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tv   Whatd You Miss  Bloomberg  September 30, 2016 4:00pm-5:01pm EDT

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we are moments away from the closing bell. stocks climb with the euro on speculation deutsche bank may -- .ith the boj across markets i'm all of her manic. >> and julie hyman. >> equities headed towards their longest monthly advance since june 2014. >> the question is, what you miss? calmter a relatively summer, volatility increases at the end of the third quarter. we look to let -- look ahead to the final months of 2016. >> deutsche bank rebounds for a record low on speculation it may reach a lower settlement with the u.s. department of justice. ofcitigroup's global head commodities research ed morse tells us why he's not changing his forecast after this week's opec deal. we begin with our market
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minutes, the dow up almost 200 points. the s&p 500 gaining two and higher for the week. it was a bit of a tossup which way we would end but it does look like it's a positive number for the week. if this was the dow's best day since september 12 and within the different sectors looking at financial and energy, those two groups leading the gains in the s&p 500. >> it wasn't a bad week in terms of volume. you had an average of 10 billion shares. i'm going to jump into what happened specifically in the stock market today, looking at a couple sectors that were the winners and losers. we will start with the losers. there was only one group down, and that was the utilities group trait i thought it was interesting because if you look below, the staples still gained 94 basis points. a bit of a diverging story in terms of the higher-yielding stock. utilities there are much more projected to the yield play. that is interesting. the energy companies doing pretty well, this has been a big
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part of the market that has come back into play as you watch commodities and oil get a little more volatile. a little bit of gains here in the energy sector. happened on the week, this is the story of the week. you can't talk about any markets, whether you are looking at bonds, stocks, without talking about deutsche bank and the financials group. solid rebound overall of deutsche bank, beyond just the news after the doj fines, these stocks have been going down for a long time to write a little bit of relief, financials groups still ended in the red. the week, infotech pretty boring. tech stocks had been doing really well and they just kind of faded this week, so we will see if they come back. andou mentioned twice rates the effect they had on stocks. utilities and financials keyed off rates to some extent. today you saw a rebound in yields. that is something that generally
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has been on a downtrend here. the two-year yield up three basis points, the 10 year, four basis points to 1.6%. you had the deutsche bank stat, but you had the bump up in yields, something a bit of a relief for the financial stocks, and also hurt the utilities conversely. if you look at the month and what we have seen for rates, it has been interesting. it has gone nowhere. yes, you have a rise in rates midmonth. we heard from the fed and got the indication that we could get a rate increase but not until december. a trap once again coming out of that meeting, only a 2 basis point increase overall in the month. at her and sees, we have some relief on the deutsche bank funds. there's an encouraging inflation report in europe that shows inflation and the euro area picked up in september to the fastest case since late 2014. the euro gaining versus the
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franc on speculation the swiss national bank may have intervened, selling the franc. the spokesman declined to comment on that possibility. i included the rand to show it is firmer in line with that risk trade. for the week, the focus has to 21%n the mexican peso, up versus the u.s. dollar, or a should say up 21%, the best performer versus the u.s. dollar. there are the gains the u.s. dollar has made versus the mexican peso. slumped as donald trump's odds of being president increased and he did not win the presidential debates on monday and that sent him lower in the polls. that boosted the peso. mexico's central bank raised interest rates this week to make it more expensive for traders to use a peso to hedge risks out as well. we had all that deutsche bank news breaking. important to see what kind of action they take to try and stay me what has been happening. -- stymie what has been
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happening. >> the peso is tied to commodities. first, a quick look at corn prices for the day. they headed for their biggest gain in 2 weeks, a government u.s. report that showed stock piles trailed analysts' estimates. for the week, oil prices moved around. the big news was that opec wti nor -- neither surpassed it. you see brent is at 50, but they do finish the week higher. we got to that $50 level for brent and crude. those are today's market minutes. let's take a deep dive into the bloomberg. i want to look at treasuries and what we saw for the third quarter what might need to come out as well. treasuries over the course of this year thus
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far. if you want to look at the third quarter in particular, you have it from here to here. been any there has uptrend in treasuries over that period of time. i have these yellow dotted lines because there are such a divergence in terms of where we are going next, what are central banks around the globe, what is the federal reserve going to do? do have goldman sachs predicting a 10 year treasury rate of 2%. on the other hand, morgan 5%.nley looking for 1.2 there's a next ordinary amount of uncertainty out there right now, and disagreement and debate among different banks, investors, and strategists about what is going to happen. a lot of it hinges on the fed, but also, what is the state of the u.s. economy. is it healthy, is it not healthy. the data has not been conclusive enough one way or another for these economists to make a very clear prediction. >> the divide mirrors what is
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happening in the federal reserve as well. next, right? >> let's go with more forecasts. i love that chart. journalists love to talk about when major strategists diverge from wanting each other's opinion. there is so much at stake there because we know the markets move together. i'm going to jump in and look at the holiday rally. it's a little early, but let's talk about christmas tree stock investors know there is the seasonal rally that typically happens at the end of the year. her last three months of any year since 1970 are the best for stocks and since the bull market started, your quarterly return in the fourth quarter is twice the next best quarter. that is indicated by the blue line here. guess what, we are not going anywhere. trading is at that level. of the 19 strategies we survey
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at bloomberg, they are predicting the market to go pretty much nowhere. reason why this is nowhere, if i take this back 5 years, that blue line -- 82% of the time it's above the white line. 82% of the time, strategists for the past decade have predicted that the market is going to go higher than its current level. some of the despite recent upgrades by some strategists after the fed chose the hold rates where they were, but it wasn't enough to put their estimate much higher. markets will have a pretty flat line from here. >> from here, but still an increase on the year. >> 2017 we have five estimates right now. we are predicting the markets to 1/2, 2300.to 22 scarlet: we have covered bonds and equities. let's look at commodities. when you look at commodity you will sees, that nickel was the second-best performing middle this quarter, up about 12%.
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besttil today, it was the performing middle. then kind of overtook it in the final day. only orange juice and sugar did that are. lead did better than both of tradingadenickel, around a six week high after an unexpectedly stringent mining audit in the philippines, which is a top for suppliers. philippines mining an audit.ailed being shut down around the country, 20 more minds to be shut down in the coming days. tighter supply lead to higher prices, and according to citigroup's david wilson, prices could reach an average of $11,000 per metric ton in the fourth quarter. being shut down around the country, 20 more minds to be shut down in the coming days. 11,700.017 could reach something to watch out for. julie: we have headlines from viacom and this has to do with national amusements. something to watch out for. the viacom board has now said it has formed a special committee to evaluate that national
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amusements request. for pbs andwas viacom to evaluate a combination. the viacom committee is going to do this comment it looks like comprises the various board members here. this is an unusual situation we have been talking about, since the redstone family controls all buthe companies involved, there are other shareholders well, as they try to figure out whether they are going to get together here. scarlet: they are adding independent directors. this committee is made up of independent directors, including thomas may and nicole seligman. we will continue to keep you posted on developments there. it's been a roller coaster ride for deutsche bank after questions about its capital alarmed investors. we will explore. this is bloomberg. ♪
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mark: officials say the investigation into thursday's deadly train crash at the hoboken, new jersey station could take at least 7 to 10 days. the national transportation safety board investigators have recovered the events recorder. they're hoping it will tell them how fast the engine transit when it train was going smashed through a concrete and steel bumper and into the train station. one person was killed, more than 100 others were injured. hillary kenton's client pain -- memberss campaign -- could be called up to serve an emergency relief and national disasters. secretary and 10 told a rally
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today in florida said there is an issue concerning student debt. i believe one of the jobs of the president is to encourage more service, to help more americans answer president kennedy's call. you know it. can do what your country for you, but what you can do for your country. mark: secretary clinton struggled to attract overwhelming support among young people. this week she turned a former rival, bernie sanders, neck in neck with millennials drawn to third-party candidates. the election on presidential debates says there were problems with donald trump's audio during the first debate monday night. according to a one sentence statement with on the website, the commission writes, quote, there were issues with donald trump's audio that affected the sound level in the debate hall. trump has said following the debate that his microphone was faulty. rightsted nations human
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council has voted to convene a high-level panel to discuss human rights in syria. the resolution passed by a vote of 26-7 with 14 abstentions. it calls for the panel to discuss issues like enforced disappearances and arbitrary detention and the need for accountability for violations and abuses. global news 24 hours a day, powered by more than 2600 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. it's been quite a ride for scherzer deutsche bank treatise or to a bloomberg reported some hedge fund clients have reduced their financial exposure to the bank, sending shares to a record low. today the stock recouped some of those losses after a report that a settlement with the department of justice may be smaller than expected. our guest weighed in on these developments. >> i think we are living in an environment of zero interest rates, banks are in pretty good shape, earnings power is pretty good.
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liquidityank was the concerned that is being alleviated today, because of the potential sediment. >> certain newspapers were reporting that sentiment would come soon. think the most important thing is to look at the overall balance sheet of deutsche bank, $215 billion of liquidity. there are questions over capital but its ability to service itself at the moment is very sound. >> if you look at it as an actual credit risk, is it about to go bust? >> not at all. of senior debt is there to become -- it comes before any of the business creditors or depositors. that effectively means 60 billion which in a crisis becomes equity and that's more than enough for deutsche bank to be healthy for a long time to come. >> deutsche doesn't really have any issues right now. the problem is more people keep talking about it -- the more
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people keep talking about it, the harder it becomes. it's hard for somebody to be liver that much. you can't withstand shock. -- levered that much. you can't withstand shock. >> mike, a confidence issue. yet here we have a person saying it's not a real issue. but that's not how the stock has been performing, right? >> i think it was matt miller who coined the phase lizard brain. there is this part of your brain that reacts to certain things. makeesn't necessarily rational sense. when you see a word like collateral in a headline suddenly in the middle of the day, it takes you back to 2008, when the u.s. investment banks had a lot of problems with the clients. liquidity.nk has plenty of liquidity to spend.
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the quiddity can evaporate pretty quickly. a lot of u.s. investors, deutsche bank is a big box. the contingent convertible bonds -- u.s. focused investors, it has been something they have sort of watched passively go by and not really focused on -- when you see that alarming headline that hedge funds are calling collateral, it is a cell first and ask questions later type of thing. even today when everyone woke up there was a good of a rebound then we heard the report that the settlement -- we have been game ofnto a three part chicken. the government -- german government blinked. and, luckily it looks like the doj is someone blinking.
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they announced it at the right time or at least it leaked to af d the right time. with any of these news stories, it's interesting to see when sometimess like that, it is debunked 10 minutes later, sometimes confirmed 10 minutes later. we go to the end of the day and neither debunked nor confirmed. i guess that's a positive sign. the fears of deutsche bank persist because of what happened earlier in the year -- the stock humbled to a record low in february. i concerned it wouldn't be able to make payments related to its cocoa bond. there is something familiar with this deutsche bank story. the liquidity issue is front and center, but the near-term issue of the settlement with the doj is what started the selling for thisthere is something familiar. underneath it all, where is the earnings going to come from for this bank even with all these legal provisions it needs to make? >> how does a bank make money in a negative interest rate environment?
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there's a lot of rethinking of these european policies, and even -- there's a big act lash against low rates in the u.s.. that is the longer-term story for deutsche bank, how do they get out of this funk with negative interest rates. separatere a way to the woes associated specifically with deutsche bank and those you just hinted at, the larger issues that have been overhanging all the financial stocks and banks in the u.s.? banks are still unchanged. people are projecting that on to the rest of that sector. this knee-jerk reaction yesterday and people trying to figure out, what would this look like. in the long term, the earnings outlook is not as robust. rebound andmassive banks since brexit. --nk of 19% in the quarter
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bank of america is up 19% in the quarter. people have been waiting for interest rates for a few years now. the good thing for banks this week was janet yellen coming out and laying the groundwork for a december rate increase. i think all the stars align for the market this week, the opec agreement so of put the floor under oil prices. deutsche bank was somewhat resolved by the end of the week. and, even on monday the debate stuck little bit of momentum from the trump campaign manager people back for that certainty on the election that they had before that momentum took over. >> i been looking at the numbers for the quarter. if you want to look at the bloomberg, i have the various groups and how they get this werter -- that is the theme have been talking about, 12% on the quarter. amazon just keeps getting record high after record high.
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there is still the hope there, charlie brown always hoped. overall we saw 3.3% bump in the s&p 500 this quarter. >> a rotation we have been talking about all quarter. of -- ifexit does kind you're looking at this quarter and trying to dissect it, brexit changes the picture a bit trade the market had recovered right by the end of june. bank stocks took longer to recover. that is partially reflected their, that continued easing of concerns over brexit. the tech story is amazing, it's deja vu. apple and alphabet, microsoft, intel, amazon, apple of 18% in the quarter. that is about 10% or 12% of the s&p move right there with the
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iphone 7 fever going on. thanks so much, wrapping up the week and the quarter. fast commentary, go on the bloomberg. scarlet: coming up, julie has a chart on the bacon, egg, and cheese index that you can't miss. this is bloomberg. ♪
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oliver: -- julie: we are talking about food prices that have been falling. straight monthth we have seen a decline in the price of food at home. rosaries, in other words. this is the rate of change for
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this particular urban consumer food at home index. anything below the white line is a negative reading. monthsbeen nine straight that we have seen that change. we seen a decline in food prices, a lot of components. in particular, that promised bacon, egg, and cheese index, looking at the proportion of bacon, egg, and cheese in a bacon, egg, and cheese sandwich. obviously you see a decline in that index. we have seen all these component parts on the decline. then on top of that, you have basically a price war among three companies spirit you have food prices falling, oil prices falling. then you have some of these lower-cost grocers that have come into markets where they worked before. then you have the giants like kroger cutting prices.all of that has equaled, despite what seems a fraught consumer environment, but it is getting cheaper at the grocery store.
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they have to make sure their prices aren't too high either. new 365hey have this store format that will focus more on value. oliver: i feel like i'm killing all the fun right now. as essential as bacon, egg, and cheese is in my life, i'm going -- and looking at stocks. -- i'm looking at stocks. the white line is short interests, the average short interest moving down, a bit of a pickup overall. we are down from the highs earlier in the year but at the same time if you look at positioning, it hasinterest mova bit. you have to try to figure out -- this is right here looking at volatility, skewed so the hiring gets you betting on markets going down. foodet: julie mention prices declining at home. what about inflation?
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we will weigh all the factors the central bank needs to consider. this is bloomberg. ♪
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mark: a new ad from donald trump seizing on recent comments hillary clinton made, questioning why she isn't further ahead in the presidential race. it shows should urge of clinton asking, why aren't i 50 points ahead? fbi criticism of clinton's use of a private e-mail server while she was secretary of state. trump's campaign has been dramatically outspent by clinton's when it comes to ads. a homeland security department official tells the associated press hackers have targeted the ofer registration systems
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more than 20 states in recent months prayed in august the fbi warned state officials to improve their election security after hackers targeted systems in illinois and arizona. u.s. officials say election systems are generally not connected to the internet, making it harder for hackers to alter election outcomes. in jerusalem, a somber goodbye today to former israeli prime minister shimon peres. he died this week at the age of 93. he had won the nobel prize for helping negotiate a historic peace treaty with the palestinians. president obama was a monthly dozens of world leaders in attendance. >> i could not be more honored to be in jerusalem, o say farewell to my friend shimon p justiceo showed us that are at the heart of the zionist idea. mark: peres will be buried next to yitzhak rabin, who was
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assassinated in 1995. six people have been killed in landslides triggered by a major typhoon in southeastern china. more than 23 people are still missing. torrential brought rain and strong winds into parts of southeastern china and taiwan, destroying hundreds of houses and shutting down airports and railways. five people died during the storm. global news 24 hours a day, powered by more than 2600 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. ♪ let's get a recap of today's market action, u.s. stocks rallying with the dow rising more than 160 points. you have concern over european bank health diminishing it bit after afd reported that deutsche bank is getting closer to settling with the doj at $5.4 billion as opposed to the initially proposed $14 billion. we have not confirm the report
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independently. in terms of the best performer's financials, yes, we are the best performers. energy was up therew. ti -- wti up nearly 8% on the week. such a surprise. energy shares really hoping things out as well. oliver: despite all the hubbub about deutsche bank other than popping the vix yesterday, there was nothing in terms of volatility. 14 on the vix. if you're looking at the u.s. market, it does not seem like we are too concerned about the whole situation. "what'd you miss?" today's court economic number, the federal reserve. fed the worried about the rise in inflation? here is what the philadelphia fed president had to say. inflation, whatever
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measure you look at, is moving towards the 2% target. some of this when it comes to headline inflation is related to energy prices and other commodity prices. those firms increase we will see the 2% target attained. i'm convinced we will achieve that sooner rather than later. i'm somewhat concerned about falling behind the curve. is a managing principal at enduring investments. we will behat maybe running up on inflation faster than we want, is there some truth to that? is 2% fed says its target and one of the reasons they did not tighten in this last meeting was because of the persistence of inflation below 2%. if you look at anything other than core pce, core cpi or median cpi or wages or eci, you name it, they are all above 2%.
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there's no huge mystery here pc ishe fed -- that core going to get up to -- concerning the fed. >> if we want to jump into the chart, this is what you are pointing out. if you look at court pc, core all the bottom three there above the 2% line right here in the yellow. the conversation is about at this point, how to get that up to the 2%? is it possible using the method we are using right now? >> the fed focuses on core pce the difference between pc and cpi is at its basic level a pretty simple thing. cpi measures what consumers buy and pce measures what businesses sell. there's a difference right there that businesses also sell to other businesses and they sell to governments. when you look at the difference
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between cpi and pce, you will look what's dragging down pce are things that we don't really buy, differences in the way we are measuring these things. julie: historically does pce tend to be a likert -- laggart? >> it does tend to be below percenti, 1/4 to 1/2 over time. the two main differences, the refer to them as weight and scop e effect. the interesting ones are the scope effects. because the government doesn't by housing but consumers do, the weight of housing in pce is less. since housing has been a large part of the cpi going up, it's one of the reasons pci -- julie: do you think the fed is misguided? is there a blended measure they could be using that accounts for both of these? pce,e reason the fed likes
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it covers a larger part of the economy. course the question is whether or not the part that the pce is covering in addition, in particular government, does it respond to monetary policy? if you look at health care inflation in pce, compared to medical care inflation and the cpi, medical care inflation cpi, the stuff that we buy, has been going up. the medical healthcare inflation hasn't been. medicare and other things that the federal government buys directly. scarlet: that's obamacare? >> obamacare is probably pushing up the consumer part of it. in general because the government spends so much money
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buying pharmaceuticals and buying things through medicare, it tends to have a lot more control over those numbers. that spread is as wide as it has been in some time and we are measuring healthcare, different types of health care. patrick parker talked about commodity costs leading into core inflation rates as well. when you look at pce, sustained increase in energy prices now that opec made a decision to cut production, will that bleed through into pce? >> whether it bleeds into core, there's always a bit of a conundrum how much energy prices eventually go into core or not. that changes over time. i don't think that's a big concern. the real big concern for me is that the federal reserve and on aing on pce is focusing measure that includes a part of the economy that monetary policy can't affect.
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that seems a little silly to me. what is your conclusion from all of this? do you draw an investment conclusion from the idea that perhaps the fed is not fully capturing what is going on with inflation? >> the fed should have begin to unwind what is your conclusion from all of its extraordinary p, back in 2011. instead they kept adding more and more extraordinary policy. the investment conclusion these days always kind of boils down to what is the fed going to do next. it is a question of how quickly the fed figures out they are behind the curve. scarlet: a lot of people thought there would be a bank crisis in the making this week with all the concerns about deutsche bank. ,f we do get a banking crisis what does that mean for inflation? this lead to deflation? classically a banking crisis
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would lead to disinflation because it would lower interest rates. lower interest rates lead to lower money velocity. right now you have interest rates that are at a very low web. it strikes me as unlikely that we would see inflation. maybe you see the upward trend level off a bit, go down slightly. we are not worried about deflation. still by no means helping the fed's outlook for inflation. >> place for coming. michael a #, managing principal at enduring investments. scarlet: coming up, new polls show that hillary clinton has taken the lead. [laughter] [laughter] ♪
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pay $20smithkline will million to settle claims that its chinese unit bright foreign officials. the agency says the division give the officials gifts while on shopping excursions to increase sales. the drugmaker says is not admitting or denying the findings but says it will put anticorruption measures in place. subaru is recalling almost 593,000 vehicles, some for a second time. windshield wiper motors can overheat, increasing the risk of fire. the recall affects certainly to see and outback models from 2010 to tony 14. -- 2014. is scheduled for the recall is not yet finished. heldomm is set to have talks with several potential acquisition targets including xp semiconductors, according to people familiar with the matter.
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qualcomm is seeking acquisition to strengthen its position in a rapidly consolidating industry. a deal could be valued at about $35 billion. and that is the bloomberg business flash. "what'd you miss?" new polls, the first after monday night's debate, show hillary clinton has taken the lead in two key states. bloomberg's politics reporter joins us in washington with more and perhaps not a huge surprise, right? she did get good reviews following today -- following the debta. -- debate. we talking about florida and new hampshire. how important are they for hillary clinton? they will be two of the most hotly contested battleground states in the november 8 election. the reviews are in, it's clear based on the polls we have so far, and we have a lot of them, that hillary clinton won the debate in the minds of most american voters. there wasn't just those 2 states
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we have seen polls from today, including the tw mentioned that showed hillary clinton leading donald trump. all four of them, she is leading donald trump trade trump is an interesting position where he has to run the table on the swing states that are available. this is the beginning of a trend where the racist breaking away in hillary clinton's favor. i have bad news for donald trump. as they say, it is still only september and have a long way to go and the winner of the first debate does not always win the presidential election. >> you look at those two states in particular, new hampshire has been the focus because that's the place where she has gotten beaten up he badly -- pretty badly. obviously she had trouble with bernie. in terms of beating trump, is that a huge obstacle she has to climb, or is it hurts to lose? >> think if trump is going to win, they are theoretical ways
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he has to get to 270 without it. it could be crucial if this goes down the wire, if it goes down the final stretch and is decided by 4 electoral votes. i don't think hillary clinton's problems in the primary versus bernie sanders will translate. a vastly different electorate from the democratic primary to the general election. new hampshire has been trending blue for a while. the left several presidential elections, even before president obama won it twice. a look back to the debate, one of the highlights for the clinton campaign was when she baited donald trump with his comments against the miss universe candidate a couple years ago. donald trump has continued to keep the conversation going. he keeps tweeting about it in to what benefit is it for him to continue talking about this? it clearly was not a flattering remark, but does he have a strategy here or is this him not being able to control the impulse to respond? >> my colleagues and i spoke to
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a number of republican strategists yesterday and today. nobody can figure out the strategy here. it doesn't help him to be aending days in a feud with former miss universe winner who he publicly humiliated in the 1990's after she gained some weight. there's no apparent strategy here, this is more than anything acting on trump instinct and in full straight hillary clinton brought this up in the debate and she very forcefully attacked him on it and he has been facing a lot of criticism about it since then. a contestant spoke up -- spoke out about this today. she went after trump. this has been a pattern with him, he doesn't like any attacks on him to go unanswered even when there's no clear political benefits to engaging in the conversation. is there harm to him doing this? the folks who are committed
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donald trump of voters at this point, will this change their minds? the folks who are undecided, will this tip the scales when we are the other? what do they care about? >> i don't think the republicans who support donald trump will be swayed by this. need to keep the base he has, he needs to expand his appeal. suburban women, college-educated white women in particular who tend to vote republican. this does not help. this obviously will not help with them. they have concerns about trump's history of sexist comments, and insulting and demeaning comments about women. this doesn't help his case with them. they're concerned about his temperament. hillary clinton went after him just at the last -- in the last hour at a rally in florida and called his twitter attacks on her this morning a meltdown and called him unhinged.
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>> great analysis. newset: we have breaking on a friday afternoon. illinois treasurer michael willrick says the state suspend investment activity with wells fargo and he will hold a press conference on the state's plan come monday. california'sow the treasurer has suspended wells fargo from underwriting state on issues and from banking transactions. that the ceo of wells fargo should step down following the disclosure -- is it disclosure? i guess it was a disclosure eventually that they opened 2 million fraudulent bank accounts. wells fargo not getting any investment activity from illinois. toing up next, back commodities greatest city head of commodities research gives opechoughts on this week's
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and whether or not it will affect oil prices in the long run. this is bloomberg. ♪
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scarlet: we have breaking news for mexico's central bank governor, augusta carson says extraordinary events including the victory of president trump in november's election could trigger an interest rate increase. he said the central bank is comfortable with the current stance. meantime, yesterday the world reacted to opec's production deal. the agreement wasn't all that gripping. >> the days of the saudi playing the central banker of oil are over, adding and attracting liquidity. oil demandis that
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growth is unlikely to be as robust as it was in the past. has of it is that oil substitutes, challenges from electric vehicles and natural gas. part of it is that shale and the duke water and oilsands can be produced, all of them, at a much lower level has substitutes, challenges from electric vehicles and natural gas. than what wanted $100 oil in the years earlier in the decade. scarlet: in terms of this announcement we heard from opec yesterday, what details need to be spelled out for you to change your price forecast in a meaningful way? to $50 looking at $40 a barrel. brent reaching $65 by the fourth quarter of 2017? think the saudi agreement with the rest of opec has anything to do with the market itself, in the market is as the saudi's have been saying, marching towards rebalancing. growing, it'sis positive, more than $1 million a day. it could be more than that in
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the winter. non-opec production is continuing to slide. the big question on non-opec production is not whether it will continue to go to mexico and colombia, whether we get toa a price where u.s. producers can hedge and start drilling again, and that drilling can lead to a million girls a day of growth and production, in late 2017, 2018, 2019, and that would keep the lid on prices. scarlet: do we know what that price point is? >> we are in a dynamic period of time. we know what it used to be. the number is going down. we used to feel comfortable that it was a $60 number and now it's closer to the $55 number. we have had recounts in the u.s. going up by 107 oil rigs since the middle of the second quarter, continues to rise.
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i think we need another 400 rigs to get back to the point where u.s. production growth could be significant. creeping up there, adding 10 or 15 rigs every week really does have an impact over time. scarlet: what will happen between now and november 31 opec meets again? have somell have to internal meetings to try to figure out the targets and whether they can actually negotiate those targets. they have in the past negotiated a group target. may be something they could announced. they talked about a range of 32 barrels a day. maybe they will pick a number and say, that's what we are going to produce. we know we had put a quota on iran but not libya, not venezuela, not nigeria. scarlet: iran seems to be the big winner here. what costs did it have to incur to get the maximum flexibility? >> iran being a big winner is an
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optical illusion. we don't know what iran is committing itself to. for saudis to agree, there has to be some commitment on the part of the iranians. scarlet: that was citigroup global head of commodities ed morse. this is bloomberg. ♪
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>> a relief rally in u.s. stocks as deutsche bank shares recover on reports perhaps they won't have to pay as much as expected to the doj. for next week, china manufacturing pmi coming out tonight at 9:20 p.m. >> monday, 4:30
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p.m., u.k. pmi for the month of september. the latest read on the brexit effect. >> we also have the
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