tv Bloomberg Markets Americas Bloomberg July 18, 2017 10:00am-11:00am EDT
♪ vonnie: mitch mcconnell -- on plans to repeal and replace obamacare. will republican simply repeal the law and what are the pitfalls of doing so? and baking news, goldman sachs turns it it's worst trading performance since the new ceo, can goldman turnarounds in? sharesnology, netflix are up right now as the streaming tv service crushes its international subscriber numbers. -- if anything might slow down on the juggernaut. julie hyman this year and it seems like we are just taking a
little turn lower for the moment. julie: it partially has to do with earnings, partially what is going on in washington as all averages of all, but not my much . look at earnings reports, we heard from bank of america and goldman sachs on the financial side. both stocks are falling. goldman sachs aside from trading business, others beat estimates. the cfo is saying modded these of revenue in the quarter was the worst on record. as for bank of america, metrics except for net interest market falling. that is what is responsible for that bank going back. we also have netflix, subscriber growth, better than estimated. international audience is now bigger than that in the u.s. the shares are up 9%.
harley davidson, another big disappointment here, the stock down the most in the s&p 500. it has cut its in will forecast for motorcycle shipments. we are seeing less demand for motorcycles. one of the things of that has really crimped what is going on with the trading earnings is the lack of volatility. we have talked about that so much in the first half of the year. take a look at the bloomberg, this is another look at it. it is a look at the vix and the move index, bond volatility, going back to 1998. you have seen the lows we see for both, less trading activity for the bank. i also wanted to mention what is going on in the dollar, because there has been a little more volatility on a relative basis. the bank remind you, for international settlements said earlier this year, that the dollar was the new risk proxy.
the vix wasn't capturing it. if you look at your today, the dollar has been falling even as the vix has been muted. the dollar seems to be reacting more to the failure to get inlth care reform passed washington, falling more the stock averages here in the united states. that giving a boost to crude oil as well as gold. i love that dollar chart, the dollar indeed at him 11 month low. there about 90 minutes to close of equity trading. if we look at equities, european stocks down for the first day in five. euro stocks, 50 futures down -- vonnie: let's go to washington. sen. mcconnell: we understood it would not come quickly, but we knew it was the right thing to do, so we pushed forward anyway. i believe we must continue to
push forward now. i regret that the effort to repeal and immediately replace will not be successful the failures of obamacare. that doesn't mean we should give up. we will now try a different way to bring the american people relief from a obamacare. i think we of them at least that much. in the coming days, the senate will take up a repeal of obamacare combined with a stable two year transition. toward patient centered health care. obama vetoed the repeal in 2015, president trump will sign it now. i imagine many democrats were celebrating last night, i hope they consider what they are celebrating. the american people are hurting, they need relief.
it is regretful that our democratic colleagues decided early on that they didn't want to engage with us seriously in a process to deliver that relief. this doesn't have to be the end of the story. legislationrepeal will allow us to come wish we need to do on behalf of our people. our democratic friends have spoken a lot recently about wanting bipartisan solutions, passing this legislation will provide the opportunity for senators of all parties to engage with a fresh start and a new beginning for the american people. vonnie: you have been listening to senate majority leader mitch mcconnell, as the session in the ascendant opens. as theanticipating -- session in the senate opens. we are anticipating an announcement -- two more
senators defected on the replacement legislature. we bring in kevin cirilli, he is that capitol hill. and here in studio is megan murphy. that doesn't mean we should give up, the majority of the senate voted for this in the previous iteration, but president obama d.e note -- obama vetoe the senate majority may have voted for the first time around, but they knew obama was going to veto. hean: let's break down what said there, this is a very different situation that we are in now. the reason why the bill failed is they had a polar opposite abide, the between conservatives who wanted a complete repeal of , someare, and moderates
who expanded medicare in their states, some who found medicaid -- to be potentially brittle in their own state that they could not go forward with the bill in its form. they have a divide in their own party between conservatives and moderates. the bill that he is talking and a-- a straight repeal period of two years to come up with an alternative, would leave 32 million more people without health care. number two, how is the american people supposed to believe that the republican party will, with an exceptional opportunity in two years time when they have promised for seven years that they would read -- repeal and replace from day one. flipside, mcconnell is throwing down the hammer.
he is saying put your money where your mouth is, i'm giving you a chance for a straight repeal. some of you have already voted for, obama vetoed it, donald trump will sign it into law. house speaker paul ryan is speaking now. he did mention obamacare, that is what he is speaking out now. he wants to see the senate "move on health care," and he is worried that obamacare will continue to collapse. so intentch mcconnell on passing any kind of legislation? is this what the core gop voter wants? megan: no. now that obamacare has been in place, people have gotten used to affordable insurance, expanded medicaid, support that it provides. the bill has gotten more and more popular as it has gone down. it is very difficult to take away an entitlement once it is
out there. the republican party has misplayed the biggest surprise, how much the american people have learned about medicaid, health care in general, where the costs lie. let's also remember the bill they are proposing now is not supported by insurers, not supported by hospitals, not supported by doctors. you see an almost unique convergence of views in opposition to the plan i have now and the plan they are going forward with. vonnie: great contacts from megan murphy dear kevin, what have you been hearing on the hill? kevin: earlier this morning i spoke with senator joe mention saying that he spoke with the senators and have a bipartisan discussion. i can tell you privately that republican aides say the only path forward would be a smaller clique a version of the bill and that a full repeal of the bill
is increasingly unlikely. at those of us in the senate right now that were former governors, we had to make deals, sit down and look at each side objectively, try to find a pathway forward. we also understand the challenges the states have, because we were there working through budgets. we would love to bring some ideas on how we can come together. kevin: they told me they are actually going to potentially have their first meeting later today. i am standing outside the senate finance committee where a tax reform hearing is underway. said, are as megan really hopeful that they can change the subject, so to speak. i spoke to some sources inside washington earlier today who said the idea of comprehensive tax reform being completed by the end of the year, very much unlikely, and essentially it would just be a corporate tax
cut, if anything. vonnie: we are seeing the dollar weakened, hitting an 11th month low. investors concerned on the lack of action on the health-care bill, you did mention tax reform there, what does this mean for the broader economic agenda? kevin: i think the indicators that have started moving on the health care news, perhaps more so on the russia develop meant, there is a sign of mounting frustration being directed toward washington about the lack of the white house's anlity to carry through agenda. you could see tax cuts on corporate tax reform, but again, the broader tax package, increasingly unlikely. you have conservatives divided on tax reform on the issue of a revenue neutrality, conservatives divided on tax reform as well as whether or not
to raise the debt limit with ultraconservatives suggesting they would have to offset defense spending. all of these divisions in the republican party, very much right now on full display as we just saw with health care. president donald trump's role in all of this, let's start with health care? his latest tweet "the senate -- 58o to a vote majority dems controlled, crazy." he is talking about how legislation is crafted here. megan: i have talked about this before, donald trump abdicated his signature legislative achievement in terms of health care. he left it to mike pence. he was absence almost in the entirety. when his incredibility falls, we ratings. his
is no effort to stand with them on this bill, incredibly unpopular bill, a bill from every corner was far greater in scale and hope then people aeded to just have replacement for obamacare. there is no reason for them to back the president. if you are there in ohio, if you're in maine, in nevada, and a replacement for obamacare. you're looking at where your state and the medicaid expansion has really come for opioid abuse, poor families, working single mothers, they have heard from so many of their constituents -- you know what donald trump will learn from this, resistance works. it will play a big part in his upcoming legislative agenda and health care and whether or not we get a budget passed. vonnie: our thanks to megan bloombergitor for businessweek. and also kevin cirilli, chief correspondent on capitol hill. now checking in on the first
word news. >> the trump administration is imposing new sanctions link to a ron -- iran. penalties were put on 16 individuals and entities for supporting iranian action. the u.s. had warned it would punish iran. house republicans are in bailing a budget that ignores president trump's proposed cuts to agencies. of $5re proposing cuts billion in said of the $54 billion that the president wants. they are calling for a bigger boost in defense spending been the president requested. here is a poll that even president trump will like, according to the latest poll, hillary clinton is viewed favorably by just 39% of americans, two percentage points lower than the president.
ministerk., prime theresa may being encouraged to fire disloyal ministers. several officials want to put an end to the backstabbing according to one official. weekend, several of may's ministers spoke out against philip hammond. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers, this is bloomberg. you.e: thank coming up, the dollar drops as senate health care steps back, dashes optimism over president donald trump's agenda. this is bloomberg. ♪
nejra: live from london, i'm nader k pitch. another setback for president donald trump's economic agenda is causing the dollar to weaken. bob yet sheow is iaccino.bob you se bob: it has probably been set on your show 300 times this morning, but with the second defeat of donald trump in mitch mcconnell's health plan, there is a push back of tax reform, some substantial corporate tax cut. when not going to see 15%, not going to see 20%. it is fair to see that this is the extension of the dollar pushing toward levels we haven't seen since of them are of last year. september of last year we saw
the string of inflation numbers, it was a good opportunity for the fed to do the rate hike, but now that we see declining year-over-year numbers, puts the dollar in weakness, it is all tied in. which -- wehe rain are still seeing a range between other$49 per barrel, but countries may not stick to the opec quota. what is keeping oil in this range? be in a range,to that is where it spends the majority of its time saver the dramatic moves that it does. people are looking for the breakout that may not happen for a while. you can say the rebalancing hasn't happened yet, but the data is showing us it has started. we have data with multiple mirror and -- multiple million rels and crudear
oil and gasoline, and there is no interruption priced into crude right now. i'm looking at is going up to $48, but it will continue to play in that range, we could see $55 soon. vonnie: thank you so much. blackrockat stuff, shapes up -- we have details on the brand-new honda etf up next. this is bloomberg. ♪
about a subsector of the stock market, but smart-beta is coming to bonds her. twokrock is starting smart-beta etf's coming next week. there are some funds that already at the -- already exist, but smaller than stocks. >> the fact they came out with the two smart-beta bond etf's last week, we have a particular hyd be, and also investment grade high-yield etf's. value andaking quality and applying it to the debt market. defenses are going down as well. we are looking at bonds that might be slightly less risky. on the other side, we have ige looking at the return portion of
that. they are looking at bonds, that are a higher yield, black rock's investment grade market etf's. , generally, know -- difference can be them the difference between them can be a hair's breadth. >> the interesting thing about the funds is how they compare to blackrock etf's. the blackrock etf's go with self indexing rather than paying an external index provider, that means blackrock has all of the control over the process the beginning to the end. they come up with the methodology, they do all the rebalancing. there is a cost saving there, not having to pay an index provider for their intellectual capital. that means when you look at how the etf's compare with the other
indexes in the market, they are cheaper with some of their peers. out more frequently with self index products, rather this up being a one-time foray. julie: as you know, the single greatest factor driving volume in the etf world is -- are the new funds gaining traction as a result of the lower fee structure? >> with these particular funds, we don't have a gauge of that yet. they have about $10 million in assets each, it is hard to say how they're are doing. but in terms of the space as a whole, we have about $500 a smallin assets, section of the market that is access managed
etf. that in't really seen the flows yet and even in the terms of the etf's being launched at the moment, a split between market cap smart-beta and access cap. if anything, active looks like it is getting more traction in smart-beta. julie: i give rachel evans covers etf's for bloomberg world news. vonnie: they give for that. shares of both companies falling, more on the numbers. this is bloomberg. ♪
let's check in with the first word news, jessica summers in new york. democrats and republicans for the failure of the replacement ill for obamacare. -- replacement bill for obamacare. working on a straight bill for repeal. former -- has been released from prison in chicago, he was sentenced for violating federal banking law. the illinois republican committed to trying to pay 3.5 million dollars to keep allegations of sexual abuse secret. david cia director petronius has been imposing tough perceptions on north korea to force kim jong-un to the bargaining table.
they have played sanctions to enable north korea to operate in the economic world. .3 percentage point from may, the first drop since october, bank of england policymakers have been concerned that inflation was getting out of hand. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. jessica, thank you. disappointing results from goldman sachs and the bank of america. next income trading fell 40% making it the worst first half of the ceo's term. bank of america declines billing to deliver on expecting boom following the fed bochy rate hike. 's rate hike.
overall trading was down just 17%, which is back, but only the worst in two years as opposed to 10 years. >> overall trading was a little worse, but equity is better. banking fees, better, investing and lending income also better. there were some bright spots. here, it is the worst first happen a while, but on the other side of things, the cost ratio is the lowest comp ratio in the public history of goldman's. that shows they are doing what they can in terms of managing costs and a tougher environment. vonnie: what could pose dangers know,he road, you minimizing costs and so forth? does that portend less talent, for example? any red flags? alison: overall for the business, it is a cyclical business the reviewer are going
to have weaker quarters, stronger quarters. for goldman, they are underperforming sears, there are a couple of valid reasons for that. are focused on active portfolio manager clients and they have seen some weakness, they are also focused on the commodities. this was the worst order in -- i can't recall how long they said, may the worst ever, but a much weaker quarter. things, theyide of have been using technology to improve things. they took out some cost in terms of headcount last year, some of the benefit you are seeing are really changes made last year coming into a full year run rate. >> i want to bring your attention to this chart, you talked about goldman underperforming its peers. enough exactly what this shows.
and that is exactly what this shows. oldman down some 6%, the other three have been raining. we have talked about the fact, trading can be volatile. if we turn our attention to bank of america, we talked about the net interest income, cfo called an offer euros saying that was down to transient factors. we have these shares down today, what will it look like more longer-term? are the issues were talking about today really just transient? there are some cyclical factors, there are seasonal factors. there will be better or worse orders, but there is generally a good story. i think we are watching the yield curve, eventually we will be watching the deposit beta, so far so good here it i think the bigger picture story continues to be regulatory reform, the
potential for rule changes, also tax reform. that is something we heard a lot about last week and really there is the indirect impact for stimulus to the economy. , translate into future loan growth here it from an earnings perspective, we have had the feds deliver. absolutely, when we look at bank of america, investors have was that share price up more than any other bank. since the election, they have been betting on better days, is that justified? alison: i think for bank of america, the key thing has been better u.s. interest rates. if you look at the stoxx, immediately following the election, we've got bank of america -- the bank of america was the leader. we saw the stocks take out the
day after trump had his first address to congress. we really saw citigroup gaining momentum there on that prospect. i do think going forward, you know what is going to be the next, i guess, the next great thing is going to be -- it's going to be tough for the next few months, but i think investors are looking for the ofger picture question regulation, of tax reform, and that may benefit thanks. vonnie: what about analysts estimates? i have loaded goldman sachs earnings estimates, and they are dire. earnings have been beating analysts estimates consistently, but what happens, do we just a discount them as investments from now on? difficult is the very to call what trading is going to be in any given quarter. rum an investment perspective,
overlook thetry to long-term trends especially when you're looking at a cyclical business. sachs, they were following 5% coming into the quarter, there estimates will be volatile, because they aren't more from trading ban other businesses. pastbeing said, over the year, when company estimates or rising, we did see goldman leading that charge. vonnie: we have seen a five of the major banks report, what are you taking away from the reports that give you signs about the health of the u.s. consumer and economy? alison: i think the slower loan growth is the worry something -- worrisome thing. we saw that confirmed across the banks, and that is something we will continue to watch here it i think that is why jamie dimon
making these calls for tax reform, because that is where you can get the leg up, possibly. thank you. alison williams is the senior analyst for u.s. banks. mike pence is speaking now at the national retail federation summit. entire remarksis on tv . --nejra: coming up waiting for mary a draw they to make the draghi to -- mario make the first move. this is bloomberg. ♪
shares are falling down about 3% here it "the business insider" is reporting. aey are reporting from restaurant in sterling, virginia, multiple reports of people getting sick. chipotle mexican grill, shares down 3.4% after business insider is reporting that a restaurant in sterling, virginia suffered multiple reports of customers getting sick after eating there. >> central banks in europe a waiting to take cues from mario draghi. policymakers are watching for signals of the decision. in catherine bosley. catherine, great to see you. which is banks are we talking about here? caroline: two key ones are
switzerland and sweden, both of whom have independent currencies and are really -- have their hands tied by what is going on in frankfurt. the governor of the swedish antral bank said recently in interview, that when you are next to an elephant you need to tread tear philly. >> absolutely. that -- it'seden easing bias, what risk are they running changing policy? catherine: if they move before the ecb, it will put pressure on the currency, narrow the interest rate differential, and that could have a negative impact on inflation rates. switzerland introduced negative interest rates in early 2015 in a bid to widen the interest rate differential and take pressure
off the currency. vonnie: what about countries in eastern europe? how does it impact them? caroline: they too are in wait burt.e mood for frank they expected to keep rates on hold through 2018, romania is also concerned about hot money inflows. theaps the loan -- out of clks they are hoping there is more action in frank burt. vonnie: what if they don't entirely get on their own policy settings? caroline: i think the swedish have clearly said that they will not act before anything happens in frankfurt and they are looking at mid-2018, in the case
of switzerland, it is anybody anybody's guess. i think everyone is just looking aghi says ono d thursday. vonnie: thank you so much, catherine bosley. good to know were not the only one on tenterhooks when it comes to the ecb. we want to bring you mario drag hi's news conference when we get that policy decision on thursday. we want to bring youit is time g business flash, the biggest stories in the news right now. >> united health has put problems with obamacare in the rearview mirror, posted better than expected second quarter results as it moved away from the affordable care act. customerslth care
have mainly quick obamacare after running losses. johnson & johnson has boosted its forecast for the next four years, the biggest company for health care products is banking on a new -- of drugs to boost growth. oracle is ramping up cloud computing services and europe, the middle east, and africa. they are hiring 1000 employees here to cloud revenues rose 60% from a year ago. and that is your business flash. vonnie: time for our bloomberg quick take, context and background of issues of interest, and today we're looking at gun control. thanericans own more guns anybody else on earth, firearms are involved in the deaths of
33,000 people in the u.s. annually. every time another mass shooting occurs in the u.s., it's parks discussion of gun rights. in february, congressional republicans rolled back a role of adopted by president barack obama in 2016 that was aimed at preventing people with serious mental health problems from buying guns. to 25 and the nays are 180. >> that was just the most recent time congress dealt with gun restrictions. just months after a mass shooting took place in newtown connecticut where 20 children were killed, expansion of back -- gun rules are largely determined by states. in 2013, democrat led states have expanded gun restrictions.
the majority of states have weakened restrictions, and many permit guns in locations like schools, restaurants, churches, and public locations. guns to bees allow carried concealed from public view. the u.s.'s original gun law is almost as old as the country itself. the second amendment right was established in the 18th century to allow states to form militias to protect themselves against the federal government. ruled8, the supreme court that the amendment protected individuals, not just militias. here is the argument, the national rifle association and its allies argue that gun regulations only hurt law-abiding gun owners because criminals simply ignore them. congress let a ban on assault weapons expire and violent crime
has fallen significantly, and fatal and nonfatal shootings have also declined here it meanwhile, gun advocates say limiting weapons will drive down crime. they look at australia where guns have been restricted since a mass shooting and since then there have been zero mass shootings and gun death rates have plummeted. -- u.s.lators try to citizens continue to be caught in the middle of this legislative gunfight. vonnie: you can read more about guns in america and all of our quick takes at and i quick on the quick take. -- on the bloomberg. manynia experienced customers reported they were sick halloween eating at to pull a restaurant. aey originally reported it to
coming --the world the word coming out of investors' mouth, things like " crushed." 5.2 million people signing up, international asked engine, the bulk coming from outside the u.s. you are now seeing about half of the users of netflix international. the ceo once 80 to 90% of users to be outside of the united states, subscribers getting up into 450 million, the takeaway is content is king. there is new "house of cards," " glowge is the new black," " ," this is drawing people in. >> we will talk more about content in a second, we want to
focus on netflix outperforming its peers. you can see really outperforming, are there any risks to this? : not in terms of analyst recommendations, you dial-in, and almost everyone has upgraded their price target, but -- andre a few notable the key is profitability. revenue is great, but what about the profit? content costs money. $66 million was all they brought in in terms of net income, that missed expectations. many want to see where the $15 billion is going to be put to work they're going to spend an content, but now looking at the upside. vonnie: let's have a look at netflix anr, there is 60% of say buy.25 analyst
you can see estimates are rising. some are still bullish on this. >> just three say sell netflix, the stock is up 70% over the last 12 months, this is a company that is dragged along with the rest of the fans and painted as an outperformer. you still have to see what the price for earnings are, this is the company trading at 150 times for future earnings. how do you vindicate that? for now, investors are happy that the scale and growth is there, but at some point people will say when does profitability come into line. for now, they are saying they won't be cash flow positive for years here. it will not be an overall lossmaking machine, but cash
flow want be positive for several years, people still betting on the future of the company for a long time. vonnie: it is almost pulling and amazon in some ways, which it they are spending everything they get in order to buy content keep the people. at some point, does that held a anyll by itself, or at point can a competitor come along and steal the customers? caroline: they are actually tackling competition had on saying we don't worry about it, in fact, they say they are growing the market in general. competition coming from hbo, hello, and youtube, they think this is a pie that can just get bigger and bigger. at some point, you have to question whether they can keep ahead of the competition. how big of a moat are they
willing to build around themselves? >> thank you so much. netflix shares up 11.3%. vonnie: chuck is speaking on the senate floor, right now. we did hear from mitch mcconnell earlier. he says the core of republicans health care bill is unworkable and passing repeal rather than replacement is a disaster. chuck schumer saying democrats are locked out of the process. >>, and up on the european close, we are following equities until the end of trading. european docs rolling the -- falling for the first time. this is bloomberg. ♪
the european close on bloomberg markets. ♪ nejra: here are the top stories we are covering from around the world. the pound flipping against the dollar as new data shows u.k. inflation posting and i'm expected decline -- an unexpected decline. bank of america and goldman sachs report underwhelming earnings. does that hold any close for european bank earnings which, next week? politics u.s. -- blamestrump lanes democrats and a few you republicans for the failure of the health care bill.