tv Bloomberg Markets Americas Bloomberg November 1, 2016 10:00am-11:01am EDT
markets. vonnie: we are going to take you from washington to shanghai and cover stories of new york, the u.k., and australia. u.s. data on economy is popping. julie hyman is with us now. 51.9 it, that is roughly in line with what was estimated. it's a small increase from the prior month. the component rises to 54.5. we are seeing an expansion. anything above 50 is expansion. we don't see much of an expansion. we see stocks that have been little changed. that is continuing at the moment and we have seen this trend in recent days. if there is any game today, it
will be the first in six sessions. the five session losing streak of the longest we have seen since june. there is not much change over all the major averages and not much reaction to this economic data. let's take a look at the treasury market. there is no change in rates expected by most markets that we are seeing pricing it in or by most economist. in little bit in yields today. they are up three basis points at the moment. that yield is climbing after that manufacturing report came out. there is action in the commodities this morning. there was an explosion at the largest pipeline down in alabama. fire killed and the one person. you can see a big increase in gasoline futures, 8.5%. crude is barely changing this morning.
goldman sachs did say if opec thes -- fails to cut out, price could fall to the low 40's. natural gas is puzzling. downwardthat we saw just a little while ago, there are some negative catalysts including the expectation that inventories rose with a forecast for warm weather. also, we are still watching earnings and corporate related news. pfizer came out with ending development of an x their mental cholesterol-lowering drug. -- experimental cholesterol-lowering drug. the company's earnings missed estimates. sales are below estimates. missingal petroleum is estimates.
-- these are some things wait on the major averages. mark: october has ended. we are down for seven consecutive days. sinces the longest february. let's not jump the gun it. this is your equities. those are your currencies that are rising against the dollar. we've got bonds gaining -- bond yields. commodities, we are talking about oil. let's get shell. profits arer smashing estimates. they are boosting oil production in helping a slump in oil prices. $46.99 aaveraging barrel. yearis down from $51.30 a earlier. vowing toexecutive is
boost savings from the acquisition and use higher cash flows to say on the dividend. it's important that the dividend follows that two-year slump. it is a tale of two oil companies. bp shares are down 2.8%. profits fell 39% in crude prices fell and refining argent shrank. they posted a loss as well. earnings have fallen. year on year for nine consecutive quarters, the pressure is being piled on the chief executive to rein in spending. they don't want to jeopardize future growth. manufacturing slowed down a little bit in the u.k. last month. 51.3.ober, the gauge was it is down from that two-year high of 55.5 in september. the pound decline is helping
exports. there was a robust paste -- pace in the month. it searched the highest level in more than five years. there is an alleged impact to sterling declining. this was when the steepest in the 25 year history. sterling declined cost precious increase. that is the story today. the dollar index in the u.s. is down 4/10 of 1%. it was expected to be up. now we have the first word news. trumpaul has donald taking the lead over hillary clinton. poll, he leads 46% to 45%. that is the first time he has led in this poll since may. it has a margin of error of three percentage points.
houseo main white hopefuls are preparing for the election to go into overtime. the clinton campaign is assembled eight voter protection program. includes lawyers all in tearing in battleground states are in the republican lawyer association has 1000 lawyers ready to monitor polls and challenge election results. troops of reach the out side of mosuyl. the stateave captured tv building. a coalition is taking part in this offensive. isis has occupied the city for more than two years. russia is increasing a threat to the u.k.. they are using cyber attacks and the director general of mi five active agents in the u.k. and pushing foreign policy through cyber attacks. this is the first time they have
given a newspaper interview. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. vonnie: thank you. we do have stocks fluctuating after a take off in chinese manufacturing. this is ahead of tomorrow's federal reserve meeting. thebig event likely is presidential election, just one week away. check out the chart. this indicates the rise of poll numbers. this is the correlation that suggests drug makers and banks are expected to do better under how strongly is the election featuring in what you are saying to clients? as opposed to the u.s. economy or other concerns?
>> we are not focusing on the election. we are pivoting back to fundamentals. i would say if you go a layer before earnings you will get revenue growth. it looks good. we are taking comfort in that. you're going to see more dispersion if you look at it by sector basis. we think investors are focusing back on top line growth. you need to see organic growth to get excited. vonnie: we look at this earnings season and that's exciting news. telecom is down 10%. if you look at things like utilities, they are 17% higher. financials are 10% higher. have they out run their gains? should you be looking at other areas? samantha: market leadership has changed over the year. there is a dividend yield of 4.5%.
you might be surprised to know that there is negative revenue towth and compare that consumer discretionary and health care. we are picking growth at 7% and 9%. dividends are not as high. those sectors are growing dividends and that is the story going into 2017. mark: as rates start to creep higher, does the focus change? the focus has to be on growth. i would agree. i think there is a sweet spot. the bond of proxies we know are not going to do as well. people still need yields, even if the fed raises rates. you can find the spot where you are growing dividends and you have topline growth and you are tethered to u.s. expansion. we have seen a big growth
in dividend yields from technology stock. past 10: over the years, the dividend went from effectively 02 about 1.5%. 30% in the tech center used to paying dividends. that is now over 70%. that is a massive trend. it does speak to the fact that can have evidence and you can have growth. vonnie: in europe there is potential outside the ecb story. europe, it's patients. i know that's hard giving what returns of look like. the truth is growth in the economy will translate into earnings growth eventually. as factorse seen that supported european growth has supported equity profits. we have seen growth in the economy in the eurozone.
ofs is the second quarter 2013. why hasn't translated into consistent earnings growth and equity returns? samantha: manufacturing is arguably a massive drag on profits. that is a massive part of profits and only a small part of growth. another example is the consumer. the european consumer is doing better. that has been supported by the gdp numbers. consumer influence on the profits is very low. we are having some disconnect in gdp growth. how can you be so positive? rates att we still see 25% in spain and italy and these places. how can you see where the revenue is going to come from?
samantha: i completely understand that point. we know there are structural issues in europe. it's hard to be overly excited that europe. the u.s. is running its course. we still believe in that u.s. expansion. if you look at europe, they have more of a runway. they do have room for growth to be sustained. that translates into profit. europe still looks cheap compared to the average. whether something changes and we are not going to get that catalyst in europe, that's more of a wait-and-see. vonnie: where are you exactly? samantha: we are coming out of the funk for the most part. the external environment has stabilize. internally, things are looking better. jpmorgan,mantha at thanks for joining us. mark: a major story in the fast
joining us from the floor to talk about the strategy behind the spin off is the ceo. thank you for joining us. congratulations first off. you must be very pleased. do you concentrate on now that the china operations are someone else's problem? greg: there is a huge growth potential for all three brands. there are emerging markets in developing markets. it's a real growth story. vonnie: growing how? are you changing how you operate toward giving the control to franchisees? greg: we are going to be more efficient. that will help us grow. ware going to open 1000 restaurants by the end of 2018. we are a capitalize business that is going to focus on it. that's the area of focus for the
organization. mark: are you going to continue to have any source of involvement in china? how smooth is this transition process going to be? we are collaborating better than we ever have. i am going to be meeting with the ceo in singapore in december and i will still be visiting china four times the year. they are going to be sharing best practices both ways. we will take the best ideas out of china and bring them in as well. mark: how much value you think this will generate? additional found an $16 per share. you have any thoughts on that? greg: i will at the market determine with share prices. -- we deliver on the promises, there is only one way
for the share price to go. vonnie: he was definitely in your ear. he definitely would have supported the action. what do you think now will be his next piece of advice for yo greg: you will have to speak to keith. he is on the board did we have a very supportive board. supportive of the transformation strategy i am putting into play. it's nice to have the endorsement of the board as you go through such a large change in the organization. what have been the most recent proposals? greg: he doesn't get involved in the operations of the business. he is trying to help us out with shareholder value. what i appreciate is and he told run as, he doesn't how to restaurant company but he can unlock shareholder value. he is demonstrating that. he is done an amazing job
supporting us with this transformation. stores inve got 1523 the u.k.. they are predominantly pizza hut and kfc. have you seen any change in consumer spending patterns post brexit? greg: there was a little changed around the boat. doing well in's the u.k. right now. we are happy. our customers are not that active in the stock. they want great taste and great dalia. if you continue to deliver that, they will come back more often. mark: are you thinking of changing your investment plan when it comes to the u.k.? has brexit changed anything when it comes to investing in the u.k.? greg: we are going to franchise our restaurants. 3000 after theut
separation from china. there is more franchising to do. we will be running -- returning that to shareholders. that's what we're working towards. vonnie: what about back in the u.s.? 85% of your company is owned. 15% is franchises. how will you tilt that? how long will it take? by the end of 2018, we will have re-franchised all the stores around the world that we want to. 2019 will be our first clean year where we've got the ownership right. we will have a capital structure in place and that's the year we are looking forward to delivering sales growth with all the other packages in place. vonnie: what about new offerings best and mark --? greg: at tocco bell we have the naked chicken chili but.
that comes out soon. we have georgia gold kfc. it's a new southern inspired dish. happen youmething all three brands from a food innovation standpoint mark:. a roades the china unit model that other consumer brands adopt when it comes to china? it's the world's second-biggest economy. separated andwe people thinking china is a china company reduces volatility and risk. jack ma owns kfc. i love that headline. it says this is a chinese brand. it's not a u.s. brand anymore. to greg creedanks own there on a day that
vonnie: this is bloomberg markets. i am vonnie quinn in new york. mark: i am mark barton. vonnie: it's time for the biggest business stories in the news right now. pfizer missed estimates for the first time in three years. they reported disappointing third-quarter sales from drugs such as pain medication. the company ended four years of
speculation. jobsrs is eliminating worldwide. they will take a charge of $250 million to keep reducing expenses. third quarter profits beat estimates. subscription businesses improved. we compete with them in providing news and information. usa today will not continue discussions to buy tronc. they have been trying to buy tronc so they can compete online. bloomberg reported that the banks set to finance had asked out. u.s. builders cut their spending on construction projects in september. this is the second straight monthly decline. total construction fell 7/10 of 1%.
iam vonnie quinn area mark: am mark barton. this is bloomberg markets. let's get the first word news. alisa is in the newsroom. justice department says it will work as quickly as possible on the review of more e-mails. the clinton campaign is accusing the f ei of crossing the line. it comes so close to election day. some are public and say that fbi hasn't provided enough detail. there is a report this is donald trump used a dubious way to avoid taxes. in the 1990's, he avoided reporting millions of dollars in income by using a maneuver his own lawyers warned him about. would rule itirs improper if he were audited. made a majorhas overhaul in the cap.
they have replaced the finance minister who had the job for two decades. key positions are under the control of a new generation of bureaucrats. for the first time, china has shown its j 20 stealth fighter to the public. it performed a series of maneuvers in southern china. it closely resembles the lockheed martin f 22 raptor. want to use stealth technology to turn its air force into one that can conduct defensive and offensive maneuvers. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. vonnie: let's head straight to the market desk where julie hyman has latest. julie: exactly. we are looking at earnings and spin off. that part of the equation.
we have arthur daniels midland out with better than estimated earnings for the first time in quarters. there is a record u.s. crop. there has been an increase in the companydm seed. said shortages in south america accelerated the seasonal shift in global demand to north american supply. then we have most say eric, a fertilizer company. they beat estimates. potash and phosphate strengthened in the third quarter. the company sees a more stable environment in 2017. we are watching a spinoff today alcoa and are chronic. the drop we see today, this is a as the stockon represses to account for its new structure. alcoa's shares are down by 21%
today. the reporter who covers the company says in the roadshow they were predict teen more of a 30% drop. this is smaller than the executives were predicting. they are a legacy business and they will keep the business that manufactures aluminum as well as a lumen. the other will keep the it --ered products are in alex. -- products. look at the component parts of the business by revenue. this is the primary meta business. this is what will become alcoa. this is aluminum production. even though this has been the weaker, the declining part of the business, it had a little the upper rebound last quarter. pricesearcher forecast will gain more than 33% over the
next year. you also have engineered products in blue. both of those had weakness last quarter. willll see how the company perform now that it has split. we will continue to track them in the coming days area -- days. mark: some news from volkswagen, american sales equate to a drop of 18 percent. the troubles continue for the embattled automaker. in the wake of the september 2015 emissions scandal. slides -- sales are lower. spend off officially a china business. they are now trading and up 3%. joining us to talk about the challenges ahead for the company is mickey pant, the chf
executive officer of yum china. thank you for joining us here in new york. mickey: thank you. it's great to be here. what is the top of your to do list now that yum china is a separate entity? it's pretty much what we've done. we will note next year is the 30th year in china. unbelievablen record growth. opportunity outweighs the challenges. our plan is what we have had or several years now. we want to build a lot of restaurants. we build 600 new restaurants every year. we grow sales. us any ideau give
of taco bell opening in china? can you say that again? mark: can you tell us about your plans for taco bell? when we can expect taco bell in china? is the going to be a taco bell expansion? micky: the first taco bell will open in shanghai in a spectacular location before the end of this year. next year we expect to take several cities, we have several stores. we have been able to localize the menu. we tested taco bell and they loved the brand. they loved some of the product. we are looking to make some changes happen. by the end of the year a store
will be open for business we will see what the responses like. vonnie: how big of a delillo is delivery and check knology -- delivery -- deal is delivery and technology? both of them are very significant area on technology, i would say chinese consumers are the fastest added opting new tech knowledge he. -- at adapt to new technology. can type in mandarin on a computer screen can do anything. the capability of consumers to get deals and delivery is growing rapidly. time, it seems like every vehicle has a backpack carrying food for delivery. our business is no exception.
we had $700 million in delivery this year. that is our fastest growing business. they are related. numbers, can those you grow in the future? i will give you a couple of numbers. we started cashless payment with no credit card, scan your cell phone. bank. in lessr than a year, it has become 20% of our rate. canou don't have cash, you -- in less than one year, the has exceededrogram 50 million members. 10% offer loyalty points. that gives you an idea of the
scale involved here. reaching 100ely million consumers. to rival whating television has got. the marketplace is changing extremely rapidly. have seated market share to local expenses. share in0% market 2012. last year that had come down to 20%. can you win back that lost market share? i am not relating the numbers you are putting their. recent survey said our market share was 30%. when a market grows, in 1989 we
had 100% market share. our competionnc.reases the chinese are adept at running restaurants. the beauty is the market is expanding. numbers andoting increases in the number of restaurants. we see that is welcome competition. significantly dominated. we have 5000 restaurants. pizza hut has 2000 restaurants. no one comes close. we still feel we have basic evident and ranted. we are in 1100 cities. cities than our next competitor. we are watching the next 1000 cities. we see our dominance in this market. mark: can you give us a sense of the difference in taste between
all of those cities? how difficult is it to cater to all of those cities when taste in those regions differs greatly? it is correct. europe, a like collection of different cultures. the spice levels are very dramatic. in shanghai, people like milder food. make severalo adjustments to sauces and we do have a spicy products on the menu for those parts of the country. we have learned a lot about rice. we serve congee. the has to be variable for ingredients. we serve different rice in
different parts of the country. there is localization. everyone loves the 11 herbs and spices original recipe. that is still our selling product. we are getting more sophisticated at marketing to different regions. mark: thank you very much for joining us today. china executive for joining us from shanghai. director hadbi conversations in recent days about whether he should have sent the letter to congress. thatials describe conversation. the official says the fbi director had the confidence of the attorney general. he has the confidence of the attorney general and they will oncuss the pace of the probe
built against valiant pharmaceuticals. mark: student loans are ballooning in the united states. it's a major campaign issue. we explain what can be done to bring down the debt. earnings plunged 49% but they still beat estimates. by shrinking refining margins, third quarter profits are up at shell. they boosted oil production and that help offset that slump in rices. intoare results perspective. shell isory today with the acquisition of bg. production came on quicker than expected. they were able to make a profit liquor than expected in the united states. get someas able to
spots around rather quickly. shellve chevron and posting profit this quarter. exxon mobil in bp are still writing declines. they missed estimates in revenue fell in the british banks division. the banksto show that losses are restoring the dividend. they posted a loss. u.s. prosecutors are building a court case against valiant pharmaceuticals. this could result in charges. according to people familiar with the matter, they are focusing on michael pearson and howard schiller. to ties to aing secret pharmacy that they
controlled. gambling revenue has risen in macau. it is up 9% in october. that was beating a slump that lasted two years. a public holiday led to a jump in businesses. -- business. vonnie: we provide context and background. in terms of american exceptionalism, student debt loan stands out. no other country imposes the cost that the u.s. does. nowhere else to loans covered so much of those costs. the roughly $1.3 trillion in education debt in the u.s. is more than the rest of the world combined. would spend $350 billion over 10 years to reduce student debt. they would lower interest rates and making loans easier to
repay. bernie sanders would make all public colleges free. president obama has called on obama -- congress to make community colleges free. administration is expanding programs in which x students make payments as a percent of income. the goal was to give students reliable access to funds that would help them get through college by deferring some of the cost. the biggest growth in the program came in the past decade $1.2 trillion 10 years later. this according to york fed data. is the problem loans or the cost of college? a common criticism of proposals is they don't address the root
problem of tuition hikes. fornly makes it easier schools to raise fees. once to have a program of -- you can read more about student debt and are quick take on the bloomberg. report.your global news mark: should you be concerned about a firm that always has a shortage? it is far from over. this is bloomberg. ♪
2010 and 2015. the growth is welcome i the industry, but it's fueling a drought here in we have a master distiller from kentucky. is there a shortage? >> there is a shortage and it does depend on the brand and which bourbon you're talking about. there is a shortage of premium and older aged bourbons. vonnie: why exactly? what has happened to make that happen? >> it's really simple. a few years ago, we simply didn't make enough. eachtimated our growth and of our brands in overtime the demand has simply outgrown the supply. is there is a lag between production and when the
product hits the market. if you are making an eight-year-old product and you make it based on a demand, you can't do anything about it here in -- it. we are expanding. $70 millionr expanding our warehousing and production and we have plans over the next 10 years to continue that expansion. people ining continuing to expand and we will try to keep up. mark: should i be using this as an excuse to stockpile bourbon? should tell people you do a little bit of homework if you have time. if you have a local store that you typically shop at, it's a good idea to understand when they get deliveries and what brands will come in at certain times. you can make sure you have enough. get me through this show.
vonnie: i am not going to take any offense whatsoever. you can source bourbon elsewhere and make it on your own? is that a different strategy? >> it's something that has to be made in the united states. you can produce it yourself. there are more producers out there. if you're looking at typical brands that have been made for centuries, you have to isolate those rants. vonnie: is there a time frame on the shortage? is there going to be an oversupply? >> the one thing we do know for sure is we will never be correct. we will either under produce or overproduce. the timeline for us is we don't see any time in the near future slowing down and the demand is still strong.
globally, there is a new market for us as well. vonnie: where? >> anywhere you can think of. china, the european market, africa, australia. vonnie: we better get our bourbon while it's around. our thanks to harlan wheatley. read more of luxury at bloomberg pursuits. , there is thep worst month in two years. we are looking at the global slump. those are the yields on the u.k. 10 year. as is bloomberg. ♪
welcome to bloomberg markets. vonnie: we are going to take you from new york to london and stories out of japan, washington, and chicago. month onbled last mounting concerns that global central banks were preparing to reduce stimulus and inflation is accelerating. will november yield a better run for securities? mark: earnings at bp and shell, why a key acquisition helped boost earnings for shell and can bp snap nine consecutive quarters of losses? vonnie: a deal to put two of the together.s. newspapers has failed. trunk goes it alone.