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tv   Bloomberg Markets Americas  Bloomberg  August 11, 2017 2:00pm-3:30pm EDT

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at bloomberg world headquarters in new york over the next hour. here are the top stories we are covering on the bloomberg and around the world. u.s. stocks stabilizing at the end of a tense week after investors reacted to the threat between thear spat u.s. and north korea. safe havens are still coming , with gold the highest in two months. and snaps disappointing sparkingarter report concerns. and the retail slump getting another member. declining sales and jcpenney adding to renewed fears of a downturn for departments doors. let's -- department stores. it has been a quiet week, but back and forth, with a pretty big decline yesterday. julie: and we are seeing a bit of a relief rally here for major averages after that a lot yesterday. that was the worst for the major
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averages since the middle of may. 500 andins for the s&p the dow. the nasdaq up a little bit more, up more than 6/10 of 1%, being helped by technology. and dow transports of the big winner on the day, about 1.2%. it is worth noting, all of these averages are down on the week. most, on00 down the her for its worst week since march. so some bearish activity for stocks overall. dowor what is helping that transports today, we are looking at some of the trucking and transportation stocks, which is jb hunt, two wells fargo analyst positive on the name, saying that the company is benefit that poised to benefit from trouble 02 truckload -- truckload two -- in turn, the dow transports, which yesterday has sliced through it two day moving
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average, now back above the two day moving average. the russell 2000 doing something interesting itself around the technicals. let's look at the one week view of the russell 2000, down more 2.8%, a -- more than big decline here. the worst week since february of last year. -- or on the year, excuse me, the russell up just 1% at this point, under performing the major averages. a were told a you after member, to small capital was up after the election on tax reform hope. but he is avoiding small-cap for large cap. let's look at technicals. this is something to think about. this chart is a longer-term chart of the russell 2000. a. in white, hitting on that 200 day moving average.
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on the bottom, the argue i i suggests the rs it is oversold at this point. next week could be pretty crucial for the small-cap index, julie. it outperformed postelection, but that game has almost been a raised at this point. as abigail mentioned, architect called -- markets have called to some degree. to "lockedand fury" and loaded," this standoff has been termed a "game of chicken." in a linkedin post, this analyst writes the world is watching to see which one will be caught bluffing or there will be a hellacious war? for more macro and markets joy --s, we are
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joined by our analyst, covering what is going on in washington. bill, i want to start with you. just to get the latest on this rhetoric, that "locked in loaded" comment was made this morning. what does that mean at this point? what is the readiness level of the u.s. military? bill: the u.s. military would tell you they are always locked slogan of thee u.s. army's division in south korea is "ready to fight tonight." the u.s. is a big military presence across the pacific and obviously in the southeastern region. this is what they train for, what they do drills with u.s. allies for every single year. i think we have seen this ratcheting up of rhetoric really on the u.s., we are used to hearing this stuff from north korea, but what surprised the markets and a lot of analysts
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this week is that the u.s. is responding in kind to the type of language that we usually only hear from north korea. scarlet: and it is president trump who is responding in kind, because secretary of state rex tillerson is taking a different town, talking about diplomatic measures. mattis, the defense secretary is also leading towards tillerson's side. this?n we reconcile are they speaking to different audiences? bill: we have seen a lot of monthsin the past seven to where the president goes out far in terms of his rhetoric, whether it is deliberate good cop bad cop strategy or top aideselse, his are setting a different tone. what we heard from matt yesterday was praise for diplomatic at -- from mattis yesterday was praise for diplomatic efforts so far, and seems interested in ratcheting economic sanctions on north korea.
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he has been visiting technology companies like amazon, and will be at google headquarters today. he has not loan back to talk about war plans with the president. so what is the next step, or is there any way to predict the next step? a hard gametion is with the trump administration. a lot of people are wondering if there are some back channel negotiations going on or not. on the military side, you would be looking at increased report minced to the region. you have nothing personnel from the state department or department of defense, family the personnel leaving the region. we do not the signs of that. so in terms of major conflict we are not seeing evidence that it is about to happen. north korea that big of a concern among investors, or is that the excuse everyone needs to dial back on risk? >> if you look at the equity market, it might be the
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excuse that people have been looking for. the fed has noted about asset bubbles, per se. yellen and fisher have talked about it. probably been has the straw that broke the camel's back in the equity market over the past couple of days to selloff a bit the effects market, not so much. bit. effects market, not so much. people are starting to move into haven assets, to hedge against what could be equities or bonds. one currency that is taking it seriously in particular is the south korean is theecause that country that has the most to lose. everyone would have quite a lot to lose if things got ratcheted up to far. specifically, what are currency traders afraid of happening? >> speaking about the lawn, -- won, it speaks to but bill said. we are in a tense situation,
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that because families have not left the center, so we are not at the edge it. on has appreciated. it has not been a crazy selloff year to date, it is still on the plus side. think this would be a situation where things would start to wayne on south korea, that would be a much, much different situation. scarlet: you put together a wrap every day as to where -- is to certain key technical levels. and i noticed we are at some key levels. we are testing 50 day moving averages. this might come right when someone is that an inflection point. are some morehese specific and momentum models.
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-- sophisticated momentum models. especially as you get into friday, things revert to the meet a little bit. we have come back today, haven is not as well bid as it was during the week, traders are trimming positions. but what tends to happen in these situations is they happen on sunday nights. we all of this. we are all gearing down a little bit. nobody wants to go in with a big position because a very small position will use or lose a -- make orof money, lose a great deal of money, as you have seen the vix go up. it does not take a lot to go in the right or wrong direction. the dollar is going in the wrong direction, if you are able. year to date, is down 9%. so when you have rhetoric like we have heard over the past few days, is there any hope for the u.s. dollar to immerse?
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vincent: the thing that will change the direction of the u.s. dollar is not what is going on in north korea, but hopefully that will --, but what will happen in washington in terms of fiscal policy. --ie: the cpi today does not instant -- vincent: a lot of people have not picked up on this yet. we are looking at the phillips curve, and maybe it does not work. we have mobility of labor now that we have not seen for in history. if a company can move from state to continent to country, inflation, wage inflation is probably not going to be present in the phillips curve is an outdated theory. he has hit the nail on the head when he says we are looking at the wrong models. we have to change what we are looking at because inflation will not react as we thought it would be in the past. and we will take more into that with you coming up at the close of trading at 4:00 p.m..
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thank you both so much. let's get a check now with first word news and mark crumpton. mark: more on that situation around north korea. reported differences with president trump. australian prime minister malcolm turnbull is making it clear where he stands in the escalating crisis with north korea. >> we stand shoulder to shoulder with the united states. this treaty means that if america is attacked, we will come to their aid. if australia is attacked, the us trillions will come to our aid. we are joined at the hip -- the u.s. will come to our aid. we are joined at the hip. prime minister turnbull also said he discussed the issue with what -- vice president pence last night. president trump ascending jared kushner to israel to pursue a
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peace deal. they are trying to take advantage of a moment of relative calm following violent clashes last month. to set antrump wants ambitious agenda for the talks, including the israeli and-palestinian -- israeli-palestinian conflict and addressing the humanitarian issues in gaza. the president has said mitch disappointed him over congress's failure to eliminate obamacare. today, he tweeted a fox news's story saying republican senators were learning the hard way about the fallout from turning on the president. some dramatic video. police in austin, texas have released this surveillance car plungingng a seven stories from a downtown parking garage and missing another vehicle as it lands in alley. people were able to pull the driver from the wreckage. police say the accident happened when the car drove through
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retention wires on the seventh floor. the driver of the suv was not heard. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton, this is bloomberg. scarlet? scarlet: thank you so much, mark. some breaking news -- three investors and uber were talking -- sherpa capital and investors, have asked benchmark, one of the biggest shareholders of the company, to resign its board seat. follows benchmarks decision to file a lawsuit against travis kalanick as they tried to remove him from the board. the board battle at uber heats up, with three board members asking benchmark to resign its seat. we will have more on this when we get more. from new york, this is bloomberg. ♪
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scarlet: -- julie: this is bloomberg markets. i'm julie hyman. continues to stock sink, hitting the lowest price yet since it's march ipo. the ceo asserts that new features like a map will help snap gain some popularity. map,nce the launch of snap we have seen increases of 30%. incentivizes our community to create more snaps and contribute their point of view. scarlet: joining us now from san francisco, our bloomberg tech reporter. new features are great, but a matter when user growth is slowing and facebook and instagram can copy those new features better than snap can?
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iswhat snap is arguing it is the new features that draw in new users to their plot warm -- platform. that gets people addicted to the point where they are spending a lot of time there and therefore generate a leading -- generating a lot of advertising revenue. but will people always compare them to the juggernaut in the market, facebook, because beenook not only has copying snap features, but they are also very dominant in the digital advertising market. snapchat should prove itself against that challenge, and it is a very difficult thing for them to convince investors they are a different. there is wall street, and snaps original investors and the silicon valley community. between the two, do they have the confidence of their core investors? >> i think snap is a company that people completely put their ahead of the ipo.
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the company tried to frame itself a something new and different outside of the realm of what facebook controlled. snap.is no news feed on they are not putting ads like that --d stories like facebook and twitter do. when it comes to competition, they will still be drawing from the same user bases of people who would otherwise spend time on instagram, facebook, messenger, or any of those apps. scarlet: and this is a young tech company, so employees can soon start to sell their shares, or insiders can. evan spiegel talked a little bit about this on the earnings call. let's listen in. >> given the amount of speculation around the lack of expiration, i feel it is important to note that bobby and i will not sell any of our shares this year. the company will withhold the shares needed to ask if i -- task of i our -- our holding operations.
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scarlet: is that something that investors are talking about, the leadership of evan spiegel? it starts with him not selling his take, but being able to share his strategy with investors? >> a lot of people are talking about his arrogance, about this position. on the call yesterday, when he was asked about -- it seems like you are using similar growth tactics to facebook, and it seems like you do not like those growth tatts -- growth tactics, he had an arrogant answer to that and said listen, we are always the underdog, we always have in. we are the last market and all of these areas and have always been sick ethyl. -- successful. so a lot of yards i'm hearing --m investors and others concerns i'm hearing from investors and others is that he does not seem to think he is threatened by facebook. he thinks that snap cans will succeed, which might be a good option to have but i think they are looking for a bit more of a
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reality check. for giving us a reality check. we appreciate it. --ll ahead, why well fargo wells fargo securities analyst says that the big banks are strong enough to whether two financial crisis. will hear from next.
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scarlet: this is bloomberg markets, i'm scarlet fu. julie: betting on the banks. u.s. financials had a rocky earnings season, but the analysts at wells fargo securities as optimistic about the road ahead. bullishe structurally on banks at wells fargo security. balance sheets are stronger than they have been for a generation. banking regulators have forced banks to increase capital liquidity, and now banks cannot financial crisis, but to financial crises, and
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that is the fed's own data. revenues have been somewhat flattish this decade, and we think revenues were poised to break out, a combination of the headwind, the biggest noncredit headwind in the history of u.s. banking are now over, in addition of a few interest rates hikes help, this is before any big benefit from lots of rate increases, deregulation, or some kind of reflation trade. and returnsenues going higher, returns going lower, and it is a paragon shift if that happens. >> is that the street evenly across the sector, particularly when you talk about money makes -- big money banks is close to regional banks. it is equally -- is it equally beneficial? recommendations, we see one half side over three years, bank of america, the jpmorgan. >> the big guys.
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>> think about it. in 1990, 1994 that is when you have the first ever national banking. but the big banks did not fully integrate the acquisitions in the tech bubble burst. then last decade, you had more financial positions -- acquisitions, and what happened? the initial crisis. since the first time interstate banking released in 1990 four, the big banks can focused on the international bank. they can retool their operations, and they are not doing other bank acquisitions area they are not distracted. this is the time of the big banks finally doing what was promised from 1994. >> here is what i do not get. you come here, you do not have a prop, you are really subdued, what is wells fargo doing to you? >> this is week six at wells fargo securities. i will say we have 30 individuals analyzing financial companies and individuals. i launched on the banks yesterday. this is my debut at wells fargo
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securities, but i collaborated with about a dozen different individuals in research as part of my launch. i love having those resources. >> out is working together feel for you? >> i love regarding another people's expertise to make a better call when i can. >> so you like it over there? >> so far, so good. >> is there one big bank you cannot cover? >> i have cover the industry for a long time, and the market cap is well over $1 trillion of the companies that i cover. i have a lot to do. >> the big issue coming up is deposit data, this will be the first mover and what does it do to margins. what do you stand on that? >> the negative is that the margin decline this decade with the banks is the biggest it has been in 80 years. of ais a function not only lower interest rate, but able to cash on bank balances sheets. has increased from $1 trillion to $2 trillion is before the financial crisis.
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markets have been impacted by many factors. --rlet: that was mike mario mike mayo, bank analyst at wells fargo securities. julie: up next, iron ore has been on fire this summer, but will tensions with north korea put the brakes on that? from new york, this is bloomberg. ♪
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got you outnumbered. the dinosaurs' extinction... don't listen to them. not appropriate. now i'm mashing these potatoes with my stick of butter... why don't you sit over here.
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find your awesome with the xfinity stream app. included with xfinity tv. more to stream to every screen. ♪ from bloomberg world headquarters in midtown manhattan, this is bloomberg markets. i'm scarlet fu. let's get caught up on some of
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the day's big movers and the week's big movers. oil has erased its earlier losses and is moving up for today's russian, but it is not enough to -- session, but it is not enough to change the directory for the week. this would be the worst week since july 21. the ia this week reduces cash demand for opec in 2015. this could be a sign for opec as well. that -- isshows starting to make a come back here, particularly in the market for crude. opec's plans to clear this up what what might start to take hold. let's also get a check on metals. higher week, off a tensions over north korea defending gold futures to their best week since april. gold with a gain, at least for the time, of -- do we have the right one? that is morgan stanley's. but it is higher for the
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week. julie: i will tell you how much old has -- gold has gone up this week. it has risen about 2% on the week. let's talk about metals beyond gold. a big summer for iron ore and copper, both of those commodities posting big gains as china's economy has improved and demand is strong. can it continue, especially with these rising tensions over north korea? our commodities analyst with berkeley specifically covering metals. thank you for coming in, james. i want to ask about north korea, commodities, along with any other risk assets, take a hit on this situation. is it a real risk? >> when you look at the metals complex, it could be. it is not my job to work as scenarios, under the commodity analyst. if you look, china is a major importer of copper, tin million tons that of a 22 million ton market. one billionabout tons of iron or. when china buys all of these
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metals, they are coming through the seaborne lanes. we have an escalation in the pacific basin, that could impacts shipping lanes to china. it is not so much on the demand fund, it is the supply front. could that constrain outgoing supply is launched be a support prices? >> you could a potential fragmentation of the market. you could have a market in china were market prices start to rally because they do not have enough domestic supply, and a market where prices fall because there's too much. copper isor the day, higher and the trend has been higher overall. people paint a great macro story of china being the driver behind cover. do you buy that? >> i do, but i do not think that is the whole story. it has been doing really well, but it has been doing really well since q3, q4 2016. it is not simply a macro story. the phrase we used was that it was a necessary condition, but condition.cient
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other sources are going on. in copper, you have had a lot of supply disruptions this year, problems in indonesia that have been an ongoing story, it never seems to end. curtailing supply, and china category seven scrap imports camusso imports of motors and cables will be bands hurting in 2018 and beyond. the market saw that is very bullish with china upgrading the quality of scrap they are importing. weaket: there is also the u.s. dollar helping to lift copper prices, to some extent. >> absolutely right. i do not think the weak u.s. dollars enough to get this price direction, but i think it certainly helps. it is just another factor in the positive call for copper and metals as a whole. scarlet: so all of these different factors you are talking about, whether it is currency, individual supply disruptions in the minds, will they continue to provide? >> we are skeptical. we have been cautious, and that is the message we keep putting forward. conditions are supportive now
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and will stay that way for the next couple of weeks. but when we look at q4, q1 of 2018, and the chinese macro economy continue to outperform happily hit x percent of gdp growth -- outperform? growth, and i gdp think that slowing down metal prices. scarlet: and you think this is because china acted to boost its economy at the end of 2015 and we are starting to see some of those effects take hold. things will kind of peter out as we get to the end of the year. 2015 was not a good time to be a metals analyst. rises were falling off a cliff, and the problem was the chinese macroeconomy, where there was a deterioration in things like automobile production, which was down, appliance production, and the like. out on theina pulled stops -- all the stops. they did whatever they had to do to stabilize the economy. that started to happen and leak
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through to the real economy in 2016, and the second half of this year. it is a sugar high we do not believe it is ultimately sustainable. questionone more quick to delve into the political realm once again. steel tariffs? at this point, how likely are they with regards to china, and what effect will that have on the iron ore market? >> i come from youngstown, ohio. tariffs and nafta are a hot issue. i think they are more likely than not. likely to underestimate the prospect of additional tariffs. bere is going to have to some form of protections, or they will use their steel -- lose their steel industries, whether that is the u.s. of the european union. i think they are coming. iron ore is still very much a regional market, so you could see asian iron ore prices fall domestic u.s. and north american iron ore prices remain somewhat stable. julie: we got a little local
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there for you. thank you. i appreciated james, thanks. -- appreciate it, james. thanks. onrlet: let's get a check the first word news with mark crumpton. mark: north korea has sounded off again in the war of words with the united days. the country's official news agency says president trump is driving the korean peninsula to the brink of war. that was after the president warned north korea not to conduct a missile test near want. he told reporters that pyongyang becausee "very nervous things will happen to them like they never thought possible." that escalating war of words is alarming international leaders. russia's war and minister, sergey lavrov, says moscow is deeply concerned -- foreign minister, sergey lavrov, says moscow is deeply concerned. deploys starting to land-based patriot interceptor's after north korea threatened to
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send ballistic missiles flying over western japan and landing near guam. at least 36 people are dead in more than 100 injured in egypt after two passenger trains collided just outside the mediterranean port city of alexandria. the associated press reports the thetry had its -- this is country's deadliest rail accident in more than a decade. a train heading to alexandria crashed into the back of another train waiting at a small station. a national survey by the nonpartisan kaiser family foundation finds most american believe it is time for the gop to give up trying to replace the affordable care act. four in five people want the trump administration to take actions to help the health law function properly rather than trying to undermine it. only three in 10 want the republicans to keep trying. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton, this is bloomberg. scarlet?
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-- julie? julie: thank you, mark. coming up, jcpenney, the bearer of more bad news for department store investors. where the retail chain goes from here. on why crocs is a retail win this friday. from new york, this is bloomberg.
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♪ this is bloomberg markets, i'm julie hyman. we are seeing stocks take a little bit of a leg off of their tohs here as we had closer the weekend. people are not wanting to be long or not as many people want to belong. we are looking at the three major averages here. we have them all trading lower
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half of their highs of the session. they're kind of close to where we opened up this morning, but nonetheless some of the jitters over the past two days still present for equity traders. indexes are three still higher, but it is also friday afternoon. declinek bucking that is crocs, seeing the biggest move in three months after the company reported higher profit than estimated. growthemakers full-scale -- wholesale growth makes up for the slump in brick-and-mortar stores. do you on crocs? >> i do not. either they are popular, but you know what, they are right. there part of the death of retail story that we are reviewing three they are going back to basics, that core business, getting out of the cheaper versions and looking at higher, more profitable margins, and looking at shutting down some of the stores. so they are now in a 52 week high, if we go back one year,
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which is pretty remarkable. if you also want to come into my terminal, this is more of a technical side as well. you can see that going back one year, rsi chart are now over 70, showing it is a little bit overbought. so that earlier 6% surge that we saw is now crossing over that seven -- 70 mark, which was the most since june of 2016. when he goes over 70, it is more of an overbought, when it is below 30, oversold. so that is fundamentals for just a second. the company is shutting doors, which we have seen a lot of retailers do right now. so how much cost savings are they expecting from this? >> that was something they talk a lot about. their income statements, and if you look at those comparable, where it was, it has taken quite a hit. this news actually put it back in line with the benchmark. about $5 million
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less than they otherwise would be. some of that store closing is translating into more profit on the income statement. julie: i actually did go into a store last year. scarlet: did you buy anything? julie: maybe for my kids. scarlet: but you can always get a five dollar version at a random dollar store, and we have several errors of those as well, in addition to the reels one -- the real ones. let's stick with retail. jcpenney becoming the biggest desk latest big-name department store to post a rough quarter. -- this week's would put the question to the former jcpenney seeing euro. crexendo nothing to will happen in a decade, because quite rightly, you have no brick-and-mortar stores to go into, you have a smaller internet business because people get their ideas by going into the store. the iphone, which is a 10-year-old component, has an
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transformational in terms of people being able to shop on their phone before they go into the store. i think there will always be stores. the challenge is how do they make it exciting and interesting. i think that is the bigger issue here. the internet business is important for everybody, but as people to not go into those stores. 20%ink most stores do 15, -- 15%, 20% of their business on the internet. but it is less able to come into the model. that is a real challenge. the monitoring to create more excitement, the sorcerer trying to create more excitement. we will see at the end of the year. hang on that, you can have the same objectives profit wise -- you cannot have the same objectives profit wise as you used to have. profit or very little profit, mostly on the cloud, and you have a 10% objective, there is no way you can compete in the marketplace. you have to have competitive
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prices and get free delivery, and if you do not do that, you are going to go to a competitor like amazon. but you cannot have the same objectives as you used to have. i think many of these department stores and retail have to lower over thefit objectives next 4, 5 years because of their chinese compete with amazon, they are going to lose on that deal. scarlet: that was the former jcpenney ceo, speaking on bloomberg markets earlier. civic -- can they make their stores exciting again? let's bring in our u.s. senior retail analyst, joining us now from princeton. top little bit about your response to jcpenney's results, and if you see anything changing for the retailer, fundamentally --nging the way approaches it approaches the customer. >> i think the biggest challenge, just like everyone else, is driving topline. and it is expanding into non-apparel categories, such as home with appliances, mattresses, and so on, and so for a. that said, apparel is bill its
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largest business. reallyt see than doing materially anything that could change that business and turn a positive, at least in the near term. thee: during the quarter, company said liquidation sales was one of the things that pressure to the top line and the bottom line, for that matter. they had to close some stores and do clearance sales there. if you take that out of the quarter, what can we learn of lies from looking at the core results? 100 --idation sales had basis excuse me, 140 points impact with the quarter. so they still need to be promotional while their inventory levels are very clean. markdown cadences expected, especially as we go into the back half of quarter two. when you look at all the different retailers that have reported, one consistent
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theme is cost cutting. every retailer out there is trying to reduce costs to that whatever sale they get can flow through to the bottom line. when you look at the cost pressures of this actor, where do you think they are static and in fact growing? >> i think it is in the shipping. everyone obvious he is going to their online presence, but with that they are also offering reshaping. every single retailer i have seen far is talking about shipping being amounting cost pressure. it is unlikely that that goes away. >> at the same time, you have not all retailers that are doing as poorly, of course. nordstrom actually saw an increase in comparable sales, which is becoming more and more rare. what is so special about nordstrom compared to the other department stores? >> they are a little differentiated. they do not have as many stores, which is a good thing. they also offer service and experience in their stores, which they are known for. one thing that really helped 's was theirq
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anniversary sale, which the others did not have. julie: what about now? >> you will not see the increase you saw in two q. they are seeing topline pressures, even for nordstrom. even though they are the best in class for the department store group. scarlet: when you look at the group and the whole, it does not like air is much getting investors excited. if nordstrom gets private, gets old, how are investors position? the investment stories and case for retailers always seems to be based on some activist coming in and making the company a mocked real estate value. >> real estate is still a big have seentail, as we in macy's. investors are still waiting for that, dillards, there is some
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speculation on real estate. as a whole, when you look at retail, there is not as much optimism on top line yet, because they have not you're not a way to drive consumers back to stores. everyone is trying something, but nothing has really materialize. we cannot see signs of things materializing until they close stores. enclosed a small portion of their stores so far, and there is a lot more needed. still earlyre are portion so far. bloombergyou to the business flash, a look at some of the biggest business stories in the news right now. planning on charging $10,000 a year for entry-level equity research. that is the lowest price among financial firms post knee fed -- nifid. berkeley was planning on charging $39,000. jpmorgan is trying to grab market shares, but also run the risk of scrutiny from regulators.
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u.s. supreme court has subpoenaed to companies on the sale of opioid drugs. than 30,000 americans died from overdoses on opioids in 2015. trumpdent recently declared the opioid epidemic a national emergency. according to the startups barometer, tech startups reached a record high, up 44% from one year ago. driving the surge is a number of new businesses focusing on raising money for the first time. that is your business flash update. coming up, the latest behind-the-scenes drama in hollywood. how hackers are threatening the way studios produced tv shows and movies. from new york, this is bloomberg.
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♪ this is bloomberg markets, i'm julie hyman. scarlet: and i'm scarlet fu. the latest action plot in hollywood could be threatening the way it does is this. hackers are now gaining access to everything original, everything from original stories to full episodes of popular tv shows, like game of thrones. week, hbo investigated a cyber attack after an unmarried episode of game of thrones appeared online. we are joined now from los angeles the details. lucas, this was terrible news. but it is not surprising when vulnerabler how hollywood is to cyber crime because of how much the out doors -- how much they outsource to freelancers. >> the challenge in hollywood trying to stop hacking, which is also possible for any company, is that they can put security in place were there employees, officers, but they rely a lot on third vendors for postproduction, props, costuming, you name it.
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it is hard to ensure that all of parties you work with have the same rigorous security in place that you do, so if you are a hacker, all you need to do is search for that one weak point in the chain, it like that, find the episode, find something. the good news for them is it means there are things like episodes that they can still from those vendors, but some of the personal information of those employees that we saw stolen in the sony hack are less easy to obtain. they have the challenge of protecting the content, but also what to do with the content gets out there, and whether they back, ransom the stuff will that even be successful. how has hbo or the studios, for that matter, been addressing that? case, the hackers leaked in email in which it ratherd hbo offered a paltry sum is a bounty for these episodes. it was unclear if that was a stalling tactic or what, but it is difficult because you are trying to assess how damaging it
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out, have these episodes in this case. i would argue that hbo was relatively fortunate, compared to some others in that it was just a handful of episodes. but if you are hbo and have gained from, -- game of thrones, one of your most popular tv shows on air and in the world, if the hackers put up knowseason's episodes, you -- scarlet: who would want to watch all of those episodes? i cannot imagine. i am sorry. >> you're wondering who would want to watch? i think a lot of people would be happy to watch, people who do not have hbo would be happy to get these episodes for free. remember, game of thrones is routinely ranked as the most pirated show in the world. it hackers can get those pirated episodes early, they are happy. scarlet: to some degree, hbo has not necessarily mind the fact that game of the front is one of the most pirated shows in the world either. they do not mind the fact that
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people share their hbo passwords as well. there is a little bit of making sure they get their name out there, and game of thrones continues to dominate the buzz in terms of popular mindset. but there is also the need to preserve profit. >> yes. i think the most recent episode was one of the most watched in history, or at least for that date in the siege and -- season. the interest in the show has swelled with every season, every year, and in this case, some of the attention may have actually benefited the show. you never want anyone to hack your servers, you certainly do not want any personal information employees to get out -- lucas we got a go.
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scarlet: it is 3 p.m. in your, 12:00 p.m. in san francisco and 8 p.m. in london. scarlet: welcome to bloomberg markets. ♪
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julie: where live at bloomberg world headquarters over the next hour. .t here are the top stories u.s. equities are stabilizing of the end of a tense week after investors reacted to the threat the nuclear spat between u.s. and north korea. we will examine how investors are trading the risk. meanwhile, north korea is not the only thing on president trump toss agenda. kevin brady says there is room to work with democrats to pass a tax overhaul. in the latest economic reading make it tougher for the central on itserhaps, to stay tightening course. we will tell you what you may have missed in today's inflation report. we are one hour from the close of trading select get a check on markets with abigail doolittle down off the highs of the session. atgail: we are looking
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gains, but we are off of the highs. the question could be whether or not we see some more before the day is out. investors may be just a little bit skittish going into the weekend. not wanting to have long positions on the books, taking profits. and on the week the three major averages are lower. -- up the of the most most. speaks to thelly geopolitical tensions that have rattled investors this week. g #btv 5917. since the election, on the opposite are the downside. there are four more weekly gains than not. -- butg to the rally this week, look at the declines we are seeing. the worst for the dow since april, the worst for the nasdaq since june. the s&p 500 having its worst week since march. we will see if we can hang onto
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these very small gains intimate close. let's take a look at the havens. they are rallying in response to declines on the week for major averages. have gold trading higher by 2.5% . we have the dollar falling against the yen. the tenure yield down by about seven basis points. bonds rallying. and look at the vix up this week. the best week since december of 2015. also worth noting that haven assets and the vix all up on the year. putting together that for the all-time highs we have seen. something has got to give. one a look at the big movers the weak relative to what is happening in the s&p 500. and also projected an increase in pricing. companythe military
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back on track. investors disappointed by guidance that was too aggressive. and finally, bright house financial down about 11%. having it's a very -- it's worst week and it's very young life. scarlet: thank you so much, abigail. u.s. equities are stabilizing at the end of a pretty tense week of verbal threats between the u.s. and north korea. sendingers are still investors to havens with gold hitting its highest level in about two months. billionaire ray dalio raised the alarm characterizing the geopolitical risk as to confrontational nationalistic and militaristic leaders playing chicken with each other. in chiefring investment strategist bruce bital. are they coming into early, too late? i think the north korean
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situation certainly has influenced the market this week. and i think that can be overstated easily. there is a lot of deterioration going on under the surface. dow was diverging, down 5%. we are trading at 22,000. we lost a lot of market leadership. represents a softening or weakening of demand . and now we are entering the season, august through october. , the markets are correcting here. we haven't had a correction since june of 2016. 14 months. that is the longest stretch we've had in 20 years. add it all up. week perioation, a
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deterioration, a weak period. and the north korea situation was the spark. julie: why was it the spark? some of this has been in place for a while and you had other political and geopolitical event that have happened over the past few months. we would've thought it would hit the markets a little higher. are there fundamental concerns here about north korea or is it just a spark? mr. bittles: i think it is just a spark. the noises certainly louder under the current administration then we've experienced in the past. and threats out of of north korea are nothing really new. if you look at the market the marketkorea,
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started to deteriorate four weeks ago. august and september are notoriously weak markets. and you have the fed potentially raising rates are reducing their balance sheet. there is a budget situation coming up in september as well. you have a number of things coming together that could finally caused the market to correct for the first time in a very long time. i have a chart of one of the elements you are talking about. the advanced decline line for the nyse that shows the rollover you are referring to. talk about expecting markets to correct this time, do you expect that technical definition? do you think we will pull back by 10%? do you think we will stay there through the balance or will we try for a rebound? mr. bittles: it's hard to say how much they will pull back. 10% would be reasonable. 10% corrections in the market
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were commonplace and would happen every year. the fact that we haven't even had a 5% correction makes any correction at all seem a whole lot worse than it might be. my guess is the market weakens until we get enough -- until we get older sold enough. enough. we get oversold scarlet: what is the leading indicator for when you look at how and when starks will embark on the 10% correction? you could look at high-yield spreads. high-yield credit has started to move up as well. mr. bittles: they have. and i think it is a measure of psychology. i think that is what is shifting as well. this summer and the spring, investors were kept on edge. there was complacency, certainly, but not optimism. dow is touching 22000 and by
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the time we got to august, all of a sudden, enthusiasm started to come into the market. you can see the intelligence numbers were we had four times as many balls than bears. it is typically a sign of optimism. have these kinds of valuations, that is a sign of optimism. wasin debt is twice what it in 2000. that by itself is not a real problem. months in a row. and typically, once again, it suggests a lack of demand or diminishing demand for stocks and another reason why you might look for a pullback. julie: given all of this, what are you counseling investors to do? should they had to areas where they can find safety? i think this is a good time for caution and not at
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a lot more new money into the market. but my synopsis of the market is unchanged. the economy is doing reasonably well. today's inflation report suggests the federal reserve will have a very difficult time raising interest rates before december, certainly. the market before gets in big trouble, you need to see long-term interest rates rise substantially. and there is no evidence of that anywhere. tles urginge bit caution. joining us from florida. let's get a check of the headlines with mark crumpton. those tensions between north korea and the united are raising concern throughout the international community. german chancellor angela merkel spoke to reporters in berlin. >> i think that i am firmly
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convinced that an escalation of rhetoric will not contribute to a solution of the conflict. i also don't see a military solution to this conflict. with think constant work members of the security council will have resolutions with regard to north korea. mark: chancellor merkel added the security council needs to keep working on the issue. mueller'sunsel robert turning up the heat on former trump campaign manager paul manafort in the russia investigation. according to people familiar with the matter, mueller has subpoenaed banks to provide account information involving manna for it and some of his company's last month. fbi agents raided his home in virginia. voters and candidates in kenya to respect to the final results and resolve any potential disputes in court. preliminary results have incumbent president ahead of the main challenger.
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protests have arrested over several days in opposition areas after it was alleged there was vote rigging. at least three people have died in the violence. suspended dallas cowboys star running back ezequiel elliott for six games. he's been under investigation for more than a year for alleged incidents of domestic abuse. is the mandated punishment under the league's domestic violence policy. elliott was not charged with any crime and can appeal before the 2017 season officially gets underway. global news and four hours a day powered by 2700 journalists and analysts in over 120 countries. i'm mark crumpton. news regarding tesla's bond deal, increasing the value of that deal to $1.8 billion as it tries to finance production
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of the model three. the eight year bond will be 5.25% in line with initial talks according to a person with knowledge of the matter. the sale is private. the original value of this bond sale $1.5 billion. increasing it to $1.8 billion. one of the concerns among investors is the cash burn. and a lot of people say the bond is too risky. it's another way of looking at it. coming up on bloomberg markets, when will tax reform get done? what will be in the house bill? we will hear from kevin brady. from new york, this is bloomberg. ♪
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julie: this is bloomberg markets, i'm julie hyman with scarlet fu. scarlet: president donald trump is not just ramping up pressure on north korea, he's demanding results from lawmakers on health care and tax reform. he called out mitch mcconnell saying, mitch, get back to work and put repeal and replace and tax reform and cuts and an infrastructure bill on my desk for signing. toone of the main points make is that president reagan wouldn't even recognize this tax code. bloated, going exactly the opposite. and to make the case of what we have today hurts americans in so many ways. the second point will be to strive with the work we are doing.
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dramatically -- just as president reagan to deliver that reform. >> it was a bipartisan effort. there is a line at the end of it, as committee works toward the end, we hope the friends of the other side of the i'll will participate in this effort. how big an olive branch is that? you get a sense democrats want to be involved? mr. brady: there's not only room at the table, i'm pulling the chairs up for them. not ultimate crowds are for tax reform. i get that. those same types of companies are leaving the u.s., taking jobs. young people can't find jobs either. so yes, i do think there are democrats that one tax reform. in my discussions with them, we have these ongoing for months now.
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they want to balance within the budget. alwaysyou know, they're focused on income inequality issues like that. there is common ground there. especially making sure tax reform moves us toward a balanced budget. i am hopeful. it will continue the discussion. >> what about the conversation that was involved major tax reform? whereu give me an example you've had your ideas or notions of all for change? >> we had this is a key provision in the house because it eliminates taxes for u.s. jobs overseas. homeings the supply chain and level the playing field so
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we lower tax rates. i still think that has great merit. but there were too many unknowns. that debate is over. we set it aside. i expect others to be able to make this same type of tough decision. focused on it.n we get more americans engaged with the process. how do you keep everybody on message? you want the focus to be laser on this. mr. brady: the people representing their institutions and working toward this, you would be pleased with the seriousness of purpose of those in the room. we know how critical this is. i think the president is all in
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on tax reform. he knows how critical this is to the economy and his presidency. pretty optimistic for his ability to use his unique bully pulpit to make the case for why what we have isn't working. >> i listened to the senate majority leader speak. it didn't get past. it didn't sound like he was eager to bring it up again anytime soon. would it be a mistake to enter into a conversation about reforming health care again? letdown,: it was a pure and simple. i think we have to transition to something where it is done at the state and patient level. where we can restore the free market. senate,urge the especially republicans that couldn't get to yes.
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critical of the prioritization coming out of the white house? is the messaging from the white house complicating matters for you? them telling you what you should be focusing on? i know that on discussions of health care and tax reform, they have been incredibly helpful. the relationships, the tone, the tenor. i don't agree with every tweet. i don't need to. the president has made tax reform a key priority. that was chairman of the house ways and means committee. still ahead, there are -- the worse week.ted is we can tell you how you can take advantage of this decline. from new york, this is bloomberg.
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scarlet: this is bloomberg markets. julie has today's options insight. julie: joining me from the cboe for today's options inside is alan that men -- nuckman. a very eventful week with the selloff we have seen. or,you look at vix futures for that matter, futures and options on the indices, what kind of indications are you seeing for where we go next after this selloff? >> we've had an explosion. some heavy options action. 2 million today. those are records. it is significantly above average, 650,000 a day. heavy volume. what it looks like is it could be a lot of shortage just trapped. that the a surge
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markets had to adjust to. ist important with the vick will this be a whack-a-mole incident? we have seen each and every time before. it was different than with brexit or the chinese black monday crash or greece or the eurozone or all these other spiked up. the vix it should come back down in the next few sessions. now, we are getting a big bounce and up 50% on the week. vixsplosionitely a as you put it. we see them underperform even with the large caps. -- only up about 1% now. at're looking for the ruffle some point. talk to me about that. >> a reward risk play. look at the muted action in
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stocks. look at the movement we have seen. we made all time forever highs in the dow and the s&p on tuesday. it with what we've seen wednesday and tuesday, the market is only down 1%. not much market reaction. me, i am interpreting as a positive. -- i&p is 10% higher than like the 130 call for november. it's about six dollars and the money. costhat option is going to $900. it is in the money, so react well. 2017 trading sideways-on -- sideways in 2017. in this option, gain about 75%. julie: do you think we are not
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in for a correction here? or will it be sewn up? time,uckman: you've got you've got staying power. obviously, there will be additional volatility. picture, mybig major worry is that we're at the end of earnings season. we don't have the fundamental catalyst. and the banks don't report and to friday, october 13. so that could be a scary day. julie: mark your calendars. scarlet? , electionsming up begin this week we have a 30 minute special every monday at 8:30 a.m. london time. germany decides. we will bring you the latest political market analysis in the lead up to that election. this is bloomberg. ♪
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mark: it's time for first word news. it can you apostle electoral commission has declared the incumbent as the winner of the presidential election. led by theion
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candidate has rejected the results. international observers are urging all losing sides to respect the final vote and resolve any potential disputes in court. president trump has another warning today for north korea. the president tweeted military solutions are now fully in place , locked and loaded, should north korea act unwisely. un willly, kim jong-i find another path. trump has warned pyongyang not to conduct a missile test near guam. japan has started to going land-based patriot interceptors in response to the threat to send ballistic missiles over its airspace. the defense ministry said today ,hat they are being deployed expected to minimize the r

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