tv Bloomberg Markets Bloomberg October 7, 2016 10:00am-11:01am EDT
david: from washington to london, covering stories out of germany, wall street in florida in the next hour. byrolls in the u.s. jumped markets, the the dollar paring earlier gains and stocks falling on the news. crash for the pound. analysts expect the initial byline may have been sparked an error -- pound dollar parity a level unseen in the uk's currency history. david: hurricane matthew moving along florida's east coast in the u.s. 500,000 florida homes and businesses have lost power.
30 minutes into the trading day in the u.s. julie hyman has the latest on the heels of that jobs report. julie: we are seeing stocks pulled back a little bit this morning. initially, looked like a goldilocks report. enough material in there to allow the fed to raise rates before year end. now, turning a bit more negative. the headline number coming in below estimates with a read of 156,000 versus the 170,000 that was estimated. this number historically has been revised higher in five of the past seven septembers. to keep in mind as we watch the action today. in other asset classes, we are seeing a bit better behavior on the shorter end of the than the longer. with thethe curve here
yield on the two-year going down just a basis point. if you look at the u.s. dollar, we are seeing some small declines there. even though much of the commentary this morning said that that is still on pace to raise by years end, that's not what's being reflected in the thatmarket and currency rates market and currency market. reed hastings speaking at a conference to they, pointing out weakness in china for netflix. netflix is focused on the rest of the world. the stock is little changed. earlier come the shares fell by 5%. take a look at the groups on the move today, we have industrials that are the worst performers in part because of negative earnings outlooks from the likes of honeywell and pcg. nejra: thank you so much.
the focus very much here on sterling, 90 minutes until the close in equity trading. overnight in the asian session, two minutes of chaos where we saw this flash crash of sterling. dropping the most since the brexit vote. it has not managed to recoup all its losses. i have tracked sterling since april. roughly 124, perhaps 123 now. we have really seen that three-month implied volatility, the white line absolutely spike there, hit its highest since july. traders pricing in a little more volatility. still overn what caused these declines.
look what's happening to the ftse 100. we know a weaker sterling has --n seeing gains on the ftse it is edging up towards that record. we did see this benchmark hit a record high, higher since april 2015 in the past few days. look at european stocks more widely, this is down more than 1% right now. a third day of losses, sending the stoxx 600 towards a second weekly decline, it sports weekly decline out of five. -- it's fourth weekly decline out of five. basis,look on a weekly the stoxx 600 heading for a weekly drop. the bank index heading for a weekly gain. david: let's check in on the first word news now.
taylor: hurricane matthew is bearing down on florida, about to become the strongest storm to hit the u.s. since 2005. it has been hounding florida's shoreline with heavy wind and rain for hours. the hurricane has been downgraded to a category three but still has winds of 100 miles per hour. 2 million people were told to flee their homes. in haiti, authorities say the hurricane death toll is approaching 300. the expected to rise once rescue crews get to the remote areas. the international red cross announcing an emergency for $6.9 million for medical aid, shelter and water for 50,000 people in southwestern haiti who were hit by that hurricane. needed to meet the immediate needs of children in the region. colombia's president is dedicating his nobel peace prize to the people of his country. the nobel committee honored on
anuel santos -- juan m santos. santos is trying to resurrect it. a group of high-profile defectors will establish a north --ean government index i'll in exile. they would try to install a democratic political system in north korea with an economy based on china's. the un security council will extend a crackdown on human trafficking. member nations will be allowed inspect ships on the high seas. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. nejra: now to washington, d.c.
where global finance leaders and central bankers are convening this week for the annual meeting of the imf and world bank. francine the pot is there. -- francine lacqua is there standing by with sergio ermotti. francine: there's one or two things going on with the banks. what is the mood out there? one, we gotsame ,uite used to every other week financial markets are now more stable. we still need to go through all the challenges we are facing on the macro front. how much do negative rates hurt you? sergio: they hurt us in respect of our ability to generate
revenues on our deposits. we have a long inventory of deposits. our clients are very risk-averse. that is a real challenge. francine: deutsche bank is one of the biggest concerns. how many times do you get asked how ubs is different? sergio: i was waiting for that question. deutsche bank is in a graphic situation. a situation that is much better than people probably assume at this point in time. the system is very strong. the same kinds of discussions and matters five or six years ago would have created much more turmoil. thateason i'm confident is
i see how the system reacts and i get comfort about this. francine: have you think the doj is handling negotiations -- how do you think the doj is handling negotiations? every situation is different, so it is difficult to judge from the outside. i would prefer not to comment. sergio: we had this huge -- francine: we had this huge fall in the pound. have we learned anything about the markets? sergio: it's difficult to make comments without knowing the codes. there is a clear lack of liquidity. most that is not the liquid time of the day in terms of pound dollar.
in thes less liquidity markets and people are concerned about developments. out of the uk exiting and the there is a readjustment of the pound to the new paradigm. francine: how closely did you watch the tory party conference? are you convinced we are looking at a hard brexit? sergio: i'm still not convinced. those kinds oft topics, one issue is to say what from to be said vis-a-vis a negotiating standpoint of you and a domestic standpoint of view.
it may not be the same as we have today. it will continue to play a role in the future. the reality is the assumption is always that growth is going to go somewhere else in europe. some of it may also go back to the u.s. or go to asia. francine: you said recently that ubs is ready to expand during any turmoil in the market. sergio: there is a level of complacency around the numbers macro themes we are facing and the geopolitical risks we are facing.
are sustained by liquidity. that's the reason the market has despitete constructive these challenges i just mentioned. so, liquidity can freeze very quickly, as we have learned in the past. what concerns me is a --vergence of assets francine: would there be some sort of crisis? rick: what could -- sergio: what could trigger an event and a selloff or beginning of correction? is it coming from the macro front or the geopolitical front? we don't know. there is a level of complacency and a sense of, ok, we are used to it. eventually, some of these issues
we are facing the to be addressed. francine: would a donald trump presidency be a possible catalyst? it should be a shock. sergio: we don't know. those kinds of political events are unlikely to make big changes third i hope wins there is a possibility to unlock some geopolitical themes with a new administration. i hope this is an opportunity that needs to be exploited. francine: going back to deutsche ipoing theire asset management. sergio: we are never commenting on potential m&a situations. if they ipo, there's nothing we need to look at. francine: you could always change their minds. would you like to be bigger in
asset management by buying something? sergio: i'm not commenting on particular matters. every going through designation of our asset management -- a redesignation of our asset management strategy. the asset management industry is an industry that is becoming very competitive and is likely to see more consolidation. we look at first about making our business more efficient and effective and eventually, we cannot rule out anything, but that is one option. our base option is to grow organically. francine: thank you for joining us. -- that isk rieder sergio ermotti, ubs ceo. at 2:00 p.m. eastern,
among those calls being -- cars being recalled, the audi a7. on the bloomberg billionaire index -- the waltons $3.5 billion lost from their fortunes. shares fell 3%. alice, jim, rob, lucas and christy walton have a combined net worth of $120 million. has agreed toe --l a unit to carlyle group the company's health chemicals and equipment such as spray boost. that is your business flash. david: less than our into
today's u.s. trading session. stocks and bonds are fluctuating. the dollar is falling and gold futures holding onto gains. steady growth in the u.s. labor market. fed's hand.orce the >> this is a no drama report. that is what we would like right now. we are digging our way out of the problems created by the recession. we've growth is now the strongest it's been in seven years. >> i thought it was a solid number. it markets were expecting the recent growth data to be good, you take out seasonality of the government workers and we are back at 180,000 jobs. >> there's not much there to keep the fed from raising interest rates. whether it is november or
december, i'm not sure. at some point, they have to. the central banks tend to be a little weak kneed. the ecb may be running out of bonds to buy. their policies may shift to more price bullish. nejra: we will break down that jobs number and what it means for the fed a little later on. still ahead, etf's tracking subsectors like social media, 3-d printing and client computing are providing big returns. we will find out why, next. this is bloomberg. ♪
uts are searching this year. dust but because of m&a activity in their various industries. more of a a bit pickup of etf activity recently in various areas. we talked about the c.t.s. before, but not with regards to m&a activity, necessarily. social media is one of them. >> this one made a name for itself when facebook went public. it is up 41% since march. it held linkedin when microsoft bought it. the big in t ones -- twitter went down recently, but for a wild, that was a big contributor. it has yelp and pandora.
uts typically will go out and have bigger weightings for smaller names -- etf's typically will go out and have bigger weightings for smaller names. this thing is volatile. it can go down just as fast as it goes up what an interesting alternative purpose for these cute sounding etf's. if snapchat ends up having his ipo, that could go into an etf like this. are designed to get them within a week or two. it would take a tech etf a year or two. these are very liberal. julie: buyer beware because of that volatility we talked about. , the 3-ding etf printers which do tend to have some pretty crazy swings.
>> this is up 15% since it came out when your ago. a third of that performance as from two stocks that general electric bought. thing doesn't have any overlap with the s&p or the tech etf. another it is going out and buying stock you may or may not know. could be takeover targets. julie: social media and 3-d printing. now, time for cloud. the other buzz word. sky, how appropriate. skyy. >> this one is the least added value in my opinion because it's got microsoft, apple, google, amazon -- a lot of overlap. netsuiteit does hold and a few other companies. this is up 15, 20%. julie: another one is a biotech
etf. ,> this is the bio shares biotechnology products fund. this one had five acquisitions and is up 25% this year. etf is up zero. julie: thank you so much. lots of buzzwords today for us. nejra: thank you so much, julie. today'sead, how will weaker than estimated jobs report impact the fed's decision to raise rates? is a hike this year off the table? this is bloomberg. ♪
hurricane matthew has been pounding florida for hours with high winds and heavy rain. matthew was downgraded to a category 3 storm, sustained winds at 120 miles per hour. hurricane is located southeast of daytona beach and following the shoreline. about half a million homes and businesses are without power. 2 million people in the path were told to evacuate. on sunday night, donald trump and hillary clinton meet for the first town hall-style debate at washington university in st. louis. the second debate present challenges for both candidates. clinton has largely been absent from the trail while she prepares. trump held a town hall-style event in new hampshire thursday but denies it was practice. join us sunday night with all the respect mark halperin and john heilemann have special coverage before and after the debate in st. louis. a: 30.ts at
the winner of the 2016 raise is yet to be decided but indiana governor mike pence is already emerging as the republican favorite for 2020 if donald trump loses. 22% republican say pence as her top choice. 12% said they would prefer texas senator ted cruz. 11% favor senator marco rubio. a powerful bomb exploded on a passenger train in southwest pakistan. six people were killed and 19 wounded. no one immediately claimed responsibility for the attack. separatist groups in the province have claimed similar attacks in the past. a piece of an aircraft wing found on the island in the indian ocean is missing from malaysian airlines flight 370. that is according to both malaysian and australian officials. it is the 6th piece of wreckage linked to the plane. the aircraft banished with 290 in marchople on board
2014. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. david: the u.s. economy added 156,000 jobs in september, fewer than estimated. the employment rose to 5% and the participation rate at a six-month high. >> we have another solid report that shows both steady job growth and wage growth. you look at the wage growth over the business cycle, better than any business cycle we have seen since the 1980's. david: what does this mean for the data dependent fed? joining us is betsey stevenson. professor at the university of michigan. we have heard this referred to as a goldilocks jobs report.
your reaction on twitter showcases long, steady job growth. give us your reaction, first of all. >> i think this was a solid jobs report. in theber of jobs added payroll survey was a little below what people were expecting, but if you take a look at the household survey, looks like things are also going gang busters. like to put both those surveys together. when you do that, it looks like we're right on target. if you take a long-term view over the last six months, we have had job growth of 192,000 jobs a month. it has been a remarkable come along comest to -- slow, steady job growth, pulling people act the labor force who have been out and reducing the long-term unemployed rate. we are now less than one quarter of the overall unemployed and it has been a long, long time since they have been such a small fraction of the unemployed. david: help us understand the
importance of this report, put into context. there is political factors and the importance the fed ways what it is going to do in november. >> the challenge for the fed is to think about how much slack there is in the labor market. if businesses want to keep adding roughly 200,000 jobs a month, are they going to be up to find people who want them -- those jobs? so far the answer has been yes. we have been getting people off the sidelines who have not been participating in the labor force, and they have been showing up for these jobs that businesses are creating. that is what we need. the fed does not want to choke that off. the fed gets concerned if businesses want to keep hiring 200,000 workers per month and there are not the workers there for it, what is going to happen is they start bidding and fighting over each other for the remaining workers and that is what causes our inflationary pressure. the question is, how much slack is there?
we've never really seen this coming situation before where the slack is coming from people who are not in the labor force. we are not seeing the unemployment rate getting pushed further and further down. are people seeing responding to the increased job growth by entering the labor force. as long as i continues, then the fed once to allow that to continue, but that is a tough call for them in terms of how much farther connect go. how many more people are willing to come into the labor force. nejra: i just want to ask you about wages showing less of a pickup them projected. what does this mean for inflation prospects and also what the fed might do? again, we have seen some pretty strong, steady wage growth, but not to the point where the fed needs to be concerned that what we're seeing is inflationary pressure in wages. that is the goldilocks you referred to. what the fed wants to see is that the labor market is moving along, but not -- not
inflationary pressure coming from firms having to compete with each other for a small pool of workers. nejra: i have a chart. --ickly, what it is showing basically, showing the two-year treasury yields versus the odds of a 2016 fed hike. we continue to see the odds rise of a hike in december, but the two year treasury yield come off a little right now, also a little bit of a weaker dollar. whitey you think we are saying dot market reaction -- why you think we're seeing that market reaction? -- not, you know, having being able to see the data, i don't want to speculate on the market reaction. thell tell you, you heard cleveland fed president come out this morning and say this report said to her in this still time to raise rates. i think there is a light a speculation about whether or not the fed should raise rates.
frankly, what we're seeing between the employment reports and the gdp reports are somewhat different stories. we has in the first half of this year economic growth has decelerated. that is slowing. in gdp growth, we usually see a slowingre we see the and hiring. the last segment fed wants to do is be the cause of the slowdown in hiring, so they need to be paying attention to not just what is happening in the labor market, but what is happening on the gdp side of the aisle. david: looking at these data, i wonder what we learned today about where americans are the types of americans looking for work will stop i know underemployment was at 9.7% and held there. what do we learn today? mean, i think this report looks good for everybody. if we are looking at one month -- we should look overall at the economy. what we see in the economy is things are working really well for high skilled workers and not
working as well for lower skilled workers. those are the ones who have high and a planet rates and also have low participation rates. they're having low-wage games. -- gains. college students right now have the highest premium in terms of higher wages compared to people deskout of college degree without a college degree than they have had in a very long time. that is the good news, we should give people skills. the bad news is, people who don't have skills are being left behind. so people who are lower skilled workers with less training, less education. david: i am curious about the energy sector. oil hovering around $50 a barrel. talks of u.s. company is investing and more production in the u.s. looking ahead to the next couple of reports, will receive growth going forward? -- will we see growth going forward? >> in the energy sectioor
recently, it responds quickly. when they do not need workers any longer, they're not holding on to them. they are able to shed them quickly. when they need them, they will hire them quickly. that is something to be looking towards in the next couple of reports. betsey stevenson joining us from ann arbor. thank you. nejra: coming up, a lackluster public debut for shares of entergy. company'sar from the ceo. this is bloomberg.
live from london and new york. david: you are watching bloomberg markets. bloomberg business flash. we begin with honeywell international. third quarter profit was below forecast, cutting the top end of each one a 16 earnings target. honeywell said the recording just the quarter dropped -- honeywell said there quarter dropped and the weakness will spill in the 2017. reinstating a verdict it won again samsung, the case still feature.e unlock u.s. court of appeals from the federal circuit says three-judge panel was wrong to throw out the verdict in february. in order the trial judge to consider whether the judgment should be increased based on any international infringement by samsung. former mf global chief is close to resolving allegations he failed oversee the firm properly with a brokerage unit spiraled toward fairly are -- failure.
they pay $5 million to settle the claims. he's a former cochairman of goldman sachs and served as new jersey's governor and was u.s. senator. and that is your business flash. ipoa: europe's biggest since glencore began trading today. german electric utilities trading in began frankfurt. shares opened more than 3.5% above the offered price. ceoline hyde spoke to the who said despite a strong debut, he expected volatility. >> the first quotes they came out, good confirmation of how the market values it. in the first days, see a lot of trading were people will hedge their books. so far, it holds up. i think is a very good sign because we have oppressed the
market. the market is stable on that level. we are not disappointing any of our first investors. are you expecting them to sell off more after the six-month lockup? >> yes, but not immediately. rwe has a lot of provisions with a very long maturity. therefore, shares like innogy are there most superb financial flexibility, years if not decades to come. i think it is good for rwe and for innogy. having one stable shareholder for a company of such a size is a comfortable position to be in. caroline: it is interesting you are waving goodbye to that company. is it a shrinking business model? is this the future? >> no. we have made a lot of promises to the capital market, to the shareholders, to the investors. it was me making those promises. i think this fair to deliver
upon that. i can't do that as the coo ofinnogy. fulfill theews to obligations -- somebody needs to fulfill the obligation's will stop caroline: i was looking -- how would that look in terms of strength of the business? >> first of all, it is a very stable investment grading company by perspective. e, long as we are part of rw we will not immediately get an independent rating. we will ask a survey rating company to do so. by the way, more than a rating agency, already looking through this because the valuation of is a radio must on a standalone basis. caroline: how difficult has it been drumming up investor support? as the deutsche bank story been in any way a hit on your own
shares? >> not really a hit. we had a bit of exciting moments . the deutsche bank was a minor one for us. the whole quantitative easing discussion that we have had in the middle of this week certainly was something that impacts companies like innogy. that was the case, but we see most of the investors, specifically long many in the u.k. and america, looking for long-term investment so it is not the emotions of the day that determine this and it was more of the long-term business case which impressed him. caroline: are you worried about deutsche bank? >> me personally, i think a society like germany needs a stable german or maybe even european based bank. deutsche bank, it could be put up for, but really for the finance market, but all of the
german industry that does not have a local player to help them. -- line: the report is havedon't think investors given us money to invest in deutsche bank, but in our renewables. i'm pretty sure those investors that want to pay good money on deutsche bank can do it directly. we have a very good relationship , banking relationship of deutsche bank. i think at this moment, deutsche bank needs stable customers and stable partners. ceo.: that wasinnogy david: still ahead, the conversation of deutsche bank continues. share seven cut in half. the company is considering a share sale to raise money for its mounting legal bills. this is bloomberg. ♪
york. david: you are watching bloomberg markets. isew headlines, stan fisher speaking in washington and a banking conference, addressing the unemployment numbers from this morning saying growth is not close to what we used to view as normal, saying the rise of unemployment participation rate is fine and saying investment is been discouraged uncertainty. stan fischer speaking in washington at a banking conference, the first of four fed officials speaking today. look at the market reaction, we are still sing a slightly weaker dollar. we have seen the two-year treasury yields coming down as well. now to deutsche bank, shares rising today following a report the bank is weighing various options, including raising capital in case it is needed to meet rising legal bills. we're learning the ceo is set to meet with u.s. justice department officials today, according to the frankfurt daily
newspaper. ruth david covers the european banks for bloomberg. she joins us now. how much capital are we talking about and what does the amount depend on? >> can raise about 5 billion euros without getting approval. they have preapproval that could be about 5 billion. which is 50% of the market cap and then if you take a discount, a typical discount for these kinds of sales, the same amount i can go with immediately if to thent to write up fines. they want to anything until they knew the full extent of the fines. as someone said, you don't raise money to give money away. the want to be sure what fines are, how much they're going to pay before they go out and do anything. investment banks are pitching to them and their conversations going on with investors, how
they feel, maybe look at getting anchor investors. if they do it be deal, the hourly have investors -- they are ready have investors. you mentionesting the anchor investors. we heard reports of other german companies almost stepping in to deutsche bank's aid. what are the banks options, perhaps even the best options to raise capital? >> they have their asset management business. the analyst numbers are about 9.5 billion. they could look at listing a stake in that. john cryan says he does not want to sell it. if they listed, they can raise 2 billion to 3 billion from it. they can still say they own a majority stake in this. you have seen other banks across europe, last or you saw societe generale do that. this is not a new method. some ideas are doing well in
this market. foring at maybe an ipo another one of their businesses. david: given the last few weeks, how long can john cryan's insistence it not be put up for sale? is he facing more enthusiasm than before? >> he is. marketsinvestors in the are waiting to know what is the full extent of the fines. whether you're talking about big anchor investors coming in and putting money there or you are talking about shareholders saying you need to do something, i think they are all waiting. but while this is going on, you're having the top investment banks on wall street pitch to them a range of solutions. in deutsche bank ratio, 11.2%, so they want to know how much of a hit they're going to take on these fines whether it is in russia or the u.s. before they do anything. they are lining up a bunch of
options, is our understanding. david: i'm curious about the timetable. john cryan has laid out this five-year plan. the newspaper reporting he may meet with the doj while in town. is this accelerating his plan to restructure the business? how much is he having to scrap the plan he put in place? >> i am not so sure it is accelerating as much as it is ensuring they are implement -- implementing it. deutsche bank stock has fallen about half this year, have -- it is half the price. they are talking about fines. there's a lot of sense of you don't know what the extent of it is and is this affect the investment banking business. he wants to ensure he is making the right noises, telling investors it's fine, meeting with the regulators, with the government, and trying to ensure it is business as usual at deutsche bank. nejra: how with her troubles affect the rest of the investment banking business?
anyone tried to capitalize on it? >> we saw the german bank, commerzbank, have cheeky adds saying they're the only deutsche bank in town. so you are seeing some of that. of course, i guessing investment banks pitching for business might be making the case because deutsche bank is going through problems, maybe they cannot extend as much balance sheet support, so you should be going with us. that is a bit behind the scenes. we're not saying that so much publicly yet. your jamie dimon saying he thought that deutsche bank would whether it's troubles. what they're saying and pitch meetings, sure. but not publicly. nejra: i've seen those adverts. thank you so much. coming up on the european close, we will dig deeper into what we know about today's flash crash in sterling. what else is driving the selling frenzy this week?
plus, it's u.s. payroll support strong enough to get the fed to move? stocks are at how trading. we are about 35 minutes from the close. you can see the stoxx 600 down 1%. ftse 100 bumping that trend up. weaker sterling. dax off. let's take a check on sterling. drop as much as 6.1% overnight. it has not really recover those at a 31 your1.3% low. europe also stronger against sterling, up 1.6%. this is bloomberg. ♪
european close on bloomberg markets. nejra: we are going to take you from washington to london and cover stories out of germany, wall street, and florida in an hour. everyone is trying to make sense of the more than 6% drop in the pound overnight. move and extent of the shows volatility is becoming more commonplace in the global currency markets. david: payroll in the u.s. rise 156 thousand in september, many categorizing this as a --dilocks report will stop goldilocks report. the imf world bake meetings taking place in washington, d.c. h