tv Bloomberg Markets Bloomberg November 6, 2015 10:00am-12:01pm EST
betty: good morning. here is what we are watching at this hour. it is jobs friday and the numbers are good. they are better than good. they are great. unemployment falling to its lowest levels since 2008. is is the number that will get the fed to raise rates finally. the first and 10 years. we will get the answer from mohamed el-erian. us, opening up to bloomberg about he is planning to revive the hardware business. he says more acquisitions are to come. we are about half an hour until the trading session and it would look in the market desk where julie hyman has the latest. we were up and now we've turned quite a bit lower. julie: quite a bit lower.
it seems as though the question of whether the fed will raise rates in december already seems to have been answered by the market, at least for today. when you look at stocks but across the asset classes the interpretation of today's data seems to be that the federal reserve is now more likely than ever to raise rates in december. that is putting pressure to some extent on stocks today. all three major averages are down. look at the bloomberg terminal so he can dig more deeply and with the sectors. financials are in the green because there seems to be this perception, that is cecily -- especially for regional banks, it will not be a bad thing. interest margins improving. utilities as the worst performing groups because higher rates tend to push down utilities. we have energy level along with -- lower along with oil prices. about the rising expectations for the fed we have
to look at fed funds futures. wirp. we are now at 70% in terms of the chances of being priced into the market for december rate increases. the incredible surge we have seen ever since the fed's statement just a week ago. we've seen such a rapid change in expectation. it also is evidenced in the bond market. click at treasuries. the 2-year note is seeing its yielded the highest and -- since 2010. is the highest since july for the 10 year. both of them surging in the wake of this report. off to currencies. the dollar has been strengthening in the wake of this. strengthening person the japanese yen and the euro and the pound falling versus the dollar. gold prices heading sharply as well. down by 1.3%. row weseventh day in a have seen lower gold prices.
betty: thank you so much. juliet the markets desk. let's check in on the news this morning. bonnie has morphed the news desk. bonnie: they want to serve the details. surging by the most this year in october. wage growth accelerated in the jobless rate down to 5%. that could be the senate labor market durability that policy are looking for as they consider a boosted borrowing. -- boost in borrowing. all000 jobs exceeded expectations in the bloomberg survey. more on that jobs report in a moment with betty in michael mckee. russian president putin has agreed to a recommendation to ask that -- stop all russian feisty egypt. the russian intelligence agency said it would be quote reasonable" to in-flight.
u.s. and british officials fear a bomb might have blown up the plane midair. rescuers are searching for burstors after two dams in brazil. authorities sent one person was killed and four were injured and 13 are still missing. a small town was flooded. project is owned by two of the world's biggest mining companies. whether maven a factor a crash that killed six people. the bus get off the interstate in arkansas last night and hit a bridge support. police say it was still foggy after heavy rain. the news rightt now and you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. betty: thank you so much. let's get back to the top story. it is a job stay in america.
today's robust labor report much stronger than expected. pretty much blew past any economist's estimates. a compelling case for the fed you raise rates at the meeting next month. here is how bill gross puts it. bill: i cap related that any jobs never over 150,000 would be sufficient. the fed these the economy and future inflation through the phillips curve that speaks to low unemployment that is somewhere around 525% -- 5.25%. i think they are ready to go. betty: is the fed ready to go? should you cancel your vacation plans to sever 16 because you might have to be at your desk on that day. mike mckee with me. you don't even have to make of these calculations to say what
bill gross is saying. it looks like we're looking for lift off, right? it's not going to be 100% into ligety november jobs report but we should probably wait to see if anything around the rest of the world comes up. nobody anticipated china in august selling off september. if things continue as they are right now, the fed will raise rates on december 16. they have told us they want to and they were watching the data come in as expected. nasa's unemployment but with wages rising it could make a plausible case. betty: double the estimates on wages. how did we all get it so wrong? mike: i don't think it was wrong as much as the economy was giving us mixed signals. there are some good things happening and bad things happening in the us harder to tell, particularly when you have an economy that is not growing very fast. the villas are not as great. if we were at percent growth and had fallen to 1%, you would say the economy was in a real
slowdown and we should watch the that. -two .5% month after month, quarter after quarter, it's not giving us a lot of signals so everybody is parsed from the month-to-month data. the bloomberg terminal function, we look at it time and time again. what traders are pricing in. we don't think too much attention to the actual number but the trend, we were at 56% yesterday and now we are at 70% for the december move? mike: that tells you what you are seeing reflected in the market. the two-year pitted 93 point basis move. that was about 62 weeks ago. -- 60 two weeks ago. the markets have reacted to the data that suggests it is supportive of a move and we are pricing in right now a 25 basis point increase. you will have a 1% to year going
into that meeting and it will go a little bit from there so markets and overreact. is -- interest rates are going up. betty: if this was the greenspan said we would be halfway to 3.5% normal rates right now." mike: maybe. he sat on his hands in the late 1990's and did not do anything because he thought we could get some sort of additional growth without inflation from technology. it's hard to say that is true. what is really interesting is we have gone into a world that maybe does not compare. everybody is trying to say is this like 1994 when the fed started and said it would be very gentle going up? 2004 when we were anticipating 17 straight months of 25 basis point moves? this could be the fed is insisting it will be a much slower or shallower path.
they have some room to do it because inflation is so low. even if they overshoot a little, it will not be a disaster. we are not looking at a 17% inflation rate as were during 6%-7%lcker days or even a inflation rate as it were in 1994. they can afford to the a bit more patient. betty: what about the labor force participation rate? that dropped slightly in this last month. a job and say be you're looking for some sort of an argument about why you might want to hold up a little bit, could you look at that for instance? mike: you would be a dove really, really looking for something. labor force participation is a source of a lot of debate. the consensus is this is the tail end of the baby boom. all these people are setting to retire out of the labor force. it is largely demographics. there is a pool of people out there who have retired they could be lured back into work.
we saw that dynamic in the 1990's. we were down to 3% unemployment rates because a lot of retired people said i can think of a little bit of money at walmart. re: going to see that again? that's an open question. alix said maybe not. where at a point now those people are largely out of the labor force. rising wages won't necessarily lower the backend. -- lure them back in. betty: much more on bloomberg television with this job report. how will that play out in the rest of the world? bloomberg businessweek takes a special in-depth look at the global economic outlook and how the next year shape up. what countries are leading the way in the most important variables in 2016? ♪
♪ betty: all across the country from new york to san francisco we are watching the jobs report. a stellar job report, way above economists'estimates. falling down to 5%. it's time for the bloomberg business flash. looking at some of the biggest business stories. valiant pharmaceuticals says goldman sachs has sold 1.3 million shares of the company. they were holding it as collateral as part of a $100 million loan to mike peterson, the ceo. he used the loan to finance journal country regions through duke university and a communities funding pool.
1/5 of his total holdings. mobile payment company square is setting its ipo at 27 lead shares of the price range of $11-$13. they hope to raise about $285 million. ceo jack dorsey will have 23.6% voting power. underwriters are goldman sachs, morgan stanley, and jpmorgan. just weeks after suffering a heart attack. in a letter to the carrier's employees, he says he will be back in the first quarter. it was his first medication since taking medical leave in october. he was always -- already a united director when hired. you can get more business news at bloomberg.com. nothing matters more to the market right now than the jobs and growth numbers. october searching by the most this year. the jobless rate dropping to 5%.
what does all this mean when it comes to the world economy and what happens next year? bloomberg businessweek looks at the year ahead. joining me now is economics editor peter coy. we were driving in new york and already christmas decorations are out. peter: we are contributing to the problem with coming out with our year ahead at the beginning of november. betty: before we get to that, you covered the economy here and jobs, with you make of his job number? peter: you have got to love it. a strong report. k months itea bounces right back up. betty: doesn't seem like an aberration? peter: it could that -- turn out to the anomalous, one freakish month. there is a lot of uncertainty about these numbers.
it could be the real number was lower than that but you have to take it you get. we don't have better data than this. let's take it for what it is for now. 2016, for next year in did you ask people about what they see for the jobs numbers -- the jobless rate? peter: we looked at bloomberg's survey of economists before the report came out they were looking for average on women rates in 2016 of 4.9%. under 5% already. i would not be surprised after december comes out the further revise and see numbers down in 4.8% or something. a really strong numbers. in 2016? let's start with the country that matters the most. i suspect it will be china. peter: let's start with china because it's always uncertain. it varies more.
it fell below 7% for the first time. people are talking the international monetary fund about 6.3% growth for china next year. you hear people using numbers even lower than that. that will be the big? -- question mark. u.s., germany, china. u.s., were looking for the mid 3's. the world economy as a whole is 3's number.id the u.s. is down in the 2's. -- highs around five 1's or 2. it's growth comes from exporting and therefore kind of using its
exports to suck growth out of the trading partners. it's not entirely a positive thing. betty: india? will exceed china in 2016. betty: let's talk about commodities. oil was such a big story in 2015. what about 2016? peter: it looks like oil will stay cheap. the futures market is indicating by the end of 2016 it will be around $55 a barrel which is pretty low by recent standards. up from around $48 where we are now but that is silly low number which is great for consumer nations which consumer -- continue to include the u.s. bad for opec, russia. betty: that is the oil price and on other -- and looking at the other graph. the outlook for world growth.
it's very different but we are all in the 3's here. peter: the bloomberg survey of economists is where we get that number. betty: 3.8%. the lowest as the world bank at 3.3%. peter: i would make too much of that because these different ways of measuring. the imf number tends to be slightly higher. that is kind of trivia that the wonks talk about. betty: that gets them excited. peter, great to see you and thank you for bringing this to us. just a reminder you have got it here and we haven't there. -- have it there. staying on the global economy, don't forget to tune in tonight for bloomberg's exclusive conversation with bank of england governor mark carney.
♪ betty: welcome back. etf's are up to nearly $3 trillion in assets. julie hyman standing by for our weekly the dive into the etf market. julie: you can see the jobs number was not the only number released this morning. an etf survey came out and highlighted some major trends in the industry. over the be going numbers. he is our in-house analysts. who did they survey them over the looking to find out? eric: etf.com. for etf surveys done
investors are sponsored by issuers. you question the bias. this is an objective survey done with advisers. advisers are heavy users of etf's. this is like early adopters. what ec is foretelling to what trends you will ultimately see carry on. julie: what stood out? eric: 99% of them plenty of increase smart grid etf's. beta etf'setf -- -- like index funds and are active. they smart beta etf is like an artificial intelligence version of a manager. capakes dividends or small and embeds them into the index. it's essentially a rules-based passive index. orwaits for securities
select them by something other than market cap. that, if you going to do it looks like most of the people judging by the survey let the etf do the work for them. eric: correct. if you want to make of that or feeling low volatility will have a nice run, you can go higher and active manager in pain of 1%. now you get a low volatility etf which basically does the same thing 44 25 basis points. points.25 basis it's eating into mutual funds and making it harder for active etf's to get a foothold. smart beta is a big trend. $400 billion in it now, up from 12% just a few years ago. 73% say theyt -- make very cute etf trades. --y put it in this market the smart beta and don't move it around? eric: the turnover is 800% on a
whole. that's two or three times with stocks turnover. i think there is a concentrated group of trading going on and make the buy and hold people, it overshadows them. you can tell that. spy, where the vanguard turnover has a 1% a day. they are using cheaper products of the buy and hold, the advisors are. sometimes it will use more liquid product if they want to go in and out short-term. julie: we talk about of skier etf's. only 33% say there are too many. how many thousands are there now? eric: 1800 exactly. 250 launched this year alone. that's more than one launched today. i thought we all have etf launch 50. i do this all day and i can't keep up. julie: babies because you are
immersed in the world. eric: i do think is a little bit of a contrast. they do it to see more fixed income and liquid all products. they like those areas. they also feel fatigue. one third feel fatigue. some of these are just going to die. we are almost like a silicon valley esque explosion. julie: really interest in results. we appreciate it and our weekly etf segment that airs -- that is eric. we will be back with much more. stay tuned. ♪
we have more on the news. vonnie: we start with the latest on the russian plane crash. vladimir putin has agreed to suspend all russian flights to egypt after the head of the russian intelligence agency said -- itld be unreasonable would be reasonable to suspend the flight for it houses a british tourist stranded in egypt after that jet crashed or headed home. britain grounded flights to the area where the plane crash last sunday and fears that a bomb brought the plane down but no cause has been found. mobil lie to the public? that is the focus of a wide-ranging investigation by the company by the new york state attorney general. they must respond to a subpoena seeking documents going back 40 years. they want to know if exxon knew about environmental and
financial effects of climate change. for the first on a decade, americans appear to be smoking more. cigarette sales have been rising for several months. this would be the first year since 2002 that volume is increased. among the reasons is the same using the improving's jets improving gast -- markets. chris christie in my cockup he will not be on the main stage next tuesday when the gop hopefuls meet in the walkie. the top candidates will be in prime time. my desk chris christie and mike huckabee will join to others in an early for him. three candidates did not qualify for either. our first wordt news. you can get more on these breaking stories 24 hours per day at the new bloomberg.com. betty: thank you.
strong jobs report could provide a compelling case for a fed rate hike before the end of the year. the probability for a december hike in the fed funds rate is now up to over 70%. what would that mean for all asset prices including global real estate? let's bring in phil mcandrew. he has more than $800 billion under management. let me hear from someone who has to put money to work after the strong jobs report. will the rate hike change your world? >> it does not change it overnight. what we do in the real estate industry is rent space to employers and good job growth statistics are excellent in terms of expanding and leasing out space. anyou mentioned, that's indicator of what it might mean for interest rates. in the real estate industry,
interest rates don't necessarily have a one-on-one relationship. as interest rates widen maybe 50 basis points, does not have a direct corollary to mortgage is just rates. betty: you did see this fear of interest rates rise that hit the public market. when it comes to real estate. >> yes, it does hit the public sector. it has sensitivity to the reit sector but direct real estate which is the purview of many institutional investors is less sensitive to the direct interest rate reaction in terms of mortgage interest rates. the sensitivity you see from the reit is a response to the index reaction. betty: you have a global view. does this make the u.s. more attractive? >> i think the u.s. remains attractive. the u.s. has been the attractive to you -- institutional investors around the globe.
we have a strong position in terms of real estate fundamentals. the supply is in a good position and we have strong growth so we are in a good demographic position. we look attractive. to u.s. looks attractive other investors around the globe and that's why we have seen many and testers from china and europe participating in our marketplace. make your lifet difficult because you have so much money coming in? you've got chinese, koreans, russians but particularly the chinese coming into commercial real estate. >> yeah, and there is nothing wrong with a dynamic premarket. it makes it makes a more challenging ideal that all it takes is one of the better to make competition. it as creating more dynamism and more capital in the market and grading larger vendor partnerships. for us it is the advantage of a win-win. we manage a lot of third-party
capital for institutional investors in the united states and globally. their interest in the united states and our global platform in terms of the european operations is all good news. it's healthy to have a vibrant investment environment. bloombergjust had our businessweek economic editor who was talking about the four countries that will be on top for next year. obviously the u.s. but germany, india, and china. what about 2016? which companies will be top of mind for your portfolio? >> the u.s. will always remain top of mind. it represents almost half of the institutional opportunities to invest in the globe. right out of the gate, you want to be active in the u.s.. germany is of interest to us. china and india are interesting and provocative but a lack the same transparency as the united states and germany. an exemplary more transparent market that would give you correlation to china that we have taken advantage of his australia.
we have invested in sydney and melbourne which our markets that are in a highly transparent and liquid country. it is in correlation to china because of the resources in australia have become the steel that held the chinese office buildings. betty: it absolutely does. you mentioned parts of europe. are there other parts of europe that are also attractive? >> absolutely,+++
construction in london and remain optimistic about the london economy. we have done a development transaction under way in spain. in poland, we are building outlet malls in those countries. poland is exciting and a market that is not always recognized. there is tremendous employment growth and terrific consumer spending. it's a very literate population base, overnight in 9.8% which we know is important when we think about poverty levels. poland is a very strong economy and its under retail. i don't have enough retail experiences so it's a great opportunity. betty: you don't hear talk about poland much. >> it something other cover right now and we like it. 1 you have a joint betty: venture with norges bank to buy office buildings in the u.s.? >> it has gone tremendously well. it represents the reserves of the government of norway. we have had this relationship in place for several years and invested in new york city and washington and boston and san francisco. it's a very important and strategic client of ours. we represent a lot of third-party investors like elian's and norge as bank. betty: what about the decline in oil prices, has that hit their ability to buy? >> it has not. they are on a very exponential growth and they need to invest in real estate because they are
under allocated. betty: thank you so much, great to see you. much more ahead on "bloomberg markets." says it willachs relet faster promotions for young investment bankers and will it work? abuzz with the news of 270,000 jobs created in november and is it the fed in the same boat and is is the year of a rate hike westmark long shop is setting the -- longchamp is talking about a slowdown in china. that's coming up. ♪
betty: welcome back. we are one hour into the bloomberg market and is time to get you caught up around the world. asian stocks retreated because they are waiting for what was going on in the u.s. the u.s. jobs report came out. is facing questions from investors is big-name customers start to leave. >> the latest results show japanese airbag maker takata is really from the near collapse of its airbag inflator collapse which is the biggest recall. it has cut its full net income forecast by 75%. the site and exit is, it has maintained its sales view. toyota joined honda in ditching the airbags. the automakers have borne the brunt of a global recall of the safety devices which has found a rupture with excessive force.
the faulty airbags are linked to more than 100 injuries and eight debts. takata fell in japanese trade. betty: let's get you to the where abigail doolittle has the latest on gainers today including monster beverage. putes, monster the average up a monster third quarter yesterday after the bell. soaring after the company beat estimates and posted better-than-expected growth on the top and bottom line. this is important considering the company second quarter was somewhat disappointing causing some investors to wonder whether the company's egg growth run was over. by weakness was driven hiccups with the new distribution deal with coca-cola. apparently, the issues are over with the monster ceo saying we are pleased to report good progress on the implementation of our strategic alignment with coca-cola bottlers. that progress has extended into the current quarter with a company saying gross sales for october are up 6.8%
year-over-year. another earnings story but one going in the other direction, trip advisor, the travel service company reported a disappointing third-quarter yesterday after the bell come missing estimates and lowering its full-year outlook. it decelerated hotel shopping chan's -- trends which may be to blame. rating.mer cut the near-term issues were cited and said risks are skewed to the downside. even with today's big drop in a 12% short interest, the shares are down less than 1% year to date. betty: thank you. let's go to europe where mark barton is seeing some european stock markets advance. we were down 0.6% and
rebounded to a gain of 0.9% after the jobs report and we are up 1/3 of 1%. the european markets are set for their fourth weekly gain after that jobs report. it's not particularly bullish out of germany. we had unexpected drop in german orders in an unexpected drop in german production. you can blame china or weak emerging markets. it does not bode well for third quarter german gdp. have a look at some of the big moving stocks. richemont is down. it reported a surprising 6% drop in october sales because of weak demand from watch retailers. other luxury companies are also down. the momentum of the
cartier brand. look at the german big decline today because the shares of alliance is down by 1.4%. profit fell 15% last quarter insing estimates earnings casualty and asset management units decline. among the difficulties this company is facing at the asset , it has lostvision its global investors division. let's show you what is happening with currencies. down their setro for its fourth weekly drop against the dollar, the longest losing streak since march. looking at stirling, also down today, the biggest weekly drop since march. as we said yesterday, the bank
of england is pushing back rate expectations and looks like the fed will go in december. that's not good for sterling. betty: not at all. good for plans to raise rates by any measure for the bank of england. thank you so much. let's turn back to what's going on in washington. it's not just the jobs report that we had movement on the highway bill. inyou read the fine print the bill passed by the house yesterday, one of the big winners was wall street. the final vote stripped away a provision that would have raised money for transportation projects by taking it from the pockets of the big banks. joining us with more is michael moore who covers the banking industry. it was a really big one because the banks did not want to you about their dividend payments from the fed? >> right, they have been
lobbying all summer over this. it is a decent amount of money. betty: how much are we talking about? >> a couple of hundred million, not a huge amount, but something you would like to hold onto. there was also a symbolic meaning that if we let washington take money from oz weather is fed dividends or something else, how long before a bank tax comes along? to pay for these type of transportation or infrastructure issues? they thought they needed to hold the line in terms of money taken from the banks. betty: how are they lobbying? did they just hire a bunch of lobbyists or did we see the bank ceos and go down and make please? ? >> we don't know if the bank ceos went down. there were no public issues on
that. the banks have really stepped up their lobbying strength in the last few years. i have a major presence of their constantly meeting with lawmakers. this has been one of the top priorities over the last few months. betty: another top priority for banks is retaining talent. they are getting hit on all sides. particularly public sentiment. about if iries out am graduating college, am i going to go to wall street? goldman sachs is treating the way they are changing -- treating there you junior bankers? >> they are trying to get the college kids in and once you get them in, you have to retain them. in the last few years, after about six months, some of the top young bankers are already getting requests from private hedge funds. goldman sachs is trying to beat up -- to speed up their promotions to counteract that
and have earlier conversations with some of the young bankers about their future at the firm. betty: what are they doing? to associatests go after two years and now all analysts will go after two years. you can get to vice president 3.5 years after that instead of 4.5 years. it is a faster path to the vice president role where you are out of some of the grunt work. 1 what about automating some of their functions? >> the way they will do this him up by speeding that up, they will have fewer analysts as a proportion to their workforce. they will take some of that work and try to automate it. a lot of the analyst work is kind of filling in the regulatory information in that kind of thing. a lot of that can be automated to some degree. they are starting to try to introduce technology to get rid of some of the worst parts of that job. betty: thank you so much.
betty: welcome back. we havereaking news -- just been sent an advisory that the president is going to be meeting with secretary of state young kerry at 11:00 a.m. deliver a.m., he will statement along with vice president joe biden from the roosevelt room. we will bring you his statement as soon as it occurs. advisedm., we have been he meeting with secretary of state john kerry and will deliver remarks at 11:45 a.m. in the meantime, today marks the grand debut of the new blackberry smart phone.
it is the first blackberry to run on android operating system and features a slide out version of their signature keyboard. erik schatzker sat down with john chen this morning to discuss the phone and the future of the company. what was your biggest take away? see, the phonen looks more or less like any other android phone. that is the point -- it's an android phone that brings together the best of the new being android in the best of the old reading the blackberry keyboard underneath the screen. you just slide it out and you can use either the virtual keyboard if you prefer or you can pop this out and use the physical keyboard. betty: i imagine people will be happy with that. erik: that's what blackberry is hoping. some question why they are in the handset business at all. they used to be the dominant
player eight years ago and now they have only 1% of the market. chen has high hopes for this and wants to bring back as much of this business is possible but they are. they don't think for a moment they can displace samsung or apple for that matter. they want to have a reasonable amount of the market. inwe made five acquisitions the last 20 months in the most recent one was for technology. erik: are there more coming? >> there will be. erik: he was talking about acquisitions which have been very important for blackberry. last quarter, they completed the acquisition of a company called good technology which is a mobile security company. that is the selling point of blackberry the brands to the consumer that it is secure. that's why they are calling this phone the priv.
it stands for privilege and privacy. the selling point is that you will get more of both using this then you will using an android device or an iphone. business customer still use the blackberry. is he targeting the business user? yes, the person concerned about productivity and they were hoping with the introduction of the most recent smart phones that apps were not going to matter, that security and privacy were enough of a killer app that people would be willing to forgo the functionality on their business phone and keep it on their personal device. they found that's not the case of they had to go into the android world because ios would not let them in. the question is what kind of sales volume they can generate. generate sales via him in this world with apple
advertising everywhere, you need to spend some money. a bit, i will not give you a number. erik: what is quite a bit for blackberry? >> we are still a $3 billion company and have over $3 billion in cash right now. of that intog most research and development because we want a new platform. erik: he is signaling that you can expect blackberry to spend a great deal on marketing to get the awareness out. it's in at&t stores today. betty: they have a lot of awareness. erik: i'm a blackberry loyalist. i think it might keep me for. betty: i will have to try that out. onwill have much more "bloomberg market." ♪
from bloomberg world headquarters in new york, good morning, i'm betty liu. this is what we are watching. it is jobs day in america. payroll surged the most this year and wage growth accelerated in the jobless rate stands at 5%. we will talk exclusively to mom and el-erian who is following -- to mohammed el-erian who is following this. this had all the right notes on three factors that matter in this labor report. deutsche bank is shrinking its footprint. is the era of the global bank over? not the way you would think and we will explain. news on theking keystone pipeline. julie hyman has the latest. journal"he wall street
reports that the obama administration will reject a trans canada proposed xl pipeline. set to speakma is at 11:45 a.m. we will presumably get more details if that is the announcement he will make. looking at the markets, we see a mixed picture and have been ever since we got the job or it. toestors seem to be trying figure out if we are seeing a better economy and what that will mean for the fed and what that will mean for stocks. looking at the terminal, you can see how it's playing out with financials the best performers on the perception that if there are higher rates and a yield curve that that will be better for margins but utilities are getting hit sharp late, down 3.7%. they moved down when yields move up and we have a lot of selling elsewhere. the big banks are gaining a lot today.
jpmorgan, bank of america, citigroup are up at least 3% on the latest job numbers. if you look at the other asset classes, you can see how the job report is playing out. we've got oil prices trending lower today. we have then on a recent losing streak for oil. pressureocks are under counterbalancing the gains in big cap banks. betty: it's not just the higher rate pushing down stocks? julie: utility stocks in particular tend to be sensitive to the rates. we have disappointing earnings reports coming from the large utility. duke energy came out and cut its forecast because of flooding in north and south caroline and the effect a had on just that had on earnings. con edison in new york, we did
not have flooding and these which isissed and oge in oklahoma also came out and missed estimates. you have that and what's going on in the bond market. this is a chart we brought up reiterating what we had. , the tenure climbs in particular come utility stocks are moving down and we tend to have this inverse relationship. utility stocks is a group are the second worst-performing group this year following energy shares. just on that breaking news about the keystone pipeline, the low oil prices the obama administration permission to reject the pipeline if that's what we are going to hear. don't forget the president will be holding an announcement at 11:45 a.m. let's start with the first word news. just receiving word from
the white house that the president and secretary of state, john kerry, will make a statement at 11:45 a.m. eastern after mr. obama meets with john kerry in the oval office. the administration will reject the keystone xl oil pipeline. this comes days after the administration rejected a request by transcanada to delay a decision on its application for the pipeline. presumably, both are related and we will have live coverage of the residents statement when it happens right here on bloomberg market. russia is stopping airline service to egypt while the crash of a russian airliner is investigated. president vladimir off on the decision today. the plaintiff crashed saturday in egypt, pieces of wreckage are being checked for traces of explosives. weather may have been a factor in a bus crash killed in arkansas last night.
it was still foggy after a heavy rain. october was the strongest month this year for payroll. 271 thousand jobs were created in the can make the federal reserve lsu makers think the economy is strong enough for an interest rate increase this year. 5% unemployment rate fell to and growth in wages was the best in nearly six years. that's a look at our first word news. you can get more 24 hours per day at the new bloomberg.com. betty: thank you. u.s. employment surged to a high this year, boosting the economy optimism but speculation rises over the december fed hike it what does this mean for the market question mark stocks are sliding today which is putting the brakes on the rally. bring our bloomberg economist and mike reagan.
markettart with the reaction? why are we down? >> there is a lot of yield proxy stocks. you were talking about utilities and even real estate investment trusts and master limited partnerships. not so much the energy limited partnerships but they have been a big driver of the bull market in recent years and months because the hunt for yield was so great. it is coming off a little there is the regional ranks etf exploding today, at the highest and's 2007. the net interest margin is good especially for regional banks. that is their primary business model as opposed to jpmorgan or bank of america. the market seemed comfortable with the prospects of a december increase. quitebviously not
comfortable to get past the 2100 level especially now when you look at the numbers so strong. it seems that we are not just talking about a december rate increase but also pushing the needle on all the forward months , the slope of the projected fed funds rate is now higher not just in december but next year. betty: is that a possibility? i thought it was one and done? >> that it certainly will be that way for 2015. i think we will see a slower fed than what they are signaling. are the markets the markets tend to overshoot. we see that reflected in the fed funds futures market today. clearly, this is a solid report from the unemployment rate. aggregated income through the diffusion of job creation and average earnings, very few pockets of weakness. this is the validation the fed 2015 to declare liftoff in
which has been a long-standing goal. this will be good news for them. betty: we were able to get at least one fed president reaction, jim bullard spoke moments after the job report came out. he has been wanting a rate hike. let's play what he said. >> the unemployment rate has fallen faster than the fomc expected. this morning it's at 5%. the 5% is not very different from what the fomc thinks the longer run value should be. betty: is that true? a it has been falling at surprisingly steady pace come about one percentage point per year which means it's on the cusp of blowing through the feds year-end projections and the fed is expecting the unemployment rate to reach a soft landing, about 4.8%, which is their target for the next three years. it looks like the him employment rate is on a course to move sharply through that which could
mean more wage inflation as a result and could leave the fed to reassess. when you see the increase in hourly earnings like we saw today, that's a boards the notion that they curve is not broken, it's just bent relative to past cycles and we are getting close to full employment. you saw this jobs report cause the dollar to spike. what about that factor for earnings? >> the dollar will be on the front of everyone's mind. also with the ripple effects will be. will china considered the valuing again. ? the best reaction i have seen so was a stake in the heart of the vampire of deflation. i don't know if that's too strong. is that number as important or more important than the headline
jobs number? that was a strong number on wages. that's what everyone is waiting for. >> i would not say it's more important. the payroll number tells us about overall level of activity in the economy and that will tell is what ultimately happens to the inflation trend. there is evidence of a little wage pressure. it's relevant but i would not say it dominates the payroll gain. betty: thank you so much. president obama and secretary of state john kerry are expected to make a statement about the keystone xl oil pipeline at 11:45 a.m. eastern time. they are expected to announce they are rejecting this project. i want to get to phil manning late. you have now confirmed this to be true? >> that's correct, according to edmunds nation officials, president obama will announce
that he has rejected transcanada's application for the keystone xo pipeline. this has been a politically charged issue that is gone everywhere from congressional and administration politics into the 2016 campaign. hillary clinton and bernie sanders and democratic candidates have announced their opposition to this proposal. transcanada attended to pull their application a week ago. official heration is coming in today after a private meeting between the president and secretary of state john kerry that's going on now. president obama will announce in a public statement that he is going to reject the keystone xl pipeline according to 2 administration officials. what affected this decision? for a long time that the u.s. was stalling and they did not want to reject this. scenes is withhe this administration and the
president himself, they have thought this issue was overblown. they thought this turned into two big of a political issue, surrounded by hot rhetoric and not a lot of facts. is president's rationale this will be related to the urgency on climate change. that has always been his bar as to whether he would approve or reject this deal. the state department itself has released a reap or over the last couple of years that said the impact would be somewhat minimal. thatresident has decided the urgency is too great on climate change. that is the issue that will prevail and that's why he will reject the keystone xl pipeline. i am told that secretary john kerry in the rugged meeting will be officially recommending that the president reject this.
looking at a note from jeffrey's analysts said the company has done accelerator rollout of its instant booking tool and had new partnerships with wyndham hotels and priceline during the last quarter. investment in that is perhaps as well as results that it will continue to perhaps put pressure on the company. a couple of chipmakers are doing quite well. of them with earnings that beat estimates in a forecast that it's doing a $1 billion share repurchase. nvidia is forecasting sales above analyst estimates and seeing demand for hardware that can handle the most visually intense applications. it is returning cash to shareholders and raising its quarterly cash dividend by 18%. betty: thank you so much.
america's best jobs report this year came out today. stocks and bonds in currency markets across euro, the euro is tumbling to a seven month low against the dollar. u.s. payroll was up by 271,000 last month beating all estimates. for more on how the euro weakness could impact european companies selling goods overseas, let me bring in the ceo of long chance, the french luxury company. it's a perfect day to have you because we want to know how the consumer will react to this jobs report in a looks like we are diverging more in the currency. is the euro going to be a big boost for your product? >> good morning, yes, of course the lower euro is a boost for us. it is making us more competitive around the world. yes, for us, it's a positive factor. betty: how about the stronger dollar?
that has had an impact on tourism particularly here in the riches of products here. how worried are you about that headwind? >> tourism has become important factor in our business. a lot of the customers by her products by them while traveling. in europe, we have a large influx of asian travelers thanks to the lower euro. we have more and more asian or american tourists in europe. in the u.s., it is less positive because it makes traveling to the u.s. more expensive for most people. it makes tourism more difficult. tourismou spoke about out of asia. we know chinese tourists by a lot of ultra luxury goods and in the last few months or so, we have seen a slowdown in the number of chinese tourists that
have come from china to markets like hong kong or in the u.s. how is that affecting your business? businesslance of our has changed a lot in last few months because of this changing situation. business has been a little bit difficult in asia because the asian customers are now flying to europe and buying goods in europe. in europe, the business is booming but we are simply moving customers from asia to europe. it's not really positive for us and has created some imbalance. most of our chinese customers know by our products outside china which we feel is not a sound situation. betty: do you feel in order to adjust to slowing global growth you will have to pull back on your's door expansion or cut prices?
-- your store expansion or cut prices? >> that's not in the plans. we are still very optimistic about our brand. the world economy is one thing but it's also important the efforts we are doing to promote and develop a brand. -- the brand. we still have a lot of opportunities. in north america, we just opened a successful store in toronto. in the beginning of next year, we will open in dallas. we are still in expansion mode. betty: what about collaboration? how are you improving the pipeline? i am here in los angeles because we set up the 10th anniversary of our calibration with our friend jeremy scott. he is a los angeles-based designer. greate been having a collaboration with him for 10 years. collaboration of
which is a world record. we enjoy working with jeremy and we try to keep this collaboration simple and friendly and it's working pretty well. betty: before we go, we have er-luxury brands go public. would you take your company public? >> no, it's not in the plans. and we hope private and intend to stay that so far as long as possible. betty: thank you so much. "bloomberg markets" coming up. ♪
brendan greeley is in chicago attending a federal reserve international banking conference. what are you learning now about the future of cross-border banking? brendan: if you don't like capital buffers, you will be annoyed. one of my takeaways from yesterday is daniel tarullo spoke who was a member of the federal reserve governors board who was responsible for stability policy. he said it's very likely that board iscial standards going to request that ranks that are international holding companies carry an extra buffer of capital at the international holding company level. that will make things more expensive. this is something banks talk about a lot which is that they claim they are being forced by every individual country to hold country and they say it makes it more expensive if there is another buffer layer that will make it more
expensive. governor brought that up in a speech yesterday. he said something interesting web -- about the way it's happening. >> when i hear complaints of the emphasis on financial stability will result on the vulcanization of international banking, i think it's not clear that since the crisis, we have had vulcanized banking as much a shifting assets from the oecd countries which banks were disproportionate he affected to banks from some emerging markets and developing countries. brendan: when we think about deutsche bank pulling back its footprint, what we are missing is that regional banks like in latin america and africa and asia are actually ticking up some of the slack. it's not as of international banking is over. regional banking from a developing market is picking that up. betty: thank you so much.
expected to make some remarks about the keystone pipeline. i want to turn to vonnie quinn. vonnie: secretary of state john kerry and president obama will make that statement at 11:45 eastern. bloomberg has confirmed that the administration will reject the keystone xl oil pipeline after a seven-year review. we will have live coverage of the president's statement right here on "bloomberg markets." legal experts think a new inquiry could lead to investigations of other oil companies. the u.s. attorney general wants to know if exxon knew that global warming would hurt the environment and its profits. the subpoena goes back nearly 40 years. authorities in southeastern brazil fear that a flooded town
is filled with toxic water. 15 people are dead and dozens are missing. a dam burst. the next republican presidential debate will have a different look. chris christie and mike huckabee did not qualify for the main event next tuesday. they will be in an earlier forum . only eight candidates will debate. americans appear to be smoking more. cigarette sales could increase for the first time since 2002. americans have more to spend on the smokes because of the improving job market and low gasoline prices. news.s a look at our you can get more on these and other breaking stories at the new bloomberg.com. from the first word desk, i'm vonnie quinn. betty: thank you. with today's october jobs
numbers a green light for the fed to raise rates, if you judge by the equity markets, they may be saying no. let's bring in mohamed el-erian, who is saying it is a green light. mohammed, i know you wrote a bloomberg view columnist ago saying this is a green light by the fed. are you a hundred percent certain. how certain are you? mohamed: i would be near 100% certain. you say 99% certain. because we still have six weeks, things can happen. gives three consequential messages to the fed. wages are going up. with the participation rate
unfortunately not moving from , it tells uslow monetary policy cannot be the answer. with the rather muted stock market response, 10 year yields have moved nine basis points. with the rather muted stock market reaction, it tells the fed, you can because this -- be cautiously confident in moving forward. i would reduce it to what the market has priced now, which is 70%. betty: certainly, a clear majority. it seems like almost every economist did not project something this strong. is it possible this might be an aberration? mohamed: what is more of the
aberration is what happened previously. if you look at the path of job creation, they have been really steady. the annual average has come down. you would expect that as we create more and more jobs. it has been steady and consistent healing. that is the constant story. wages are finally moving. wages to movect because slack is being taken out of the labor market. betty: is there some concern that now we have finally seen wages pick up it could get out of control? mohamed: i don't think it gets out of control. i think you get a slight pickup and wages. we are not anywhere near getting out of control. there is too much competition out there for it to get out of control.
do you worry about -- betty: do you worry about the stronger dollar? mohamed: there are three implications. i am among those who expect the ecb to press harder on the stimulus. is that divergent monetary policy is back. there are three implications. we have seen this happen. there is a bigger differential between u.s. rates and german rates. three is the return of higher equity volatility. these are the three consequences of what is happening here and what is happening in europe. betty: you make a great point. there is this widening gap between the u.s. and the boe and
the bank of japan. we are alone in the world. what are going to be the consequences in the next 12 months. betty: short -- mohamed: short terms, higher wages, more stock market volatility. the longer-term questions are hard. these are big questions. either the u.s. is going to pull everybody up or the u.s. will be pressured down. it is not too early to make a call on the short term. these other central banks trying to spur on inflation, whether in england or japan or elsewhere, are they going to be able to meet their targets.
?o you see that happening or are most going to miss their inflation targets? mohamed: most will miss their targets. they will succeed in clipping the downside of deflation. are going to be unintended consequences of that. i think that the market is going about significant deflation, but it is going to have to worry a lot more about the unintended consequences of very divergent monetary policy around the world. betty: we will bring you back to talk about what is happening more around the world. keystone pipeline news is happening in just a few moments. u.s. bondon the market, you did see this enormous spike in treasury yields on the shorter end of the curve. is that something the fed is
going to have to worry about? mohamed: no, this is a natural consequence of the fact that it is highly likely that we will have the first rate hike in almost 10 years. what is interesting is if you look at the forward rates, the market is correctly anticipating a very gradual path of rate hikes and a terminal points that can be lower than historical averages. with the fed's seating is consistent with what it is likely to see. what it is going to be worried about is excessive volatility. it will worry about spill back to the united states. el-erian, the former pimco ceo. we are monitoring the presidents upcoming comments on the keystone pipeline. that is a live picture right now
toty: welcome back "bloomberg markets." let's bring back mohamed el-erian. we don't often talk about the keystone pipeline with for thiswe are waiting press conference by the president, where he is expected to reject the keystone pipeline. you know how much of a political issue this was. said, welicans had want the keystone pipeline because oil prices are too high
and now that argument got kicked back from under them. what would be the impact of not building this pipeline? mohamed: the macro impact would be limited. the oil markets have changed completely. changes a demand supply that suggest even lower prices, but the producer has shifted. the macro implications of this decision are much less than what they would have been in the past. the company-specific implications are significant. i think the biggest message to investors is that noncommercial and non-economic issues are important, especially in this political environment and it is a reminder to markets that they need to extend beyond the usual economic and commercial analyses to include these other factors. they are going to become more important. is not immune to these noncommercial considerations.
betty: that is absolutely true. the big consideration was higher oil prices. that is now gone. where do you see oil prices? mohamed: they are going to remain volatile because that is one of the two unhinged markets. it is going to take time for the market to reestablish its footing, particularly when it comes to supply responsiveness. , but priceskets will remain low for quite a while. betty: "bloomberg businessweek" is talking to various voices and asking for their predictions and some are predicting oil prices may not go up more than five dollars or seven dollars next year. does that sound right to you? mohamed: i would anticipate that majorg, absent any
economic disaster around the world, we will see oil in the $50 too low $60 range. people should expect a lot of volatility. we are not going back to $100 oil anytime soon. that going to impact oil-dependent countries? in particular china? mohamed: china is a big positive. for countries like china, like india, the fact that they are big oil importers, they are having a very favorable term of trade, so was europe. for the oil exporters, you are going to have two groups. one group of countries is going to be incredibly challenged and will be very close to an accident or a policy mistake. think of venezuela and russia. you have another set of countries that have built up enormous wealth, that are adjusting gradually to the lower
oil prices -- the uae, saudi arabia, kuwait, those countries. then you have the middle group that are going to find it ombia's ofe col this world. keep an eye on venezuela and russia. betty: thank you so much for staying with us through all of this. mohamed el-erian, the "bloomberg view" columnist and the former ceo of pimco. as you can see right next to me, we are awaiting the president, his remarks on keystone pipeline. you are looking at a live picture of the podium from the roosevelt room. i want to go to mark crumpton, who has more on this developing story. thank you and good day,
everyone. this has been a seven-year tsonga, one that pitted the obama administration against the former administration of the canadian prime minister stephen harper. there was some tension between the white house and canadian officials over whether keystone would, in fact, proceed. it seems that will not be the case. phil mattingly covers the white house and he joins me now with more. phil: good almost afternoon, i guess you could say. some tension between the white house and stephen harper's administration is an understatement. a point of tension between the two countries. a seven-year process, one that many in the obama administration got way out of hand area it became much more of a figurehead then maybeth sides
what it actually merited based on the economic and environmental impact it would have had. the president, and about five or 10 minutes, will officially reject the application from transcanada to build the keystone pipeline. delayanada attempted to their application a week ago. the reason expected was that they wanted to wait until 2017, maybe they would get a more friendly administration. the president, after his meeting he currently has with john kerry, will reject that application going forward. a seven-yeard to fight that has been brutal between business interests and environmentalists and it has caught the white house right in the middle, much to their chagrin. mark: justin trudeau has been in office just a minute, but he did
make the case that although there could be disagreement on the pipeline, it was not something that had to strain .elations any further he said sometimes friends to disagree. phil: it will not cause as much tension now. the trudeau administration said they would be pulling out their troops in support of the islamic state coalitions. the expectation is that this decision will not be a dealbreaker. the relationship is very close for all sorts of reasons. probably less of a reason as it would have been with the harper administration. this would, -- this would come
up between the administrations over the last couple of years and the obama administration hopes the relationship with canada and the relationship with the environmental community and the business community will be put behind them. todaylly, the decision moves to the side and they can move forward on bigger issues. mark: bill, thank you very much. reports that the obama administration has rejected the keystone application to build the pipeline. the president, secretary of state john kerry, vice president biden will be speaking to reporters in just a minute. stay with us. ♪
and his remarks. podium.see the the president has not approached it yet. newscrumpton is that the desk with more on this developing story. mark: thank you. a market check, let's go right to the white house and phil mattingly. aready, some of the tweets coming in from republicans who wanted this keystone pipeline to go. , i saw one tweet from the louisiana governor that thedal -- he said president had capitulated to environmental extremists. we have been hearing throughout this seven-year tsonga those same things. this is a very, very political issue. the white house did not think this was big enough to garner the political heat and light that it has. we are already hearing from republicans. iny made it a campaign issue
2012, in the midterms in 2014. they made it an issue on jobs and revenue. the attack will be full frontal on the white house, more or less, after this announcement. this was not just a chamber of commerce initiative, the labor unions also supported this. there is a rare combination where to entities that generally hate one another were together on this issue. the white house choosing to go the opposite direction on this issue and this aligns with what you have seen over the last couple months of the obama administration. this is a legacy issue for the president. this is one that he plans on making his last two years in office all about. you see the white house making moves on climate relations. this aligns with that.
the primary reason the president will announce his rejection of this proposal is on climate change grounds. have aause this would massive impact on the climate, but because he wants the urgency he wants people to grasp when it comes to climate change. it is a political issue that will likely not go anywhere anytime soon. this will likely only fuel republican complaints and criticism. it is one of the obama administration feels like they are on the right side of. mark: phil, thank you. let's now get a check of the noon inas we approach the eastern united states. julie hyman is standing by with the details. at whatet's take a look is going on with the major averages. we are still seeing a mixed picture. we have been fluctuating around quite a bit. to remakeare trying their investments based on what the fed may do.
financials have been showing strength today. a strengthening economy is evidenced by this morning's jobs report and that would be positive for the consumer-facing banks. utilities are lower. consumer staple stocks getting hit by earnings news. energy shares are oil along with oil prices -- lower along with oil prices. the futures probability matrix. a 70% chance is being priced into the fed fund future. down here, you have the chart that we have been watching closely. the huge uptick we have had ever since the fed statement last week that indicated that the december meeting was a possibility. janet yellen reiterating that this week, calling it a live possibility. areou look at rates, we
seeing that expectation priced in. we are looking at the highest yield in about five years. on the 10-year, we are seeing an uptick. we have been seeing the dollar strengthened against other currencies as with the rates go higher, as well. gold prices also caught up in the ripple effect. --d sharply lower asked her after we got those jobs. in jobs report delivered terms of surprise value, mark. mark: julie, thank you. just been informed that the president, vice president, and secretary of state kerry will be headed to the roosevelt room at the white house momentarily. the obama administration rejecting the application for construction of the keystone xl pipeline. remarks, ao to their
final comment from phil mattingly at the white house. just because the white house is taking this action does not mean that this issue is now gone. phil: no, it likely will resurface. for the time being, this puts an end to it with this administration. this put something for the democrats to hold up as the go into the campaign season. something could happen with this after the -- this administration. for the time being, this seven-year tsonga will be put to an end by this administration until january 2017. the secretary of state recommended that the president reject the pipeline. just quickly, the role that this is going to play in the 2016 presidential election? fill: you've already seen --phil:" --
is a base issue. republicans attack it on jobs say it is, democrats great for any kind of legacy when it comes to climate change. this is an issue that will not go away. put climatehis change front and center during the election season? think if democrats had it their way, climate change would be front and center. mark: let's go live to the white house. president obama: good morning, everybody. several years ago, the state department begin the review process for a pipeline that would carry crude oil from canada through our heartland and to the gulf of mexico. this morning, secretary kerry informed me that after extensive public outreach and consultation with other cabinet agencies, the state department has decided that the keystone xl pipeline would not serve the national
interests of the united states. i agree with that decision. have theing, i also opportunity to speak with prime minister trudell of canada. white -- while he expressed his disappointment, we both agreed that are close friendship on a whole range of issues, including energy and climate change, should provide the basis for even closer coordination going forward. in the coming weeks, senior members of my team will be engaging with there's in order to help veto -- continue that cooperation. now, for years, the keystone pipeline has occupied what i frankly consider and overinflated role in our political discourse. it became a symbol to often used as a campaign cudgel by both parties rather than a serious policy matter. all of this and secured the fact that this pipeline would neither
be a silver bullet for the economy, as was promised by some nor the express lane to climate change promised -- climate disaster promised by others. some of thent on reasons why the state department rejected the pipeline. first, the pipeline would not make a meaningful long-term contribution to our economy. congress is serious about wanting to create jobs, this was not the way to do it. if they want to do it, what we should be doing is passing a bipartisan infrastructure plan that could create more than 30 times as many jobs per year as the pipeline would and, in the long run, would benefit our economy and our workers for decades to come. -- business has created businesses created 2.5 million