tv Bloomberg Markets Americas Bloomberg May 24, 2017 10:00am-11:01am EDT
vonnie: plenty to cover over the next hour, including an interview with carson block of muddy waters. let's get to julie hyman. existing home sales falling 2.3% went over month but still coming ahead of estimates. ,.5 -- a little below estimates excuse me. the annual case for the existing home sales, the largest part of the housing market. a little bit choppy or data as of late when it comes to the housing market. that number a little bit weaker than estimated. already we are not seeing much change in stocks. five straight sessions of games for the major averages here. not quite getting to record levels, although it looks like
we have hit 2400 on the s&p 500. we would need to gain a couple points. volatility is pretty much gone again. look at the vix with the one-year and five-year averages. the five-year averages in blue and one-year average at a lighter aqua. we had despite last week and came back debt -- we had the spike last week and came back down a little over the one-year average. calm has returned to markets after a little bit of a spike last week. leading gainss today, looking at the return for the utilities. it is up 2.5% over the past few weeks. .p nine of the 10 sessions we are seeing a return to the strategy of people posting for yield. and by the way, this index is trading at its highest since
july. on the flipside, counterbalancing the gains in utilities, declines in retail. tiffany's is the worst-performing stock in the s&p 500 after the company numbers came out missing estimates. analysts have been looking for a gain of 1.7%. not able to keep up with competitor home depot. advance auto parts following on the heels of competitors yesterday and missing numbers as well. i believe we have our bank of canada decision out in the past three moments. canadian central-bank keeping the benchmark rate at 0.5%. a little bit of a letdown but not much change. up a fifthave been of 1%. the u.s. justice department
yesterday filed a lawsuit -- the china rating cut is weighing on sentiment today but we are roughly about one 20th of 1%. retailer -- clothing retailer being analysts estimates from overcoming persistent weakness in the closing unit. introduced hopes that chief executive is set on a long-winded path back to growth, focusing on improving availability to stem market share losses while the aggressive store opening program is boosting sales and food. m&a shows up 9/10 of 1%. interesting call from blu-ray asset management -- blue bay asset management. the outcome is going to be pretty grim. .oing to be a hard brexit
currencies rallied since the election and started selling sterling next week, betting that the uk's set for a damaging brexit process. such a view does chime with global -- aliianz investors. to 126.the blue line the red line is 120 for the end of the year. as we await the fed minutes, as raghi started i come i thought we would look at the balance sheets of banks. when you compare those balance sheets relative to gdp, japan is 93%. in its totality, the ecb balance one out of the three big central banks. vonnie: developing story now.
deutsche bank has been asked to provide documents on trump and very, very rich russians were being investigated. and now the bank is being asked to provide what it found. letter house democrats citing compliance failures. the house democrats folding deutsche bank for withholding russia reports. -- faulting rocha bank for withholding russia reports. once again, democrats have deutsche bank a letter citing compliance failures and asking for findings on those trades and trump accounts. meanwhile, president donald trump and first lady m elania are due to land in brussels. it is the latest leg of a nine-day journey of the middle
east and europe. the president will meet with belgian royals and the prime minister tomorrow the president will join a nato summit. he will be returning to italy later in the week. the nato summit is with top allies including the newly elected french president emmanuel macron. is an editor for bloomberg news. kobe the primary wish list for -- what will be the primary wish list for tomorrow's nato meeting? >> from nato's point of view, the main thing they want to have is a smooth meeting. they want the optics to be good tomorrow. they would like for donald trump to come in and show that he is in these nato and wants data and is behind nato. as you know in the past couple has been a bit equivocal on his , but he seemsto to be on what the eu and nato
considered to be the right path, and they hope that continues tomorrow in brussels. vonnie: you say equivocal, jones. it has been a bit more black-and-white than that. at a certain point he called nato obsolete. stoltenberg inh the u.s. and once again decided it was a great organization. what will donald trump one from nato? jones: i think his main pushes for the spending. he has said before, and i'm sure this will come up tomorrow, that he wants to have the nato allies contribute at least 2% of gdp to defense spending. the eu has pushed back on this a little bit, or the european countries and nato, saying it is not just about money, that it is other nonmonetary factors and support that eu nations give to the defense effort. but that will be one of the discussion points tomorrow. mark: another discussion point,
no doubt, jones, in the wake of the manchester suicide bomb call for atrump's type of anti-islamic state role for nato. is that likely to gain some traction now? jones: yes, of course, that will be discussed tomorrow as well, especially after the manchester attack. stoltenberg has been very firm in saying that nato will not engage in combat activities in this sphere. that message seems like it is going to continue tomorrow. but the discussion will be about in what otherwise nato will contribute. nato will say they are already doing training and other types of support in the logistical efforts for this and other programs in the middle east and around the world. we will have to see. i don't think anything concrete is going to come out of it. i think the optics of it -- if we see donald trump engaging with nato, engaging with the eu,
both cases,ort in then that is going to be seen as a positive meeting for the folks in brussels. mark: as vonnie said and you referred to, jones, he has been not only not supportive of nato, calling it obsolete, but he had times has been critical of the eu project. there is a list 2 -- almost 2 things to be worried about, nato and the eu. jones: right, and he will be meeting specifically with the eu leaders, tomorrow, and we will see how that goes. again, nothing concrete is expected. if trump can show his support for the project, or at least not call brussels on how and not give a lot of criticism -- not call brussels a hellhole and not give a lot of criticism for the project, europe will see that as a step forward and a positive sign. vonnie: and of course, meeting
with the french president, emmanuel macron, for the first time. how will their relationship evolve? jones: this is hard to tell, but this is a very important meeting. not least during the campaign, trump was on the side of le pen, and not cause a bit of consternation here in europe. just the fact that he is having this meeting with macron is seen as a positive sign. i think they will talk about ways to push the relationship forward. it is not exactly what they talk about. it is just good to have trump here and engaging with europeans, engaging with the leaders over here, and showing support in both directions. vonnie: will you face any awkward questions about his dealings with russia -- will he face any awkward questions about his dealings with russia? jones: i don't know, probably. trip, thear in this mideast and the about -- the
mideast and europe comes yes has been ok, he has been able to deflect whatever is going on with a crisis use facing at home. he will be about focus on the nader issue and the eu issue -- nato issue and the eu issue. vonnie: he has been treating in etingast few minutes -- twe in the last two minutes, air force one coming to land, about obamacare. he says "the hhs report shows premiums were up 105% over obamacare," saying that obamacare is "a disaster." air force one is arriving. president trump will be heading ,o the royals first of brussels of belgium, and a meeting with the prime minister afterwards. he will go to the nato meeting
which takes place tomorrow. jones hayden reporting from brussels, thank you let's check in on "first word" news with emma chandra. emma: there are a number of developments in the investigation into the manchester suicide bombing. police say they've arrested three men in connection with the attack and are not giving further details. 'sime minister theresa may warning that another terror attack may be imminent and she is taking unprecedented steps to prevent it. the military will start guarding national landmarks. they raised the threat level from severe to critical for the first time in a decade. there is a report that former senator joe lieberman is no longer being considered for the post of fbi director. that comes from cnn, which says president trump's team has restarted its search. a number of senate democrats were opposed to lieberman, you know he was the party's vice presidential candidate -- even though he was the party's vice
presidential candidate in 2000. in spain, the supreme court has sentenced a man to 24 years in prison for tax fraud. argentina andm played for barcelona. spanish judges usually don't enforce still time for less than two years if the person doesn't have a criminal record already. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. chandra. this is bloomberg. mark: thank you very much. coming up, i'm going to keep a close watch on oil. opec will be in vienna tomorrow, edging closer to an agreement. this is bloomberg. ♪
shortly. we can get reaction from that as well. we have seen a pretty tight range as we anticipate the number going into the meeting tomorrow morning. where do you anticipate going once it settles if we indeed accept there is going to be a continuation of production cuts? what should be the range? what is the correct price? want?o saudis >> i think they want it north of $50. we're seeing the trend back over $50. short-term, it looks a little bearish because you have a series of lower highs and lower lows there does seem to be support on the moving average. right now the saudis are keeping it somewhere north of 50. vonnie: what about the idea and the white house budget request yesterday that the strategic
petroleum reserve might be sold off? to the oil market it is not that big of a deal but in the cme, whether you all say? >> i think that is how it is being interpreted. not too much of an impact. -- we will have to see if that is how it manifests itself. right now it is not being priced in to significantly into what is going on out of the opec meeting tomorrow. today'sdan deming "future in focus." mark: china's economy is back in focus as moody's downgrades china's credit rating. bloomberg's chief asia economics correspondent and the current has more on the downgrade, the first movies china downgrade since 1989. enda: one bank said it is a wake-up call and that is the way to read it.
authorities are preaching the need to rein in leverage and rein in risk in the financial system, but the kind for an. from reforms that are needed to -- the kind of pain. short reforms that are needed to do that are going at a slow pace. gradualoverall the erosion of credit metrics in china is going slowly, nonetheless, the direction is headed is the wrong direction. i think that is the main takeaway. bloomberg's and occur at -- enda curran reporting from hong kong. vonnie: once again, president donald trump arriving in brussels, having left of the vatican earlier today. we are about to see him and the first lady land at the airport out of air force one. they are going to be meeting with king philippe and the
spoke out today and here is what he told matt miller market reaction to policy moves. >> well, i think that markets have understood very well our reaction function in the monetary policy. so i do not fear that markets will be in a position where they will be surprised by what we will do in the future, reflecting the new situation, the new developments. the markets know that we are committed to a certain policy stance until the end of this year, which by definition means that we have to communicate something to the markets before the end of the year, closer to the end of the year. markets understand that very well. problems ofr any ourulence resulting from
monetary policy decisions going forward. as you said, financial stability implicit in the concerns of central banks. we see the financial stability risks as something that has to be addressed by market prudential policies, meaning decisions about regulations and financial institutions. do you have to be especially cautious -- if you want to make it clear that there is change in monetary policy by the end of the year, it would make sense to be cautious this june because you have the fed moving again in june -- >> i'm not anticipating what the governing council will do in june or september. i'm pointing out something -- adamant that we are committed explicitly with policy instrument's until the end of
the year and we have to make decisions about the future. year, ine end of the my perspective, closer to the end of the year. not in the end an important consideration if it is whata problem of analyzing is the best time to do it. that is not indian so important. -- not in the end so important. vonnie: that is the vice president of the european central bank speaking with bloomberg's matt miller. resident trump has arrived in brussels and has deported the plane -- de-boarded the plane. that is charles michel, the prime minister, beside him. the first lady has also arrived. they will head to the palace to
meet with belgian royals king felix and -- king philippe and queen mathilde. mark: a transaction social is a minimum of 75% of linda shares. linda says after a possible signing, no assurance of a deal. packed in confirmed a principle with praxair. this has been an ongoing negotiation between the two companies in a deal that would combine 2 big industrial gas supplies. that is just crossing the bloomberg terminal a few moments ago. this is bloomberg. ♪
we are waiting for weekly oil inventories in the u.s. especially in focus this week was the opec meeting. just getting underway tomorrow, two-day meeting. there will be a communiqué. we think we know what might be in it, but nonetheless, these are important. julie hyman. julie: larger than estimated drop in inventories and it is the second straight week there has been a drop. as welleeing declines in gasoline inventories. down 787,000. and distillate inventories. all of those numbers are better -- deeper declines than had been estimated. off thekend kicks traditional summer driving season, it being the holiday weekend for memorial day. as well, we're going into this weekend with crude oil inventories about 111 million barrels above the five-year average. work down inis
inventories that there has been recently, it is still above where it has been the past several years. we are seeing oil take a leg higher here, much more so than it was earlier. if you want to follow the bloomberg for more commentary ,tlive is your place to go. vonnie: thank you. that is julie hyman. opec is closer to reaching an agreement to cut oil production for another nine months ahead of tomorrow's meeting in vienna. manus cranny caught up with united arab emirates energy minister earlier to ask him about efforts to trim the global oil glut. >> you will find us all supporting deposition -- that decision, and we are there supporting the market stabilization from the beginning. i don't see a problem to do what
it takes to create the market stability. vonnie: for more now, let's go to manus cranny, who is in the end up. you happens -- who is in vienna. you are speaking to many participants and advisers. ofn we get a continuation the production cuts? manus this is a coalescing of the thinking here, nine-month extension. opec could post something a little more substantial out of the back. of's bring in a veteran cornerstone analytics. the sun has come out for you. it was pouring a little bit earlier. we were chatting and you said, look, i get that there is a bit of frustration. give me your sense. >> the minister, when he put
together the deal in november, it was basically three times as big as what people thought it would be the case. it has effectively take us 45 million barrels for a month is wise -- a month of supplies. there was an inventory built in january, bigger built in march. it was not what they thought to be possible by the time they got together now. they are under pressure to get the price up. manus: could they be shocked? could they get something more substantial out of the bag? are caught up with someone upstairs and he would not commit to the menu of nine and longer. what can they pull out of the bag? >> on paper>>, i don't think there will plenty thing out of the bag. the oil market cross the rubicon last december and we have drawn
stocks every month except for january. the idea is that the cuts should accelerate and we agree with that view. at this point it is more about maintaining the course than anything else. from a historical perspective, and you have to be aware of this , most people are not used to the fact of opec pulling this much oil out of the market as quickly bit in the 1980's and 1990's, you me multiple times a year, and compliance was a huge issue. hads: was in 1990 when you 4.5 million barrels, out and it is about compliance -- 95% overall, but the iraqis are not playing ball. >> iraqis are not part of this deal. given that they have a civil war going on, nigeria's issues, the heavy lifting was expected to be the saudi's, kuwaitis, and emma miratis. e manus: the fed has to come up
with an exit strategy. the ecb has been battered. he said it is too early to talk about it, but should they talk about it in september? >> well, it will really depend on what inventories are doing at the time of the next meeting and whether they need to unwind the cuts. the exit strategy has a couple moving parts. some people think there will be a bigger response, particularly the u.s. not a view we share, but that is fine. there is a question about if these cuts -- the last nine months -- it is taking them too much. manus: i know vonnie is in a hurry. one last question. every time we get $50, oh, shale. you have a different proposition. put it to the markets. >> effectively, the issue of shale oil is it is never going to be the long-term solution. it is ahink about it, short drive resource fit in the u.s. right now, crude production is 9.2.
to stay there year from now they have to come up with 1.7 of new supplies. that is how much you will lose from existing wells. in the next few years we get more growth in the u.s. and then it peters out. heard them work through the issues. thank you. the president of cornerstone analytics. you heard it here. cares?ah, who vonnie: i think you are quoting the views of some of the participants. looking forward to more from you in beautiful vienna the next three days. manus cranny. mark: let's check in on "first word" news. emma chandra has more from new york. emma: president trump is now in brussels. hemark: will visit the belgian l palace and meet with the prime minister there. tomorrow's the nato summit. earlier, he met with pope francis at the vatican. it appears the pope is trying to
send a message to the president. he gave mr. trump a copy of his book on the importance of protecting the environment. later this week, president trump is heading to a meeting of world leaders who will pledge to honor the u.s. commitment on climate change. the manchester police chief says authorities believe the network was responsible for a suicide bombing. the british government has raised the terror threat level from severe to critical for the first time in a decade. that means another attack may be imminent, and prime minister theresa may is taking unprecedented security. the british government is urging social media companies such as afterok and twitter to go their sites. after the -- after the
manchester attack, the head of the islamic state posted messages boasting about it. if the congressional budget office says the bill misses required targets, republicans and has to be forced into an embarrassing do over on the measure they barely passed last month. they are trying senate rules to allow the bill to pass by civil majority. democrats are unanimously opposed. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i am emma chandra. this is bloomberg. mark: thank you very much. coming up, carson block of muddy waters says he will discuss a potential short target in the social-media business. this is bloomberg. ♪
vonnie: live from new york, i am vonnie quinn. mark: in london, i am mark barton. this is "bloomberg markets." time for the biggest business stories in the news right now. softbank group has taken a $4 billion stake in nvidia. that makes it the company's fourth biggest shareholder, all this according to people familiar with the situation. plan tort of softbank's become the biggest in minster -- investor in technology. cost cuts and improvement to the food business offset persistent weakness in the retailer's clothing unit. that will boost hopes that the set theecutive will chain on a long-awaited path back to growth. that is the latest bloomberg business flash. looks: our "quick cake"
at the views of pope francis as he met with president trump. still has the world's attention. the first pope from the americas, he quickly stamped by down style on the papacy, salvaging the image -- down-to-earth style on the papacy, salvaging the image of the church. he has a goal to change not only the church, but the world, speaking out on issues such as, change and capitalism's role in creating poverty. the pope has lashed out at political and business leaders and the vatican bureaucracy. here is the situation -- francis' agenda has provoked resistance among some conservative cardinals and he has clashed with trump over inequality and climate change. pope andan said the the president had a cordial discussion on life and freedom.
excuse me. the pope has ruffled feathers -- on a trip to africa, he called corruption a new form of colonialism and became the first pope in memory to two or a war zone. --t tour awards him zone. he has questioned vatican spending. close to his deeply devout he trained as a chemist before enrolling at a seminary. excuse me. he was ordained at 32 and four years later was named head of a jesuit order in argentina. person whoof 76, the is to become francis and the leader of 1.2 billion catholics. here's the argument. catholics,servative francis is overstepping his bounds by campaigning against global capitalism, calling the
unfettered pursuit of money the drug of the devil. critics charge he has no authority to speak on economics or signs, but to supporters, he is bringing the church back to its roots. just after his election he called for a church for the portrait please read more about -- church for the poor. please read more about francis on bloomberg. mark: bonnie, you deserve a big loss of water. coming up, find out which social-media company may be worthy. this is bloomberg. ♪
since the ipo. schatzker is in san francisco and has more. much.thanks very i'm here with none other than carson block of muddy waters capital, a noted short seller with many successes to his name, the most recent of which is noble group, singapore-based commodities trader that looks to be on the brink of collapse, a company he called out to his ago as come if i'm not mistaken, carson, a zero. we are not here to talk about noble group. we might get to it in a moment. i want to talk about snap. you are not here to present a full report, if you will. so far as i understand, you are not yet short snap, but you have concerns and i want to hear about them. carson: we have done a decent amount of work on snap, and we are not short snap at present. we might be short in the future.
really three categories of concerns. erik: by the way, we should remind everybody that this is the owner of snapchat. carson: yes, exactly. we have corporate governance concerns, and some of those are well known. there is also real questions about the ethics of the company. that is something that is not well known. also, and this is the area where we are really trying to form a view, questions about the business model and strategy. coupled with the fact that it effectively has a lot of debt in the form of commitments to amazon web services and google. erik: let's take them one by one. you say some of the corporate governance concerns are well known. they might be known to many people but not all people. stockeople who own the may not know that there are no voting rights in the shares.
first company i've ever seen that has no voting rights in its shares. on the surface it strikes me as a corporate governance concern. is not the chief concern but it is definitely a concern, because the ceo, evan spiegel, he strikes me as one of the founders who you don't necessarily want around to run a mature company. erik: why? carson: well, at this point, and this gets to the ethics concerns we have -- ok, getting the easily well-known corporate governance concern is he got effectively ended hundred million dollar stock bonus on the ipo, few to no strings attached, and he can the fei company now and he will still receive the stock -- you can leave the company now is still receive the stock. that is really -- erik: red flag? carson: you normally don't want
to see that kind of conflict of interest, the outright money grab. beyond that, the actual ethics concerns. there was a lawsuit filed by a former employee who i was hiredo lead their growth team. he was hired in late 2015 and was only with the company for three weeks before he was fired. in his lawsuit, he is alleging that at the time snap was selling investors and have 100rs that they million daily active users, it was really about 80. at the time there were telling werebody that they growing double digit month on month, which is what we see now for the first quarter as a public company. erik: let's say he is right and you are right to give him some credibility.
who is to say that evan spiegel isn't going to "grow out of this stuff," grow up, if you will, and start running snap like a public company? carson: ok, well, one thing i do want to emphasize before answering that question, we have diligenced the whistleblower here. we have had one of our investigators do a lot of -- everything that has come back indicates that he is a very standup guy, very serious and honest. at this point i would say it is probable that what he is saying is correct. in terms of the question of can as you for change its stripes, let's say -- can as you grow -- bra change its
stripes, he has been massively rewarded for this unethical, problematic behavior. people who are positively rewarded or positively sanctioned for that, i don't see them all of his moment where they say, you know what, that was great back then, but now it is time for me to toe the line. erik: incentives lined up in the right direction. carson: people like that have to have something really bad happened to them before they correct their behavior. erik: i'm not sure whether it is quite bad enough. before we run out of time, let's get to the business model strategy issues. sounds as though they might be more important than the ethics and corporate governance issues. carson: for us we generally don't do a lot of forward-looking analysis. this is something we need to work on more to come to a view. erik: you know about some of
this stuff, right? everything snapchat does, facebook seems to replicate. carson: but there are some important differences. the younger generation, they think of facebook as we thought of oldsmobile. we are not interested in it. and they are not going to go to facebook. but the counterpoint to that, which i think is a salient counterpoint, is that snap is great when you are a teenager in high school and you have your to hideand are trying things from your parents. but when you get to college and start thinking about jobs come that is when you want to embrace the wider world, and snap, with its focus on tighter social and -- social networks, as opposed to the wider world with facebook, is not well suited to that. today's teenagers will become they will use
facebook as their primary social network going forward. it is not that we see a real generational difference. that is one thing that is actually important point. the other thing that is also an important counterpoint, because snap is trying to limit everybody's social network on snap, on snapchat, to 20 to 25 contacts, the value of each node in the social network is arguably a lot lower than it is for a wide-ranging network like facebook or linkedin. that is some thing that could ultimately impact advertising. one other thing that i will say as well is just in general, i've become a little skeptical of online or digital advertising as a business model. carson, you to ask, raise what sound like legitimate concerns. obviously, it is higher be where with any stock -- buyer beware with any stock.
why is it not time to short snap yet? you have done work on it and identify these problems, but you are not short the stock. carson: in a sense you are asking somebody -- i'm normally looking at things that have happened. when we come out and say i am short xyz for these reasons, it is because those are facts that can be objectively proven. here we are trying to understand the future. i think i'm ok at that, but when the feeling i normally get with a short where i am saying 100% conviction that this is a problem for this did happen, it is really hard to clear that bar thinking about the future. so it is a matter of getting comfortable with that sort of -- quickly, give me a level under percentage of conviction on snap. carson: medium conviction. erik: 50%? carson: for most people i
wouldn't say 50% is accurate, but for us i will call it 70%. erik: good seeing you this money and spending time with me. carson block of muddy waters capital, talking about snapchat, a company that, as you just heard, he had some issues with. vonnie: he moved it from 50 to 70% conviction there. great interview. erik schatzker in san francisco. coming up on the european close, mark. mark: close less than 35 minutes away. albeit by a0 is up, small margin. ftse is up. the other two are trading lower. let's leave you with the currency board. this is bloomberg. ♪ .
this is the european close on bloomberg markets. ♪ mark: here are the top stories from the bloomberg and around today, president trump in brussels meeting with the belgian prime minister ahead of the nato summit. from terrorism to trade, we will look at critical issues for investors. big day for central banks, the fed minutes coming in just three hours and two ecb leaders showing a desire to avoid market volatility. they will move slowly towards unwinding the eurozone stimulus. vienna and all signs point to a formal extension of production cuts, will it be enough to sustain the oil rally as opec continues to battle record u.s. shale production?