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tv   Bloomberg Markets  Bloomberg  January 28, 2016 11:00am-12:01pm EST

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london as we wrap up the trading next hour.the you guys are under decline after these gains we have seen. >> stocks are down. disappointing earnings shadowing a more dovish federal reserve. close" starts now. betty: we will take you from new frankfurt inn to the next hour. first, to london, where mark is watching the markets. 30 minutes left of the thursday session. investors overlooking a more dovish fed, focusing on earnings as they are in the united states. we have a whole host of blue chips that have disappointed.
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the only performing as in in the stocksector today is oil , what a move we've had in oil in the last hour, as speculation firstly arrives that there might he and opec, non-opec meeting, and of course it is denied by various opec delegates, showing the skittishness of the market. yesterday we talked about europe's second-biggest drug maker. it derived more of its earnings from companies that high high -- that have countries with high levies. europe's second-biggest clothing retailer, also down by 5%. we've had unusually mild winter weather here in europe.
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that has prompted discounts as well. the company said it will get no wrists bite from the strong dollar in the first quarter. from the strong dollar in the first quarter. johnnie walker whiskey, smirnoff, captain morgan rum, you know this company -- betty: what are you talking about? mark: you can't kid a kidder. basically earning speed, but they underwhelmed analysts. it's all happening, and earnings dictating the move of the stoxx 600 today. betty: also in the u.k. there were economic numbers that showed the economy has got some good momentum behind it, right? mark: we, the u.k. -- i am the u.k. we grew by 4%. it is a very unbalanced company,
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principally the driving factor its services. we have sluggish manufacturing as well. they are going to push back any chances of an eminent hike in interest rates. the big risk are the upcoming referendum, of course. it could hit employment. unemployment has fallen to its lowest level in a decade. we have real wage growth, consumers are benefiting from all those factors varied the economy is in pretty good shape as we headed into 2016. betty: we are about 90 minutes into our trading session here and we are mixed right now. bloomberg's julie hyman has the latest on how we are trading here. julie: the big data point in the
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morning was your level goods. we are looking at a positive picture for u.s. stocks right now. we been vacillating between gains and losses, particularly poor the -- for the s&p and dow. you will see bouncing around between gains and losses. we have got energy stocks and tech higher. we can thank facebook for that. energy shares higher, health care lower. drag in terms of groups on the s&p 500. oil prices still hanging onto gains. if you look at oil prices, we're seeing them come off of their high but still hanging onto the gains of the session.
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coming off the highs but still gaining by about 3%, betty. betty: where energy stocks? julie: health care, the drag they're having to do with a couple of earnings reports. that company gave a first-quarter profit that trailed analysts' estimates, talking about the effect of currencies and that could persist. in addition, we have for techs. -- vertex. we are seeing this decline spread to other biotechnology pharmaceutical stocks in the health care as well, regeneron, mellon caught, all seeing declines today. betty: let's check in with courtney donohoe. courtney: good morning. the u.s.'s health agency today
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said there could be 4 million thes of the zika virus in u.s. today. the world health organization will meet on monday to decide if the disease causes a global emergency. in 23 been found countries. donald trump and fox news are standing their ground, which means tonight's presidential debate on fox will go on without trump. the accused fox anchor megyn kelly -- he accused fox anchor megyn kelly of bias. respect" will be live from des moines, iowa. 5:00 p.m. new york time. the spotlight on the flint water crisis shifts to lawmakers in michigan and washington today. the state legislature is expected to approve $20 million or more to address the lead contamination problem.
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in oregon, the jailed leader of that armed group has urged his followers to leave the federal wildlife refuge they have been occupying. the other bring leaders -- other bring leaders were arrested tuesday. only a few members of the group remain inside the refuge. 70 years agoay, -- today, the challenger exploded. memorials near houston and arlington national cemetery. news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. i'm courtney donohoe. betty? betty: american automaker for delivering a record annual to its all thanks aluminum body pickup truck. suv's a really popular. ♪
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>> welcome back to "bloomberg markets" live from london and new york. this is "the european close." bloombergfor the business flash, a look at the news.t is this arecompany's pretax profits more than 8% in the fourth quarter. h&m gets about 80% from asia, where clothing prices are often linked to the dollar. takataef executive of may designed to implicate shareholders unhappy with the way he handled the massive airbag recall. that person says the resignation
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is the only way to gain the support of japanese automakers and lenders to may bailout the company. french carmaker and it's a rainy and partner will spend $435 million to upgrade its factory in tehran. that's your business flash for this hour. shall we talk cars? betty: we shall indeed. you wanted to talk liquor before. today,good day for ford the company posting a record profit of $10.8 billion, the most in the company's 111 year history. ford seems to be in the driver seat right now. but analysts are concerned that earnings may have.
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let's get to matt miller and the ford cfo, bob shanks. matt: thanks for joining us. let me ask about the numbers that ready just a -- betty just gave. yet the stock is down. why do you think after beating on every metric for the quarter and the year, the market chooses to sell the stock? bob: when i was a kid my mom used to tell me that the lord works in mysterious ways. i did not realize she was talking about the stock market rat. growing business, it's profitable, margins are expanding, the risk row file is improving. we added onto that in january. believe thato ultimately through the big macro market sentiment there watching over equities around the world,
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people appreciate and realize the value that ford is delivering. stock is down 18% in this month alone. does it hurt your ability to do business at all? or can you continue to meet your goals for 2016 regardless? bob: it does not hurt the operating performance of the business. it's disappointing. i'm sure investors are confused as it is delivering all these great results. it's a whole sector and many other companies outside the sector. in terms of the view that somehow we are peaking, we are at very high levels of operating performance and industry in the u.s. we don't see the industry declining a time soon. when you think about the opportunities for ford, we delivered on that in the fourth quarter. it's around the improving business performance outside of north america.
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that's the big opportunity for us. we delivered on that in the fourth quarter and in the full year. : record asia-pacific results. you are back to profitability in europe. at you are not forecasting climb in profit or a boost in margins for the u.s. you could see single-digit margins in 2016 at home. why is that, since you are selling so many of these high-margin vehicles? north american business has been operating on what i would consider to be benchmark levels of those absolute profitability and margins for the past number of years. in three of the last four years, our margin was over 10% rate we delivered 10.2% in 2015, and our guidance for 2016 is to sustain that performance in terms of traffic ability and to be at 9.5% or potentially higher in 2016.
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we are about in the same space and we see the industry in the u.s. about the same as last year. we don't see the u.s. business as materially changing as we go from 2015 and 2016. very strong. matt: you did say on the call that you receive less benefit from rising sales in 2016, and the marketing is offering less in terms of tailwinds. what did you mean by those two things? when you look at the rise of the u.s. industry sales 2014, it was up quite sharply. as i just mentioned, we think it will be about the same, maybe higher. you think about our own business, in 2014 we have a very large and long an extended a complicated launch of the f-150.
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2015 we were largely pass that. we don't get the benefit of the year over year recovery from that that we had in 2015. it is those two factors that are changing our view in terms of the benefits we will get and what we call market factors. matt: when do you think we will start to see a benefit for your lincoln brand? when are we going to start to see that pay off with ford? b: financially it's going to be medium to longer term. this is not going to happen overnight great what we're doing -- we are doing this methodically, relentlessly. we know what the factors are that will create a strong brand but also great products and extraordinary customer experience. we are already seeing benefits from that in terms of various metrics, such as customer satisfaction.
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u.s.d grow sales in the last year and we had over 10,000 units of sales in the first full year, the fastest at any new premium brand going into china to ever achieve that metric. we are on a really good track. it will be there in the medium to longer term in terms of the benefits. bob: it is an emerging market great it is a big company that is transitioning largely based investment in infrastructure to one that is more consumer-oriented. it will be bumpy, and clearly we have seen that. but we did see last year was a pretty robust industry. it is in part by incentives that the government provides, particularly on purchase taxes. in 2016, that will continue. i think we will see an industry that will probably be as large, if not larger by the time the year is over.
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matt: you are going to run the gt this weekend at daytona. any predictions? : i'm pretty bad forecasting, unfortunately. it's a fabulous product, and guys are really excited about it. certainly the consumer interest in that for those who can afford that supercar is extraordinary. matt: have you gotten into one? bob: no. i'm the cfo. matt: you need to ask your boss for at least a run around the track. bob: let's do it together. matt: i will hold you to that . bob shanks, cfo of ford. daytona has a 24 hour race in the u.k.
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it is very important to motorsports and they will race the ford gt this weekend. mark: can i be in the passenger seat when you try the ford gt? matt: only bob and i will fit. it's a two-seater. mark: you can put me in the boot. -- we will, big news hear from the cfo about the bank's next big move. ♪
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betty: you're watching "the european close." there is one problem area that people are really turning their focus on. the company is losing ground in and in turn,nesses
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the firm is making big changes to the bonus structure. the deutsche bank ceo sat down with bloomberg television and discussed just that. >> quarters three and four of 2015 in both these areas have not been great. in contrast to the first half of the year, where the businesses performed quite well. clearly there will be some answer, which probably has cause the drop innt activity. we have admittedly also operated in a market environment. what we are doing now is we recognize we need to reinvest into our equities business on the research side. secondly, we have to strengthen our corporate finance. we've made some investment as in hired some additional people. and we will keep trying to look for some additional selective add-ons to the team. >> are you losing people in
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those areas? generators in those people, because of the outlook? john was pretty clear on bonuses. is that having a ripple effect into the fact that people will be stepping away? >> in a way i would say it's too early to tell. this is something that is still yet to happen. the message is clear, and yes we have lost some people, and as always some of them, you regret that you lose some of them. we have communicated, we overall need to reduce staff. look, we think we will have a big differentiation sense of how we play out the bonus side. those people that we really want to keep will be paid at
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terms, and others probably will have to accept a much lower and sometimes zero bonus. mark: the cfo of deutsche bank speaking with us. theworrying is it that chief executive is losing market share in businesses that he wants to expand? reporter: one quarter trend does is make, but the big issue how these crimes pivot away or reduces focus on capital intensive super costly debt trading business, when at the same time what he would like to pivot to, the cash equities ink, the equity trading general, but large parts of the business such as sale of equity and bonds for clients, those areas are showing some of the
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weakest trends. the kay, the heart of these challenges is that shift, being crippled by these market developments. betty: how is the bonus season going to look for deutsche bank? ter: probably not so good. we don't have the exact numbers yet, but we did hear it clearly that we will see a decline in bonuses from a year earlier, then we will see deutsche bank paying not as competitively as international peers for this specific year. and further, we have the board saying they will not be taking bonuses for last year among the top executives. as you heard also from mark now, that will extend to some underperformance in the bank as well. it's not going to be a pretty
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much for deutsche bank employees. mark: will the bank after raise capital because it's financials strengthened at the end of last year? the core of people who say deutsche bank needs to raise capital is not going any quieter. today he reiterated those two analysts and the press in frankfurt that he does not currently see any to raise capital. the big question there, the wildcard is whether they have to with u.s. settlement regulators in the residential mortgage-backed securities scandal, is that comes along as expected and billions of dollars, you can't rule it out. betty: thank you very much. we will be back.
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betty: i'm betty liu with mark barton in london. they tried to come off the lows,
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right? mark: who would have thought a more dovish fed would have been overshadowed by weak earnings, the oil prices pushed up oil companies, miners also rose, those were the only gaining groups. but it was earnings that dominated today's session. inope's biggest drugmaker the news today, down by 3.7%. shares falling the most since august, europe's biggest drugmaker reported weaker than antiicpated profit. duringcipated profit really quickly, i want to show you shares of h&m. shares almost down by 5%. the dollar strength adding to purchasing, because we had this unusually mild winter weather which caused it to add on a few discounts. a lot of earnings disappointing. betty: not disappointing was the
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u.k. economy at the end of last year, right? mark: it rose for the 12th consecutive quarter. what a run. economy,opsided manufacturing sluggish exports, sluggish services is where all the growth is happening. the risks are still global. that is why we will not see a rate hike for a long time. the referendum is an upcoming risk as well. we are benefiting from prices, higher wages, and unemployment, which is at a decade low. let's not scoff at 812 quarter of growth. there's one chart i was looking at great it indicates the fear that we have in the markets. eye on the fix index. according to goldman sachs, the average fix for this month is at
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24, which they say is outside the red zone. if you're at 25 and above, the red zone essentially indicates that eventually we will see gross thomistic product in the i.e. aat or negative, recession. we are so below that level. even though it seems that we've had fear and there is all this recessionary concerns, we are not at that level yet according to goldman sachs. a big part of that volatility has been in that fear has been the plunge in oil prices, which has affected economies around the world, including russia. on energy for more than 40% of its budget and the country's oil output is heading for a post-soviet record.
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ryan, what happened here, and whether or not russia and opec will be meeting. he said russia would be open to meeting with opec in february, and it is possible they would discuss a 5% cut. there's a lot of questions about exactly what he said, whether the reporter put words in his mouth, but roughly that was a thrust of what we heard out of st. petersburg. that sent oil through the roof, then we heard opec say there is no meeting planned. if you look over the last couple of days, the russians have increasingly been talking about how maybe they would be prepared to talk to opec. the energy minister in opec met with the big oil producers. no decision made. but it is something we have been hearing a lot for. it all kicked off with the rocky saying heil minister
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thought the saudi's were more prepared than ever before to discuss the cut with non-opec countries. mark: is russia really able to arabia in engineering some oil production cut? not: it's probably feasible. as the price of oil has fallen, the russians have only ratcheted up their production. the second point is, russia gets very cold. even if you wanted to turn off thetap, you might lose whole field. from a technical perspective, it's difficult. therussians, the saudi's, venezuelans, the mexicans, they tried this november 2014. meeting.the opec the russians came out and they said basically no cigar, we agree to watch prices. the russians and saudi's do not trust one another.
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the russians think the saudi's habit in for them. they want to steal their market share. they think they're in cahoots with the united states to punish russia. they saysaudi's do, we're prepared to cut if other countries are prepared to do that with us. some may say that the russian energy minister's comments today are a bit disingenuous. mark: the price of oil intraday went up 7.5%. now it's up 2.6%. ryan: volatility is extraordinary. standard deviation is 7%. these are not big moves anymore, are they, which is extraordinary. it tells you there's not a whole lot for the oil market to move on right now. yesterday's u.s. oil inventories, they indicated the glut is only continuing. ever since then, there has not
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been a whole lot out there to trade on. we have breaking news on iran and airbus. the iranian president has been on this european tour as sanctions are lifted on this country. iran just announcing they are going to be buying more than 100 airbus jetliners. the speculation was reported to be over $25 billion worth of aircraft. rouhani has been on this trip through europe great he announced $22 billion worth of deals when he was in italy. he's in france or paris and he has reached paris, announcing this deal with airbus. we will keep our eye on how the trading, and his trip through europe. let's head to our markets desk.
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julie hyman has a check on some of the other company movers happening in the u.s. actually, i will talk about currencies. we will take a look at the dollar, which has been declining versus the yen, versus the euro, versus the pound. there seems to be this new pall cast on u.s. sentiment despite the vix and sold -- goldman sachs call. there is nervousness being expressed in the markets about the economic outlook in the united states. we will get the read on fourth quarter gdp coming out on friday. have a four-day decline for the dollar versus the euro, specifically this is what you see in the red box. it's the longest decline we have had since september in the u.s. dollar versus the euro. if you take a look at the 10-year note and what it is reflecting in terms of
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sentiment, right now it is unchanged. we have the fed in the mix as well, saying in its statement it is monitoring the international situation and global markets. gold and silver, there we are seeing a little bit of a decline for gold futures. we have seen a rally and some of the metals were a rebound. they are giving up some of that advance today. betty: thank you so much. for more on the market nervousness julie was just talking about and the currency market, i want to bring in the head of g10. he previously led currency strategy at citi. let's talk about the fed statement yesterday. toant to read part of it remind our viewers, what was
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that key statement out of the sentence, the committee is closely monitoring global economic and financial development. and for the balance of risks to the outlook. dovish?read that dollar fort: it was not supportive the dollar. it confirmed market expectations that a march rate hike, a hike anytime soon is fairly unlikely for now. it is the case that when in september the dollar linked its policy outlook to the development outside of the u.s., that was seen as rather dovish. it was not necessarily supportive for sentiment. the dollar did lose some ground against the yen and the euro. betty: it could complicate the situation for other central banks, like the bank of japan,
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for instance, the need to see a lower currency. the author of "currency wars" was on with us earlier. yes, japan -- they have a 2% inflation goal also. limited tag of tricks. you can only open and close the capital account or depreciate the currency. that's all you can do. betty: so what do they do? >> we are going to see more currency wars to come great i think it is a losing battle to be betting on upside in dollar yen, given the respective central banks are closely monitoring those developments. in the case of the euro-dollar, it's already in the firing line. it is an uncomfortably higher level for the governing council, acting likely as soon as march.
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in the case of the dollar yen, they may have to wait longer for the boj to announce anything. however, we think they could surprise the markets by signaling a commitment to longer term expansion of their qe program by tapping into the last available asset class. that is the japanese stock market, $200 trillion, which will allow them to cruise their program for years to come. and a downside in dollar yen or upside in euro-dollar will represent attractive opportunities to buy the dollar. some say the yen won't to rally if the boj announces more measures, because in part it has run out of bombs to buy. facing -- the
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biggest risk is the fact that investors are losing credibility . that's what they are doing perhaps long-term. i think they should be focusing on the remaining liquid assets deep enough that could absorb a qe intervention for a long period of time. that will be also the surprise for the markets. could push further more excess japanese savings outside of the economy. by implication, that could push yen lower across the board. that in combination with persistent upside pressure of the short and of the u.s. yield should encourage japanese investors continue to buy for an nhedged, the hedging ratio for japanese investors could be falling just because the return they are getting,
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when you subtract from that, the hedging costs will drop potentially below zero. junction a few years back when we did have similar situation where the japanese are losing money on their hedge for an asset purchase, which means that given those outflows will continue, the negative impact from the japanese yen -- mark: what about the pound balance? it's a very lopsided economy. we have the quarterly inflation report. the fall has been quite swift, hasn't it? are we approaching lows are not? >> the pound is a prime candidate for a short squeeze. it is the case that a lot of negatives in the price by now, the selloff is quite premature. two, i think compared to other relative volume measures like rain differentials or
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indefensitivity to risk, and asian -- and even measures like risk liability is aimed at the pound has corrected a bit too much. thatations by the boe effectively -- not necessarily a significant shift in their view could mean that the pound could be a primary candidate for a short squeeze. betty: we have been losing ground from the last four days, the longest losing streak since september. does that indicate to you that we are headed towards possibly not just a slowdown in the u.s., but a recession? that is one of the risks we have been discussing with clients. two key risks at the moment. one, whether we are heading towards a global recession. also, the u.s. data encouraging. and the disappearing
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central-bank rally, inability of global central banks to support growth, inflation by implication to support the risk correlated up. ist risk has grown and it being taken into account not only by the fed, but other global central banks. a me that means the period potentially reduce liquidity in the market is coming to an end. expectations are more doveish. the question is more about the timing, it's really not if, it's when. potential disappointment by the boj, tomorrow, some people are expecting more to come from and his- kuroda colleagues. by implication, next week's chinese data could disappoint again, holding the latest risk or rally in its tracks.
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the longer-term outlook is still determined by the central bank's ability to provide more support to the global recovery, and we still believe with that support a global recession will be avoided. against that background you still think the dollar could g10in the best-performing currency. so much.ank you we are going to get more answers to that question. is the u.s. recession bounds? that will be in today's special edition of "what'd you miss?" right here on bloomberg television. ♪
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mark: this is "the european close."
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i am mark barton. betty: we have been trying to but the to get back up, dow is back in the red. the nasdaq struggling to hold on to its gains here. bloomberg's abigail doolittle has more live from the nasdaq on some big tech shares, including facebook surging today. >> lots of volatility at the nasdaq. one of the big bullish moves is certainly big tech led by facebook, the stock sorry today after the company put up a huge fourth-quarter yesterday after the bell, blowing away street estimates. revenues grew to 5.4 $8 billion. this performance really stands out from the recent earnings report. other big tech names, perhaps setting facebook up to be a star in 2016. the stock may climb by more than
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50% from current levels. the stock is up also perhaps on a facebook glow ahead of that company's first ever segmented earnings report next monday after the bell. google iss on google, being probed in italy for unpaid taxes of more than $250 million, as the ft reports the european commission is set to examine google's u.k. tax deal. is reminiscent of apple's recent tax deals in europe. betty? abigail doolittle at the nasdaq. mark, it's a favorite part of the show. mark: you already won the battle with your vix chart. is, are the periphery countries in europe feeling the pressures of mounting political risk? we will answer that question by looking at that 10 year spread. the battle is next. ♪
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betty: time now for our global battle of the charts. we take a look at some of the most telling charts of the day and what they mean for investors . for viewers at the bloomberg terminal, you can access these charts by running the function featured at the bottom of your screen. joe weisenthal is back. he's the anchor of "what'd you miss?" joe: this morning we got earnings out of caterpillar, which has been smashed lately because commodities and industrials and manufacturing. little bits up a thanks to higher-than-expected earnings for next year, crosscutting. this chart goes back 10 years and shows caterpillar shares versus the mcsi emerging markets index. caterpillar shares have tracked investors in the emerging markets.
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.t's not hard to figure out why cost-cutting aside, the future of caterpillar largely rest on what happens, will be emerging markets turnaround. you have to bet that will be the real determiner of caterpillar shares. china is a big factor for them great no doubt. mark: beware the periphery. that's my warning today. in case you missed it, european peripheral yields, those countries that characterize the sovereign debt crisis of years gone by, their yield increasing higher since november. this is a six month chart. let's start with portugal. this is the green light. last thursday hitting the highest level in 15 months, its new government is antagonistic to the reforms of its
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predecessor. number two, let's talk about the greece-germany spread. it received a bailout, growing concerns, the bailout unraveled. number three, the spanish german spread. the orange line, which last wednesday rose to the highest level since september. yesterday we had the deal between italy and germany, but in spain there is also political forces that work. and to italy, yields also rising to the highest level since september. yes, we have some bad loan deal, but is it enough? spreadhas now rose the since last thursday. they have been creeping higher despite qe. isone bond analysts said, qe not aimed at neutralizing
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political risk. beware the periphery, betty. , i have to hand it to you. great performance. i got some applause, finally. betty: thank you, joe. joe weisenthal of "what'd you miss?" i know you have a big special coming up on whether we are headed for a recession. mark, that does it for us here. for you in europe or it we will continue with much more on the markets, as we are coming off our highs of the session. we are struggling to get back into the green with the dow. ♪ the only way to get better is to challenge yourself,
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>> good afternoon. i'm scarlet fu. alix: i'm alix steel. the glut in oil actually good news for the tanker business. so why are stocks getting hammered? the founder of art and more will explain the contradictions. scarlet: we will look at what turns sentiment soured. alix: analysts are primed for earnings news from amazon. we need to get a snapshot of today's market activity. let's head over to the markets desk, where julie hyman has been tracking. julie: snapshot is a good word. at each moment you see a different picture. there's been a lot of volatility in relatively tight range, that we have seen a stock vest light between gains and losses here.


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