tv Bloomberg Markets Americas Bloomberg November 2, 2016 10:00am-11:01am EDT
vonnie: we are going to take you and washington to london cover stories out of austria, germany, and china in a next hour. a new bloomberg politics. as hillary clinton holding a slim advantage with independent voters. with less than a week to go before the election, she adds more campaign stops. trump rallies today in miami. nejra: the race for the next u.s. president titans. stock markets around the world author. european shares falling for an eighth day. vonnie: still a big day for the federal reserve. why the meeting is likely to pass with little fanfare. we will be watching closely for rhetoric whether december will be in play.
we had 30 minutes into the trading day in the u.s.. julie hyman is with us with the latest. julie: we continue to see a slump. little changed from by the downward bias is intact. this has to do with the narrowing lead or closed lead hillary clinton has over trump. that is one of the things weighing on markets in recent days, and we have the conclusion of the two day fed meeting. no expectation they will be any rate change today, but we make it hints to december. if it authentic, it could be the longest losing streak since 2011. the almost 2% pullback we have now seen in the s&p 500, but the selling is not limited just to the united states. we have seen risk aversion affect the globe. over the past seven sessions, we
have seen declines. seven hundredht, $28 billion have been wiped off of the global market cap in this selloff. volatility has been increasing as well. we have a chart on bloomberg of various assets. we have the u.s. dollar versus yellowo and gold in appropriately enough. the past few days, and today, we have seen this one month volatility spike in a pretty dramatic fashion. we are seeing this cross asset of volatility increased. meanwhile, we are looking at oil prices today after an industry report last night showed a big build in the weekly inventory number. we will get the government number and see whether that is confirmed. at 10:30, i will be back. gold has been one of
the winners over this period of time of rising trepidation over the election. investors are looking to hedge. they are looking for more safe. one of the beneficiaries is gold, which is about 1300 today for the first time in about one month and has risen 3% over the past five sessions. is risk. europe, it we are 2.5 hours away from the european close, but we are looking at an eighth day of 600.s for the stoxx it closed at its lowest level since july yesterday and continues to pull further. the eight-day losing streak is the longest since 2014 for european stocks. what are we seeing rising? it is volatility as well. the v stocks index up for the day, his longest jump since 2011.
longestth day, it's jump since 2011. basically what we are seeing is that frank at the strongest level since june versus the euro. also strengthening against the dollar. switzerland's currency is headed for its strongest close in more than a year. we are seeing that in the bond market, too. we have a german 10 year yield in white, france in blue, and that u.k. 10 year yield in purple. what we saw in october was a pretty bad month for bonds overall, but we are seeing the heels coming down today because of the jitters, a lot of and around the u.s. election. finally, one of the stocks we are watching today. it looks like these stocks gain is retraining some that's regaining some losses -- reg aining some losses.
the world's largest container line announced a declining in fourth-quarter profit. the number missed estimates as well. vonnie: thank you for that. let's check in on the bloomberg first word news. moines, iowa, two officers at in their cars were shot and killed in an ambush-style attack. shooting took place two miles and 20 minutes apart. police say the suspect is a 46 you'll, scott green. he is described as armed and dangerous. hillary clinton is pressing into arizona as she tries to a state away from donald trump. her rival reinvigorated by the fbi new e-mail review is focused on florida. that is a battleground states he cannot win the white house without. president obama will be hosting a rally with james taylor in theel hill, north carolina,
first of two visits this week to the swing state. a panel of judges will rule on a challenge to theresa may's plan to begin britain's exit from the european union. that is according to a lawyer in the case. they want control over how and when the country leave zero. enter aers say she must vote in parliament before. analysis has come up with conclusions of the final moments of the missing malaysia airlines like. australia's transport safety may says the boeing 777 have fallen at 20,000 feet a minute at the end of its life. i-- its flight. they say it was not configured to land and water. venezuela, the opposition has called off a nationwide protest for tomorrow. a trialeed to postpone
for nicholas maduro. they are trying to defuse an ongoing political crisis. entered byas been inflation and a shortage of basic food and medicine. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. vonnie: thanks. the federal reserve meeting in the u.s. will wrap up in a few hours, but it is lots of being overshadowed by the timing of the presidential election. you can see a 16% probability of a rate increase today, but that jumps to 68% next month. our next guest has all the data and language pointing to an increase of 25 basis points in december. he was at the fed for more than two decades. he is joining us. thank you. to that end, if there is going to be a rate increase in december, what kind of language will begin today? what will you do to markets --
what will it do to markets? >> to be honest, the election is all-consuming right now. don't expect much change in the language. be verywant to explicit, they could do this november what they did last october when they were in a similar situation. they promised essentially they 2015 and ran in out of room. same thing for this year. action atonsidering the next meeting so if they are monitoring developments to make a decision at the next meeting, it is basically saying the presumption is they will tighten. they will have to see evidence to the contrary to convince them otherwise. u.s. economye healthy enough for the event to begin it again? vincent: that is a bit of the ironing of the delaying process.
they had a stronger argument to tighten in september than they will i. households and a nathan was --ong in september, w household spending they said was strong in december, but it has weakened since. they are continuing to have a $4.5 trillion balance sheet so it is only modest but slightly removing the ample accommodation already in place. nejra: the markets already pricing in the december rate hike that you expect. is there an argument for the event today to stay neutral with his language so it will lock itself into the hike if the
unexpected happened and we have that risk with the election coming up? vincent: i think you have identified the base cases. that is my base case. what they would do is change the date on the september statement, soften up the characterization of household spending because that is more accurate, and and hope nobody notices it when they release it at 2:00. in principle, if they wanted to strongest signal the december action, they would release the words for next meeting, but i don't think they will do that. they could talk subsequent to the meeting if they need to raise the probability. nejra: you spent 24 years at the threat. o person whote one sent "i think raising race or
signaling a december increase would be a mistake." really it is because he highlights the risk of the u.s. economy, bad debt in china, in the financial malaise in europe. he says if the risks materialize, that it has limited tools with which to fight back. when a rate hike in december be a mistake? vincent: there is always a risk associated with that, and wha he will go to the president of the minneapolis fed and he tended to make the policy for the argument. is policy still remains accommodative even after they raise it 25 basis points. i like to ask you, what would be bloomberg had lightl headline re story that the fed did not tighten in december? i think it would say that the
fed is some worry about global economy that it refrains from reacting. nejra: it may be a little bit snappier than that. vincent: probably true. nejra: i want to ask you about inflation. we had many people think inflation will be topping 2% soon in the u.s. what gives them that conviction? what will happen to productivity in the next six months? vincent: a couple points. one is you should never have conviction in forecasting inflation. it is very variable. second thing is there is two parts to think that inflation will hit 2% and probably overshoot next year. number one, potential output growth is slow. it slowed before the financial crisis. something in the neighborhood of 1.5%. that means we mostly worked out resource slack immucell and there is upward pressure.
we will find out the output had declined over the last four quarters. secondly, when you are talking about headline inflation, we had been absorbing the effects of earlier decline in oil and other commodity prices for most of this year. now that oil prices have reversed some of those declines, they will be adding to headline inflation. that is why inflation at 2% in of the year, about 2% early next year is a safe bet. when you forecasting inflation, there are no safe bet. vonnie: chief economist at standish. thank you very much. don't is the latest fad decision -- fed decision at 2:00 p.m.. we will bring it to you live here on bloomberg television and bloomberg radio. we are six days away from the u.s. presidential election in case you have been under a rock for the past couple months.
nejra: live from london and new york. vonnie: this is "bloomberg markets." brand-new bloomberg poll has hillary clinton leading donald trump among independent voters 39% to 35%. this rate was connected after friday's revelation that the fbi discovered a new batch of e-mails. almost half of independent voters say the renewed scrutiny will not affect their vote. let's bring in ben bodie in
washington. 35 is hardly a margin you can sit back and be comfortable with. ben: absolutely not. think the clinton campaign is comfortable right now. it is making an aggressive push es, especially in states they considered safe, particularly michigan. this poll does suggest a bit of good news for clinton. the gap is in her favor. this is a group mitt romney led in 2012 wi-fi points that the not help them win the election, but suggests donald trump is having trouble reassembling the coalition mitt romney put together that he would need to build on to win so there is good news for hillary clinton. there is still some doubts about this renewed look into her e-mails or an aide's e-mails. there are still a lot of independent voters who say the
e-mail controversy is in my vote, i know i'm doing, and i will not change. 41-36 on the bloomberg chart library, and it shows how the polls averages are coming together. red is trump an rising. clinton is blue and falling. decided months ago or will be decided in the next either days? the surprises of the last few days have changed the dynamics, and we have seen in a solution of the polls, and we not sure we have seen the end of that when i referred to as the bottom in polling, for clinton. another thing that has happened is we have been seeing a 2% to mean foroving around a much of the last year. what we are looking at here is how much variation
around the meat will happen in the last few days. that was established a long time ago, but the variation can happen in the coming days. nejra: i am glad you mentioned a variation. i want to go back to the independents. you talked about it as a bit of good news for hillary clinton, but how likely are independents to change their mind at the last minute? ben: sure. they are often a group that make up their minds in the last minute. independents are two kinds of people. there are those who lean but are not affiliated with the party, and they tend to make up their mind quite early, but the others wait until late to make a decision. this four-point lead is something that may be somewhat reassuring to clinton but not necessarily something that could let her rest on her heels, especially when she is losing momentum in michigan, north carolina, arizona, colorado, nevada, some of the states they
said would be there firewall in the electoral college. nejra: you mentioned hillary clinton as well pouring more money into what were previously thought of as safe states. we have trump increasing advertising in a dozen states in the closing days. what should we be looking for in the final few days to gauge which way this may swing? ben: a lot people are dealing with the uncertainty we are dealing with everyday. the polls are very volatile. they are showing massive shifts happening very quickly. it is hard for us to know if the race is shifting that quickly or if we are just getting a barrage of false making vastly different assumptions. when i look for is north carolina, nevada, maybe new hampshire, michigan a little bit. i would keep an eye on those states. pennsylvania a little bit. i was he when the polls go because that is where hillary clinton -- the states that
ford, f series pickup trucks were up and lincoln sales were up. a quick to people familiar with the matter, representatives from the private equity firm were not pleasant last week when automakers met with bidders for takata. the company is blamed for the largest auto recall in history. that is your business flash. vonnie: thank you. let's head straight to our markets desk in new york. julie hyman has been looking at a deal that is on. julie: another semi conductor deal. here is another . that is all caps.
is rising as investors are bullish on this deal. broadcom place to divest the internet geared business, whiching ruckus wireless, it bought earlier for $1.5 billion this year. alibaba shares are up 8/10 of 1%. the chinese economy may be slowing, but alibaba is still growing. a big boost at its cloud-based business. the company has seen quarterly sales beat estimates for five straight quarters. as alibabafell invests more but was still ahead of expectations. a narrower loss that have been -- than had been estimated.
zillow raising its 2016 revenue forecast as well after its numbers last quarter beat estimates. even though some overall weakness today, definitely some strengths within technology. nejra: thank you so much, julie. still ahead, in a world of lousy hedge fund returns, we will talk with a macro manager who made his investment 18% in less than 18 months. our exclusive interview is next. this is boomer. -- this is bloomberg. ♪
we are closely watching oil and a one-month low. latest onn has the weekly crude inventories of incentives. julie: yes, and it was anticipated it would be a build in the inventory numbers, and it looks like we are indeed seeing a build although it looks to be substantially larger than estimates. i am seeing a 14 million barrel build if i am reading this correctly. there was a drawdown in gasoline inventories, about 2.2 million, and a drawdown in distillates. build.llion barrel i have not seen that in quite some time. we are substantially worse than had been estimated. i will call my bloomberg terminal a look at the last time
it has been since we have seen a number like this. take a look if we can. this shows the weekly change. here is the build we just saw a 14 million barrels. this chart goes back to the beginning of the year. at least this year, we have not seen a weekly build like this. i will keep going through the numbers, but evidently the initial reaction in oil prices is quite negative. already, we have been seeing quite a bit of selling in oil in recent days. his appointment over a lack of agreement from opec nations. oil is lower than it was before these the wrist came out. here you have it down three percent right now. -- 3% right now. vonnie: let's check in with bloomberg first word news. >> a senior russian diplomat is urging the next u.s. president
to work with his country to end the war in syria. they defended russia's military intervention as they fight against terrorism. vladimir putin has ordered a humanitarian pause in aleppo on friday. crisis facing south african president jacob zuma worsened today. the high court ordered the nation's protector to release a report about the alleged influence of friends of zuma over appointments. zuma dropped his request to stop the publication. trump lost another attack on obamacare. he says if he is elected president, he will call a special session of congress to repeal the affordable care act. he says if something is not done, obamacare will destroy american health care forever. a record number of travelers are
expected to take to the skies during the 12 day period throughout the giving. more than 27 million people will fly worldwide on domestic airlines between november 18 and 29. that is up 2.5% from last year. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. this is bloomberg. vonnie: thank you. i don't need to tell you how tough it has been this year for macro hedge funds. , he started his own. he is here for a bloomberg exclusive with our own erik schatzker. erik: thank you so much. great to see you. >> great to be here. what may's begin with be the biggest question for investors, and i am not just talking about macro managers or everyone. is the great bond rally over? >> i think so.
i think the yields we saw across core markets into july, i think the lows we got to will be those lowse in our lifetime -- we see our lifetime. i think going forward, the propensity for that to continue diminishing. erik: why is the central bank buying over? you would not be the first person to call the end of the bond rally. those would have called it before were wrong. ben: sure. i think the outlook of the rate of change of bond buying going forward is diminishing. if you look at the policy goal considering now are that a formal policy mistake and how low and flat those goes up to. all the way of the curve, it makes it difficult for a financial firm with banks and
pension funds to generate returns they need, which in turn feed them back into the economy. the fact that those policies did not provide an economic gain and as we have seen in the u.k. and a switch a couple weeks ago, the beginning of switching from focusing on monetary policy to fiscal policy and all create a reaction in the long and on the yield -- end on the yield curve. it is ae signal that change underway in monetary policy is what? japan's effort to control the yield curve? ben: i think it is a combination of that. we saw in the announcement in july they need to rethink their policy followed up in september by their efforts to steepen the yield curve in japan. in the u.k., the relative interference by the government,
the bank of england's future policy, the government state of policy preference clearly shows diminishing ability for the bank of england to continue their policy. in the u.k., that is important because traditional policies offer -- for the government. there is coordination in the policy. erik: which we at least in theory do not have here. ben: exactly. erik: let's talk about the reference you made to theresa may and this prospect of fiscal stimulus in the u.k. why should we be certain it is coming? again, we have been talking for years about the need for fiscal stimulus. every western banker in the world talks about it. we have not seen much if any of it. ben: hosts crisis, things have changed in relation to physical. post crisis, the policymaking environment is one that said we need to correct the fiscal environment. wers later because of what
achieved in monetary what we have lowered the term structure of interest rate we have created more fiscal room that gives the government the ability to borrow more in this environment. there is more room in the budget. furthermore, new academic thinking. showings a recent piece that coordinated fiscal policy can end up reducing deficits due to the effect on growth. as we saw in the recent g-20, that environment is what policymakers want to go to wawa. it is a situation that is not deficit enhancing the long run. erik: if you believe central bankers are coming around to the view the unconventional monetary policy is running out of space and some
governments may begin increased spending, how do you express the view? ben: the most extreme view of that is where we got to the long end in the u.k. something like the 15 year rates starting at 15 years time is an interest rate where people believe yields are going higher that expresses views to low into flat. -- and too flat. 1.4% is in thet process of starting to normalize the curve, and that brings into account the go-to move and the idiosyncrasies in the u.k. policy. less is a combination of incremental qualitative easing coupled with growing inflation expectations. ben: and more supply. central-bankion
buying, more execution of government issuance from the fiscal as well as a higher probability that is policy and therefore, you have a future higher inflationary expectation. erik: we have seen evidence the yield curve is beginning to steepen. ben: globally. erik: you can measure it anyway you want. five-year yields against 30 year yield. two years against 10 years. you see it playing out your point in the u.k. and here in the u.s. how much can we should do you have behind this? ben: i have a huge amount of conviction in this. i think we only got to those levels because of the policy. now that we can see it changing, we are already invoking that dynamic. therefore, i'll see has released these yields to stay where we are. t
erik: a huge amount of conviction. get me a comparison. making comparisons to something in your career. you have a macro manager for how long now? ben: for the last seven years. erik: what else looks as good retrospectively as this? ben: i compare the distortion in long end yields today to back in 2006. erik: really? credit ridiculously low and primed for a fixed-income blowout in 2006, which we subsequently experienced. ben: not to that same order of magnitude necessarily it 2008, but in terms of the conviction that this is the wrong right and ate and has to-- r change. erik: what happens in japan and europe?
ben: it is a bit of a different dynamic in japan. if you look at where the pressure can be released, the japan policy change in september, we have to have a pressure valve as physical increases come through different markets. the modelincreases toresponds, that pressure come to the equity market and currency market in japan. erik: that is the trade. ben: especially if you compare that relatively to europe. let's compare japanese examples where we are in europe. if we think we are in an environment where monetary has run out of room, you are unfortunately i get is back in some elements of policy paralysis because there is little ability in the camera institutional architecture in europe to conduct the same policy we will see in places like japan and the u.k. and 80
the u.s. if any on the political outcome. in europe, germany is the only one with room. it is extremely unlikely to get any fiscal impulse in germany ahead of the election next year. in the environment with a lot of political risk in europe over the next six months especially with the italian no, dutch french electionatio combined with the ability to move forward with the stimulus compared to japan, in that environment i would have very high conviction for japanese equity markets to significantly outperform europe. erik: since you make an indirect reference to populism in europe, let's talk about populism here. the october surprise from the director of the fbi has been into the trump campaign --
breathed new life into the trump campaign. is there an obvious trade for you? ben: if you look at the latest poll today, we still have a 30% chance of trump winning. because of the brexit result, the market has a great fear of a potential of set like with brexit. brexit. like with i would be looking at the mexican peso of the barometer of that. i think the underlying fundamentals is very attractive. i would be looking for locations this week along the mexican peso into the election. erik: we can bring out a chart to show what is happening. ben: in order to take advantage of trump feared price into the election. erik: what else?
that has been the place most people have been looking. ben: that is the most extreme. we arelook at where priced today under 19.5 and the probable distribution of the general value of that trade under hillary winning and a are pricing a greater than 15 degree chance of trump winning. back and gravitate back down to 17 in the event of a hillary when. -- win. analysis.tistical erik: unless you think the end result -- and less you think of the end result. there is another topic, regime change. argentina opportunity fund that generated in 18% return in less than 18 months. nice straigtrade. as a result of that we witnessed happening in argentina, bond
spreads have narrowed dramatically and yields have come down. there are a lot of investors looking for the next argentina, and they like what they see in and they like what they think might happen in venezuela, where the government appears to be increasingly holding on to power in a continuous fashion-- tenuous fashion. ben: the market is looking for a repeat of a previous example. i think either case is a replica of argentina. argentina was unique and dramatic in terms of 70 years of populism unwinding and starting to deliver real institutional change. if we start in brazil, where there has clearly been an , you can hardly say that is great institutional
change when it has been endemic in the system for the last 30 years plus. while we have a relatively small increase in quality people in , if we look forward to 2018, ision in addressed a caretaker government. we will see a cyclical pickup in brazil which is cyclical and clearly being priced into markets. the ability to develop real institutional change is minor. in venezuela, the market is getting way ahead of itself and looking for positive change there. if and when we get that transition, it will be very messy and in the context of a very ugly default. if they try to replace him, that is the opportunity either for the new government in the same system to embark on the default
and reduce the debt burden or for a civil war environment. in either case, i don't see venezuela vietnam to continue on its current path with a lack of resources to generate real revenue. erik: venezuelan bonds usually overpriced. the real trade in venezuela is to wait for the messy default and buy we'll distress in the default -- real distress in the default environment. erik: i enter you have heard the $50re that there is 5 trillion to $70 trillion sitting in cash and investment worldwide. what does that say? is that cash that lacks conviction or confidence and is ready to be mobilized, or is it saying something else? ben: being in the extremely environment, fixed
income, risk-free fixed income and credit as well as real estate and equity, all across the asset spectrum, the amount liquidity created has created an asset environment. going forward, that liquidity a discount is factor. as the discount factor reverses, we go into a much more tricky acid environment. erik: correlations breakdown? ben: correlations breakdown or hold to what extent in the same way we have seen assets rally together and everything can sell off together. in the environment, cash or be able to have a certain breadth of mandate to ensure certain securities will only pay off. erik: so it raises a question about hedge funds for me. we are seeing an enormous shift
and nothing seems to be more active that a hedge fund. what is the future for the hedge fund industry amid a shift like that? ben: i think it is a great environment. when i first came in here withing with mr. bloomberg acting out is in time for passive investing to take over from active investing, i think it is the opposite. forward in a more we don't environment have the same support of the discount factor propelling upwards, you need to be active and pick your spots it be long and short assets so i think the workouts it is incredibly exciting. erik: great having you here. your maiden voyage. i am pleased to have been along for the ride.
let me just say not every guest who comes in for an interview gets to have a pre-chat by mr. bloomberg. nejra: that's true. fascinating. some great headlines there. ben saying the eels we saw in july will be the lowest in our lifetime. today.seeing money move up across the markets. much more to come. this is bloomberg. ♪
are there any former homes of former presidents for sale right now? james: there are not actually residents's homes, but there are ancestor homes of multiple presidents, including benjamin harrison, who was the great great great grandfather of william harrison, was a president. is the senate was another president. -- his descendent was another president. vonnie: to these presidents grow up in a life of luxury? what happened to the areas they grew up? james: most of these people and the properties are right about basically the parts of extraordinarily wealthy people. charles carroll is another person mentioned who was a founding father and sign the definition of independence. he was wealthy.
he was a slave owner and maryland. the is a house built on some of his property that is for a cool $7 million. all of these people at the time when they were involved in u.s. politics were some of the wealthiest people in the country. nejra: tell us about an apartment in new york with presidential ties. james: yes. 55 liberty street and one of the oldest , but we know that york you are in his building so there is that connection. there is also connections via -
- i pointed out this gorgeous estate in bermuda that was the former residence of the u.s. consul general, where a variety andresidents statyed presidential hopefuls state including ted kennedy, the caucus, george h.w. bush. the list goes on. vonnie: is its history buffs who seek out these properties or do they market it to anyone? james: real estate agents with certainly argue it does add value, but i think that there is trick that george washington slept here. anyone in new england can claim some sort of historical providence. a lot of these places i mentioned have a much more direct connection, and i think
that history rubs off a little bit on the value of the property. nejra: we have to leave it there, but it is a fascinating story. i urge everyone to read it. thanks to james. you can read more about luxury at bloomberg for your destination for the finer things in life. coming up, a pound power. certainly continues to gain against the dollar. we will continue this with a top ethics strategist at ing. that is next, and this is bloomberg. ♪
mark barton. welcome to bloomberg markets. ♪ vonnie: we will take you from washington to johannesburg and cover stories out of new york and the united kingdom in the next hour. tech earnings in focus. alibaba's quarterly sales beat expectations. now we look to facebook with a focus on mobile advertising. nejra: for once the pound is benefiting from increased political risk. rising to a three-week high. oil markets are turning skeptical about opec's ability to deliver on cost. the chart telling the story right ahead. 90 minutes into the trading day.