tv Bloomberg Markets Americas Bloomberg October 25, 2017 10:00am-11:00am EDT
welcome to "bloomberg markets." ♪ vonnie: we will cover oil inventories and much more but first, breaking data on the u.s. economy. >> new-home sales rose at a faster than estimated pace in september. 600 67,000 was annual pace, a surge of 18.9%, the highest we in some time. some of this is adjustment and delay following hurricanes in august. it was not entirely unexpected here but nonetheless, the search bigger than estimated 18.9%. the highest since 2007 i am seeing now for new home sales.
definitely a recovery in that and again, it delay. presume there was also a strong demand for housing. other breaking news not to do with the u.s. economy but to do with canada. the bank of canada has an overnight different -- interest rate of 1% and says it will be cautious with future rate increases. some economists and strategists in canada have predicted a stronger -- saying they might signal that they would raise rates. be --s not necessarily to viewing that we see the dollar strengthened up about one half of 1%. getting back to the u.s. averages, we're seeing some weakness. all three major averages are down here. let's get to them and earnings
movers i should say, up and down. first of all, anthem is stronger today. earnings topping estimates by 10%, the biggest beat we have seen, earnings per share up a percent -- 8%. illustrating a debt ratio -- more, andoving actually rising. now little changed, almost 2000 rite aid stores, we reported process -- profit estimates, coming down to her gerbil is one of the biggest losers on the day, suffering from a lot of different actors during the last quarter. avocado prices rising, hurricane force in reference -- restaurants to close. stores.at some of its shares down 13%. if you look at the bloomberg 4%., two point
that has got a lot of discussion. he needs to start rallying effective immediately or obituaries need to be written. the bondthe bond market has mads above 2.4%. it appears to be holding this time. a missed economic data and discussion of the next fed share. mark: this is change here. earnings and we will head to the big ecb meeting. unchanged for the day. day for corporate earnings. nothing bigger when it comes to share movement. shares up by 7% today. , sales growthhine revitalized, confirming the withalization happening
revenue increasing 28%, faster than the estimate, shares up 8% this year. record today, luxury demand rebound in china. the creative revival, the company's efforts to target millennial customers. shares of i 7% today. gdp data creative revival, the company's today in the u.k. speculation the bank of england will raise rates next week. gdp up by .4%. by economists. industrial production jumping 1% . construction shrinking in the most in five years. the last major piece of data before next week boe meeting with inflation. the governor has signaled tightening, maybe needed within months, economists and traders,
we can make that leap next thursday. sterling against the dollar bouncing above the 65 day moving .verage stronger-than-expected data. , we100 day moving average have not been since early september. sterling on track for its fifth weekly drop. the pound has fallen 3.1% since reaching a 15 month high on september 15. the ecb tomorrow, but as soon as that is over, will focus on the bank of england. canada and the bank of earlier as well p are much to discuss central-bank wise this week. the current fed chair, janet yellen, only advocates in the white house. the president himself, donald
trump. impressed -- impressive last week but yesterday, a show of hands supporting yellen and other -- others. economistniversity seemed to when that particular straw poll. reading thiss morning, talking about advise when it comes to donald trump. does it depend on who he spoke to last? >> it seems to be the case. we do not know where he will end up, but we know that steve mnuchin has been pushing the idea -- he worked in the past with the regulatory issues he would be sympathetic to the administration's goals, while keeping rates low at the same time. the big recommendation is that he is antiregulatory, in the
republican orthodox mold but his background suggests he would favor higher rates. a lot of questions about which way the president would want to go. janet yellen, who said she is open to regulatory changes but not anything major, she is definitely the low interest rate candidate. vonnie: we spoke to one guest yellend they would be 2.0. yellen 1.0, she is particularly dovish which is good interest-rate wise for the president. the stock market has been at records and there is no reason to change. should also be the unusual choice for president trump, which might please him. that she is a registered democrat appointed by barack obama, two strikes against her up on capitol hill. they don't like the idea that
anyone from a democratic administration particularly obama's could do anything right. a lot of pressure on the president to dump her and take anybody. they are not happy with how either. a lot of conservatives would really like to get somebody who would shake up the fed because they feel the fed has too much power. a lot of political games are being played in washington right now. we know for sure the president says he will do something soon. he said that before and it is taking a while. the interesting thing to watch is going forward, what is the market reaction going to be? it is bouncing around every rumor of who might be the fed chair. see 13 on your bloomberg curve.l is the yield this is a one-month chart and it shows how the yield curve has flattened and you were mentioning him from bm oh.
a lot of bond strategists writing if john taylor is the selection, you will see the belly of the curve rise more they figureuse short rates will go up faster than the market anticipated. mark: nothing to shout about, 1%, the current rate stance is appropriate, any early takeaways? them as theyor have a situation that is different from the u.s. , this is 1635 -- wages are rising in canada. here -- the unemployment rate is going down. that is what is supposed to be happening in the u.s. and has not been happening. --
25% of the canadian economy and a problem, we have heard all the negative talk about the treaty and what donald trump might do. so the bank will step back and watch and wait a little to see what happens with treaty negotiations and lead the market one way or the other. we have some sound of the canadian finance minister. >> things that are at a fairly low -- we think that would continue under any scenario. bonnie: too optimistic? hoping that the stakes are high enough for all three countries to fall apart. no one knows whether the strongest stance the u.s. is taking is a negotiating tactic on the president's part or
whether they really mean it and if they do mean it, it is bad news for the canadian economy. vonnie: we will eventually find out. thank you, mike mckee. time now for the first word news. here is m a -- emma. emma: a new leadership lined up includes no obvious potential successors. could be promoted anytime. win on capitol hill for financial firms. the senate voted to overturn a rule that makes it easier for customers -- republicans have fought against the agency since it was created after the financial crisis. in the u.k., the economy grew faster than expected last quarter. the bank ofy for england to raise interest rates last week for the first time in a decade.
some of the prime minister's allies are concerned he may be going too far trying to crush separatists. according to people with knowledge of the matter,'s -- they are talking's attempt to take control the situation in barcelona. they do not want to shut out options that would dignify retreat. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. mark: coming up, slipping ahead of that in roughly 18 minutes time. it is futures in focus. this is bloomberg. ♪
vonnie: live from new york and london, i am vonnie quinn. mark: i'm mark barton. focus to oilres in slightly lower before the release of inventory data in the u.s. allies reassuring traders they will complete that strategy to have a surplus. bob, what to discuss, are you looking out for him today's inventory data? >> good morning and thank you for having me. i see a draw and a drop in crude oil and gas specifically. we have seen a convergence between api and eia lately. eia had the huge gasoline draw and it had a lot to do with a drop in refinery runs that we saw in the data last week. is the piece of data most important to me given the recovery of 2-3 hurricanes.
the seasonality of crude oil, october the -- october is playing directly into the seasonality come -- seasonality, october, and then fall know last week or so, continued that into about mid december. that is how the seasonality over the last 20 years or so has played out because of the end of the summer driving season. this year is different. we went in with 95%, up high and last week, down past 83. was, the reduction we saw mostly west coast refineries, nothing affected by the hurricanes. either the recovery of the refineries in the gulf coast are not going as well or they have gone into early turnaround because they have the opportunity to. if we will detach from the seasonality, it will start with the eia we are getting a few minutes.
jonathan: not only are we heading late november to see whether it extend those cuts, but there is now an exit strategy ensuring that market once the -- are you convinced it would be able to manage that? >> i do not actually think they will exit. i do not know what the source of that story is the one you look at it from this perspective, to the proclamation of 100 20% compliance does not really match what is going on in the ground. we are getting with the 200,000 barrel a day drop from the kurdish region based on tensions, it might get them closer to 100% compliance but they said it was in september were out of paris, it was just said last week or -- week they were closer to 8% than they had on the ground. the truth is probably somewhere in between if you look at
compliance proclamations. the ground has never reached what they said. 120% seems a little far-fetched. -- the ground has never reached what they said. 120% seems a little far-fetched. mark: what would that mean for the gold market? >> he will be viewed as very hawkish. there are a lot of inputs in the model. i was listening to bloomberg radio on the way and and they had a discussion about, not only are there a lot of inputs in the model, but those inputs could between. the view of him being hawkish may be overdone but it will drive the dollar higher. it will affect gold prices and
that is really the driver right now. there is no believe global geopolitical headline in terms of action to push gold back up to 1310 so i don't think we see it. mark: thanks a lot. we will see you soon. it is time now for a look at some of the biggest is the stories in the news right now. the 730 seven mass jetliner propels commercial airplane deliveries to a new record. investors are concerned about claims that boeing did not deliver. quarter, it in the rose. guidanceeat its own and expects growth next year to increase by the high-end of the midteens.
investing in digital payment technologies as consumers shift from cash and checks. returning to saudi arabia after a 13 year absent, -- absence. it has become more attractive to foreign lenders. they also plan to sell shares in what could be the biggest ipo ever. bloombergur latest business flash. mark: coming up next on the bloomberg show, we will be live and we have erik schatzker interview starwood capital chief and, how doesy, one following the footsteps of ?ill gates david grimaced in talks to the microsoft chief executive to find out. this is bloomberg. ♪
mark: this is "bloomberg markets." vonnie: the tech company seems to have lost its luster but now, microsoft is hailed as an innovator. markets." vonnie:the david rubenstein shou are two p are conversations. david: you are following two legendary figures. how do you say, a lot of the things you did, i don't want to do anymore and i will change things. so andent 22 years or became ceo. built, up in the company i understood like the back of my palm all of the things we got right and all of the things we got wrong. i have a point of view of what i wanted to do if i were to become ceo.
when need to make microsoft thrive in a moberg -- mobile first world. >> it was about what do we do in the future? >> one thing you did was to change the proprietary culture at microsoft. it said this is the way we do things and we do not want to cooperate with other firms, -- and those kinds of firms. >> let me view things as zero-sum. let me approach, even our traditional competitors and say customers use some of what we do and what we -- some of what you do. let's figure out a way to combine forces where it is market expansive and satisfies customers. that is a lesson i learned in my early days at microsoft. >> historically, windows and office where your cash cows. they are still the biggest source of profit. you expect there will be major sources of profit for a long time. after that, you spent $26
biggest acquisition ever from microsoft, to buy linkedin. what does that have to do with microsoft? ofwe have one billion users microsoftd office, or 365. what is the common thread there? they are all professionals. they are people trying to get things done. microsoft 365. we have the professional clout and professional devices in the world. the vision was to combine that with a professional network of linkedin. if you look at some integrations we have since launched, you can get an email, i can get any mail from david rubenstein, i can look up your linkedin profile, all of theok up mutual connections we have so the idea that a professional network and professional content
can be brought together, i think it can ultimately be a big driver of productivity. another piece which has been a real game changer for us is is the way people do business to business sales. if you want to be able to reach customers and sell, this integration will be a game changer. we have a lot of synergies between the products that are now coming through. catch "the david rubenstein show" tonight at 9:00 p.m. eastern on bloomberg television. still ahead, moments away from report.inventories this is bloomberg. ♪
joining us now, the former ecb member and senior advisor at the i professor at mit's school of management. .e joins us from cambridge thank you for joining us. can the ecb tomorrow avoid a taper tantrum? >> they could avoid a taper tantrum simply because they have already communicated in clear to do,hat they wish however, i don't think that should be the metric for evaluating whether this is a good decision or not. they should take a view and ask the question, is this really the right policy for the well-being of the euro area and the ?edium-term it raises some questions that
may have implications, not tomorrow, but in the coming months. mark: it sounds like you have got some issues, maybe, do you have some doubts? your answer? >> of the issue is whether the ecb has provided since it started its quantitative easing program, the necessary to regain the objective it has. the ecb has been underperforming on its objective for several years now. the degree of accommodation and has provided according to ecb's's own estimates and forecasts is insufficient to take it closer to 2%. this is just on the primary objective. the firm looks at the real
economy and it is much more suggest.han some the unemployment rate is -- this is really up securing the fact that there are very different economists now. in my assessment, the german economy is overheated and if this is what is driving policy, i could see why they would want to tighten. if i look at the rest of the euro area, the unemployment rate , excluding germany, is 11%. this is exceptionally high. the technical aspects cannot be changed, substantial legal barriers to that at least for the moment. so the ecb has to taper. is there something else in mario draghi's toolbox he can use to try and boost the inflation number, like forward guidance, or some other type of tool?
has compared to other central banks, virtually unlimited powers in order to implement the necessary to hide its inflation objective. we take it as a given that for technical reasons, self-imposed constraints need to reduce government, that for example, there are many other things they could keep purchasing. one approach they could be adopting would be to increase the purchases of other assets. increase the purchases -- they could start purchasing bank debt for reasons that are not that easy to justify. they have excluded quantitative easing they could embark on quantitative easing with asset
classes. they have a lot of ways to go if they wanted to seriously raise inflation for the primary mandate. about talk percent, is that a problem for mario draghi? >> this relates to a combination of fed an ecb policy. the currency implications for ecb and fed policy remind me of what we saw more than a decade ago when we were looking at the yen dollar. the bank of japan was actually doing what the ecb is right now. they were hesitating to provide the accommodation necessary to raise inflation in japan. and that did lead, for quite end being to the stronger.
this is part of what we see in the euro area now. it is one of the dangers. but i have to say, the euro in this case would not reflect the life of the economy. it is a reflection of monetary policy mistakes of keeping policy tighter than it should be. mark: as a former member of the ecb, you have witnessed firsthand the push of hawkish and dovish views. if you don't mind, it seems you are more in the dovish camp today. how does the ecb manage to appease both sides of the spectrum? the hawks and the doves, when it comes to setting policy tomorrow future?he can smell broader concern is what i observed in the european central bank. the ecb is an extremely
independent institution in theory and it should formulate a policy for the euro area as a whole. this is not what we see in practice. the suggestion that the ecb should start tightening policy effectively now while inflation is still so low is not compatible with the mandate. it has nothing to do with dovish miss or hawkishness. -- s about meeting i don't think it would be for the mandate. -- defining price stability almost 2%. if i interpret that as 1.9%
inflation. the ecb should independently deliver on that. policy is not accommodative enough to do that, other considerations, politics, loomed too large, which i don't think it's healthy for europe. we have a german 10 year difference if they can buy more bonds or something else, how do you reconcile the two economies? >> it highlights the problem with implementation and policy in the euro area. it is incomplete to just focus on the german ten-year if you are trying to understand the conditions.
i suggest you look for an example at the same time of what the italian 10 year is doing. it is actually considerably higher. the difference between italy and is in part reflecting the ecb decisions. yearcb could raise the 10 german yield if they wanted to operationalanging decisions and implementation policy. that is a different story. you should not only focus on the german ten-year but look at the rest of the area. mark: professor of mit's sloan school of management, thank you for joining us today. let's check in with emma chandra. the campaign paid for research that included fallacious check -- claims about donald trump and his links to rush according to multiple
reports. the research was compiled by a spy. partisan a chat -- attacks to disrupt the election. split wills on the go to the last moment in the game of ranks men ship. they told parliament lawmakers may not get a chance to vote on the deal before the country leaves the promise -- in february, they would get a vote on the agreement. regionalthe kurdistan -- free the results of the , which hurt oil exports. calling for a cease-fire and talks. passengers will be interviewed for security reasons.
american officials global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. -- this is bloomberg. thank you. blackstone is one of the most powerful equity firms in the world but dave schwartzman has plans to make it much bigger. we will hear from the man himself next. live atad, we will be the future investment initiative . erik schatzker introduce barry. this is bloomberg. ♪
the future investment initiative, he talked to our own erik schatzker about the fresh faces at his private equity firm. erik schatzker: we can -- we , aspirationsplans to basically double where we are , which would take us to about 800 and dollars in five years, that is what we are looking at. we have not finished our plans. we will see if we can accomplish that but it would be a substantial increase in terms of what we are doing. we always have something in mind where we think we can deliver a product to people who are not getting it, or do it materially better.
we have had a lot of fun taking the next generation of people and putting them to work on the problem. we have had a terrific meeting with people presenting ideas and that is how you grow the culture of a business. one person sitting around, that would be a huge misunderstanding. have got the firm totally engaged in how we can grow but growth great returns. providing something unique to investors, there is no reason for a business to exist. that is what we think we are doing. we're on a mission to be the best in the world and our asset classes. becausewe will know it that is easy to measure. i know that sounds a little, sort of, reaching, but that is what we do and that is the standard.
can we do the best for our investors? vonnie: that was blackstone ceo steve schwarzman speaking with erik schatzker. let's bring in the bureau chief, who wrote the book on private at new tycoonsons, the inside the private equity industry that owns everything. of course, great ambitions. is an amazing figure but not out of reach. when you think about blackstone, they went public in 2007 with $85 billion under management. they now have upwards of two edge at $60 billion and he is talking about doubling that in the next five years and $1 trillion is not out of reach. part of it is because the appetite for private equity and all that is adjacent to it and he alluded to this, hedge funds and real states, the appetite
including in the middle east where he was speaking with erik schatzker, it feels almost infinite and that is true across the industry. vonnie: can you make more returns with the money? >> a good question. can you make the same returns from the early days of private equity just doing private equity? probably not. it has become so competitive and when you think about a lot of these firms started in the 1970's and 1980's with blackstone and the group that started just a couple of years after blackstone, those returns, they were easier to come by. easier to do, so much more money coming in and so many people doing deals right now. changingare seeing the of the guard. how significant is this? >> we heard obviously steve schwarzman talk about the generation coming up that blackstone. what he did today is they
announced they will have two new co-ceo's. the first non-founders, glenn and a guy named kyu sung who came out of -- he came out of another very well-known private equity firm. it is the moment where private equity firms really start to prove their worth for the long-term. the ambition you alluded to a steve schwarzman, he has the same ambitions. the question is can the new guys , though they are not new to the firm, but the new leaders carry entrepreneurial founders have created over the last 20 or 30 years? vonnie: speaking of which, what is happening with all of these places? similar concerns? >> and similar activity. we saw one of the cofounders essentially bump up to chairman. , kkr, similar to a was done today, although not quite as far.
they named two guys who are eventually going to take over and what these guys all have to try and capture the ethos that the founders set in place. one question you alluded to a few minutes ago was the notion of can they get to those returns, or can they get into other businesses that allow them to get there? vonnie: you will have to write an exit chapter, a new chapter. .hat is jason kelly thank you. mark: coming right up, erik , it very sterling, chief executive of starwood capital group. this is bloomberg. ♪
vonnie: live from london and new york, i am vonnie quinn. back to erik schatzker. the hotel and real estate business. erik? the: i'm here with barry, ceo of starwood capital with $62 billion roughly speaking. nice to see you. whye's one reason while -- the world's financial relief have beaten -- it is all about money. the saudi's have a lot to allocate and we know that. but there is a lot of competition. is this just speed dating or is their business getting done here? >> i have been here many times we have had clients here in the region.
business is getting done and a renewed interest in the public investment fund to allocate capital and we are expecting to have quite a bit of it from the -- through the process of interviewing prospective managers as well as thinking about upping the sides -- for existing funds. >> to make the allocations. but it is a good thing. for us as an institutional money manager. places like the united states east, and the middle we are all looking at the future for japan, especially the cif. that will make up for some of the lack of investment which has
been dominant from the chinese. >> that they are pulling back. are pulling back. >> only -- all of them. i would say assets they bought much moref it thoughtful and rational. not a complete end but it is definitely not the politically correct thing to do right now. they are definitely slowing down. both funds have a mandate to invest offshore. they continue to do so. >> steve schwarzman shows up in june and walks away with a $20 billion check for the infrastructure fund which did not exist at the time. how do you compete with that? >> i should join -- it is a big world.
we do energy infrastructure and we have been quite successful. it is a big world. you have controls for the advisory board and kudos to steve: that off. >> he is looking for more mega partnerships. >> we are happy to help. i think, it is interesting. alternative asset classes, which gas, known for the second largest portfolio for the united states. we couldomething partner and do a major fund.
i don't think anyone has the knowledge and information we do in the united states. we have sister businesses like our public company merging with blackstone shortly. they want to play the residential market in the united states, which has consistently classes, the asset they could put a lot of money to work and i heard yesterday at finkpening, larry mentioned 4% of the target rate going forward for the quiddity and were bonds are. we could handle the single home price and current yields in the real estate clasp. -- class. erik: the managers invested in other countries also want to attract capital.
so,e have hospitality future, iity of talked about, think of it as adult disney world. helped the backbone of sports that take the amazing fight on the red sea. i love diving in scuba diving so i will go here maybe i don't go and the other thing i find attractive about this location or the red sea is the proximity to the growing middle classes, india and china. a single person from the united states, hundreds of names of people could populate and travel there. safety of tourism, the left figure out where they want to go on the social spectrum.
>> fed is the key question. i know it is beautiful territory but there are a couple of obstacles. at the very least, they can just have a want. but it will be a subset of tourists. -- that will be up to them to decide. be successfulwill or less appealing if they don't let some of these things. if they do a good job on the authenticity, the retails shouldn't be a retail, they can do wellness, they can do hospitality, medical tourism. a lot of things to do their --