tv Bloomberg Markets Americas Bloomberg October 17, 2016 10:00am-11:01am EDT
vonnie: we are going to take you from new york to london. here is what we are watching. four majorrica's businesses post increases in earnings. global bonds selling off from asia to europe today. janet yellen fuels concern that policymakers will tolerate faster inflation. also getting hit hard today. we will discuss the latest moves with an asset manager with over $1 trillion under his belt. the ultimate winner for brexit may be far beyond the winners of europe.
new york is emerging as the leader. we are 30 minutes into the trading day in the u.s., so let's head to the market desk. abigail: we are looking at declines for the major averages. two weeks of the kleins for the major indexes. the longest losing streak since brexit. take it across asset classes and there are three markets that stand out. the 10-year, the dollar index, the bloomberg dollar index, plus oil. the 10-year is dropping down after the empire state manufacturing disappointed coming in at -6.8%. this is the third consecutive survey below zero. this is also weighing on the bloomberg dollar index. there was also an industrial
production number that came out right about part at 0.1% growth. we have the bloomberg dollar index also trading down. this conveys a sense of risk off by some degr. oil is also down for a second day in a row. iran is unlikely to cooperate with the opec deal. that certainly seems to be affecting things. we take a look at the s&p 500 sectors. lots and lots of red. where we have green, some of the interest rate sectors, these sectors perform well when rates go down. they are dividend yielding. dividends look more attractive to a following right. let's take a look at a few earnings movers. we do have bank of america trading down now about flat. it had been higher early.
hasbro, a nice big winner. it looks like it was the girls that really drove this beat, the girls' sector was up 57% in the quarter. mark: thank you very much indeed. the stoxx 600 down today. down for the fourth day in five. talk about economies overheating. talk about inflation overshooting. that is dominating discussion today. in light of comments by fed chair janet yellen and mark carney, the governor of the bank of england. groups are rising, basic resources and banks. .earson's, the big decline or biggest decline in a year. the world's biggest education company reporting a 7% drop in comparable sales for the first
nine months of the year. this has been a slowdown in the key u.s. market for textbooks. almost half its market from education and it is facing sluggish demand for textbooks, dwindling u.s. college enrollment, and decline in testing business shares. the u.k.he yield on 10-year versus the yield on the spanish 10-year. spain is the white line. what is interesting is that 10-year yield in the u.k. is now 10-yearabove spain's since april and it is rising to its highest level amid speculation sterling is already pushing up prices for consumers in the u.k.. data tomorrow could show consumer prices rising in september. that would be the strongest in two years. --lt yields have been crying climbing for three consecutive weeks.
driving the market gauge for inflation expectations to the highest in 2.5 years, the brexit concerns. spain has its own political concerns. are we heading for a third election? this is a wonderful mps chart. the white line is keywords on the bloomberg terminal sits brexit. the keyword is hard brexit. the orange line on top is sterling against the dollar. as you can see, as the use of hard brexit in articles on the bloomberg terminal has increased, particularly in the last month, we have the pound falling. the correlations, the inverse correlation between the two is -0.9%. if we had -0.1%, it would be a perfect inverse correlation. what a wonderful function. news trends chart. let's get vonnie quinn. you better take it away. vonnie: yes, i love that.
let's check in with the first word news. .> thank you u.s. defense secretary ash carter calls that a decisive moment in the fight against islamic state. iraqi soldiers have launched an offensive to recapture the city of mosul. the iraqis are being backed by shiite militias and the u.s.-led coalition. mosul is iraq's second-largest city. syrian opposition monitoring groups say an airstrike on a rebel-health village has killed 23 people. the attack was in a northern province of aleppo. 30 people were killed when russian warplanes attacked the village. germany is joining the u.s. and the u.k. in considering new economic sanctions over attacks on the series -- city of aleppo. it would be the largest against the syrian and russian governments. john kerry and his british counterpart boris johnson have
all but ruled out a military response to end the siege in aleppo. russia's president hopes relations with the u.s. can be restored after the election. ties have gotten worse since the collapse of a cease-fire agreement in syria. putin said that russia has no influence over the u.s. vote. wantspines president death once talked tough about china and he is leading a trade delegation there. he another 400 business leaders began a four-day visit to beijing tomorrow. he is the first philippines leader invited for a one-on-one talk by the chinese president g jinping -- xi jinping. global news 24 hrs per day powered by 2600 journalists and analysts. this is bloomberg. vonnie: thanks.
let's get back now to bank of america. now.s are relatively flat by deathwas held helped by fixed incomes rating cabinet -- trading revenue. a price target of $20 per share. paul, you say that the headline beat may not be as good when you look at the subcomponents of the beast. what did you learn from the conference call? , like you said, fixed income trading did really well. they are not earning their cost of capital. when you back at some of these the $.38,is closer to $.39 number.
i think you have seen it trade down on the lack of excitement. innie: we have a great chart the bloomberg chart library. excuse me. this shows several of the big banks. how does bank of america increase its r.o.e. >> they are trying to do it through call savings. it is very difficult to get any r.o.e. of right now. yield curve where it is, it is going to be very difficult, but they have done a great job. they need to continue to do it on the call savings to get it up. mark: you've got a $20 price target. are you thinking of changing that after today? >> know, even all the negative news with bank of america, it is
trading below book value. they are conserving capital. they will probably be able to return capital over the next couple of years. , i will bebook value buying this thing all day. vonnie: how does it fair? mark: we had wells fargo, jpmorgan. wells fargo, outperform. jpmorgan, outperform. could you rank them? >> we are seeing bank of america. we think people are going to allocate capital away from wells fargo. because of these trust issues ,oming out on the retail side we think people will rotate out of wells fargo and its bank of america. they still have hurdles to overcome. this external audit could be another shoe to drop. mark: the issues that wells fargo is experiencing, have the since friday,oken
they put to bed any issues that they could put to bed any worries that they could be suffering from the same sort of account issues? >> they have all taken a very confident. they have said that they don't have the same issues. about the occed coming in and taking a look at this anyway. the regulators usually find problems. how serious of the problems is a concern. you don't know how the regulators are going to define what crossed sales is and what is not. there will be new regulation coming on. we don't think regulation is going to be at the same level. vonnie: what did you hear about net interest margin expectations? >> the same. areink a lot of these guys
saying that it is going to $5 billion to earnings, but we don't think we are going to see four rate hikes over the next year. we think the fed is going to talk tough, but they need the 10-year, they need fed hikes to get the r.o.e. north of 10%. mark: i'm looking at your favorite names. signature bank, what did these banks have that make them real favorites? >> they all have growth, they are much smaller, they are able to grow portfolios. much better loan growth, much better margins. that is why we like them. to paulour thanks miller. he is head of financial services in arlington. mark: coming right up, more from the chief strategy officer coming up in about 20
vonnie: you are watching "bloomberg markets." mark: right, time for the bloomberg business flash. they look at the biggest business stories in the news right now. retire nextive will year at the biggest maker of construction and mining equipment. he will step down on march 31. 11 caterpillar to record sales in 2012 and guided the company through a global commodities downturn. vet will caterpillar
succeed him. deutsche bank is considering whether to shrink u.s. operations. that is according to people with knowledge of the matter. deutsche faces mounting legal expenses, including a $14 billion penalty in the u.s.. they have discussed proposed cutbacks in talks with u.s. officials. supervalu is selling the grocery chain. it will use the proceeds to repay debt. the company expects to complete the deal by january 31. about 1300 discount grocery stores. that is the latest bloomberg business flash. vonnie: still ahead, the state of the travel industry. all of this with jeffrey boyd, chairman and interim ceo at priceline group.
mark: live from new york and london, i'm mark barton. vonnie: i'm vonnie quinn. you are watching "bloomberg markets." the travel industry has seen a share of challenges over the year. joining me now for insight on the industry is jeffrey boyd, the chairman and interim ceo of priceline group. they can for joining us. jeffrey: thank you. vonnie: we can't talk about results, but let's talk about the second half and performance so far. how has the travel industry and priceline been affected by things like terror attacks in europe? therey: if you look back to second quarter, we announced a few months ago, you could see that because of the diversity of the business, while we experienced some softness and travel and some of those markets that were affected by terrorism,
we still had a very strong quarter relative to folks' expectations. that reflects the fact that we have a global business and some of the demand in locations outside of places like belgium and paris were able to make up the softness we saw in some of those markets around the attacks. is it an immediate impact? do you immediately see bookings and inquiries about travel to those places impacted? jeffrey: yes, unfortunately when a location is impacted by terrorism, the travel demand will tend to fall off fairly directly. asr time, it recovers, people get further and further away from the event and the potential disruption of travel associated with the event, but you do see an immediate impact. vonnie: we also had the brexit vote. how had the weakness in sterling impacted inquiries?
jeffrey: i think a couple of things you have seen, the u.k. has become relatively of greater value for people visiting from the united states or from europe and that can have an impact on travel demand. for u.k. customers, because they have suffered a little bit of a downturn in their purchasing , they may look more toward domestic destinations for their trips rather than traveling overseas. you then manage this? do you try to forecast what sterling is going to do, for example? sortffer deals that might of hedge in a way the impact of something like a brexit vote and the weaker currency? fortunately, our technology and systems automatically change prices when prices change, so somebody is shopping for a hotel in their local currency, the pricing will reflect over time changes in
that currency, so we are able to automatic the show somebody good when one currency becomes softer relative to their own. vonnie: google recently unveiled some new tools. given that you have about 10% of the online travel industry, expedia is about 10% of the online travel industry. are you becoming a little bit more concerned about the likes of google and their new tools? jeffrey: i think for us, even though we are similar in size to expedia, much more of our business is a hotel business. for google, they have different types of functionality and flights, than they do hotels. we are a big advertiser on google. we keep our eye on what they are doing in the travel space. their new product is really mostly about what to do in destination, which is something that we are just starting to get into ourselves, so hopefully, they will provide opportunities for us to advertise further. vonnie: yes, your cell price is
pretty much at an all-time high. it is doing rather well. how do you keep that going? what is next for priceline? jeffrey: i think the most important thing for us is to continue to build organic growth of our hotel and other businesses. we have been able to sustain a reasonably high growth rate given the scale of our business and we need to continue that. we have been able to sustain reasonably high growth rate given the scale of our business and we need to continue that growth and we need to also deliver good margins to our investors. vonnie: speaking of the hotel business, the starwood deal closed and they are emerging. they are going full scale so they can do a better job of driving traffic to their own websites, that is something the hotels have been working hard on over the years and i would continue to expect them to do that. we continue to provide great value to folks like marriott and
starwood, by giving them access to international demand around the world that is harder for them to access, given the languages we operate in, given our distribution and the relationships we have around the world, so we still provide great value to them. vonnie: any trends surrounding the u.s. presidential election? a meaningful things that you notice in terms of people traveling to the united states or away? jeffrey: i haven't seen anything in particular from the election, as it relates to our business. i don't think it can overall be helpful to international travel to have a lot of negative discussion about immigration an so forth. i don't believe that would be good for the travel business in the long term. vonnie: we are concentrating a lot on growth and the 2017 and what the federal reserve might do and what the ecb might do in december. what do you foresee for travel demand in 2017? jeffrey: the
market has continued a fairly long period of pretty good fundamental strength. if you look at hotel average daily rates and occupancies, they have been strong. as long as we don't get a recession going into next year, i would expect to have a favorable market for travel. vonnie: consolidation in the industry. are you looking at anything to buy or any other way of inching ahead over expedia? jeffrey: i think we have got a good track record with our acquisitions over time. it has always been a part of the marketplace and we will continue to have an active corporate development process and look at basically everything. i don't have a comment to make specifically today, but you can expect us to be a participant in those markets. vonnie: all right, ok. time, youyd, next have to be a little but more forthcoming on that. the interim ceo and chairman of priceline. mark: great job. still ahead, we are joined with
insights on today's global selloff. strategies for investing in urbanization and an agent population. have a look at what is happening to european bonds, particularly in germany and the u.k. the u.k. 10-year and the german 10-year have risen to their highest level since june 23. you will remember what happened then, the date of the brexit referendum. the u.k. gilt yielding 1.14%. thgerman 10-year yielding. big, big week for europe with the ecb announcing its latest rate decision on thursday. this is bloomberg. ♪
markets.""bloomberg >> north korea wants britain to exercisesf military in south korea, calling the drills hostile act. britain plans to send fighter jets and support plans -- planes. north korea has increased its opposition to military drills in south korea. close allies, like france while are -- hollande, questioning why they took part in a tell-all book. the book was released just weeks before he must decide whether to run for another term next year. polls show he is far behind. china has sent two astronauts into space for the country's longest mission yet. the crew will spend more than one month in space, most of it aboard and orbiting laboratory. a simpler version of a space
station the china hopes to launch by 2022. vietnam, heavy flooding triggered by rain has killed at least 24 people. roughly 125,000 people -- homes have been flooded and the situation ma it worse. they are now bracing for the approach of a typhoon. the white house says that president obama will announce that the american high school graduation rate has reached a new high. more than 83%. increases were seen are all , asic and disabled students well as students from low income families. ,lobal news, 24 hours per day this is bloomberg. lisa,: elisa for anti--- thanks. >> we have a bit of a recreation team. take two interactive, shares are nicely on pace for their best day since may of 2015. this after the blog game spot
over the weekend reported a possible teaser for their new game red dead redemption ii. they think it will be a big reviver for the company. gopro, this is the action camera maker. volumes are better and they are citing feet from partners and distributors that the stock may be up today. , both areover to toys nicely higher in the great third quarter, earnings by 17%. they are taking over the company's princess in frozen hasbro for the first quarter. mattel is trading up in
sympathy. netflix, shares trading down after the close. investors are looking for adjusted earnings of $.13 on about $2.3 billion in revenue. the company has put up a lot of sloppy orders this year. investors generally going into this, it's important to remember that investors did initiate with a buy rating, expecting the earnings misses to disappear. expect the company to start meeting and beating. vonnie: janet yellen fueled inflation concerns with a post-brexit high with german bonds at the highest june. averages a little changed. joining us with more is the chief strategy officer with $1
trillion in assets under management. we are all talking about inflation. running hot, that's the buzz phrase. this has always been the decision of the federal reserve. or at least in recent months and years. why now? why is it creating concerns? >> long-term core inflation is up. the key is that when it is already there, it's too late to do anything about it. you got to move ahead of it. thinking about the kind of investment classes that you want is something that everybody wants to get into the war inflation rises. the good news is that inflation still seems stabilized but the other indicators of inflation, think of a possible rate rise, it should be on people's agenda, at least watch out for. vonnie: you say that we are not
getting wage inflation, but we are. 2.3% in the last jobs report. consistent inflation readings. maybe not as much as we would like, but wages aren't growing. taimur: our position still remains that we are in a local long scenario and it's something worth watching for. thinking about how you are positioned, we are not going to have a major inflation risk in the u.s. in terms of our moderated growth. got two big, you trends. globalization within urbanization and you got the aging population. within urbanization we've got infrastructure, real estate, and consumer goods and services. to dig into those big for, how do we investors best take advantage of the opportunities presented within this big theme of urbanization?
certainly within infrastructure, today's infrastructure is not our grandmothers and restructure area the opportunities are right different. -- theeless nests wireless nature of the world, you can now invest in cell phone towers, there are ways to play in the security market to do that. the rise of broadband, the opportunities and broadband infrastructure, that's a big new opportunity that we see. within real estate i would say that it's no longer countries in the emerging market with that paradigm changing. ofs really about the success the individual cities, the failure that he's, that drive -- failure of cities, that drives how you should think about the space. it's important to think about what's the wave of growth to be driven by domestic middle-class in emerging markets and mark
which creates protectionism? you seet the u.s. election results. it's one of the internal drivers of growth in the market, fueling the next generation of growth. >> if the first stage of technology focused on millennials, is the next stage about those who are retiring? how do we take advantage of that? taimur: we actually call it silver tech. we think the real use of technology platforms is helping elderly people and baby boomers as they age, using technology to their benefits. that's about the social care network when they come to your house. about linking to remote medical care gets more expensive. the range of capital companies dedicated by the opportunities that let you get to how technology in the biotech center can help is better on the line.
all depend ont it fiscal authority when it comes to urban development? doesn't it and on authorities being willing to spend and so far we don't have that? >> it does very by country. in of where land on infrastructure spending," $3 trillion cap would be very important. i do think that in latin america and europe, you see the private sectors from private public art or should -- filling the gap. see the private sector, santiago, and the airports there, in london those are opportunities where the private sector can step in and reduce the infrastructure as an opportunity to help these cities thrive and succeed. low rates, we have to ask everybody, these are
wonderful ideas that will hopefully pan out, but shorter-term investors need income. even the longer-term rates and low scenarios are really important. the first that we suggest is realism. realism around where the rates will be tomorrow and the fact that pension plans with liabilities and individuals constituting successful retirement you take into account a very different paradigms. the second is the search for yield. we do see this best opportunity for high-yield investing. high-yield in the u.s. outside commodities and energy. at the higher end of structured products in the fixed income getd, these are ways to yielding the diamond square. mark: you got a big interest in trade protectionism, laying nicely into the exit. how big the play into the
wet-brexit world? taimur: see it as a broader trend. more in the election results in europe. onhink it will depend a bit where the election results land, affect which country or sector will drive in the future. we spend a lot of time thinking about growth in the u.s. and europe as a primary form of success. a strong infrastructure with political instability, investors today, think about this tomorrow, and in a world where globalization is at risk. how is the u.k. looking post exit? -- brexit? taimur: we certainly see the
signs of the lehman like event taking place. having done a good job, we certainly see the people have frozen some of their plans. i would characterize the market sentiment as being one of -- let's wait -- rather than let's invest. particularly in relevant markets. all right, taimur hyat, thanks for joining us. coming up at 12:15, stanley at the will be speaking economic club of new york. we will bring you his remarks live on television, online, and you can watch it as live go on the bloomberg. apple, reportedly giving up on its plans to make its own car, but still interested in working with the auto industry. this is bloomberg. ♪
vonnie: when. mark: and i must part. your bloomberg business report. more deals on the horizon. mark: apple scaling back -- vonnie: apple scaling back plans to build its own car. mark: a quick look at the iranian economy after a decade of international sanctions were lifted. vonnie: shareholders and italian investors calling back their merger. mark and -- marking the biggest triumph in a decade. the prime minister has encouraged the weaker banks to shore up their finances and push through measures to abolish
restrictions on ownership and on voting rights. ceo spoke about the potential for more consolidation. >> i think that if consolidation is needed in any case it will all be a bit more encouraged by this possibility and so understand that either way it requires the banks to be more profitable for the banks to be more capitalized. the two of them, it's rate difficult right now. of itcutting their share is commercial property lending a studyfor the exit he finds the u.s. and canadian banks reduce their market share from working percent to 7% in the first six months of the year. at the same time, overall demand for commercial property in the u.k. fell by half. the european central bank will reportedly extend qe in
december. according to a bloomberg poll of economists, mario draghi will prolong the bond buying program. consumer prices are rising and the economic recovery is still fragile. drastically scaling back ambitions to take on detroit, apple. according to people familiar with the project, they cut hundreds of jobs after deciding for now that they no longer want to build their own car. instead the company is focused on creating an autonomous driving system, giving them the flexibility to partner with existing carmakers or returning to designing their own vehicles in the future. vonnie: time now for our bloomberg quick take. providing context and background on issues of interest. for decades, the u.s. and other powers squeezed the iranian economy in order to weaken its nuclear program. now that major programs have been lifted, here's the
situation. sanctions were lifted in january nuclearan curtailed its program as promised. now the country's president is courting global companies with the goal of doubling farm investment this year to $15 billion. however, in 1995 a u.s. dan on trade and invest concerned about the links to terrorism, keeping most u.s. companies on the sidelines. here's the background. the monarchy that ruled from 1925 transformed a small, agrarian economy into a booming one of oil production. the revolution of 1979 shook the economy and subsequent leaders have never quite settled on the appropriate pace of growth in an islamic state. elected in 2005, mahmoud ahmadinejad took a populist turn
. fueling inflation just as sanctions began to bite. rouhani was elected in 2013, prominent -- promising to end iranian isolation. growing by four .5% this year, the low cost of producing crude theran makes investing feeling in an era of chief crisis. they are skeptical of western capitalism. you can read all of the bloomberg quick takes on the bloomberg. [coughing] well done, vonnie. you can read all about it on the quick takes. looking at potential winners and losers in brexit, why might new york city be one of the winners? drink ofll have a nice cold water. this is bloomberg. ♪
mark: live from london, i mark art and, with bonnie win. theresa may is getting ready to attend her first eu summit in brussels this week. many are wondering what she will have to say about her plans for .u. ng britain out of the e johnng us now with more is . is there a secret plan? were wonderingle -- what was the plan -- what does she want? ,he's a very methodical person in some ways like angela merkel. someone who will take positions based on the situation that she sees in front of her rather than having a specific endpoint.
mark: frustrating the people that want an endpoint. john: it is so fiendishly complicated, it is sort of elliptical to explain it in any way to any one person what it will look like. some might-- mark: say that the court cabinet is close to -- the cabinet is close to unraveling. but there are calls about various characters, like philip hammond, the chancellor, which makes me worried. like when a football chairman says that the management is doing well, that's when you know you are in trouble. -- john: what's happening as we have seen the market send a clear message of concern over where brexit is going.
mother is no sign of a u-turn on , you have seen a circling of the wagons to a certain extent where everyone is pretending they are good friends and supporting each other. theresa may made headlines when she called into question the bank of england low interest rate policies. sort of stepping over a line that british prime minister's have been reluctant to step over for the past 20 years. today you saw a spokesman say that the prime minister has massive conference in the bank of england. likewise, there are no real divisions between downing street and the chancellor the exchequer. even if the last 10 days haven't been fantastic the government, they are trying somehow to win it. and this uncertainty is causing many doubts in the .ommunity we did a wonderful piece -- haven't we, john?
the big winner might not be frankfurt or warsaw, it could be something further afield. new york, yes. some of them will laugh at this notion, somehow that new york anchors would want to help london or shore up london in some ways, but you know, bankers will tell you that if they are being realistic, london can expect no help from new york. new york could do very well. also, some of the asian markets in hong kong could do very well as well. mark: and the reason why may had a tricky week last week this case that has gone before three senior judges. last we heard on the half of the people who put forward the case today, the big guns came out. the attorney general. argument to trickle article 50 without parliament
consent. contesting her ride as prime minister, he says it was essentially in there to overturn the results of the referendum. , the a strong thing to say government's argument being very robust. for the traitors and the investors watching, this is a big uncertainty, sort of this assumption out there that the government would win the argument, but if they don't it really calls into question the how much brexit and .ower parliament will have no one is of course suggesting that this will lead to brexit not happening, but certainly the outcome of this case will have huge consequences towards the processes. mark: great to see you, john. bloomberg's john fraher, thank you for joining us to discuss
all matters of exit today. the ecb, likely to extend to eat in december? we will look ahead to thursday's decision. we are 30 minutes away from the end of the monday session. that's what the run is for the stock euro 600. inflation, overshooting, hot economies. such matters brought to the four by janet yellen on friday and i mark carney on friday. sterling declining against the dollar, reviewing bond yields rising, it's very much a day where there is little appetite for risk ♪
vonnie quinn. you are watching the european close on bloomberg -- "bloomberg markets." ♪ we are going to take you from san francisco to washington, covering stories out of the u.k., italy, and wall street in the next hour. you may see more easing the are we see less. in europe, economist berdych the ecb will extend qe in december before the central bank and even think of serving down area vonnie: approval for italian banks, we will examine one of the biggest in a decade and how we could see more ahead. is out with its third-quarter earnings after the bell today after disappointing subscriber growth last order, analyst are estimating a pickup and users focusing on international reach.