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tv   Bloomberg Markets  BLOOMBERG  September 30, 2016 12:00pm-2:01pm EDT

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from bloomberg world had cores in new york, we are covering stories out of san francisco, frankfurt, italy, and china. on reportsnk jumping it is nearing a settlement with the u.s. department of justice. its stock and debt have been under pressure since the agency opened a probe tied to residential mortgage-backed securities. concerns about the german bank stability is having -- worrying consumers enough to pull from the firm. is this another lehman brothers moment? bank is not the only one struggling to we will hear from sean matthews, the ceo of cantor fitzgerald, on the new normal for wall street. we are halfway through the trading day -- julie hyman is here for the latest. as we get ready to close at the last day, we are looking at a
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gain for the close. julie: a could be a gain for the month of september. we will not know until the close. all three major averages are at the height of the session. what is contributing the most -- we are seeing the financials strong eddies of are the stocks that are single-handedly contributing the most to the gains. bank of america, citigroup, represent in the financials, coming back after losses yesterday. pfizer as well. we saw broad weakness in the pharmaceutical industry yesterday. amazon -- another record for amazon. it has been day after day for that company. we have also been watching -- outside of stocks, what has been going on in the bond market, currency market as well. note, look at the 10-year the moving we have seen in the 10-year -- there, too, we have had some reversals going back-and-forth this week. i think we are having some technical difficulty on that
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front. there, too, we have seen a turnaround. there you have it. point/1.59%,s reversing the declines we have seen in recent days. this is helping the financials today. we have been watching the euro today. we have also seen this turnaround a little higher. what does this come back to -- the turnaround, it has to do with deutsche bank. deutsche bank, as we talked about yesterday -- bloomberg news reported hedge fund clients were pulling collateral from the banks, sparking concerns about its liquidity. the ceo, john cryan thought to reassure investors overnight. that did not necessarily seem to work, but now the french press is reporting the company is nearing a settlement with the department of justice that is much, much smaller than initial reports, closer to 5.5 billion, versus $14 billion that was initially reported. we have not confirm the report. citing people familiar,
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but the market is paying attention and reacting. out --he talk first came the stock is still down 12 .5%, but you see the bump up in today's session. the rebound. just like yesterday, when it was going down, its rise is also having a ripple effect. david: julie hyman, thank you. setting up perfectly what we will talk about for the next hour or so -- deutsche bank coming up. let's check in on first word news. mark crumpton has more. david, thank you. the national transportation safety board, the ntsb, says investigators are having trouble extracting a recorder from the forward-facing camera on the train that slammed into a rail station in new jersey thursday. the recorder should show what was ahead of the train before it crashed before the morning rush-hour pier 1 person was killed. over 100 others were injured. hillary clinton leads donald trump in michigan. the latest poll has clinton ahe
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35% in a four-way race. the survey was conducted after the first presidential debate. hurricane matthew has strengthened to a category three storm, as it swirls through a part of the caribbean that rarely sees such activity. rain and wind is within through aruba, monad, and carousel. the hurricane is expected to turn north saturday, and ahead toward jamaica, cuba, and haiti. the european union has cleared way for ratification of the paris climate agreement. eu nations agree to a fast-track vote -- the most sweeping a court to fight global warning could come to force next month. the eu has come under pressure to ratify after the u.s. and china agreed earlier this month. day,l news 24 hours a powered by more than 2600 journalists and analysts in over 120 countries. i am mark crumpton. as his bloomberg.
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scarlet: thank you so much, mark. deutsche bank, after telling to a fresh record low yesterday, shares of the german lender sharply.g of as much as 14% today on volume -- three times the daily average over the last month. french press is reporting that deutsche bank is nearing a $5.4 billion settlement with the department of justice that it would be a considerable discount from the government's initial request of $14 billion. to be clear, we have only seen this number cited by afp. bloomberg has not -- confirmed this. for more on the struggles, let's bring in yelm an owner and. do we know, or have a sense of how long these kinds of negotiations can drag on for? they can drag on for a long time, but yesterday we did see the news the justice department was trying to reach a deal with other big european
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banks before the election. they actually want to get to the bottom of this pretty soon as well, because there is going to be, potentially, government changes in the u.s.. so, they want to do it soon. .aybe they are nearing the end also, when the first number came out for deutsche bank, there were -- if you compared it to other banks that reach beforeents with the doj like goldman sachs, it starts around 14, 15, and comes down to 5, 6. it is not unusual. too,che bank said this, they were not what you pay is much mobile people were afraid because litigation reserves are only around $5 billion. anything above $5 billion says they go above their reserves, which means -- means they need to come up with more money, and a bank that is not really making profits these days -- and that becomes a problem. where you get the initial dish additional money. everyone is scared, they have to raise capital.
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it did not have to be $14 billion, but $10 billion, $8 billion, $7 billion -- anything above $5 billion would be a problem. this is close to $5 billion. that is why it is great news and shareholders are rejoicing. david: how well-equipped deutsche bank would be to pay a fine of this size -- if they were to expand legal reserves, talk about other legal challenges they face outside of this u.s. challenge from the doj. yalman: all the banks are not deutsche bank -- there are legal issues lingering parents some of these are settled. there is libor reagan. there is -- libor-rigging. fx reading. multiple regulators -- not just the u.s., but the u.k., the european union -- there is more that is going to come. again, u.s. banks have faced many times more amounts of fines in the last several years.
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kbw has a tracker. rangein the $250 billion that the banks have paid. it is a lot of money -- bank of america, citigroup, jpmorgan, they have paid enormous amounts, but meanwhile they are making money. they are making $20 billion, $30 billion, despite the fines they are paying. when you can make money, you can deal with the fines. the problem with deutsche is they are not able to make money. they are going through a big restructuring. in that depressed moment of profits, it is hard to come up with $1 billion or $2 billion here and there. scarlet: i'm glad you bring up bank of america -- every cycle quarter was a kitchen sink water. as you said, they continue to make money. john cryan leads deutsche bank and his predecessor wanted to make this bank a global investment bank. he came from the global investment side, ran fixed income in trading, ran the clientele side with hedge funds come emerging markets -- what are john cryan's credentials to
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get this bank act on track for growth? yalman: he is trying to clean up shop. he did all these legacy issues -- all these fines coming from the crisis of 2008, and before that, the u.s. housing market. but, you know, he is trying to do the right thing. he has a big, aggressive restructuring campaign. all of these things are a little bit late. i mean, when i look at the number of jobs that disappeared on wall street -- the biggest banks, european and u.s. -- by the end of last year, half of one million jobs since the crisis, but deutsche bank was not among those banks. they had not decrease their numbers. so, all these years -- eight years -- everyone has been restructuring. they are, sort of, late to the game. they said we need to do this. now they are trying to reduce numbers -- they are trying to get out of certain businesses. they might be able to do all of that, but meanwhile, they have to pay these fines, so they
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cannot make money -- they have to restructure -- the combination is bad timing. also, the combination with some banks -- like rbs, which was not really bankrupt, but it was bailed out by us government. they retrenched to the domestic market completely and the u.k. pad they do nothing else. they are all out of the other markets, including the u.s.. over-banked. there are so many small, retail banks, savings banks, and there are medium-sized banks, and there is commerzbank, which is not doing great either. so, deutsche bank does not really have a domestic market. it can, just heard a marie trench and make money on. -- domestic market it can sort of, just retrench, and make money on. david: how much further do we have to go until we have a better assessment on the health of a bank. yalman: stress tests have become very crucial in all of this.
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they do not stress all of these penalties. scarlet: they did not test for negative interest rates, for instance. there is plenty to think about. to thinks needing about whether they need to put a negative interest rates. there are some he had once for banking around the world. the u.s. has gotten over some of the issues. europe is still dealing with legacy, as well as current environment. negative interest rates seem to be helping the economy, finally, but while it is helping the economy, slowly, eight years after the crisis started, the banks cannot make money. then they have to deal with legacy. so, you know, all of these problems -- it is tough, and to know the health of the banking system, with so many headwinds, it is not easy. scarlet: in your 10 years of covering the banks -- the global banking industry, what you think will happen question mark deutsche bank, john -- happen?
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getsche bank's john cryan a little bit of a breather -- what does he have to do next week? yalman: if i were him -- i'm not an advisor. i do not know if he will listen to me. come up with asset sales. lehman brothers try to do this at the very last moment. they were really, really late to the game. i the time they announced they would sell the asset management business, it was the last day, and to be but he had pulled out. they had run out of cash -- run out of options. deutsche has a lot of great assets. it is a big bank with a lot of different units in different countries. they are profitable. so, yes, you do not want to get rid of too many profitable things, but if you need capital, and you don't want to turn to your shareholders, you get out of some markets that are not that crucial, and you get money for them. asset management -- it is wonderful, great, maybe it makes
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great money, but maybe you can do without it. so, those are things they can do. scarlet: consider shutting this is his. thank you so much. david: how an opec production freeze might hit the high yield market. we cut up with david fully, who says the opportunity is wide open. ♪
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david: you are watching bloomberg markets. i am david gura. scarlet: i am scarlet fu. david foley is in charge of one of the biggest energy allocated funds in the u.s.. among his top deals, should near , oil and gas cup and, geithner, and -- david foley joined alix steel earlier today to discuss
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the energy market now that opec has an agreement. mr. foley: fear has diminished from the first corner. people forget how suicidal they were in february if you are in the energy business, and hope is spring and again. the high-yield market is wide open. high-yield spreads on energy went from 90% -- 19%. they are down to 9%. jon: the debt market is open -- alix: the debt market is open. mr. foley: we want to focus on companies that need our help, in a period of transition. they need capital. in those cases, we can come in as a partner, or weekend by. you not -- what we can buy. you do not have to buy the whole company, that we made an investment in a firm, backing we are, really -- looking for to that. issue,art of the
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everyone wants to go there -- it is the place to be, the best asset, so valuations are expensive. acreage is double what it was a few years ago. are you having to pay up for those opportunities. deal i wasthe referring to -- we signed in april. the price fell before that. if it continues to run, you cannot price the return out of good acreage. permian is headed in that direction and we are thrilled he made some investment in that area. alix: we are not there yet, but we are getting there. mr. foley: tommy what oil prices are. [laughter] alix: 60. 50. mr. foley: at 50, good returns -- how much of a premium do you want to pay to get the acreage over that? alix: how much of a payment you want to play -- pay, david foley, blackrock? mr. foley: [laughter]
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like to get in on the ground floor. we will spend time to the technical analysis to discern -- either to see someone come in, pitch for an investment when they do not have 20% returns on each well. nobody has bad wells. of course, the truth is somewhat different. by doing a substantial amount of work on the geology -- trying to discern how much of your acreage is in the suite spot. quickly, paying up for that -- the second deal we did was in the delaware basin, which is less mature, less understood. littlewe have to be a ahead, would have a little different view that the vast majority. what kind of returns do you target -- you need 50, 70? mr. foley: we are looking at building a business over time. it is not just a well. you can get suffered in on a well. it is more of a retail investor thing to do. we want to build an important
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business, put individual acreage together, so we can have a an efficient development plan over the years. we want to build a business that can be attractive to a strategic buyer -- something of real substance. the deals we have done -- no debt. so, the returns -- you could say what returns and we have -- financial leverage or not. in an environment we think is going to have low and volatile commodity prices for the next two years, we want to take all the risk out of it. -- stayingtsoever power, we want to earn double or better over the course of a five-year period. alix: there is pe money in the system ready to be put to work. do you feel there are assets -- do partner say david, let's go, you only have a few more years question mark -- few more years? mr. foley: i got a call at the end of 2014, thanking us for being cautious.
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they know we are cautious and discipline, and that's what they like about us. once you deploy capital -- it is not easy to deploy it. it is easy in the sector -- the hard part is getting it back. we try to be disciplined about it. you do not swing at every pitch. you have to be disseminating. what they are saying now -- they are very happy we deployed the capital that we have, and we continue looking around the world for new opportunities. that was david foley. wantst: sheryl sandberg women to lean in, but according to a new report, they are not necessarily getting anywhere when they do. why women are still being held back in the upper echelons? ♪
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scarlet: this is bloomberg markets.
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i am scarlet fu. time for walk the talk, will be looking at a pressure point of social change in corporate america. hillary clinton aims to defeat donald trump to become the first female president of the net estate. whether you are a critic or an admirer, her ambition is well known and well documented. that is not the case in corporate america, where a new study has found there is an ambition gap resulting in women trailing manion c suite jobs. joining us to discuss this is it seems like the problem is not at the start. when you look at the number of women and nine at entry level positions, it is pretty even. the gap start to widen as you move up the ladder. lareina yee: absolutely. by the end, we see 19% women.
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what is really surprising is we see the equity -- the lack of equity started very early -- in fact, actually 30% men are more likely to win to actually get promoted for the first manager role off the bat. scarlet: so, it starts early, and you also find a distinct difference between the number of men and women that want promotions. 80% of men want a promotion versus 70% of women. 50% of women want to become a top concept -- executive versus 40% of women. how do companies go about fixing that -- narrowing the difference? there are a lot of things happening -- first of all, men and women want to be leaders -- they say they want to have a substantial role. them,allenges, if you ask do you want to be a very top leader, you see a drop, and in the numbers you should come you see a substantial drop in women, and a substantial drop in men.
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only about 60% of men actually want that, too, and when we asked men and women why you are not understood in the very top leadership roles in your companies, they both said family, stress and pressure, and they both said politics. -- site politics. it speaks to something we want to take a closer look at -- what is happening in the day to day work expensive does not make it as inspiring to become a top leader, and take advantage of the talent we have been developing in the current -- company question mark -- company? politicsthat brings in as well. if there's -- public policy as well. is there something, and is a not doing to inspire women and men? ms. yee: the good news is we have a witness. 70% say this is a top business priority, i understand this is imperative for talent and better business, not just social change. the challenge is men and women in copies do not buy it. lesson 4% of men and women say i
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see that. -- the, -- less than 40% of men and women say i don't see that. they say i do not believe my company has a plan. i might be aware they care, that they have this as a priority, but i do not know what the plan is, and i am not confident it will take us there. i think we are at a place where we pick about execution. we have an idea of where we want to go, but companies need to execute, just like they would when they develop a new product, a new market -- it takes a lot of work. scarlet: it certainly does. lareina yee iq for joining us. we will speak to the cantor fitzgerald ceo. ♪
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scarlet: live from bloomberg world headquarters in new york, im scarlet fu. david: this is bloomberg markets. let's get a check of the first word news this hour.
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mark c.: the national transportation safety board investigators have uncovered the recorded from a train that crashed in hoboken, new jersey on thursday. they hope it will tell them how fast the train was going when it slammed into the terminal. one person was killed and more than 100 injured when the train smashed through a concrete and bumper. an officer has pleaded not guilty in the murder of an unarmed black man. she is charged in the death of 40-year-old terence crutcher. funeral services were held today israelialem for former prime minister peres. he won the nobel prize for
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negotiating the historic peace treaty with the palestinians. president obama was among the dozens of world leaders in attendance. president obama: i cannot be more honored to be in jerusalem to say farewell to my friend shimon peres who showed us that justice and hope are at the idea.of the zionist buried nextwill be to another prime minister who was assassinated in 2005. the czech republic is joining countriesed nations urging for brexit talks to start soon. around thencern safety of eu nationals in the u.k.. a check man was beaten to death in london last week.
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global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. scarlet: thank you so much. let's get a quick check on u.s. markets right now. financials are leaving the s&p and dow higher. the dow up as much as 202 point earlier, holding near better numbers of the session. we are also seeing big cap tech well. doing speaking the nasdaq, let's head to abigail doolittle live from the nasdaq. abigail: we are certainly seeing a return to risk. lots of the strength have to do you mentioned. amazon and apple -- hitting another record high.
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there is said to be likely to dominant player in the days.erce d this is similar to other comets we have seen recently. with amazon at this record high, wall street is either getting this really right or really wrong around the e-commerce space. .e take a look in the bloomberg in blue, we have amazon. i days. this white, walmart. basically bricks and mortar retail here, e-commerce retail here. at thewas down 30% beginning of this year. we see this parabolic move. if wall street is right about , this divergence makes sense. otherwise, it could suggest a divergence between e-commerce and bricks and mortar -- maybe a little larger than comfortable and perhaps more the convergence
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in the future. time will tell. scarlet: it does look like e-commerce is being rewarded there. one bricks and mortar is doing well today, cosco. abigail: indeed, it is. they beat earnings. they made a dollar 77 per share versus estimates of one dollar 73. they missed revenue. wall street is happy with that. also, their renewal rate was 88%. they continue to take into the higher end of the consumers. analyst says she believes there is unit growth potential. ,ome good things here for cosco a stock that is still down on the year. david:david: back to our top st,
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banks borrowing dollars are paying the most since the sovereign debt crisis. this comes just as new money more now ons -- capital risk. happy to have you with us. you might want to talk about this in great specificity. what does it say to about systemic risk right now? >> i think the market is in pretty good shape in general. you look at the banks, the balance sheets are incredibly healthy. i think we live in an environment of zero interest rates, banks are in good shape. bank had atsche liquidity concerned that they were being liquidated today. scarlet: that is different from what we saw in 2008 which was a solvency concern. can you tell the difference between the quiddity and solvency? banks run.y is how
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leverage is significantly lower than the last time we were talking about this in 2007-2008. you are talking balance sheets are nowhere where they were. i think they're much healthier institutions now. >> talk about the distinctions between european institutions ones.erican >> i think u.s. banks are in very good shape. when yousee any issues really look at them. again, it is about leverage characteristics. right now, the banks are in good shape. it does point to the new normal for global wall street. where the you are in europe or the united states, it is difficult to grow profits in
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this environment. what can banks do besides cutting costs and improving efficiency? i think you said it right, banks are trying to become much efficient institutions. they have to use capital much more logically. they are in a long-term contraction phase of the environment. for the next 5-10 years, i think banks will not get bigger. they will get smaller as pressures continue. they will get more efficient as they improve the business model. scarlet: clearly concerns over banking in europe and in the united states has been a drag on risk assets this week. there are more macro concerns. usk the biggest concerns for . >> i think the concerns are
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that. the fed will potentially go in december, and what pressure that will cause. we're living in a zero interest fixednvironment with income. you put that together, and it makes everyone a little concerned, certainly. that is why you're seeing concerns in the hedge funds because it is difficult to make money in this environment. i think everyone has a feeling of concern about the marketplace and assets. we have not talked about one thing. cash used to be considered a real asset class at one time. i think in 2017 we will start talking about cash being a reasonable class. david: i just got back from south america with the treasury secretary. he talked about investment in emerging markets, in latin america. in emergnterested
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ing markets right now? >> certainly, we like emerging markets as we continue to grow our markets out. we are moving aggressively into the emerging market. scarlet: i want to go back to your point about cash. u.s. companies do have quite a bit of it, but are reluctant to deploy it in terms of making investments. what we have seen is the return of cash to shareholders. with that continue to be the theme and 2017? as long as they believe they debt atinue to roll t low levels, you will see companies give it back to investors. what willon will be they do in the meantime?
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hord cash.continue to recor you will see pressures on credit. you will see companies continue to keep cash. scarlet: for a while, it looked like the global backup in yields into awe were heading new regime. that has seemed to halt for now. was that a false start or the sign of a change to come? >> i'm amazed, when you look at where european rates are. the rubber band will have to snap back at some point in time. it will take some time. certainly, if you are an investor, you have to be concerned about the overall return. certainly, you are sticking risk
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with not a lot of returns. they are concerned about it .ight now david: you mentioned the factor of when says will raise rates. you think that will happen this year? >> i do think they will raise rates and december. they have to try to push interest rates higher. it does not help the economy over the long run. you can to the point where they have to raise rates to get things to move a little bit. more logical. we are in an unparalleled universe right now. back 20 years from now or 30 years from now, we will understand that it did not help growth. scarlet: just to come full thinke here, do you be a reason why
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they don't move in december? a fed that has been very cautious. >> i think they will. anything out there that can be considered an issue, they will take that and try to not raise interest rates. david: thank you for joining us from new york. scarlet: coming up, getting vintage auction champagne. that is coming up. this is over. ♪
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scarlet: you are watching
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bloomberg. i am scarlet fu. david: this is your global business report. apple ready to go to battle with the european union again, saying it kept them in the dark during attacks investigation. scarlet: a tough quarter for h&m. david: in today's quick take, we look at the fight over who owns the south china sea. inflation in the euro area has risen to its highest level since 2014. consumer prices in the region rose this month at a rate of 4/10 of 1%. the goaltill far below of 2%. scarlet: it has been a rough week for german banks. they announced deep job cuts. >> i think we have to see, in general, over the whole week, a sentiment, not all overermany, but
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europe. i'm convinced we will get forward next week. scarlet: meantime, apple in ireland is repaired to argue that they unfairly blocked them from the investigation. apple and the irish government contend that they never contended to a shift in the investigation. swedish fashion house h&m posted third-quarter earnings that missed estimates. david: time now for our bloomberg quicktake, where we provide context and background on issues of interest. part of the child china sea, the problem is that other countries claim that area as well.
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likeese islands don't look watch, but they are at the middle of a dispute over who owns them. there is one common player. china. the recent tensions have boiled even prompting talks of possible war. here is the situation. china claims more than 80% of the south china sea. countriescade ago, started making formal claims under new do in roles -- you and ..n. rules china got the big attention,
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they started building islands, and runways. the philippines won a case in july 2016. china's reaction, the award is null andyd -- no and void. washington endorsed the ruling. beijing said it had no intentions of blocking traffic protecting its territory. the u.s. does not take a formal sovereignty, but confined to are
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ships and aircraft. here's the argument. there is one big incentive for countries like china and china to stay friendly. trade. how quickly china has built positions and how nervous i is making everyone, some analysts say there is a significant risk of armed conflict, perhaps even as a result of those calculation or mistakes. greater resolve maybe greater risk to the u.s. and the region. about you can read more the south china sea and see all the quick takes on the bloomberg. that is your global business report. had to for more stories.
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scarlet: this is bloomberg markets. i am scarlet fu. david: in bloomberg pursuits a secretx years ago, room was found filled with 600 vintage bottles. these bottles are being auctioned off at southern, and exhibitions are very high. this discoveryh story which is an amazing one. what were the bottles doing their? >> this is an incredible story. just before, i would like to talk a little bit about what is ollinger. we are one of the last houses that is family owned. we were able to look through the .rchives and identify them we focus on the quality of the wine and just excellence of the wine. linger is known very well.
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rich, complex, elegant. to connect your question, what are these bottles -- why were they there? even being from the family, if i am there, i would be lost. .t is underground, dark this is where we put the bottles away. out,ime when you check it you don't know what you will discover. that is a little bit what happened. to clean up.ecided david: dustups the cobwebs -- dust up the cobwebs. >> exactly. they were not empty, they had wine in it. that is how we discovered these
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bottles. scarlet: it's an incredible story. how many of the 600 bottles we be auctioning off? >> not a lot at all. we did first a renovation. out of 100 bottles, half were in perfect condition. thesel have some of bottles with the 1914, 102-year-old wine. also, we will have some -- champagne. a whitevorite to have like that. david: let me ask you about the
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102-year-old bottle. what is estimated to go for? is this something that a buyer would potentially drink or keep in the co collection? >> i would leave it to them. . would drink it, of course we have 100 bottles of this vintage. it is very exclusive. .he wine is still lively that was the expression. it is incredible. 102 years old and the wine is still fresh. a nice, very balanced wine. of price tag kind are you expected? what you think it will sell for? >> we put the first bid at $10,000. it is our first experience in terms of auction. the first time that bollinger does auction. for us, we would be happy with
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anything above $10,000. it is so unique, this could go pretty high. we are very excited. scarlet: david is saving up money. >> good. scarlet: thank you so much. of course, you can learn more about luxury from bloomberg pursuits. the bloomberg. there was a wine class at cornell. david: i did not take it, sadly, no. from financial analyst chris wheeler who says deutsche bank is fine. this is bloomberg. ♪
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>> it is 1:00 p.m. in new york, london, and six clock a.m. in hong kong.
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good afternoon. i'm scarlet fu. david: and i'm david gura. welcome to bloomberg. from bloomberg's world headquarters in new york, a couple of stories from san francisco, berlin, and damascus this hour. here is what we are watching. settlement with the justice department, half the -- less than half the amount originally requested. it's the s&p 500's best day of the year with 10 record closings. cut productiono for the first time in eight years. of the cartels surprise announcement. julie hyman has the latest on the markets. julie: stocks at a high on the day. average is getting a lift on the last day of the month. some of it is a bounce back effect from the selling we saw
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yesterday. financials were up. health care is up. all of these groups are coming back. are we going to behind her on the month or lower on the month? we are not sure. it is going to be down to the wire. chart, verye is the little change, 0.04% negative is where we are at right now. september does tend to be the worst month of the year for the stock market, so even this is unusual in that it is not worse. back to today's session, it is a broad-based rally. utilities the only group down. we have seen yields come up again today. financials are higher, helped in part by yields and the situation with deutsche bank. staples, health
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care, round out the top groups. now, let's look at those deutsche bank shares and how they trade in the united states. again, a rebound from yesterday, now up 14%. afp is after a report that is reaching a much smaller settlement with the department of justice. we have not confirmed that, but you can see a clear market reaction today. among theipple effect markets. also, we want to take a look at a stock that is tumbling today because of a leadership change. the president of cognizant resigned this week. according to analyst, he was a well-respected leader at the company and he resigned because of an internal investigation into financial transactions in india. not sure if those are linked,
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but to be market is reacting to his departure. also, a check on oil. tohave been seeing a recount climbing in recent weeks. we will see how this kind of shakes out with what we have seen so far. trying to check the index on the bloomberg, that huge recount. it looks like there is a little bit of an increase. still, here is the huge recount on a weekly basis. a little bit of a bump week over week. still hanging on to gains. scarlet: thank you. let's check in on the bloomberg first word news with mark crumpton. mark: hillary clinton is ahead of donald trump in new hampshire. the latest poll has clinton leading 42%-30 5% among likely
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voters. the poll was conducted after the presidential debate. another endorsement for gary johnson. says itago tribune backs johnson for president. the paper says donald trump is thatit to be president and while hillary clinton is undeniably capable, it can not endorse her do to "serious questions about honesty and trust." children andat teenagers infected with zika virus suggests it can cause only ness.ill zika during pregnancy can cause severe brain and birth defects. this new report seems to confirm the believe held by health officials that infections after birth in children are similar to those in adults. most people do not feel sick,
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and some develop only mild illness. the united nations is developing a high level panel to discuss syria. they will discuss issues like and forced disappearances, arbitrary detention, and accountability for violations and abuses. global news 24 hours a day powered by more than 2600 in 150 countries. david: deutsche bank, after tumbling to a record low yesterday, is rebounding today. , three times the daily average this past month. deutsche bank is nearing a settlement with the department of justice over its sale of mortgage funds.
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the initial request was $14 billion. the have not confirmed this report. it comes after the ceo of deutsche bank rushed to assure confidence in his bank. in a memo to staff, he said -- is there anything more he can do or say? has repeatedly said there is plenty of liquidity, pointing that out on its own seems to be insufficient to push back from the fear. is there anything within his control? >> he has been trying to get on with cutting costs and reducing assets. but we are starting to get very
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worried about the market in general. there is a constant issue on the market. as we have seen from the rebound , hopefully, this very worrying will end and then he can .et on with tangible plans david: he urged the doj this morning to say something. does the doj have to say something about the smaller number? >> i don't think it is the size of the number given the amount of pain we saw over the past couple of days. even if it was bigger than 5.6, at least we could get some solvency. we know that in terms of
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reserves, deutsche bank had about $6 billion set aside for various settlements and fines, certainty here, right? even if it is about that level, at least we will know about potential increases. all sorts of measures have been taken, but we just need a number. everyone has been saying the one thing he needs to do or should be doing is to raise capital quickly. worthstion is, is it raising capital now before the settlement is announced? they were in some trouble in early february, when people worried about the cocoa bonds. the stock tumbled. they had an opportunity to raise capital when it was at 18 euros. hades, some say if they raised capital, the money would be going to the doj coffers.
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this is a negotiation we are seeing now. the issue of raising capital before the settlement, i am not sure. i think it would be hard to find a number. remember, if you do want to raise capital, it is going to have to be as big a number as possible because you also want to calm worries over the future. be an all ors to and to make it all, you need that doj number. david: there was a report last week about angela merkel reportedly saying she does not intend to bail out of this bank. do you think she will have to break her silence soon? >> i think, again, it depends on getting a number on the settlement. that might provide breathing space and time to give deutsche
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bank some room to maneuver. i think next year is an election year for angela merkel. i think if the pressure stays on, that could become an issue. i understand why it could be toxic to come out in support of banks when you have been saying over and over that the era of taxpayer bailouts is over, but it could be back on the table as an election issue next year. sticks to here script -- and she has been known to do that -- what kind of event would prompt her to say something or do something? markets,k financial the deutsche bank negotiations don't happen in a vacuum. be about the to cost-benefit.
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i think that she would have to be in a situation where she would realize that it's better intervene then let it get out of hand a potentially have a worse situation on her hands. in your column today, you say the pressure is on other financial actors to say something. what role should the european bank play? do they need to step in and say something, act in any way, ?erhaps provide more stimulus they did that during the year. there was action taken. >> absolutely, and the ecb is critical in this as a central bank and regulator of the banks. i think, honestly, it is perfectly possible -- people have been talking about the ece ecbng to find additional --
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try to find additional measures, but that runs counter to what the ecb is trying to do under its own power, and what the government can do. i don't think we have seen the kind of pressure that would lead to more action from the ecb, but , and the noisees continues as well, don't be surprised to see the ecb have an up swell. you have written about this short-term problem being a distraction. at what point does this become intractable? it is more than a distraction now. is he going to be able to write the ship in the long term? >> it is a good question. we are lurching from one deutsche bank to the next every few months. i think what is crucial is retaining investor backing, top shareholders, big funds.
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i think investor sentiment in .eneral is very weak he has the backing of his current man -- current plan. but that plan may need to change as well. thank you very much. check out his column on the bloomberg. it is a fluid situation. coming up, opec reduced to a reduction in production. we will talk about the energy market next. this is bloomberg. ♪
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o'reilly in gold and
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other commodities prices has gold and a rally in other commodities has driven canadian stocks to their highest levels in years. the most since 2002. canadian stocks have advanced 14% this year, the second-best performer among developed markets. there is also a 16% valuation , the widest gap since 2009. joining us now is danielle. toada is so highly geared the sectors, oil, mining. tell us how this surprise announcement has affected the rally. >> obviously, it is supportive of energy prices. by and large, the gains we have seen have held. strong month for
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oil. rising tide lifts all boats. it is definitely good for canada. , we saw news came out the canadian dollar gain and the equity markets rallied. it is very positive. for the most part, those gains have been holding. to put a little context around we still have oil stubbornly below $50 a barrel. gdp figures came out today, and they reflect energy right now. tell us what we saw in those numbers. >> they do, but not in the way you might think. off.s a bit of a one the gdp numbers were better than expected. it was fueled by an expansion of the energy industry, but really, it was because the oil companies in alberta were ramping up after
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the fires in may. of a oney, it was kind off. as for canada, the market has interpreted it as positive. a ratenow factoring in cut that is lower than predicted yesterday. but the chances are still hovering near zero. still sometem -- weight on the economy. fullet: just to come circle, with the opec news coming out, canada is not a member of the big royal cartels, opec. where does the announcement leave canada's energy industry? our bureaulking to chief in calgary about this today. most existing oil operations operate around $40. the new ones all need $70 a barrel.
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supportive, as the opec announcement would seem to be, makes it more likely we will see those projects coming on. and it remains to be seen if they will do anything. they have only made the announcement so far.
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scarlet: this is bloomberg markets. we have seen a flurry of offerings in the past few weeks. we join carol massar on radio. carol: thank you so much. we welcome everybody on bloomberg tv. raised a bunch of money, and man, they are really shut up big-time today. >> they raised about $240 million. they upsized the deal.
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in the course of the roadshow, they had a lot of interest, potentially more than they thought going into it. the stock is up more than 100%, over $33 a share. it's really continuing the trend we have seen. carol: let me ask, because it has doubled, is that just interest in this particular issue, or is it the ipo's. or is it that this was one of the few opportunities out there? or a little bit of both? >> they take data analytic storage and combine those two things onto an industry standard, inexpensive server. they were one of the first ones to do that. they were an early mover in the space. it reduces the cost to clients
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to run cloud computing. they are in early mover. we have seen a little bit of competition, but right now, it seems like they are still beating out the competition in terms of the quality of their product. to the second part of that point, we have had such a slow year for ipos. equity investors in general have. they got to labor day and said we barely had any returns. where can we find them? we have had some decent issuance in terms of new ipo's post-labor day. our busiest week of the year a couple years ago, and these tech deals, which are marketing very high topline growth, have gotten a lot of interest from investors. see more going to issues in the last quarter? >> it seems like there are a couple of things out there. advanced disposal is a waste management company that is
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coming back to market. in terms of busyness, it does seem like things are picking up. we are not going to have a blockbuster year. the sources i would talk to hope to get to 100. we are still below 80 right now. we will see what it shapes out to be. at thes just looking bloomberg ipo index and those names are up above 12% this year. they are outperforming the broader market. you just came back from the west coast. you are in the bureau talking to folks in the silicon valley. what are you hearing? >> the wheels are starting to turn. last week about blue acorn. they get grouped into the tech group. seems like they are a good
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example of what is starting to happen. companies are starting to make decisions. thet of people this year in funding world, whether public or private, have been on the sidelines. you have seen airbnb, snapchat, the rest of them have kind of been waiting and seeing. it seems like 2017 is becoming a reality, whether it is reaching for capital or looking to exit. be, it seemsll like it has become a reality that may be valuations were too high. go the company will have to out and raise money a potentially lower or flat valuations. people are starting to come to wems with that and say ok, know this might happen, let's move forward and make this decision. move on, isto
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anybody talking about a bubble? >> the argument i am hearing is that in terms of valuations, they might be a little high, but the quality of companies is so much better than 2007, we will probably have fewer dead unicorns, and maybe just some smaller unicorns. carol: digg you so much. -- thank you so much. scarlet, back to you. david: up next, the volatility surrounding deutsche bank. and we look at reserves. ♪
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you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. david: live from bloomberg's world headquarters in new york, i am david gura. scarlet: and im scarlet fu.
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let's get you caught up on the days news. more.rumpton has mark: the national transportation safety board says investigators are having trouble getting data from a recorder on the train that crashed in new jersey during morning rush hour. one person was killed, over 100 wounded. alabama chief justice roy moore has been suspended for the rest of his term for defying federal gay marriage rulings. the move effectively removes him from office. he encouraged probate justices to deny marriage licenses to gay couples. from dozens of countries were in jerusalem for the funeral of sharon -- of shimon peres, who won the nobel for negotiating and historic peace
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.greement bill clinton was president been. mr. clinton: he started as a student of israel, became its best teacher, and ended up its biggest dreamer. he lived 93 years in a state of constant wonder. potentialnbelievable of the rest of us. mark: president obama also spoke. eres showed that heart is part of the israeli ideal. voted on a peace plan to turn over weapons and be eligible for reduced punishment. it is estimated that 220,000 people died in the fighting.
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global news 24 hours a day powered by more than 2600 aurnalists and analysts in 120 countries. i am mark crumpton. this is bloomberg. david: shares of deutsche bank are rebounding sharply. ae bank has reached settlement with it the department of justice over the sale of mortgage bonds. the original request was for $14 billion. the settlement is for $5.5 billion. >> the vast majority of fromits are for him -- are normal, run-of-the-mill customers in germany. fears about the situation were overdone. the big focus is on what might occur if the department of justice goes to the top end of its settlement. was it some of the names
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pulling out that spooked theytors, or was it that saw an opportunity if shares were to get cheaper? >> far be it for me to understand why they did that. the most important thing is to look at the overall balance sheets of the bank. 250 billion dollars in liquidity. again, there are questions over capital. but at the moment, it is sound. i think he made that clear to his staff this morning. >> talking about liquidity risks, bank of america merrill see this jumped to something like a four-year high earlier this week. it has come down a little bit slightly. i know you have said you're not as concerned about deutsche bank, but what about the risk of contagion and any parsable --
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any possible counterparty risks ? >> buzzer we saw in the market all week. a lot of big names are going to be exposed. this is not lehman brothers. this would be a considerably bigger issue. but this is big retail banking, corporate banking with a deposit base as well as the kind of liquidity it has been forced to raise since the crisis. >> in terms of capital then, how could deutsche improve? >> 10 point 8% is acceptable. it needs to be over 12% by 2018 under the new rules. is that an f if they have a much bigger settlement than expected a muchgh if they have
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bigger settlement than expected with the department of justice? it's unclear. there is a chance to build that assuming the hit doesn't come until two or three years down the line. , he may have to raise more equity. >> has anybody done the math of what would be acceptable to keep deutsche bank in a stable position? are we talking double digits or less? >> it depends on how much is included in tax liability, so on, so forth. they have more than $5 billion in reserves. they wouldw how far be comfortable going down. maybe $7 billion, $8 billion. once you get past that, people will feel they have to access capital. but why issue capital at the moment and just give the
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department of justice a mac? i know the it's not that kind of game, but it would seem ridiculous. we spoke this week in an exclusive interview in london as part of the bloomberg markets most influential summit. >> we have them pumping all this money into central banks. what it has been doing is increasing leverage. i don't understand how more leverages the answer to a leverage problem. do fiscal going to spending that will help in the short term. to have to are going pay back the leverage, and it's going to be messy and horrible. is an expectation is that very long way away. we have a short-term problem. it's hard to take -- it's hard to make money. if you just take the basic idea that management is about
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allocating scarce capital to the best opportunity. when governments say capital is available at zero cost, there is not much opportunity to allocated efficiently because every return is sort of the same. so, to make money in the short innocent barman is difficult and takes a lot more skill, but the value of a next her 200-300 basis points of active alpha is incredibly high in a world where passive returns can only be 2%-3%. is certainly a challenging time for your industry. would you say there is a tipping point for the hedge fund industry, and what will it take to bring the industry back? tipping't think it is a point. i think there are pressures. i think because of lower returns , there are pressures we haven't even talked about, but that's part of it.
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industry is $3 trillion. how much more of a heyday can you have van peak assets? i am sure we will see more outflows. there will be other people who have run funds for 20 years who made a lot of money who think ok, hard work, the returns aren't as safe as they used to fun.oesn't look as much it's true. it's not as fun as it was 20 years ago, but there is a value we can bring to clients that things we can do that are valuable to pension funds and sovereign funds. it doesn't have to be fun. it just has to be something you can do that's valuable. are mostind of funds
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vulnerable? >> the current pressure is clearly on discretionary macro and big event funds. it tends to be the sort of mega sized funds where the pressure is highest because the emotional thought about the fact that you have a $20 billion fund and you are paying them a 2% management fee and you can see that it's $400 billion in management fees, that burns a hole in people's stomachs. those people are under pressure. it's a long time since discretionary macro's made money. i personally would not buy discretionary macro's today for the future. i think some people have taken that opportunity away. it's a very dynamic, very vibrant industry. when individual funds get too big or stale, the money will flow away.
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for businesses like us, it's about having a broad set of different funds that can provide value to clients. talking toround large investors in the world, the need for valuation services is greater than ever. scarlet: that was louis gallois. ellis.-- luke cand: coming up, how far the move to past investment go? ♪
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scarlet: this is bloomberg markets. david: it's time for a look at the exchange traded fund market. we have the man who engineered the series.ran want to go back in your history with etf's. you are largely a founding father of the industry. you started ishares. you came up with the acronym etf. let's talk a little bit about the growth of the industry and what you saw back then in the
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1990's that made you want to go trying toes and start reach a more retail audience. >> that's a great question. when i was running strategy at barclays, we were the largest indexer in the world. wasxing at that time already a top did in the pension market. we did over $2 trillion in indexing for multibillion dollar. , and there was a clear way things were going to go. it was a matter of packaging it so that we could do $100 units instead of $100 million units. we made the investment and did the education, and it has worked out very well. >> the rates that had come out ine largely to get trading institutions. >> one of the beauties of an etf
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is you can serve multiple markets. most of the time, when you and i are buying something from a large company, we are getting something more expensive of lower quality. etf's, we were not finding a lot of liquidity in the funds. the fund itself doesn't get hit with a lot of the in and out. what we saw was there was a clientele that could trade it, but the benefits were applicable in the long run to advisors and individuals, and they could coexist, which was a key point. you didn't have to engineer a with a lot of in an outflows. you could put the trading on a secondary market. it worked beautifully. quick so now, you are an etf investor. we are -- >> so now, you are an etf
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investor. walk us through what kind of etf's you use to sell portfolios. >> when we first launched, we had about 40 etf's and the family grew from there. what early on, you could use s&p growth with a little international exposure. today, there are something like 2000 etf's. unfortunately, in some ways, the market has moved backward. we got away from stockpicking. now you can buy thematic etf's. it has become hard for professionals to keep track. in addition, you also have the etf's you need to do a global portfolio, but that requires a completely different set of tools and framework. you don't have individuals or countries moving the same way. things are slower and macro economically driven. cut through all that.
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allow advisors to outsource to us, and run separate accounts for people on the strategy. >> that sounds like etf picking. is that going to slowly replace stockpicking as the way people go active? >> yes and no. we sometimes call it active management of passive exposure. most of it is about microeconomic things. is apple and a better position than samsung? have the same thing when you're comparing countries, regions, bonds, stocks. it doesn't make the same sort of sense. it's a slower rhythm and its macro economically driven. there is huge literature. this is been around for a long time. now to do accounts with hundreds of thousands of dollars and we will get smaller in time that democratize full allocation -- asset allocation
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techniques. >> that's great. thank you. back to david. david: thank you very much. , dan juergenng up of ihs tells us what he sees as beforegest challenges the oil cartel november meeting. this is bloomberg. ♪
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scarlet: dallas fed president robert kaplan is speaking right economy. the and he says that unemployment will slowly decline. he says the rates we are seeing are this low because of market forces. at the same time, he says he does not see evidence of
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economic overheating. you can catch his remarks live on bloomberg on live go. of 1.7% ingrowth 2016. in a move that surprised markets earlier this week, opec agreed to cut oil production for the first time in eight years. i think it is definitely a turn from where they were almost exactly two years ago come november when they said we are out of the business of trying to manage the market. we are going to let the market manage the market. now they are saying we will kind of be partners with the market. i think the pressure was on them in algeria. they really wanted to see something come out of this. i think there was some concern about whether they would let them out of the room without at least an agreement to agree on something in the future. so, looking forward, is
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the fact that they were able to agree, or agree to agree to something, more important than the fact that they were able to find some unity? >> think that's right. it's like the freeze last winter. coherence, and in particular, it's a challenge to people with shorts on the market. if they come out without an agreement, we could see five dollars, the price of oil. they have put a platform under the price of oil and suggested maybe they could work something out. it male may be in it knowledge meant of reality that iran can't go to 4 million barrels a day. -- an acknowledgment of reality that iran can't go to 4 million barrels a day. all of these obituaries for opec, which we have seen many times over the past decades, were once again to premature. it reminds me of when a
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specific policy move or would attempt to give a signal to traders on the market. scarlet: absolutely, and you are actually ahead of everyone in pointing this out earlier. it does seem like opec is threatening to make a change but to follow having through. we will see if they follow through. but i wonder, what was the incident for opec to actually come to a decision? is the bottom line that saudi arabia can't manage its finances without higher prices? >> it is certainly feeling the pressure. i think it's all so that they have moved along. the saudi's are at a very high level. this is a time when production starts to go down, and there is a strong sense -- i remember thinking this last winter, that nothing would happen until it was clear how high iran could get. there is a sense now that it could go up to another couple
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hundred thousand barrels a day, but that's about it. i think all so the stakes were raised. this was not an opec meeting. it started as an international energy forum, and suddenly, it turned into an opec emergency meeting. i think they realize that if they left without doing something, it would be a downward movement in the oil price, and revenues matter whether you are venezuela, or even if you are saudi arabia with $500 billion in reserves, it matters, and they are all feeling the pressure. david: a look at what the head this afternoon. looking at the end of the third quarter. here we are. let's put it into perspective. a good im just going to jump right in. at deutscheu look bank, that has been a big part
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of it. you look at oil. that's a big part as well. -- hereare looking at we go. basically, what we are looking at here is what i am calling recall bias. your 10 years yield. we have the fed meeting. the yield has come down. showing at the line deutsche bank bonds. those are getting weaker, but not catastrophically so. then in the bottom panel, looking at what i think has been , we are looking at the volatility index. there was a spike in the pre-fed meeting. and then finally, oil was a big , even though it ended mostly unchanged. it really did not go anywhere on
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the quarter, but it was bouncing up and down. and for a long time, we have been kind of looking the other way. big meeting ise in november. they say it will be a live meeting, but nobody believes that will be the case. know have a market that we reacts to fed posturing and the fed reacts to the market. if we get some volatility, that could move out even further. david: links very much. oliver renick from bloomberg news. -- thanks very much, oliver renick from bloomberg news. scarlet: this is bloomberg. ♪ . . .
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david: it is 2:00 in new york and 7:00 in london. i am david gura. quinn. i am vonnie welcome to bloomberg markets.
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vonnie: where live at bloomberg world headquarters in new york over the next hour covering stories out of san francisco, houston, and frankfurt. which might shares recovering after reports it is nearing a $5 billion settlement with the u.s. department of justice. pressure sinceer it opened a probe type 2 mortgage-backed securities. opec in a price war with u.s. producers. whether that translates into a victory for the u.s. remains to be seen. we head to houston to find out. with a few weeks until the election, both campaigns are facing criticism. donald trump getting hammered for early-morning tweets while questions are being raised again over hillary clinton's speeches


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