tv Bloomberg Markets Americas Bloomberg May 25, 2017 12:00pm-1:01pm EDT
vonnie: from bloomberg world headquarters, here are the top stories around the world we are following. withstocks at new records the s&p 500 and nasdaq hitting all-time highs. sincengest streak now february. opec edits allies are extending oil production cuts for nine more months, after the landmark agreement failed to curb oil supply. the benchmarks, brent crude down 3% on the session. we will get reaction from tom petri, chairman of petri partners. by donald trump to nato members, shaming alliance members for there's -- to pay their share to -- we will have the latest from brussels.
today,affecting trade strong trading. affecting stocks but not the rally. all three major averages pushing higher, the dow not at record levels with the s&p and nasdaq on the closingds basis once again. that means we have seen some momentum recently. look at the bloomberg. we have the winning streak now in its sixth straight day here. that is the longest since february when there was a seventh session run for the s&p 500. and showhe push upward of momentum. present mentioned volume below the 20 day average, seeing relatively low volume. energy affecting thing, energy stocks down.
conscript desk consumer discretionary is up, followed by staples. we have had a lot of news for discretionary topping stocks in that group. best buy shares pushing higher 19% after the company's earnings beat estimates. comparable sales rising 1.6%. they were looking for a decline of that amount. williams-sonoma had been higher, now lower after that company's earnings-per-share beat estimates. analysts are skeptical about its momentum, so that could be slowing down with what the shares had been doing earlier. pbh is up, tagging onto gains. it had estimates that greeted it to overweight from j.p. morgan. among other reasons, calvin klein is seeing double-digit store sales continue to accelerate in europe.
there is the situation with staples, those shares rising. you can see that is after bloomberg reported exclusively the company had rejected a takeover offer from cerberus capital staples, those shares rising. you can management, but that sycamore cup -- sycamore partners is still in the running. apparently the cerberus bid valued the company at more than the current market. spiking and hanging onto gains of 3%. vonnie: thank you for all of that. it is time to turn to emerging markets. markets index, gaining 3% as some countries have significant challenges including brazil. the president is facing pressure to resign after the allegations last week. we have the portfolio manager at a be. he looks at multi-assets
portfolios. how have things changed since january with president donald trump talking about policies that would be longer? >> the trump trade has faded. this is part of the effect from the u.s. election. you see the fundamental valuation technicals of emerging markets are not as good as they had been in five years. there is a lot more gas in the take. beginning?26% is the rotation? there be >> there had been a terrible year in the preceding year. e.m. did poorly with the declining earnings, decelerating economic risk, exports contracting. it is all reversed thing. but it is still cheap, trading at 12.5% earnings versus the
s&p. earnings are growing faster meaningfully. so you have good momentum. looks like the emerging-market movers, you see green across the screen. we are talking about markets like kenya and india. but where are you positioned when it comes to emerging markets? where are you positive? morgan: we see equities in asia like korea financials and fixed ,ncome, latin america, brazil brazil where you get double-digit yields with less risk than equities. vonnie: how has it changed in the last week? brazil might be going into turmoil. morgan: it certainly is. they burst out there agriculture building last night. -- burned down their agriculture building last night. it was 16% last week, so a lot of concerns about political scandal had been reflective in
prices. now people are looking that timbre will sit down -- temer will step down. a court will rule on that. vonnie: they have to change the constitution so there can be elections -- that is in venezuela. brazil, this would invalidate the election of 2004 where michel temer was named vice president. he replaced president rousseff who was impeached last year. now michel temer might be removed. this would be well received, because his support level is only 5%. vonnie: who would replace him? he was the relief from dilma rousseff, now if he is boosted -- ousted, who replaces him? morgan: they are looking at the head of the supreme court, was well regarded in brazil and dean as clean in the context of a
country going through a rough scandal. vonnie: so there is opportunity? morgan: to a degree. the equities are up 7% last year , so there is a return in the bonds which yield 10%, even though inflation is at 5% and falling. you get the best inflation-adjusted yields in brazil as about anywhere in the world until you see the economy is in recession. the yields come down meaning more than 10%. less risk than stocks. vonnie: do you buy in local currencies or in dollar? looking at the brazilian rial, down 2.28. we had been at 3.60 at your ago. morgan: for the last week, the currency has sold off from its high. this is a better entry point today. vonnie: so you are buying. morgan: yes. vonnie: where else are you
buying? anywhere in eastern europe? morgan: we are seeing better opportunities in poland and hungary. these are smaller markets, not parts of the index. people buying etf are barely getting any exposure, notwithstanding good economic momentum. they are on the screen for many investors. vonnie: and you have two countries where you are seeing powertremist parties take and change the way the country is run. morgan: this is why it is important when investing in emerging markets is to maintain appropriate specification. if you look at the index, they are adjusted for four countries. that is one of the reasons why the index is so volatile. 50% more volatile than the developed markets. investing in the emerging markets, be more diversified, don't take concentration risk,
and consider equities and fixed income together, because the bond in emerging markets will have better returns than equities. vonnie: and columbia is the next country out of the emerging index? morgan: there is good momentum in the reform in columbia. people are looking at china, the shares in the index. people are talking about argentina being elevated. vonnie: and flying into those countries? morgan: that has been a strategy, but i do see good value in the argentine sector today. vonnie: senior portfolio manager at a be, thank you. let's check in on first word news. mark: attending his first nato summit, president trump returned to a familiar theme. he urged members of the military alliance to pay their fair share on defense.
donald trump: nato members must finally contribute their fair share and meet their financial obligations. the 28 member nations are still not paying what they should be paying. mark: we will have more on president trump's first nato meeting when we go to brussels. queen elizabeth told children injured in the manchester bombing the attack was dreadful and wicked. the monarch did -- visited the -- royal hospital to meet the families and staff. 12 children under 16 were taken to the hospital following monday's attack that manchester arena. former president barack obama received a welcome in berlin today, appearing with chancellor angela merkel. it was his first speaking event in europe since leaving the white house. tens of thousands gathered at the brandenburg gate to mark the
five-month anniversary of the reformation. he called for international engagement, saying we cannot hide behind a wall. orderedemer has soldiers into the streets following violent demonstrations . he said the violence has ended. protesters in brazil, in brasilia demanding his resignation. they also trashed several government buildings and fought with police. this was over allegations that michel temer approved hush money to a jail politician. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. ♪ thanks, mark. we will have the latest from brussels, and you are looking at a working dinner now. the leaders are gathered
said the nine-month extension commentsal. a few more , turkmenistan and egypt will join the deal, but they are working to institutionalize the non-opec countries in the future. perhaps they will join the meeting on the 30th in november. so we have a nine-month , and theyto cut cost say it is optimal. let's go back to donald trump and radel. his first visit to the nato headquarters. he called for nato to be more engaged in fighting global terrorism and said members must contribute their fair share. joining us is the bureau chief. i am sure they were prepared for president trump to talk about sharing and paying their fair share. it is a theme around europe.
did he overdo it? this was assuring the strength of the members, and it is not really going very well. on one hand the e.u. leaders including the present -- president are not on the same page with the new u.s. administration in areas anduding russia, trade, climate change. on the other hand, donald trump to saying the country's which did not spend 2% of gdp on defense, so leaders are having a working dinner of nato as we speak here and we will get reactions later this evening. he talked about how much the headquarters cost, how he has not let himself ask about it. do you think the leaders should be above that petty over and
back? do you think during the dinner someone will be the adult in the room and take this conversation to a better level before g7? >> naming and shaming is not the meeting to start a showcase unity. the european nations would not accept the criticism from the u.s. administration that they do not spend enough on defense. they claim spending in areas including humanitarian aid, security, that should also count as security spending. they also say in the commitment they have made to spend 2% of 2024. defense was for they are moving to this target, but they don't have to meet this target now. it is clear that president trump does not see things this way.
it seems to be widening. vonnie: we talked about the rhetoric and posturing, and when it comes to the agreement, there are agreements made on things like intelligence sharing, which is a hot button topic at the or other actions. will they be able to come to an agreement? will the bonds of strength and that they can pick up the phone and do something from a major point of view? -- nato point of view? nikos: on the one hand the british government is furious with the leaks of sensitive intelligence information. they have actually decided to stop selling information manchestere to the terror attacks because of the leaks. also other european nations are furious over the fact the president seems to have been
briefing the russian government on the next isis plots to weaponize laptops while keeping the rest in the dark. this is another issue. there are many disagreements. we expect to see them tomorrow when the g7 me. -- meet. they will discuss climate. it is clear europe is troubled by the u.s. administration's reluctance to commit to the climate agreements of change. from intelligence, security, defense, trade, and protection, we do not seem to be getting closer to an agreement between the two sides. the only agreement i have seen join ancommitment to alliance against isis. that is the only areas of agreement so far. vonnie: all right, the bureau
chief for bloomberg news. i want to mention crude oil is for the -- further falling. 4%.t crude and wti down brent is down 5175, another 4.1% , on the most recent headlines from the kingdom of saudi minister,nergy mr. -- saying the next meeting would be november 30, that they hope that took tennis -- turkmenistan and , and will come on the deal that it was an optimal deal. he is now talking. reportsead, the biggest and the growing role of investors like many waters -- muddy waters founder. this is bloomberg. ♪
♪ this is bloomberg markets. i am vonnie quinn. time for the deal reports, dealing with the role that activists are playing in companies globally dealing with profits and positioning on m&a. one example called out noble 2015. for finances in in that year's sense, stocks went down as a battle for the -- joining us is reporter. talk to us about activists in london. it has been more of a european phenomenon. u.s. phenomenon i should say. >> that is correct. the last two or three years, we
lawyers, hearing consultants, all saying activists are coming. around, you are seeing an activist. when cars and got to them, they rejected the report, rejected its findings and said it was engaging. now shares have tanked, you see analysts with downgrades, and i think the situation is playing out in a lot of instances in europe as well. looking at ppg trying to buy aboutbel, it was stability. and almost like ppg has been elliott, a shareholder of
akzonobel. they have been trying to get a discussion. isn't it fascinating it might be the european activism, but a lot of activists are in the u.s. who are the key players? .> we are seeing elliotts in europe you have the children's investment fund. the french situation where saffron and zodiac are in the mix, dti has been there and say they should not do the deal because it makes no sense, and zodiac is not a good investment. but there has been another profit warning, saying it is up but going down 10%. you see the situations were activists are coming in, and the cases are drawn out, so investors are listening more closely. vonnie: our companies and corporate boards becoming more educated at dealing with them?
>> they are still getting used to how this plays out, and as we of thishe u.s., the ceo company, he step down after they are there was a colorful letter to bob singer. sometimes they are not as equipped, and that play to the activists' advantage. vonnie: thank you. she covers acquisitions for bloomberg news from london. awant to mention briefly that prime minister has been wounded in a car. ♪
the dow at 2172. s&p 500 is up. and the nasdaq up 7/10 of a percent. that is not where we see the most movement today. we will hear from abigail doolittle. abigail: you are talking about oil. with the gains you talked about the major averages where also looking at records. most of the s&p 500 sectors are trading higher. this is the -- imap. down the bottom, energy, one of only two sectors trading well. but down more than 1%. and take a look at some of the standout movers on the day. gm down 2.3% after the company was accused of using vw like defeat devices so the diesel
trucks could a past emission tests. this is the 6th automaker to be accused of that. up look at sears holdings, after the retailer did post a profit, a surprise profit, the first time in two years. investors rewarding the shares. and -- jewelers down. the worst decline since august last year, missing a quarterly earnings report in a huge way, by 37%. bb plus.ng to now we look at oil. trading near session lows. this after opec did extend the supply cut deal for nine months until the end of the first quarter of next year. i did speak with our bloomberg intelligence strategist who says that mrs. -- this is sell to news action. the past between 45-55
couple weeks and now they are taking profits. analyst agrees, we see the weakness in the energy complex, especially for some of those drillers. transocean, marathon, and others, you can see that they are down in a big way. these are the worst percentage performance for the s&p 500 energy sector. in the middle we have e and p names. the drillers are at the end of the energy data web, that is what he says the weakness is. and a technical look at oil and what could be ahead. when we go back into the bloomberg, this is 8842. this is the range between 45-55. why what the point out is it is one penny away from putting in what would be the death cross, that is when the 50 day moves below the 200 day moving
average. the last time it happened was in 2015 before oil crashed. excuse me, 2014. it will be interesting to keep an eye on. perhaps it could break to the downside. the most analysts say it will rebound. vonnie: thank you. the open news conference is ongoing and we just heard from the russian minister. earlier, the saudi's minister said that nine months for the oil cut extension was the optimal extension. he says the next meeting will be november 30. opec was hoping egypt would join the deal. he also talked about the six-month idea and said technically it would've been enough to rebalance, but it would have meant to build inventories a six-month extension would coincide with the weakness in the first sorter psalm -- quarter, another strategy will be made later in the year. for more on this i want to bring in tom, the chairman of
peachtree partners joining me from denver. what do you make of all of this regarding what we saw with the best possible outcome for everybody? oil picking up steam in the last few minutes. tom: yes, i think what we have vonnie's opec did what they could do. divide them time to get more data on what the real rate of global demand growth is going to be. also gives them a period to show more evidence that they are working off those excess inventories. those are the big things they will get out of this. it is obviously disappointed to the market, but i think it is going to be fine. vonnie: but how do you suddenly decide what the correct quote, unquote dynamics are? i'm sure it changes all the time and depends on price. and what is the difference between six months and nine
months, and what more could the market want? tom: what they were clearly running out of was time to actually show real progress on milking the excess inventories. by adding another three months to the normal period, they have a better chance of that occurring. i think they are right, they are try to get through that flow first quarter. it makes sense. the big surprise that the come along is that we still have seen very little evidence of an embedded decline rate in conventional production. 90% of the production in the world is still conventional. and there has been capital starvation and many of those areas, so they may well be dealing with a surprise sometime between now and next march where we get more evidence that they
can motive the client and some key markets is building up. and i think that is one of the things. they have also reserve the right basically to the price the market with a deeper cuts by big producers, sauid or russia -- saudi or russia, if they choose to. vonnie: the saudi minister speaking right now. ,, let me tell you a couple of the headlines -- tom, let me cut you a couple of the headlines. is long-term trend demand healthy. is this something he is wishing or can he foresee this, is it the truth? tom: good question. when you look at last year, 300,000 barrels a day plus of the demand growth were purchased for the reserves of china and india. and what they are saying, and i think it may be true, is this year they are going to matt last year -- going to match last year's growth.
i think they are counting on the as one of the things they get with the extra time that they just bought. vonnie: it is fascinating. turkmenistan and egypt, they were very much hoping that they would join. how big are they in terms of producers and what is the longer-term goal here that opec brings in other countries to sort of help them against the u.s. or what? what is there thinking? -- their thinking? tom: their production is a few thousand barrels a day combined total. they probably made a mistake by advertising they were bringing them in. the near-term trading judgment is, that is a disappointment. it does not make much difference on the margin in my view. it was more cosmetic man real -- than real, the goal to get them into this particular agreement. vonnie: what do you think
compliance will be over the next nine months, now that we have nine-month and the next meeting is not until the end of november? countries like iraq, what will happen? tom: each has their own set of conditions. the breakdown in venezuela makes it doubtful that they will surprises in terms of production. i think most of the others may welcome the with better compliance. the big surprise, or the big disappointed so far, is russia overpromised and under delivered. i would not be too surprised to see russia deliver somewhat more, maybe not as much as promised, but they were only at about a third of what they were promising. and i would bet they will do have to or a little better than that in the next period. vonnie: they said it was not appropriate to discuss libya and opec will not discuss deals with libya anytime soon.
what is the correct price for oil right now? it is at 49.42 right now. all, we know, first of have a very volatile commodity and weekly have to talk in terms of a $10 swing. range 45-55 is what we will deal with until one of two things happens, we either get real concrete evidence that global demand growth is above expectations, or alongside that we get new evidence that embedded declines of natural, or conventional production, is kicking in. i think one of those two things is likely to occur in the next nine months. it is not taken both. if both of them occur, we will break out into maybe a 50-60 range were better. vonnie: always a pleasure to take advantage of your knowledge. tom, thank you. and now we will get a check of first word news.
mark: the president is pledging to get to the bottom of leaks of sensitive information. in a written statement, the president called the recent weeks, -- leaks deeply troubling and he is asking agencies to review the matter. anger from britain over intelligence leaks and the decision by manchester police to withhold information from the u.s. about the investigation into this week's terrorist attack. another report about how russia tried to meddle in the u.s. election last year. according to the new york times, top russian officials discussed how to influence donald trump through his campaign advisers. they cite current and former officials familiar with intelligence information. the russian conversations focused on the trump campaign manager, paul manafort, and michael flynn who was then an advisor. and three montana newspapers withdrawn endorsement of forte
after the republican congressional candidate was charged with misdemeanor assault after allegedly body slamming a reporter. said thatfox tv crew he grabbed a reporter, "by the neck with both hands and slammed him into the ground." paul ryan had this reaction. >> there is no time or a physical altercation should occur with the press or with just between human beings. that is wrong and it should not have happened. should the gentleman apologize, he should. mark: in a statement last night, his campaign said, "as greg was giving a separate interview in a private office, the guardian's ben jacobs injured without permission, aggressively shoved a reporter, and began asking badgering questions." montana going to the polls to
vote in a special election for the open house seat. and the u.s. secretary general says the tax on health care facilities, workers and patients to place in more than 20 countries last year, including yemen and afghanistan. speaking at a u.s. a critic of the meeting, he said the attacks violate the geneva convention, "and basic humanity." the secretary general noted that the resolution last year to protect health care facilities has made little impact. he is also calling for greater investments to address complex. global news, 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. vonnie: thank you. a chief local advisor tells us that he has become less confident that the president has -- has plans to boost
♪ vonnie: this is "bloomberg markets." advanced economies face not a cyclical headwinds but structural and secular ones, according to mohamed el-erian. he wrote a piece today on the dangers of low growth and complacency, especially in light of the president's budget proposal. here he is today on bloomberg daybreak. mohamed: this period of insufficiently -- insufficient growth has gone on for so long that two behaviors are starting
to materialize. one, we are getting used to it. and we are becoming fatalistic. we're confusing self-inflicted wounds with real secular issues. self-inflictedhe wounds, we can get growth back up quickly. it does not mean there will not be longer-term issues. first of all, do not ignore it. it is eating away at the economic, financial institutions and the political integrity of the system. do not become fatalistic, we can do some been about it. >> the president would say that is what he is trying to do. this withng to avoid his approach to health care and the budget, does that make sense? mohamed: i think the u.s. is getting the sequencing wrong. first, if you are an economist you would not have started with health care, you would have started with progrowth measures. we have a design problem that instead of starting with the overall vision of how are we
going to promote economic growth, and use the budget as the tool, one of the many tools to put the budget front and center -- this budget will be going nowhere at all. and we will lose an additional few months in designing and implementing growth strategy. i am getting worried. >> we expected an isolationist president. that is not what we are getting. we are getting a president of foreign policy at the moment. he is going to resonate the message about fighting terrorism. is the focus on foreign policy now and not on the economics in a way that we thought it would be? mohamed: i think you are seeing two things we have seen all over again. when things go back home, foreign policy becomes attractive. and we have seen it over and over, not just in the u.s. the second thing is on trade. when you come in and wanted -- want to trade the world -- change the world, it changes you.
it is not easy to dismantle trade arrangements and what the administration has realized is it must go very slow in terms of trade negotiations. >> if they can get back to what they are looking at in terms of tax reform, with that lead to real progrowth results that you think are essential? mohamed: tax reform would be one element. it is important differentiate the tax reform side from the tax rates. you can get agreement on tax reform, most people agree that it has anti-productivity and anti-investment in anti-growth. we can fix it. the rate issue is much more divisive, but you can get to reform. you need to couple it with the infrastructure spending and you need to take seriously retooling of the labor force, it is a big issue. budgetary reform is one element, it is necessary, but it is not sufficient. you have to start from the top and work down. >> infrastructure seems to be
put on the back burner. we hear nothing about retooling the workforce. mohamed: i think that is a tragedy. i think between what is happening in technology, in the market, we have to move quickly on that. and it goes back to the issue of china, they do it well. they start with a vision, they say i do not know every single step of the way but i know where i want to end up. i know the first two steps and i will learn. has done work on this and it shows adaptation is important. you have to have a northstar and you have to tell people what it is. vonnie: that was mohamed el-erian the chief economic advisor at allianz. we are getting headlines from the opec news conference. mohammed barkindo saying opec invited u.s. shale producers for talks. this is a big development.
dividing them for a talk. hasali said earlier that he personal dialogue with some u.s. shale producers and he does not believe there is any confrontation between opec and u.s. shale producers. he said it is getting more costly in some areas and u.s. shale is experiencing cost inflation. those are some headlines out of the opec meeting. next, gm becoming the 6th carmaker accused of a cheating scandal. we go to detroit for an update. this is bloomberg. ♪
into trucks to beat emissions tests. they are the 6th carmaker accused of cheating when volkswagen admitted to installing software to bypass emissions rules. first of all, jamie, will they try to fight this or will they admit that this cheating did happen? and maybe try to settle. >> they are fighting back hard and right away. they put out a statement calling the lawsuit baseless, noting that their vehicles, the diesel trucks have been improved by the epa and california resources board. we will see. after the volkswagen admission in 2015, the regulators who missed that really read doubled up or its -- redouble efforts to examine diesels they had already approved and think about those going forward.
and trial lawyers have done the same. the regulators have really only since then gone after fiat chrysler, but as you noted this law firm and others pursued really everybody that is making diesel and gm is facing the accusation on their trucks today. vonnie: specifically duramax diesel. "these claims are baseless and we will defend ourselves, with the gm sierra that complies with the carbon emissions regulations." you mentioned some of that statement yourself. is it possible regulators are too trigger-happy and these trucks are fine? >> we will see. of thene of the beauties legal system, it allows for discovery and the erroring of facts, so they will have a chance to make their case and maybe it will help regulators.
maybe there is cheating and it will give regulators something to push back on or it will be that the regulators are giving their blessing, and it will protect the automaker again. they will be able then to throw it out. we will see. vonnie: give us context on how much a diesel trucks are sold in comparison to other trucks, in general. >> they are still a minority of the trucks, but they are really one of the used cases where diesel makes sense. it produces a lot of power, very low in the torque cycle. when you hit the pedal, it brings power right away. when you are moving a big truck or hauling heavy things, like a big piece of work equipment, it helps to get all of that on the low end right when you hit it. there are more uses of it in trucks. they are bigger and expensive vehicles that tend to include the necessary filters. it is challenging, we have seen
it in the big rigs. others have had trouble meeting regulations. it is challenging. producing all of that energy and trying to not pollute. we have set high standards and sometimes companies cheat to get around them. the thinking is maybe it is not all of them, but there are similarities including similar software. vonnie: ok. we will wait to hear more. jamie butters in detroit. the former health and human services secretary will be joining bloomberg markets with cboreaction to the dbo -- scoring of the republican health care bill. that is next. this is bloomberg. ♪
fair share toward defense to help fight terrorism. i will space with nick -- speak with nicholas burns, a former ambassador to nato. and getting rid of obamacare hitting another obstacle, the latest cbo score indicates 23 million fewer americans would have health insurance if the legislation were to become law. and later this hour, the former secretary of health and human services, kathleen sebelius. and the treasury secretary realigns the administration's goal of 3% growth. he says he is hopeful there will be bipartisan tax reform. david: the president visited brussels today with other members of nato. in a speech, he told many of them they need to contribute more to