tv Bloomberg Markets Americas Bloomberg May 1, 2019 1:30pm-2:00pm EDT
white house counsel don mcgann about removing special counsel robert mueller had "corrupt intent." heard the special counsel decision not to decide the obstruction issue at the march 5 meeting. when he came over to the department. we were frankly surprised that they were not going to reach a decision on obstruction. we asked them a lot about the reasoning behind this. the basis for this. the attorney general is also invited thursday to appear before the democratic led house judiciary panel, but the justice department said he would not testify if the committee insisted on having his lawyers questioned the attorney general. british defense secretary gavin williamson has been fired after an investigation into leaks him a secret government meeting about chinese telecommunications firm huawei. prime minister theresa may's office says the prime minister has lost confidence in williamson. an investigation was launched
last week after reports that the security council, which meets in letate, had agreed to huawei participate in some aspects of britain's new 5g communications network. the prime minister has named someone else to the post who is seen as pre-brexit. hundreds of thousands of cubans have taken part in the country's pastl mayday march, filing raul castro, and his successor, in an event dedicated to denouncing new restrictions and sanctions announced the u.s. government. washington recently said it would place a new cap on the amount of money that families in the united states could send relatives in cuba, and move to restrict so-called nonfamily travel. yesterday, president trump threatened "full and complete embargo sanctions on cuba if its troops to not cease operations in venezuela." john bolton earlier said that
cuban troops were keeping venezuelan president nicolas maduro in power. the cuban president tweeted in response "we vigorously reject trump's threat of the complete and total blockade. there are no cuban military operations or troops in venezuela. enough lies already." afghanistan government is making no headway in rolling back territory controlled by the television, according to a new report from the pentagon watchdog, which found casualties among afghan forces rose 31% from december 2018 to february 2019, over the same period year earlier. the report also found troop levels fell short of what was needed. global news 24 hours a day, on-air, and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg.
>> live from bloomberg world headquarters, i'm taylor riggs. amanda: i'm amanda lang. welcome to "bloomberg markets." here are the top stories we are following from around the world. the fomc drumbeat gets louder. investors expect the fed to stick to patients. that rate decision 30 minutes away. apple'set focuses on iphone sales outlook, rising services revenue, and the use of cash with more buybacks. venezuela in crisis. nicolas maduro remains in power despite the opposition's failure to topple him. we look at the potential spill into other em countries. first, i want to get a quick check on where the major averages are. looks like we are continuing to get record highs on the s&p 500. clearly, mostly unchanged.
my focus is all about the tech sector. alphabet leading losses lower yesterday. leading the gains today. we will have a smart conversation with an apple analyst from the street coming up. of course, if we switch the board, all of my eyes are on the russell 2000, small-cap index. this is one of the only major averages that has not made new fresh record highs this year, this as we see a weaker dollar today ahead of the federal reserve. a little bit of weakness on the small-cap stocks that are more reliant on a weaker dollar. amanda: so interesting, weakness could be interpreted as value. take a look at another place where we are seeing signs of value, in correlation. one month correlation for the s&p 500 now at a low not seen since 2017. we should note the euro stoxx 50 is at a record correlation. suggestion is as you get
earnings and other specific to industry and company news, we are seeing a divergence in the momentum of stocks. out news for stock pickers there in these markets looking for the individual pieces of value. speaking of value and momentum, sending some apple optimism across the market. amd doing its part, too. [no audio] when it had to forecast about where things were headed. the combination of apple and amd, we are seeing a little bit of enthusiasm across the chips. stocks higher on the day today. our analysis of around amd has been the market share they are try to take from intel and a nomura analyst had a note this morning, that they are looking to make market share from nvidia with some of those graphic processors. certainly, all the chipmakers back in focus, like you said.
amanda: absolutely. in focus in part because of the phone they supply four. apple gaining 6% after reporting second-quarter numbers. the iphone posted better-than-expected sales after that bruising holiday season. many analysts are still cautious on the stock. an analyst at piper jaffray with a buy rating is with us now from minneapolis. in terms of what we heard, clearly some relief on iphone sales, they were not more damaging. what do you see by weakness in terms of the numbers? >> it was a great quarter across the board. iphone was better on units. doing some price reductions in emerging markets. every other segment beat except for mac, and the only reason that did not beat was because of a processor shortage. mac was a little light, but temporary issue as a result of a processor shortage.
we feel good about the corner. obviously, the huge cash return continues. they authorize another $75 billion a share repurchase. it is a good problem to have, to have 100 $13 billion of net cash that you are trying to draw down to zero. taylor: increasing their dividends and buybacks. $60 billion free cash flow annually. why aren't they going out, in terms of talking about use of cash, and buying a netflix for example? >> it is funny you say that. we have the reduction in cash from the share repurchase, but that it gets replaced by the cash flow. our model right now, we are modeling in such a way that they would never get to a cash neutral position. there could be something in the works down the road for them to do something more transformational from an acquisition standpoint. as you know, it has not been mo in the past.
there could be something in content or health the closely d service component delivered on the top line. tell me about what you think about the margin expansion he is for growth on the profitability of this group for apple? >> services will continue to be a driver. as it grows, the overall profitability of the company will grow. you have this nice shift for the higher-margin services business. the beauty of this is they have 1.4 billion active devices in people's homes, on their wrists, in their pockets. they have this great trojan horse in people's lives to layer more services on top of. we saw that at the recent marja that, talking about not only the video content, but the magazine e arcade,on, appl applecart. taylor: in terms of leveraging
the position, talking about the future growth of the company, could be in wearables. not something we have been focusing on a lot, but there has been a lot of discussion about growth and health care sector, being able to track the health of a person, incorporating that data into the watch for example. how much growth are you placing on wearables, incorporating the health stuff into that? expecting continued growth of wearables. watch is leading market share. we saw strong expectations amongst teens in our recent survey for watch sales. tothink that will continue be an area of relative success for the company. health care is part of that. it is a good time to step back and say they are looking at just huge total addressable markets, and health care is one of those. transportation could be one of those. that has been rumored in the past.
we definitely think, as the company has noted itself, health care will be an important component of the business going forward. taylor: thank you, mike wilson. sticking with tech, don't miss our interview with the gopro s ceo tonight. mike pompeo says situation in venezuela is fluid. we have all the details on the crisis in caracas head. -- ahead. this is bloomberg. ♪
opposition leader juan guaido faces a major step back as nicolas maduro keeps a stronghold on the military. lawmakers in washington are weighing in including security advisor john bolton. figures like the defense minister, chief judge of the supreme court, head of the presidential guard, have been outed as people dealing with the opposition. if you are nicolas maduro, can you look at your defense minister anymore and trust him? i don't think so. maduro is now surrounded by scorpions in a bottle and it is only a matter of time. taylor: for more on how these tensions could spill over into other emerging market economies, i want to welcome our guest from voya investment management. cannot talk specifically about a buy or sell recommendation within venezuela, but broadly speaking, has anything in the last 48 hours changed your investment thesis as you look at venezuela?
>> thank you, good afternoon. the latest of elements have not changed our mind on the transition. it will be a lengthy one. we don't know exactly the timing and when maduro can be ousted. it does not change our investment strategy. inhave been out of venezuela bond portfolios but we remain active for our dedicated emerging market funds. amanda: of course the situation there is very fluid, unknown what will happen, including with debt restructuring. if you are not an investor would venezuela, are there companies that you would also avoid until it is settled? >> the contagion that we saw in the 1990's and 2000 the lungs to the past. when it comes to the contagion of the venezuelan crisis, we have to look at the direct and indirect effects. when you look at the direct effects, you have to look at the spill over to countries like colombia and peru.
if you take the example of columbia, the minister of finance recently said the cost of the refugees is about 50 basis points of gdp. that is a direct spillover to neighboring countries. so the refugee and humanitarian crisis. when it comes to the rest of the market, you can think of how the oil market is reacting to any sanctions being intensified or moved on. being, wer the time don't think the situation is worsening. nevertheless, we still think going onward, we have to remain vigilant in the evolution. taylor: we talk about oil and debt. as you look at venezuela and the debt restructuring, is there any other playbook that you can look at, let's say argentina, that would help you understand the debt restructuring process, if there is one in venezuela? >> we have to realize the following thing. the signs of potential debt to be restructured in venezuela
will be much larger than what we saw in argentina. you also have a difference in the structure of the creditors to venezuela. the seniority is not the same. there are differences in the treatment between bondholders and other lenders like multilateral's, bilaterals, small senior debtors. we think the haircut indicates venezuela might [no audio] $.30 on the dollar. in the case of venezuela, we may see probably a much lower value. that is our assumption. take the example, the venezuelan debt amount is around 200 yuan -- 200 million u.s. dollars. you look at the gdp. an average of $100 billion. make some kind of recovery in terms of potential gdp. betweent have to ride
75 and 85% of the debt. amanda: when we think about the next step see her obviously, sanctions remain in place. ,ssuming there was a change maduro pushed aside, guaido installed, what would happen to sanctions, and how quickly? >> that is the big question, nobody knows. you can waive quite fast some of the sanctions. some of the things you have to do is resume trading. as of today, secondary trading of secondary bonds and other bonds are paralyzed. you have to make sure you can trade these bonds. then you really have to face a legitimate government. we want to make sure that when you sit at the table of negotiation, you are facing a stable government that will be there in the years to come. probably when it comes to transition, whenever maduro falls, whoever x over, guaido, or a newly elected president, it will take time.
investors should realize from maduro falls until the moment we have a debt restructuring in place, accepted by all the different parties, it will take more than 12 months. amanda: great to have your thoughts on this, appreciate it. our thanks. is extending more generous loan terms to canola farmers here caught in the middle of the country's dispute with china. earlier, canada's agricultural minister told me that the government is not ready to bring this dispute to the wto just yet. >> we have different rules and our toolkit to respond to the situation. we think it is not the right wto.t to proceed with the second, we have to stand by our very high quality canola production in our very robust inspection system. accounts for about
amanda: this is "bloomberg markets." i'm amanda lang in toronto. taylor: i'm taylor riggs in new york. the world of finance awaiting the fed decision. i think the fed has gone crazy. the federal reserve is getting a little too cute. it is ridiculous what they are doing. stringent,far too and they are making a mistake. at a high interest rate because of our fed. i would like the fed not to be so aggressive because i think they are making a big mistake. despite that, they are doing
well but it's not necessary in my opinion, and i think i know about a better than they do, believe me. you look at inflation it's very low. hopefully, the fed will not be raising interest rates anymore. taylor: joining us is ira jersey with bloomberg. confirm with me that nothing that we heard their influences jay powell. >> it is in the back of their heads but it won't. they are professionals and a lot of them are economist. now we looking at the data. where are we now, where we going? therefore the best course of action right now is to remain on hold, not do much. amanda: that was a private that this bed made, the word patient is one to watch out for. a series of data points, all over the map in terms of how tepid the outlook might be. ism today not amazing. are you looking for anything suggesting a change on the balance sheet? that did surprise some people. one thing that is important
is the federal funds rate has started to creep higher in the band they have set. part of the reason for that is the balance sheet runoff. it is certainly one of the impacts of the reduction of the balance sheet, reduction of bank reserves, and therefore interest rates have to creep higher. they could tweak the interest they pay on excess reserves. it is possible, and i think they should announce a new facility that would allow them to control interest rate in the band a little bit. all technical, not a big deal. five basis points cut to interest rate reserves should not impact the market much, but i think they'll be some headlines about that. taylor: i want to look at the target for the 10-year. we heard this morning that some see 2.25, 2%. you are looking at more of a steepening of the curve. we think we will see an
acceleration in the second half of the year. as you get that acceleration along with a fed that is likely to be on hold, that will be bad for long-term interest rates but still have front and interest rates holding in pretty well. we are looking at 2.90 at year-end on 10-year treasuries. amanda: fascinating to hear the u.s. president claim that his own costs have gone up, and the impact that should have on anybody. as the long and go up, it has economic implications. where does the fed factor that in? would likek the fed interest rates to go up a little bit, i think they are scared of the signaling that a flat yield curve suggest to the markets and also to them. a steeper yield curve is a good thing because it signals the market believes you are going to have someone higher inflation, somewhat higher growth on a forward-looking basis. you have to take that as a positive, not negative. if it went too far, maybe the fed have to adjust their thinking a little bit and get more hawkish, if they thought
inflation would run away. i don't think that will happen at all. taylor: i want to talk about inflation. you are a rate strategist. you have to bring in inflation. talk about the divergence we are seeing between pc and cpi. does that concern you as we look at some measures showing subdued inflation? other measures showing inflation right at 2%. ira: not really. there is always a diverted between cpi and pce. that is by the construction of the two indices. where is core inflation going, how is services affecting overall inflation? service inflation tends to be driven by wages. given how low unemployment is, the fed will be continue to worry about that. that kind of inflation tends to be stickier. goods prices go up and down, very volatile. we take that out and services inflation has started to turn but not particularly high yet.
wageson for that is tepid growth. another reason why the fed is likely to be on hold, even if the economy starts to recover this year. likely to be on hold, even if the economy starts to recover. that is the takeaway, thank you, ira jersey. decision program is moments away. let's get a check on the markets moments before that decision. continue to record highs on some of the major averages. we will call that about flat on the s&p. nasdaq getting a lift by apple, some of the readthrough is on the other chipmakers. 10-year yield, down two basis points below that key 2.50 level. that decision is next. this is bloomberg. ♪ this is the fed decides on bloomberg television. on scarlet fu alongside tom keene. we are winning the third rate
decision of 2019 followed by a news conference from chairman jay powell. officials expect to hold rates study that there's been a lot of criticism from president trump to make a cut. he has identified a one point cut. what does that mean to you? means,don't know what it i just know that i was wrong. i thought it would be just a -- meeting. this meeting has gotten really interesting in the last 48 hours. with the economic data today, the bond market coming into low yields, all of a sudden, these that of guests we have for the this isber of hours, going to be interesting to look at the dynamics we are in. now between economics and now within the markets. scarlet: you refer to the ism manufacturing, well below expectations but still expanding. a disappointing read, given the data we had seen lately. the sense that this economy was doing better. tom: a for fire terry michael
mckee dissent meter. scarlet: has there been any dissent? tom: not lately. but are they on the same page as we look at a number of the meetings for it? i'm focused on the october meeting. scarlet: let's bring in scott minard, guggenheim partner co-founder. 260 millioner dollars under management. he joins us from l.a. give us a sense of what you're looking for. tom mentioned the ism manufacturing numbers, how that disappointed, dovetails with what the fed does. >> at the moment, the ism data probably did not factor in much in their decisions, as it just arrived. what i think we will see is a continued patience on the part of the fed to act. i think they are not going to show any bias, whether to tighten or to ease. i think they will wait to see incoming data, and once again
focus on inflation as the number one priority. very quickly, what did you learn at milken, what was the mood, is it a rate cut, stability, or rate rise milken? scott: it was a mixed bag. most people are confused about what will happen. some people put actual weight on the president tweet from yesterday. i think that's important. i think other people think that will cause that is important. other people think that will cause the said today again and show their independence. scarlet: the fed, as you know, telling us when to respond to the president, and jay powell probably thinks that is impossible during this hearing. any history of the fed independent, that will be a theme on spoken through the day. particularly, you know the pressure will come up during the press conference. there is no way he is not going to address it. absolutely.
let's get into the markets right now, because we had earlier gains, now a three-day rally in treasuries got a big today after manufacturing numbers trail estimates. let's go to michael mckee at the fed. michael: pay attention. there is no change in the fed's target range, but they do have an entrance on excess reserves points is now 15 basis below the top at 2.35%. it is important to note that is not a rate cut. it is how the rate manages the rate environment, because they want to address the environment that the effective fed funds rate is trading above that rate. it is not a cut. the fed range stays the same, 2.25%