tv Bloomberg West Bloomberg January 7, 2016 6:00pm-7:01pm EST
the s&p 500 cap's its worst ever start to the year as the turmoil in china sends around the world. 29 minutes of chaos, even by shanghai market standards. thursday was exceptional. bill gross expects more of the same today. and stock circuit breakers, the man who invented the system says beijing got it wrong. welcome to "first up ."
i am angie lau. let's check on the markets in asia. to australia we go. it starts here, 1% down, the aussie dollar at $.70. new zealand trading for about two hours now and here's the play. it is close to about 1.5% down. the new zealand dollar continues to weaken, $.66. looking at japan and korea, let's get to japan, the nikkei 225. another day of losses extending it past the 2% mark, below 18,000. check out futures in chicago, pointing to yet another lower open. the dollar-yen right now is strengthening. it's about safety plays. 2015 is turning into quite a year. it's only a few days old though. of you watching from
the u.s., just a few hours ago the global selloff showing no signs of letting up. indeed, the s&p 500 capped its worst ever start to the year. let's go straight to new york. ugly day here on wall street. the s&p down, the nasdaq falling , all extending their three-month lows. it's the worst yearly start since 1938. ever since data started to be collected. the nasdaq has lost 200 points and the dow has lost more than 900 points. of course, the reason is pre-much in your backyard, over in china. -- pretty much over in your backyard, angie, over in china. technology was hours performing sector on the s&p. apple had the biggest impact, falling more than 4% -- technology was the worst performing sector on the s&p.
apple had the biggest impact, falling more than 4%. earningsstimates for as well as iphone -- ubs cut estimates for earnings as well as iphone sales. financials, for their part, were the second worst sector. jpmorgan, citigroup, and wells fargo all falling. a route across all equities basically. what'shere's interesting. despite more drops in oil prices, energy shares were not the worst performers, for one. what's the latest? >> they were the fifth worst performer. i guess that's better than being the worst. despite crude falling more than 5% of the session low earlier today. it did repair those losses at the close.
west texas has now fallen every single trading day in 2016, 4 lose 10.1 6%, to and now be at its lowest price in a dozen years. and now at its lowest price in a dozen years. chevron fell 3.5% to its lowest since october. exxon mobil also not doing well. we are wrapped up with our thursday session, but we are looking to the friday session. investors will be looking for support from the u.s. jobs data. the december jobs report comes out. and bloomberg's own forecast calls for an increase of 200,000 . anything above that should give some reassurance to investors. we might see some green, but you never know what the future might
hold. asll, we are not as bad canada's market. sinceave dropped 20% 2014. they are in a bear market. i will leave you with a sobering number. trillion has been wiped out of global equities this year and we have only been trading for four days. angie: it's all about was happening in this part of the world, as you said. we are just under an hour away from the china open. the global route and panicked selling prompted chinese regulators to do a u-turn and suspend the new circuit breaker system just four days after its debut. what went wrong? >> it feels like august all over again. china once again changing all the rules all the time now. and the risks have increased as well.
after the sessions monday and yesterday, the circuit breakers were put in and triggered and it was like deja vu. a 15 minute halt and immediately the reopen, 7% plunge, automatic within half an hour. we have not really heard about the rationale behind this is pension, but it does signal they have recognized that the circuit breakers designed to curb volatility are actually doing quite the opposite and exacerbating investor anxiety. the psychology of the retail investor is to beat the circuit breaker and exit positions before they get trapped. they are guiding the currency lower which is what they said they wouldn't do, so china once
again sending mixed signals out there. say they will continue to intervene in the currency market. they did also change rules on selling by major stakeholders. limit toed the selling 1%, not completely lifting the ban, but opening the cap a little bit. more mixed signals. as the panic sets in and the concern is the threshold of trading holds, they are just too low. 7% in china is not unusual. but the circuit breakers designed to engineer kolmar doing the exact opposite. the inventor of the circuit areker -- engineer calm doing the opposite. the inventor of the circuit
breaker even saying they got it wrong. yvonne: he created the whole system after the 1987 crash and he said china got it wrong. he said they need circuit breakers that appropriately reflect their market. the right thing to do is to widen their band. funds have been forced to sell their holdings in china. there is mandatory -- they have mandatory liquidation levels. a third of these funds have already reached those levels if not approaching them very soon. .ngie: wow thanks for that. asia bracing for another tumultuous day. if markets on wall street are any guide, investors are advised to buckle up. david has more on what we are seeing so far. david: it's an absolute mess out
there. first market out of the gates this friday is new zealand. 1.5 percent down, trading for about two hours now. 5% ofi checked, 80%-80 shares on this index or on the way down. can we look at australia? ,ast i checked, we are down 1% 1.5%. let's see how this plays out in the next few minutes. we are moving toward 6% losses this week. rate, australia will join the likes of japan and hong kong, which have already entered oversold territory. below twol briefly dollars a pound for the first , extending aears
three-year decline. as you might expect, gold is up, back above 1100. let's take a look at some chinese etf's. as you might expect, anything with the chinese stamp on it was dumped. we are expecting to see a further drop in china when markets open up. once the proverbial floodgates areopened, the sell orders likely. a few things. expecting their he heavy pressure at the open, but will that level off now that -- a very heavy pressure at the open, but will that level off now that investors know there is more space to play with? the bar's closing you start taking shots like a crazy person. let's take a look at the
renminbi. it's actually pretty steady. into andlikely stepped are being. have a look at this. forwards. inching closer to the seven handle. three straight days now we are above nikkei futures. i will tell you what those forwards are doing. 692 against the u.s. dollar. nikkei futures down 475 points. it doesn't look like it's going to be a great open in about an hours time. very quickly, can we look at the japanese yen? can we get that up? had an 11 month high against the u.s. dollar. in fact, the japanese are gaining on every single currency on earth. on top of that and on top of is on its wayd
down for a fifth straight day. yeah. you could make a very strong argument, a strong case, that we will be down again this friday. angie: checking other headlines for you right now, china's policy makers have been burning through their stockpile of foreign currencies as they prop up the yuan. record $1.8t from a billion in december to $3.3 .rillion saudi arabia is considering its own big bang. cruderld's biggest exporter is considering selling a stake in its crude oil company.
apple is thely top largest listed company in the world. the crown prince set a listing would help counter corruption. a decision is expected in the next few months. major league baseball is launching a major league push into china. the sports network will have exclusive rights in china and show 100 games a season including the world series. baseball's top priority is cultivating new markets and delivering games digitally. it could also mean that china might host mlb games in the future. coming up next, playing catch-up. our next guest says global selloff is not about what happening in china right now. details when we return. ♪
the u.s.ocks in tumbled. banks and tech companies led declines. to its lowest in 12 years. it is now looking like $33 a barrel. traders are worried turmoil in china will weaken demand for fuel. a reminder of how chinese markets closed yesterday. 7%, triggering a halt for the day. china triggers a global from, $2.5 trillion wiped global valuations, but you say it is not necessarily all about china. why? >> first of all, china's economy has been on a downward path for the past two or three years. and that has been felt globally. theas been reflected in
earnings of certain companies around the world and their share prices. we have been living with and digesting china's slowdown, even if we haven't realized it, for some time. if you have a selloff or a series of selloffs in china, it's not really a reflection of the long-term downward trend. stockhe fact that china's market has been completely out of sync with the reality of the chinese economy for the past year or more. there was a bubble. when the bubble burst, the government intervene to prop up prices at unrealistic levels. overdueare seeing is an correction to an overpriced market. the sell off doesn't mean there is some new thing happening in china that the rest of the world has to react to. angie: you're absolutely right. a lot of china watchers point mainland activity is
mostly retail investors. this is a momentum driven place. in hong kong, the global markets are active participants here, so it does shakeup global investors here. yes, and interestingly, you saw the hong kong index go down i think about 3% yesterday in sympathy with the mainland shares. but hong kong cala even though it did have a bubble last year -- hong kong, even though it did have a bubble last year, that bubble completely burst. so you don't have an overvalued stock market in hong kong. interestingly enough, i think it opens opportunities for looking at values. we saw this in august. it's almost like a replay of what happened in august. around the world saw a
big selloff in china because of what had happened in the chinese market. they said i will sell first and ask questions later. then shares gradually rose back again because they looked around and said the fundamentals hadn't actually changed very much. angie: that's true. the fundamentals remain the same, but it doesn't quench a lot of opinions out there that the market is reflecting that -- sentimentchina that china is slowing down. it is, yes, momentum play, but retail investors are also looking at the data sets coming out of china. look at it selectively. we had bad manufacturing number is out of china all fall. they seized on this one, and it
was a catalyst. i am not trying to say that the chinese economy does not have problems. i think the downturn is going to be deeper and more long-lasting than people realize. but i think we need to separate the gyrations taking place in a very distorted stock market in china from the reality of china's economic adjustments and what that means for the global economy. two big concerns. first is currency that the seem to behorities inclined now toward a currency valuation. i think that's a mistake. think it will help the chinese economy solve any of its problems and i think it may cause some serious headwinds for u.s. growth, so that is a concern. the other thing is, by sending all these mixed messages about
the stock market, about currency and what the exchange rate should be, chinese creditors have really undercut their credibility globally. there are a lot of people saying are these guys up to the task? are a lot of people out there becoming more and more , and that isthat also sending shockwaves through global markets. angie: is that apprehension for foreignaden investors? >> my impression, and i used to be very active in the american chamber of commerce in beijing, is that foreign direct investors on the ground know what the real conditions are on the ground in china, good and bad. and they are also there for the
long term. trouble, they are not necessarily going to run away. they also recognize that while china's industrial economy is really suffering, china's consumer economy is chugging along. what we are talking about with is chinesen investment. portfolio investors in london and new york kind of have this 30,000 the you -- 30,000 foot view of china. they hear that things are ok and then all of a sudden the market is down 7% and they are scared. they don't really understand what's going on in china, and they are going to sell first and ask questions later. angie: stay with us. we are going to come back to you after the break. stay with us. ♪
angie: let's head back to at --k, chief strategist asset management. what opportunities are therefore investors like you who say there is a disconnect between the markets and the fundamentals? where are you buying now? are you buying? patrick: i think what we are seeing in china is the end of china's investment boom, or over investment boom. and that is going to create winners and losers. if you were feeding into the boom, selling equipment, selling machinery, selling raw materials, obviously the end is hitting you hard, but there were a lot of other sectors in the global economy that were hit hard by china's overinvestment and overcapacity.
instance, in the solar sector, you had a credible expansion of capacity that drove the price of solar panels down and drove americans out of business and europeans out of business, and then the chinese stroke themselves out of business. so, the end of that piling on of overcapacity is actually going to spell relief for a lot of other sectors. look at the s&p 500, a lot of people will say average earnings were down in 2015. that's true, but it's true because three sec spurs, mainly , mainly, energy and materials, that you would expect to be hit hard were hurt and a lot ofard, other industrials fed into that. the restaurant sector though is doing just fine.
there are winners and losers in the equation. i think the important thing is not to look at the average index, but to look at that inside china and outside china and recognize that there is real change taking place and there are going to be winners and losers. angie: to your point, take a look at china. we saw health care stocks and stocks really gain. we saw a massive selloff of adr through the week. is this an opportunity? if you do buy into the china story of a new economy? patrick: i would be careful about it in a mainland market because the mainland markets have been overpriced and there has been so much intervention to keep them overpriced. in hong kong, where they had a bubble and it has burst and is gone, and valuations are not that unreasonable, that is where i would be looking for the same kind of assets you encounter in a mainland.
four days after bringing the men. it triggered a market policy. it was brought in after last summers wiped out $5 trillion in less than three months. stocks suffered more losses showing no signs of letting up. sellingeet extended its between earlier in europe and asia. all major benchmarks fell 2%. the dow has lost 900 points so far this year. china's cooling demand for metals and the slowdown have pushed copper futures below two dollars a pound for the first time in six years. bloombergs industrial metals plunge 27% last year. that is the biggest fall since 2008. breaking news out of korea.
>> the largest listed company, fourth-quarter guidance coming in below expectations. number, 6.1. they are missing on that guidance. this equates to around $5 billion. samsung facing a challenging environment with this smart phone sales. let's take a look at the other metrics. fourth-quarter sales coming in slightly weaker than expected at -- they are00
going be watching that fourth-quarter earnings guidance. predicted 6.6 4 trillion . again we transfer that to u.s. dollars. it is 5 billion u.s. dollars. the stocks, it was down 5%. sam some executives yesterday out with a warning that this year will be challenging. the competitive landscape is like no may have seen before. samsung it's to do that. there plays they had of the mobile division with executives platforms.security that does you were samsung is going. we will see how investors interpret the results. oil is trading near a
four-year low. closer to $30 a barrel. right now it's at 33. $30. that would be amazing. the last some oil was trading more than $30 was 2003 when britney spears had the biggest record in the world. the story as it has been for the past year and a half is supply is overwhelming demand. oklahoma where u.s. oil is traded has the highest inventory on record. it is not going away soon. worried if the economy if they slow down
who is going to buy it? headline,'s other big considering flooding, that would be a big deal. >> biggest one way to describe it. it would be probably by far the biggest company in the world. to spending on how you value the worth $300is billion. it has 25 billion barrels in reserves. it would be bigger than the biggest six companies combined. .here are caveats to that having that and we should be a .ig deal
angie: all right, it is about china. we can see the headline numbers. what is happening under the surface? >> it is been remarkable but consistent with other ups and downs. areasve those highflying like tech and health care that have fallen most. they have fallen 13-15%. we've also seen a major reversal. they have led the rally in the autumn.
have been down 10% in terms of the smallest and percent of this. it is one of the things where the new world, the new economy stocks are leaving the market up and down. it presents an interest opportunity to revisit. angie: that is what we were saying. where does china stand relative to global benchmarks? is it still expensive? sense to examine these parameters. the world benchmark is 16 times. it is still a higher multiple. , the growth rates
18%ied in the market, 8%, for the csi 300. it is actually below one in the csi 300. charlie: trading has been underway -- angie: trading is been underway for over 30 minutes. 5%. have lost more than what has been moving the most this morning? we're back below 5000 points. half a percent at the moment. the movement is not coming from
probably of the news they have brought in of the difficulties they have been encountering. we have had some losses this morning that perhaps not where you would expect. i would expect more action to come where there are steep declines when china opens. we didn't have the circuit breaker in place today. it will be one to watch when that market gets underway. >> thank you so much for that. right, perhaps a little lighter right now, just to lighten the mood. don't you wish you could do that literally? this weekend, that is going to be when we see the latest installment of star wars hitting cinemas. analysts are questioning whether the force awakens will hold the same sway over the world's
second-largest movie market. we have bloomberg news joining us now from los angeles. why is the blockbuster expected to be less popular in china? >> as you know, star wars the force awakens, the first disney made star wars film has broken every record in the u.s. because it's the biggest market in the world for movies. it has overtaken avatar for the biggest movie ever. but china is the second biggest movie market. but because when star wars was first released it was an open to movies like that, theodore going was in the industry it is today, it doesn't have the track record that some of the other more recent franchises like the marvel films or the fast and the furious franchises. the first hours
movie was shown in chinese theaters was this summer. up trying toamp introduce audiences in china to the franchise. so, no one is expecting it to breach the record set by other films like monster hunt, which is number one and the area seven from universal which held the record. far, they say it could be between 150-200,000,000 dollars. about the highest i have heard from analysts. but what is important is that four-five more star wars movies to come and it will be interesting to see how the chinese audiences receive the films this saturday when it opens. what impact will the current market turmoil have on the movie industry?
>> it is interesting because china is the fastest growing in the world. many theaters are being built. we are seeing talk of international m&a in the industry from chinese companies. the question is does the market turmoil affect theatergoing? construction of theaters? the other question is how are they going to record this revenue number when it comes in because the weakening against the dollar -- some say it could whento a cut in revenue converted back into dollars. that is going to be an interesting thing to look out for. angie: it boils back down to the bottom line. thank you for that. coming up next, failure to communicate. the disconnect between the public statements and what is actually going on.
angie: in asia, seeing red. at thes here with a look prospects. >> the silver lining is some of actuallyses have dialed back a few notches in the last few minutes. this is where we were this time. right now the silver lining is they have given back some of those losses. there looking at losses at board. an 11 month are at high.
hasn't communicated policy clearly enough. guest on capital markets. >> we've had a lot of intervention in the stock market and in the foreign exchange market. it is creating confusion. the mixed signals we are getting from the chinese policymakers are not helping with market volatility and it is creating a panic mode. angie: let's break it down. willcome out and say they liberalize the you on -- what you on. yuan. was that the right move? guests: it was not the best way of executing or engineering a weaker exchange rate. there were better ways. people get used to the
fact that we are going to get a the rules areat specific and then yesterday the beyondted weakening the lawn that scott. >> exactly. it could be better and it would go a long way towards limiting volatility we are saying globally. angie: have they lost control? >> they're having too much control. interventionist, invisible hand of the market -- the circuit breaker of 7% brought in on monday, and stocks overnight. towardsg a long way improving credibility which has been damaged a lot. angie: for market participants and strategist like yourself, what are you to do? >> we are very busy for one thing. we are fielding a lot of calls.
it is important. facing significant headwinds. up rapidly significant stockpile of debt. not only that, but a demographic timeline as well on long-term growth. on top of that you have an intense cyclical slowdown. it remains a huge drag on the economy. up, itsumption will pick is in question. we have some labor market indicators on top of that. in the weakening exchange rate. angie: and they would rather save their money than spend it. they don't want to put in the stock market considering the action has been like. >> sure.
angie: why would the pboc yuan/o weaken the ? >> they have to prop up growth. they have an ambitious growth target. anywhere they can try and somethingrowth is they will do. angie: it is designed to trigger exports and perhaps make things cheaper, still demand? stay right there prayed we have breaking news from japan. the first ever summary of opinions right policy meeting watching the details. juliet: this is just crossing the bloomberg terminal. so far we have heard the bank of a couple ofleased
lines saying japan's economy has ,ontinued to recover moderately and that downside risk hasn't increased. this is a summary of opinions. as you mention it is the first time we have seen this summary come through. it really doesn't specify individual board members opinions. it is the first time they are trying to get their minds across what is coming through. global financial markets are stable. that is the understatement of the century. as i mentioned, this the first time we have seen a summary coming through. they are forging on with the record stimulus program.
such interventions. the chipping away -- [indiscernible] angie: what are you expecting? >> $64 million question. no one knows. we are waiting and watching like everyone. angie: do you think they will wind in and weaken it again? >> there is little question where it is going. potentially seven by the end of the year. 7.5 in 2017. it's not going to be a straight line. no exchange rate moves in that direction. the danger of what is happening is this trade is turning into a one-way bed. no policymaker wants to be in that position.
we expect greater volatility throughout the year. angie: very quickly, weird you go int pboc is going to terms of rate cut sorcuts? >> rates are going down. another 25 point cut. they have more to move in terms of the reserve requirement ratio. may we live in interesting times. we, five days into the first trading day of the year? that. doing thank you so much for joining us. the next hourat of the show, the very latest on the global selloff as we count down to the opens in japan and korea. this is first up. stay with us. what will the pboc do today?
>> from our studios in new york, this is "charlie rose." jackson isuel l. here, the highest grossing actor of all time with $10 billion in worldwide ticket sales. his newest film "the hateful eight" is the sixth collaboration with quentin tarantino. tarantino has said jackson is one of the greatest actors to ever say my dialogue. here is the trailer for the hateful eight. >> what makes a man brave a blizzard, kill in cold blood?