap. vanguard's 20 basis points.
that is well below the average of 69. julie: how was their performance versus those that are taking in money at lower costs? eric: you take a 10 vanguard active funds that the inflows, only half are outperforming. that lead you to believe people are putting costs above all else for the time being. julie: that's a really interesting trend. how long is this thing going on? eric: not that long, three or four years. this is just developing now. if you go over to index funds and epf's, they are already cheap. we will call that passive. migration is going down. flowsdex funds have taken with an average of 12 basis points. the index funds that have seen outflows have seen 46. the average etf fee is 57 basis point, of the acid weight averages 25. the one that saw the most influence has an average of 11. every bucket you see this
migration south the lower costs. julie: what is driving this? with individual retail investors, this is what they are telling their brokers or making the investments directly themselves. or is it advisers who are steering them this direction? eric: advisers are a big part of it. they are not taking commission. gets in their best interest to go cheap. cost has become -- the media is covering get more. studies say cost is the biggest factor in the ability to outperform. that will penetrate to the masses. and the department of labor rule says you need to keep your client's best interests in mind. you would think is happening already. basically that will mean you will see more money go to index funds and etf's and cheaper products. julie: if the impetus is cost and not performance, what
motivation do these active managers have to outperform? doesn't it sort of take away some of the -- i don't know what the word would be. eric: motivation. yeah. outlier.is kind of an generally speaking, yes, i agree. if you have done your job and beat the benchmarks, you see outflows. i throw my hands in the air. julie: i'm sure this discussion will continue. back to you. vonnie: thank you. just yesterday the turkish central bank saw its key central rate for the seventh month. we hear from the president. ♪
lisa has more from the newsroom in new york. isa: vladimir putin lamenting the collapse of the soviet union. he says it was not inevitable. the russian president says instead of collapsing a quarter century ago, the soviet union could admit a transformation. he met with political leaders after's united russia party swept its biggest ever victory in parliamentary elections. the european union has more to lose than the uk and brexit leads to limits on trade. the report comes from policy analysts. it says 5.8 million european jobs are linked to trade with the uk. in britain only 3.6 million jobs are dependent on exports to the uk. nearly 130 pledging $3 million in humanitarian assistance to south sudan's refugees. more than one million people have fled the area. tens of thousands having killed since the civil war broke out in december, 2013. the u.s. has given a total of
nearly 1.9 dollars in aid. -- $1.9 billion in aid. reports of unarmed african americans being shot by police should be a source of concern for all americans says president obama. a white police officer charged in manslaughter surrendered overnight and was released after posting a $50,000 bond. shears erected as life begin to -- likely to get a flickr back on the cross puerto rico. their territory struggled to emerge from an islandwide blackout. a fire at a power plant caused the aging utility grid to fail. about 75% of homes and businesses served by the power utility had electricity restored by early today. the majority of puerto ricans will likely have power back on by saturday. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries.. this is bloomberg. vonnie: thanks.
turning now to turkey. in the wake of july's attempted coup, the president faces renewed pressure as far as economic growth. he sat down with bloomberg's editor in chief to discuss the central bank's latest inflation. >> i see central-bank cuts as a steady, careful and balanced cut. because it is not right to make some moves up or down that could contain violence, and that could create a tremor in the economy. but i believe it will be beneficial to continue this steadily. right now this new demonstration of the central bank since they took office, they had been carrying out cuts, taking into consideration interest rate policies of the government.
i think this is an important signal, especially for investors. my hope is that the other banks will take the signal that the central bank is given that they also heated and accordingly opened the way for investors. >> you are an economist. surely you're a bit worried by inflation at 8%. is at a time to cut interest rates? when you came in inflation was much higher at 70%. still, a person is a lot higher than other countries. clearly cutting interest rates is a bit dangerous. in turkey before we took over the office we had seen inflation exceed three digits.
but we took over the office the inflation was very high. 30%, and in the interest rates used to be around 63%. after we took over, the official inflation rate started going down. about the protests the interest rates reached 4.6%. and the interest rates at a low , and the real interest rate being at that level pulled inflation down. let me say something. i don't see inflation as being inversely correlated with interest rates. it is exactly the opposite. i see inflation and interest rates is correlated.
if you raise interest rates, inflation will rise that much. over you cut interest rates, inflation start to fall with that. for my 40 years as prime minister and president i followed this and i have seen this. i have seen banks raise rates and inflation is gone up. when we cut them, inflation has gone down. even now when i look at the measures being taken, if inflation is falling, is because interest rates are falling. that are these things not impacting this issue so much. this is what i believe. >> that sounds to me as if you would like interest rates a color lower still, if you think interest rates, the lower inflation gets. is that what you think? i'm going to give it the most
outstanding example in that regard. if we consider interest rates having a different nature from one country to another, that would be a wrong perception. looking get the interest rates in the united states, it's around 0.5%. when you look at the european countries, the interest rates are around 1% or 1.5%. in japan the is just rates are negative. -- interest rate are negative. if rates are that low why should they be 13%, 40%, 50% in turkey? -- 14%, 15% in turkey? in a country where there is no investment we can't talk about development. we can only talk about development in a country where there is investment. we have been pushing this issue. we still have not seen the speed and stability and investments we
wish to see. investorsts were low, would get credit immediately and start to invest. when interest rates are high, they cannot invest. this, hourdespite investors are making investments. i say let's look at america as an example, europe, japan. and accordingly interest rates are as low as possible. vonnie: that was turkey's president with bloomberg's editor in chief. mark: coming up, cut a brexit timetable come much earlier than expected? the uk foreign secretary. boris johnson thinks so does the rest of the government agree? this is bloomberg. ♪
vonnie: you are watching bloomberg. mark: this is your global business report. turkey's president fixed a bloomberg. he tells us recent downgrades in turkey's credit rating are politically motivated. vonnie: how many jobs could london lose it is a brexit? the new estimates are out. mark: efforts to get driverless cars on the road is speeding up. how soon could they get approved? july, the global ratings lowered turkey's credit rating after an attempt to topple the president and his government. in an interview, he said he's not worried if his country is rated below investment-grade. all.don't care at
they are making mistakes and they are doing it intentionally. you look at places where the economy is finished, collapsed. they raise it four levels at once. even though turkey has never had troubles, you look at turkey and they freeze the rating. such a thing as on acceptable. that is not honesty. mark: taking steps to modernize its aging air force. the prime minister has agreed to buy 36 fighter jets from france. is valued at $8.7 billion. it's the middle of a plaintiff great india's military. he's buying everything from submarines artillery. the head of the london stock exchange warns 100,000 jobs could be cut if the job of clearing financial transactions leaves london because of brexit.
he spoke to bloomberg television. he says that jobs would be lost all of the country, not just in london. there are very few financial centers outside of london that could accommodate clearinghouses. facebook admits thanks to a faulty metric it said advertisers -- people are watching more advertising than they were. network says the errors are being fixed and advertisers have been informed. vonnie: time for the quick take a read of -- where we provide context and background on interests. it may sound futuristic but parts of it are already here. the robots are easing us out of the driver's seat bit by bit. here is the situation. earlier this year the u.s. government proposed spending $4 billion over 10 years on
researching infrastructure to promote driverless cars. in september that the government made out a regulatory path for putting them on the road. companies are partnering up in order to make this a reality. google and chrysler are dealing up to the -- teaming up to develop self driving minivans. bmw is collaborating with intel. background. the dream of the self driving car appeared in science fiction, and then in the general motor's futurama display in the 1939 world's's fair. automakers began operating -- offering adaptive cruise control. they logged more than 2 million miles testing driverless cars on silicon valley roads. here is the argument. there are few laws of the books requiring drivers to keep their hands on the wheel. no one imagined that would ever be an issue. there is the ethical dilemma of
turning over this is -- decision-making power in life or death decisions. design as have yet to car that can't be hacked. that raises security concerns. dystopian scenarios of robot cars run amok. driverless cars could save thousands of lives since driver error is blamed and 94% of crashes. you can read more about self driving cars at niquick on the bloomberg. had to bloomberg.com for more stories. mark: pressure on the pound today. the currency dropping to its lowest levels since august after comments from the british foreign secretary boris johnson raised concerns the uk is heading for a swift exit from the eu. here is what he actually says. boris johnson: you have two years to put it off. i didn't think he would necessarily need to spend a full
two years. >> doesn't british industry -- mark: that was yesterday. mocked the brexit comment. he says he is offering to send boris a copy of the lisbon treaty to help him understand the link between free movement of people and the market access. following the trend? >> the war of words is certainly only beginning. fear that britain will go for a hard exit. it suggests the idea that once it triggers article 50, k could take less than two years. mark: what does it tell us that johnson came out of these comments? they have not been rubberstamped by may's office.
is this johnson playing to the brexit audience? >> may wants to emphasize she is in control and making decisions, this slight rap on the knuckles. johnson making this comment says the -- we reported last week he made these comments to the italian foreign secretary. we wrote a story that said it would be in the early part of the year. the reality is you have french connections coming out, a lot of pressure for the brexitteers and the government to move quickly. it sort of suits everyone for boris johnson and make these kinds of comments. he has a very small role in theresa may's administration.she gave him something to buy his teeth into, but it's more ceremonial. if he pushes the envelope, at least it puts the fears out that britain was to do this fast. even if that is not technically possible. svenja: he is the foreign
secretary. he still sits at the table as a representative. he is also a brexiteer. he is not a minor minister. i agree with you in the sense there is no way that he spoken clearly out of turn here. it is very much putting the feelers out there. the fact is the pressure is also coming from europe. europe wants britain to get a move on. and invoke article 57 negotiations can start. until they do all we have is tit-for-tat. until article 50 is invoked they have no problem sitting out at a table and having a plan. that is what everyone wants to see. vonnie: the other story we were telling about whether producers was o'neill's resignations. what happened? svenja: george osborne appointed
him. very much a product of the previous government. he is said to have been satisfied over theresa may's handling of the interest points with the chinese. it drag on for a couple of months. he is the champion of the northern powerhouse, which is set to broaden investment to the north of england to the whole country. there is a little bit of dissatisfaction there, but it's still a major loss. jeremy corbyn is making his name tomorrow. get one back if he is reelected. what sort of schism will that continue to cause in the parliamentary labour party? svenja: looking at labor's antics, it's hard to imagine a
more stable party and we have now. bigger, andgets that's the prediction, what are they going to do? do it they take a job in the shadow cabinet? or do they take a principled stance and sit on the back bench? it's not a very happy prospect. mark: the labour party conference kicks off on monday. what a week we have in store next week. ahead, oil prices little changed right now. -- the latest on the potential next. this is bloomberg. ♪
output if iran freezes its production at current levels. this come as opec prepares to meet next week. joining us now is julian lee. how has the sentiment changed in the last number of days? a short time ago it seems the deal was posturing and never going to be made. have beenthink people heartened by the news that iran and saudi arabia, who have been at loggerheads and still are at loggerheads over issues like syria and yemen and oil production, has spent two days locked away together in the opec headquarters in vienna talking about a potential deal. i don't personally think anything will come of the proposals put forward. as i wrote on the terminal earlier today. i think the market is taking
heart from the sense of the two sides are talking and that they seem to be, at least a little bit more appetite for a deal then it was perhaps the past. isnie: part of the problem about 800,000 barrels a day or coming back online? julian: this will potentially be a significant problem. there are a number of issues. we have nigeria and libya, both of whom are are in the process of trying to regain the reduction they have lost. much longer in the case of libya. you've also got all of the persian gulf countries producing at or near record levels. 30,000 oria within 40,000 barrels of its all-time high. for weight and -- kuwait and the united arab emirates.
iraq was slightly higher in january. and you have iran producing much more than anybody thought it would be able to do by this point in time, not quite a precinct in levels but not far off. mark: 50 see some sort of pact for countries like libya, nigeria? is that feasible or not? julian: there is no hope that any kind of agreement that doesn't exempt nigeria and libya from current levels of production. those two countries at the very minimum have to be allowed to restore some or all of their lost output. they won't agree to anything else. iranyou add in iraq and who both have growth targets of their own and the deal starts to look -- a meaningful deal starts to look much more complicated. mark: there is just too much while in the market.
some analysts said that. what happens if we don't get anything? does it depend on the fudge? we are already starting to see the fudge happening. a number of ministers saying algeria is just a consultan that consult -- consultative meeting. they are due to be on the 30th. we will take it down the road another couple of months. mark: we could test 40? we are at 46. julian: it certainly seems possible. i don't think they are alone in that view. mark: prices. with a hold of a $40. vonnie: a busy few days ahead. thank you julian lee. mark: coming up on the european close, the chief executive of the lse says 100,000 jobs are in
jeopardy. we will wrap up the markets for the week with a strategist with just over $2 trillion under management. have a look at european equities. 35 minutes away from the end of the friday session. we are peter and out. -- petering out. today we are falling. we are all on track for a weekly increase. that is significant because we've had two weeks of decline. it looks like it will be the biggest since mid-july. stoxx 600 down by three quarters of 1%. to close his next. this is bloomberg. ♪ ,l
close on "bloomberg markets." mark: we will take you from new york to london. we will cover stories out of turkey and ireland out of the next hour. here's what we're watching today. central banks may use different tools. that is the latest investment note from ubs' global chief investment officer. he tells us where he is putting the firm's $2 trillion under management. vonnie: the ceo of the london stock exchange says jobs will be at risk if. leaves the u.k. and, it's official. ceo arnie sorenson tells us how the te