tv Bloomberg Markets Americas Bloomberg February 20, 2018 2:00pm-3:30pm EST
for scarlet fu. welcome to "bloomberg markets." julia: we are likely in bloomberg world headquarters in new york over the next hour. here are the top stories we are covering on the bloomberg and around the world. equity and debt markets on pretty shaky ground. we will get insight and analysis from catherine keating, ceo of commonfund. feasting on debt -- bond traders digesting $250 billion-plus worth a treasury auctions over just three days. we will discuss. under the value at bhp, the world's largest miner come on digging up profits and battling asset management. the u.s. markets close in two hours. let's check with taylor riggs. taylor: you mentioned the shaky ground -- we are all over the place today.
some of the averages with the dow and s&p are a little bit lower. the nasdaq is higher. nxp semiconductors is pushing tech stocks a little higher today. i want to focus on some of the weighing downe some of the major averages. i'm going to start with merck off almost 2%. federal judge tossed out the verdict that merck had previously won. merck is a little bit lower. walmart and procter & gamble are all. -- off. dragging down all of the staples including procter & gamble. i want to take a step back and look at the broader macro picture by looking at the dollar. we're having the first three-day rally so far this year. doesn't sound like much, but for a year that i see no weaker up three-dayout 9%,
so far this year isn't a terribly bad story. you would not expect the dollar to appreciate, but we have a lot about rates rising. focusing on the treasury auction 6039.e's g #btv the two-year bond deal relative to the s&p 500, pretty incredible going back to 2008. you are seeing that gilmore blended dividend yield. -- yield more than the dividend yield. lisa: thank you so much, taylor. amazing that cash has finally yielded something. let's check "first word" is with jessica summers. jessica: the supreme court is rejecting to challenges by gun rights groups, both returning to california laws regulating sales of firearms. in one case, the ninth circuit court of appeals upheld california's $19 fee for sales and transfer of guns. in the other, the court said the
state could make people wait 10 days to buy a gun even if they already own one and a background check was completed sooner. today's action can less than a week after a gun man in florida killed 17 people at a florida high school. special counsel robert mueller has unveiled new charges in the investigation of russian meddling in 2016 election. a lawyer has been accused of lying about former trump campaign aide rick gates. he has been charged in the form of criminal information which usually precedes a guilty plea. the pentagon will miss a deadline to send a prisoner from guantánamo home to saudi arabia. officials say the transfer may occur soon. he pleaded guilty in 2014 two charges that included conspiracy and was supposed to be transferred today to a rehabilitation program for former jihadists in saudi arabia. he would be the first transfer from guantánamo under president trump. u.k. brexit secretary david
davis is warning business leaders to expect changes in the way deals are negotiated after the u.k. ends the bloc. he addressed the business community in vienna. >> brexit will inevitably mean a change in the way britain and european union companies do business. it has to if we are to make good andhe referendum result cover path to our own immigration deals and trade policy and make our courts sovereign. jessica: davison says the u.k.'s stated goals after brexit will not change the u.k.'s identity as an open and dynamic country. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm jessica summers. this is bloomberg. floodgates.the debt today the u.s. treasury sold $179 billion worth of debt as it works to rebuild its cash balances. yields on the three-month and
six-month notes are at levels unseen since 2008. joining us with more is ira jersey. great to have you with us. we have been talking rate sensitivity for a number of sessions. to what extent is the pullback with the repricing versus the sheer volume of issuance of the market has to take down this week? >> i think it is little bit of both. what you saw in a three-month and the two-year option is repricing. the two-year notes are starting to flatten a little bit, and one of the reasons for that is there is going to be a lot more of them. the treasury department going to issue $6 billion more every month of two-year and three-year notes, $2 billion of longer-term securities. one of the reasons you have seen the front end do a little bit worse here is just on the supply. the lastan't remember
time we have priced into an auction as much as we have this time around. can you talk about what the results were for the three-month and six-month bills we got today? ira: interestingly, when you look at the trends, we might have charted this -- when you look at the trends of six-month and three-month t-bills, the amount of bonds auctioned versus the demand for the bonds has actually been falling over the last several years. anthe fed has been spending increased interest rates, the alternative or partially maybe because of regulation. the downward trend in the think in the blue on the bottom. carry on. indirect --unt of this is the amount that and users, money market funds, and foreign investors, they keep
shopping around how much they buy. that is the top part of this chart. pay attention to those two things going forward. these happen every week. we will have a lot to talk about when it comes to treasury supply. julia: what about demand going forward? we have more medium-term debt coming. if you look at the two-year in particular, what can we say, or can we make any kind of cage about demand going forward? ira: demand for the 2-year note option that happened an hour ago is lower than it was last month but higher than it was in november and december. i don't think you can take a lot out of the demand side of that. the market definitely repriced. the market of my soul a little bit going into the option. i think that is what you are going to see. you will see dealers set up because they're not sure if end-users are going to show up at these auctions, in this they
don't, you will wind up with them owning more of these bonds. physically going into a little bit short. you could see decent demand from dealers. doesn't it matter that the six-month auction was bigger than the three-month option? ira: couple of things going on. one is that there was a lot of supply of three-month hills, and when you have that much, it has to be of george somewhere. secondly combat six-month bill auction is interesting. part of it was just an arbitrage play between those two points on the curve. julia: the regular macro man made an observation today which i wanted to get your take on. he was talking about being paid andinance between deficits the discussions the united
states is the seeing around this right now. yield 40 basis points more than treasuries. interesting. surely that is a problem. asset-swap these bonds -- this is a point i made a couple months ago, in late jgb's,r -- whether it is japanese government bonds, the yields are the same or even higher than u.s. treasuries. you cannot just look at what is the yield differential between the euro-been omitted asset and the dollar asset. you have to look at them on the same basis. yields worldwide are about the same which is one of the oddities of the market today. julia: perfect storm. lisa: we will be following this perfect storm for a long time. thank you so much from ivory jersey of bloomberg intelligence. on friday you can get a recap of all the options on "bloomberg really yield."
julia: this is "bloomberg markets." i'm julia chatterley. lisa: i am lisa abramowicz. time for the biggest business stories in the news right now. chief executive officer jeff horowitz has stepped down. since taking the helm in 2014, his efforts to improve operations have failed to turnaround performance. gap's comparable sales have
fallen for 13 of the past 15 quarters. the executive vice president will oversee the unit in the interim. qualcomm has raised its bid for nxp semiconductors by 16% to shore up support from shareholders. the new all-cash offer is valued at about $43 billion. aalcomm itself is fighting takeover attempt and rejected a $121 billion offer from broadcom. a chicken shortage has shot more than half of kfc;s british -- kfc 's british outlets. 470 shops without chicken to cook. that is a problem. yum!which is owned by brands from expect this to last through the week as it works out a solution. that is your "business flash" update. julia: let's get back to the markets now. stocks remain mixed after six days of gains.
joining me is catherine keating, ceo of commonfund which oversees $24 billion of assets for nonprofit clients. she is the former ceo of jpmorgan in the united states. thank you so much for joining us . give us a sense of their broader views of the markets right now. i know you said you was in the past that there is reason for exuberance here, but i know that a lot of your clients are cautious, too. catherine: the interesting thing about the markets last year and it's aally this year is better time to be an investor than a forecaster. a year ago we thought we went out on a limb forecasting 10% returns on the s&p. and yet 19% in the u.s., 24% globally. it is a very good time to be an investor, and client have had great returns. why is that? the markets, as you know, being held a three sturdy pillars. the rest is secret eyes to
global growth around the world. second is growing profits, also around the world. equity markets are led by profits. the third is relatively accommodative central banks around the world. that may start to change in the butng months and years, right now that is created a pretty good environment for investors. -- a i want to get to qt lot of superbikes have moved away from stimulus -- but it tot to get -- i want to get stock buybacks. the biggest volume of share buybacks this credit cycle -- does that worry you? is that problematic as an investor? catherine: i guess the answer is, it depends. you want to see investments being made for the long-term, and one of the things he is in the market recovery cycle, people talk about it has been a very low returning gdp cycle, but it has been a very high-returning cycle for earnings for shareholders. goodof that is real
old-fashioned investment. we saw more of that the last couple years. we will be watching that very carefully. julia: what about volatility here? that is one of the things we traded on in particular the last few weeks with pickup. how do you recalibrate our make decisions based on what we have seen? it feels like a tough one. catherine: our client are long-term investors, and when you are a long-term investor, you can and volatility. , ithe normal market cycle is something like 14%. -- of the time it ends up most investors should be able to withstand volatility. what has been very different about the market cycle and those
especially in the last three years is how low volatility has been. we have had 400 trading days without a 5% correction until what we saw the last month. ought seeing is what we to normally see and perhaps we haven't just because of the synchronized growth in companies and economies and support from central banks. lisa: we hear about cash on the sidelines, and you can argue about the fallacy of the whole concept of it, but ubs put out a report saying that their clients did not put their cash to use. were your clients spending? catherine: one of the things about our clients as institutional investors is they have long-term investment policies. the policies protect you, so if the markets go down and you find d, youlf under-allocate dubai. we rebalance to policy portfolios when the markets are down.
it's a good discipline for all investors. julia: what our clients' biggest concern at the moment? where do you share their concerns? catherine: i think the biggest question we get from clients -- we are nine years into this market and economic recovery -- the biggest question we get is how long. how long can this go on? we had a great year last year. the second 1 -- when it ends, how far can fall? do not confuse an aging bull market with an ailing bull market. we really do continue to have very positive conditions for stock investors. if you look at the world right now, we have all 35 countries in the oecd growing for the first time in a decade. that is 70% of the global economy. typically when that happens, you see stock returns in the teens, not just for one year, but few years. can't promise that will be the
lisa: this is "bloomberg markets ." i am lisa abramowicz. julia: i'm julia chatterley. we are back with catherine keating, ceo of commonfund let's focus on endowment returns. 2017 had average gains of over 12%, but he comes after a challenging decade with just 4.6 percent annually. this has been a real challenge, a daunting prospect for a decade.
enterprises,ig asreased spending rates, and you have already said, even with returns in the last year, increasingly tough to achieve in the year to come. how do you meet that challenge? catherine: artist had a great year -- and it has been a good five-year period for the average endowment. it has been a tough decade, 5% returnsess than thanks to the financial crisis. one of the things about our clients as they know where they are going. they have to earn enough to spend which is usually between 4% and 5% a year. on a cycleeturns basis north of 7%. long-term1970's, the and very challenging over the last decade and i would say even
over this new century in 2000, we have had two very difficult market drops. are reallye fascinating -- the first one gets you the break down on investments for these endowments. me the surprising thing was the sheer volume in alternative strategies, but if you are talking about 12% returns, i guess you have to work but this difference in size between the is quite fascinating. this is looking at the percentage of investment in alternative strategies -- for the big guys, alternative is a huge chunk of the portfolio. for the smaller guys, just over 10%. i set the good thing about our clients as they know where they are going. we call this cpi plus 5%. we know how you get there. the first thing is you have to have bias for equities.
in 19 some new one, all the nonprofits were investing only in bonds. by definition you will not make enough to distribute returns with inflation in mind. you have to have a bias for equities, and all of the institutions regardless of size and health have more than half in equities. a bias for equities. the second thing is as you saw from the chart is stocks in the last 30 years have earned on average 4% a year. that is why you need them. in liquid investments, private equity, earned between 3% and 4% . that is why you see that the allocation towards alternative investments. lisa: i am trying to struggle with what you do as an advisor and you have to reach returns of more than 7%. charles our crew was telling his
clients, forget it. you are not going to get that. what you tell your clients? catherine: we tell our clients a couple of things. they cannot control markets and they cannot control interest rates and they cannot control inflation. i can try to understand them and make predictions. the two things that control is asset allocation, the pie chart you just showed, but the second thing is how much they spend. tell them to focus on those two things. of course you want to try for the north of 7% returns. for decades, the common fund has generally been achievable. it has been what difficult this decade because of the market corrections. julia: how did that i chart evolved -- how did that i chart evolve? valuations,rket given the gains we have already seen? that from your purse
a slightly different direction. one of the things about the nonprofit investor is they have to keep distributing. they cannot tighten their belts. they have to keep supporting their beneficiaries. if that is the case, the most difficult thing for them is if they have a very dramatic downturn in the market and it stays there. , chiefatherine keating executive officer of commonfund, thank you so much for your insight. unlocking the value of php. dazzling activists. from new york, this is bloomberg. ♪
i am julia chatterley. lisa: and i am lisa abramowicz. let's check headlines on first word news this hour with jessica summons. jessica: a group of florida student to survive the school shooting have made a trip to the state capital. the students left coral springs this afternoon and expect to arrive in tallahassee this evening. they plan to hold a rally at the state capitol building. tomorrow will mark one week since the gunmen killed 17 students and faculty at the high school. the trump administration is taken another shot at obamacare, clearing the way to a lower-cost alternative to comprehend of insurance plans. health insurers would be able to sell short-term policies that could last up to 12 months and would not have to meet obamacare's covers requirements. the head of the european union border agency is warning the number of migrants trying to reach europe to the mediterranean will remain high.
more are expected to arrive through spain. the director told reporters today overall members have decreased since 2015, when 1.8 million people entered europe, yet migrants are finding new ways to cross borders and forged documents are a major challenge. puerto rico got needed help in restoring electricity five months after hurricane maria blasted out much of the island. a loan has been up for the bankrupt power authority. loan,als want without the the utility would need to impose rolling blackouts. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. julia? julia: thank you. we are back with catherine keating of commonfund. just before the break, we were talking about helping your clients manage the dips and pullbacks we have seen.
flexibility seems important at that stage -- having such a huge chunk of assets tied to alternatives doesn't seem right. catherine: so the answer is it all depends. one of the things i said earlier is every investor needs to know where they are going and our investors know they need to distribute money. the worst thing that could happen is a big draw down and then having to reverse distribution. instarted market corrections 2001, 2008, and others as well. we have learned it has taken about two and a half years for the endowment to recover to the point where they are making the same level of distributions as before. do withare trying to asset allocations is see if we can shorten that -- shorten the period to when you get back to making the same level of distributions. what we have found is we have to change the asset allocation just they bit, just tweaks to get there, and interestingly enough, it means more in public stocks, more in liquid bonds, and a
little less in hedge funds and other alternatives. lisa: just to put this in perspective, harvard, for example, has come under pressure to put more money into etf and liquid funds rather than hedge funds. what is an appropriate hedge fund avocation for a very big and down that at this point versus where it has been historically? catherine: so, unfortunately, they are all different. i know you are going to hate it that i said that, but some gets get lotsifts -- some of gifts, some spend a lot of money, some don't. we think the appropriate allocation for hedge funds is around 10%. lisa: what was it five years ago? catherine: it could have been 20. to -- can see 20% is it typical allocation. if youdefined tweaking
are talking to clients about how they manage the portfolio. to what extent would you be for the equity portfolio versus reducing the alternative? catherine: if you are talking to clients about how they there will probably be more equity, as i said, more fixed income -- including some private credit, not just public markets -- a little bit less in hedge funds, and probably a little bit more in real assets, because they respond very well to spikes in inflation. lisa: so private credit, interestingly, is also a liquid. they are on long lockup. is your bias having to do with fees, lockups, the asset mix they usually invest in? catherine: when you look at hedge funds, if you chat -- track the index, you will see it follows equity markets pretty closely, and what that tells you is there is a lot of equity risk in the typical hedge fund. not necessarily all of them, but in many hedge funds there is a lot of risk. not need to get equity risk through a hedge fund. you can get it through an index fund and pay very little for it. we are looking for
differentiated sources of return you are not already getting through big allocations to stocks and bonds. that is what we have a smaller allocation. lisa: so what is a good example of a hedge fund strategy that you like? so, for instance, macro strategies. you'll will get different exposures in a macro hedge fund strategy then you will get with a typical stock-bond allocation. that would be one. relative value. credit related ones. you make it different exposures. is about making your portfolio as efficient as you can and this is part of that. lisa: we'll would be remiss to have you here and not talk about the -- my julia: we would be remiss to have you here and not talk about the tax overhaul. how are you talking to clients in reaction to the changes that have been made? catherine: there is a big portion of the tax bill that of course benefits companies with lower tax rates. that benefits shareholders and investors. there is part of the tax act that will benefit all of our
clients as investors, but the other part we focus on is the one that comes a little closer to home to them -- the standard deduction has been raised, and if you look at reporting around giving in this country, 80% of people that itemize have historically reported that they give gifts to shared versus 40% of the people that don't. philanthropic, -- country, and i do nothing by any means people are only motivated by taxes, but nonetheless, that is a big change, and most clients from -- mostudgets clients rely on 5% offering budgets from gifts, so we we watching to see how that turns out. lisa: quickly on endowments, where are the colleges and universities you advise -- where are they looking to cut? financial aid? project? catherine: if you look at service, they are not cutting. two thirds of and downs in -- endowments increased spending. lisa: something has to give. that is the answer. setting up quite a scenario.
lisa: this is bloomberg markets. i am lisa abramowicz. julia: i am julia chatterley. time for our tech stock report with abigail doolittle. the tech sector is among the top forming sectors today. what is the reason for the strength? abigail: you are right about that, julia. let's look at the etf that does track technology.
.7%, in fact, up six days out of the last seven days. to your question, julia, it is interesting we have a rebound in technology. not a lot has changed fundamentally, but we do have a rebound rally. it seems investors are buying high-quality technology names. if you look at apple, microsoft, alphabet, microsoft, old-school technology, trading well. interesting on apple -- on the selloff, the disappointing quarter they posted a couple weeks ago -- shares fell below the 200-day moving average. that tells us buyers disappeared after sellers stepped in. now it is above the 200-day moving average. it speaks to the swings we are seeing, not just an apple, but microsoft and alphabet because they were being sold during the two weeks of selling pressure and now they are snatched back up. one outperformance -- the chip space. we look at the stock, philadelphia semiconductor
index, we see a nice jump higher for the stoxx, of about 2% on the day. thend this jump higher for stoc, wek have some deal activity to talk abouts. we have the news that nxp's semi conductor bid from qualcomm has been raised to $128 per share. --xt --see annex t n up p up 20%. that is giving a tell went to the entire chip space. many investors are hopeful there will be more deals to come, and speaking of more deals to potentially come, broadcom has the $121 billion takeover bid for qualcomm that has been rejected so far. that will be a story we are following. another chip stock that is higher -- the stock of the hour, dia.
it is one of the top performers for the stoxx in the tech sector overall. behind us, getting the tailwind nxp the ncp news -- the noise, bitcoin is back about 11,000. pretty amazing. so much volatility in bitcoin. they make some of the chips used for bitcoin mining, mine of those tokens. lisa: chip drama. what is next for nvidia? abigail: it is interesting. no one knows how much revenue is from bitcoin. it is thought to be about 7%. if we take a look at g #btv 7824, you see a long-term chart. the technicals are interesting. this is a one-year chart. it puts into perspective the move. it does not look quite as
parabolic, but that is the big move up from below 1002 almost 20,000. you see the area of congestion -- that is a battle between the bulls and the bears. it cost the uptrend to break. it is still breaking right now. it is on the cusp whether buyers and take control. it suggests that despite a andund rally, bitcoin crypto is likely to go lower. julia: brilliant. to work and we will check in back later in the show. a sweeping indictment has 13 russian nationals and three entities. for the latest, let's bring in kevin cirilli, bloomberg's chief washington correspondent. great to have you with us. and about the significance what this means more broadly for the russian investigation. kevin: friday, you had the
30-place -- 30-page indictment. over the weekend you have the back and forth between secretary mattis and president trump, and then tuesday, after the holiday weekend, in the morning, another indictment drops. you have charges against him as rickas the news that gates, paul manafort's deputy -- paul manafort in the previous trump campaign chairman -- pleading guilty. rick gates, paul manafort'sall of thb mueller's team of investigators are focusing heavily on paul dealingsand business with businesses surrounding the previous trump campaign chairman's business apparatus and support of the pro-russia faction in you dealings with businesses caring. -- in ukraine. they are also continuing to double down over this widespread digital move on behalf of the russians to influence -- as far back as 2014 -- the democratic process here in the united states. work 24, kevin, you
hours a day and you talk with a lot of congresspeople. what is the mood like, and what is the word from republicans on capitol hill? what are they talking about as they watch the indictments and the guilty pleas? kevin: congress is out, but i can tell you senate judiciary committee chairman chuck grassley -- the chairman of the heiciary committee -- tweeted out over the weekend he wants president trump to make sure what happened in the last election cycle with the russians meddling, with the spreading of social media accusing companies like facebook to divide americans amongst race, gender, orientation, to stop. that tweet is indicative of where a lot of republicans are right now on capitol hill. that said, lisa, we should note that secretary mattis speaking on saturday saying there is no doubt that russia meddled in the election -- he got a response to president on twitter sunday
morning saying what the secretary forgot to say is that there was no collusion. that did not sit well with president trump. all of thatmorning saying what e secretary forgot is mixed messa. there is increasing skepticism and frustration, and really, a sense of wonderment in terms of what exactly this administration is doing to bolster cybersecurity protection heading into 2018 to prevent what happened during the last cycle and into the next. the final thing i will say, republicans, every source i have spoken to, zeroing in on the word unwittingly, with the indictment on friday, saying there is no evidence to suggest that anyone within the president's inner circle new or colluded with, in any shape or form, the russians. julia: i am so glad you brought that up cause for me that is the critical angle here. what is the strategy for the midterms? for tackling this kind of interference? who is on the front line beyond the big tech companies we know now were dramatically involved? is there a strategy in place? kevin: so, on capitol hill,
julia, there is a bipartisan piece of education being chaired by the likes of a leading democrat, where they would be better able to protect the voting processes because you have to remember the stakes are the ones that control each of the elections. mean, look, the cybersecurity issue, whether you go back to the obama administration or follow it into is being done -- a lot of folks are speaking out against that including senator james lankford, a republican on the senate intelligence committee. these conversations have been ongoing. earlier today president trump tweeting out he feels he has been tougher on russia then the obama administration, but look, i covered that campaign. i remember when james comey had the press conference and he released the memo. you had indictment on friday. another indictment today. no timetable, no warning.
we are months out from the election. a lot of folks i talked to feel the investigation as far from over and as a result of that, these indictments could be a political wildcard for quite some time to come. lisa: kevin cirilli, we know you will be covering -- covering them we will be hearing from you. kevin cirilli, thank you so much. all --up, citation are generale's thinker is back. this is bloomberg. ♪
ruled the u.s. justice department does not have to identify whether there were indications between the white house and attorney general jeff sessions. --t has suggested that at&t that presidents -- president trump's dislike of cnn and time warner has persuaded the deal. verdict has been lost to gillead from mark. themorting said they owed for a patent on the drugs. gilead said the patent was invalid. ceo's tenure missed targets. and that is your business flash update. julia: let's stay in the world
of banking. earlier on bloomberg, the section ceo discovered how european banks are faring now. oudea: we suffered from volatility in global markets that was not good. we entered into something of a progressive normalization. the normalization of the monetary policy, the central bank, i think we are exiting. david: how are you position your bank to take the most advantage without having undue risk? frederic: we are building businesses for the long-term, in which our client-driven. we have in equity derivatives to categories of activities -- structured products that are updated for investors. they are not that sensitive to the volatility. they are fundamentally meeting client demand. then the volume business.
to see toll environment better volumes, particularly on the equity derivative said. al: are you taking on more alix: i've taken a more risk? they would be either decreased or remain steady. frederic: they are remaining low. we have so much constraints. lessons have been drawn. we don't increase the risk. fundamentally, we are developing client activity. david: is that a good thing for your bank, work to severe -- is it constraining you as we move into a more normalized environment? frederic: we have no choice anyway. we have to live with significant regulation, not just on capital, but also in europe we have other regulations on data. the most important thing for me is beyond the long-term opportunity in europe's
financial markets, we are going to probably complete the banking union. we will probably see markets. there are long-term opportunities and we can take advantage of this. on top of this, the economic activity is good in europe. we have growth rates we have not seen for the last, maybe, 10 years, across the eurozone. that is an opportunity for banks, and also we see, hopefully, rates rising. we suffer dramatically from negative rates. he did not have that in the u.s.. it is painful, i can tell you, and progressively, we have had more inflation and in the exit of monetary policy we will see a much better environment. lisa: it is not just a steeper -- alix: it is not just a steeper curb -- curve. you need to get out of the environment. what is your plan? frederic: our plan is we will exit the negative territory. with growth rates at two point 3%, 2.4% in the eurozone for the next two years, normally you
should we progressively lower in employment rate, which means also higher inflation on wages, and i think the outlook is much better and the monetary -- the central banks would like to exit progressively to avoid any asset bubble, any distortion on prices. david: as you look forward to a european banking union, which you anticipated this point, does that mean socgen has to get bigger, and in particular will there be consolidation? what you anticipate? frederic: the completion of the european banking unit will be at the top of the agenda of governments. once we have effectively the german governments, there will be discussions on what the next step for the eurozone, in particular on the banking union. long-term, yes, i think you will have less banks. the priority short-term is to fundamentally transform the businesses, particularly in light of the new technologies. in 10 year's time, yes, will have less banks and we want to
be in a position of strength to take avenge of opportunities if any. lisa: that was societe generale 's ceo speaking earlier on bloomberg. a lot of questions to remain for the whole banking industry, particularly in europe. coming up, getting the deal done -- we speak with the cohead of m and a ubs about the climate for mergers and acquisitions. this is bloomberg, from new york. ♪
retail. under pressure like never before. and its connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. 3:00 p.m. in new york, 12:00 p.m. in san francisco, and it :00 p.m. in london. i am julia chatterley. lisa: and i am lisa abramowicz, in for scarlet fu. welcome to bloomberg markets.
julia: we are live in bloomberg world headquarters in new york over the next hour. here are the top stories we're covering on the bloomberg and around the world. the the debt floodgates -- u.s. treasury sells around $180 billion of debt today. yields on short-term notes hit levels unseen since the financial crisis. feeling the deal -- we speak to m&a at ubs about the changing climate for mergers and acquisitions. and new charges for robert mueller's russia pro. white house press secretary sarah sanders is due to speak shortly we will bring about it. we are one hour from the close of trading. we have a check on markets with abigail doolittle. abigail: you are right about that -- bears are stepping in.
the dow is down nearly 1%, near session lows with the dow and the s&p 500 on pace for their worst day in almost two weeks. we have had lots of volatility recently, the big rebound recently after two weeks of selling pressure. we are seeing the bears take control to a small degree and .9%,ech-heavy nasdaq up giving back many of the gains from earlier. when we happen to the bloomberg. we seek just one sector higher -- lots of red. 10 of 11 sectors lower. tech up top, up just 4/10 of 1%. the bears again, stepping in after all volatility we have seen. a little bit of uncertainty here. it'll be in see how this week plays out. another day of mixed trading action following next trading action on friday, but behind the texturing, take a look at n
etapp. a rebound there. we see lam research, applied materials, and analog devices all up, accompanied in the chip space within his tailwind that nxp semiconductors bid from qualcomm was raised. plus, analog devices raise that bernstein to an outperform on valuation. let's take a look at one of the stocks faring less well, not for chips, but in the consumer discretionary space. this is a two-day chart to show the gap we are seeing today on the news that the gap brand ceo jeff kirwan is stepping down. they are looking for another ceo. brand has been doing less well recently. old navy better. they are trying to correct that problem, perhaps, by searching for a new ceo. finally, despite the fact that we have stocks selling off at this point for the most part, there's not a fear -- a lot of fear in the markets.
bonds are selling off. is selling off -- yen selling off relative to the dollar. interesting to see a mixed message between the decline your session-lows for stocks, but the havens not registering it right now. lisa: that is interesting. thank you so much. let's get the first word news with jessica summers. jessica: the supreme court is rejecting two challenges by guns rights groups, both related to california laws regulating the sales of firearms. in one case, the night circuit court of appeals upheld the $19 fee for sale and transfer of guns. people waituld make 10 days to buy a gun even if one and the own background check was completed sooner. the action came less than a week after a gunman killed 17 people at a florida high school. one and the background check was completed
sooner. president trump will host the swedish prime minister at the white house next month. the white house says mr. trump looks forward to exchanging views on deepening ties between the u.s. and sweden with a focus on trade and vestment. the leaders are also expected to discuss advancing global security and achieving shared defense globals -- goals. the billina koch brothers have rejected a proposal to raise the gasoline tax by $.25 a gallon. to groups tied to the brothers have released a report that it would fall hardest on states president trump won. agency u.n. children's has singled out pakistan as the riskiest country for newborns. according to a unicef report out today, 46 out of every 1000 children born in pakistan dies at birth. the report says after afghanistan -- pakistan, the republic is second.
global -- global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. julia? julia: thanks very much, jessica. time for the bloomberg deals report. another twist in the semi conductor saga -- qualcomm has raised its offer for nxp two $127.60 per share. that was enough to secure support from shareholders including activist elliott management, who owns 20% of nxp stock. qualcomm fell on the news pictures have recovered. joining us a senior deals reporter at hammond. we know how much i love this story. the plot thickens. a combination of deterrence/poison skills. how will this be for qualcomm? it theys adjusting,
said if they would pay over the initial offer, the deal would not happen. now they have a question -- do they push ahead with their deal, try to tweak the terms, or do they do this march to take over the board and somehow do something to change this nxp deal? the challenge of the if it gets close before them, there is very little broadcom can do. they can and up control and the board of qualcomm but not want to combine companies. lisa: talk about that -- controlling the board of qualcomm. and you walk us through where that has been? ed: there were some interesting developments over the weekend. they were advised sure others on how to vote. both came out in favor of broadcom. they essentially recommended that all six of the broadcom directors get elected to the qualcomm board, which would give broadcom's nominees majority control of the board. lisa: than the board would most deftly try to push that deal through, no?
ed: that would be the assumption, though not necessarily always the way these things work out. board, yes, the theory would be they would approve the deal, whether they approve it at exactly the price proposed, or suggest that the value are presented something higher on the table. julia: whether broadcom is willing to adjust at this stage. ed: they said they are not. they basically said every dollar ,hat qualcomm overpays for nxp which is not relevant, is a dollar they would take away from shareholders if they get the deal done. what at a certain point, is the credibility -- what credibility will they have left. we will leave that question. albertsons, write it -- talk about this deal. amazon disrupted the space
last year. themis really a way of getting into the markets, reversing markets into write it. -- right aid. it is what is left. so, they will use this as a way to list albertsons and get this vehicle they held for 12 years, which for a private equity fund is monstrously long. julia: great to get your perspective. do not move a muscle. joining us for his perspective and a bit of a contrarian view -- underappreciated, let's call it, on the tax reform package, larry grafstein. still with us, ed hammond. great to have you with us. let's talk about your views on the impact of the overhaul because it is underappreciated, and we use the term together off-camera, what you think the impact will be on spending
versus m&a? is a: i think tax reform big positive for m&a generally and you have a lot of guests that have commented on that. one of the less appreciated aspect is the incentive to expense capital expenditures in certain industries. if you think about m&a, it is fundamentally a allocation decision for corporate between buying back stock, paying dividends, investing, or perhaps buying. there is an in-built incentive buy.eople to build versus often when we announced deals with clients, we talk about the benefits of buying versus building.
on the expense of capx, and even though congress has extended it, you cannot count on that happening. we do know there is a benefit to spending money now from a tax perspective. ed: i want to comment on this because tax reform has been built as the great white hope for the m&a market and its continuing boom. is it really eat -- either all -- either or? will you build or buy, or can you do both? .arry: i think it is and it is not change the dynamics and drive volatility across sectors. i think, for the first time in a while, there is a dialogue going on about bringing full or capital projects to get the benefit. julia: they can both grow. larry: absolutely. lisa: i am struggling with why companies -- why they haven't done them yet, these capital expenditures. you are saying they will bring them forward. . . with really low interest rates. haven't they done the projects? larry: great point, but the bill came in december 22. there is an extra kicker. lisa: have you seen company starting to deploy the cash? cfos: we have heard from
and ceos about a range of andgs, of course m&a overall strategic positioning, that they are try to take advantage of this accelerated benefit of expensing capital. ed: i want to pick up on volatility, a huge theme this year. it seems to have called down the last few days, for one thing that seem to be happening as we had a lot of cash deals, sellers seen prices fluctuate meaningfully. how do you advise bigger clients in terms of what is fair value when you have everything moving so much? ed: there is always the financial, intrinsic value you assess when you look at a transaction either as a buyer or seller. there is also the psychological dimension. one of the things that happens when you reach volatility, like we had the last few weeks, people always think about a headline number, and if their stock was trading at $67 a few weeks ago and now at $62, do
they want to transact at a lower level? of course, on equity deals, it is less relevant. you are really negotiating over a share of the enlarged pie -- what is the ownership each company gets? deal,mething like a cash it does tend to lock in a headline price. there is always a little bit of hesitation to pull the trigger, especially since many deals come down -- as you know from your reporting -- from the last couple of issues, the last couple of dollars a share, always the toughest. julia: i want to talk about asia-pacific because you guys and dominic the rankings in terms of deal flow. what is your sense whether it is the regulatory concerns or the influence -- what are your thoughts here? larry: i think there is an outbound and an inbound dimension. the inbound dimension is
cynthia's. it has been in existence for a long time. there's legislation circulating in the contest that couldcynth'. it has been expand some of the restrictions, or perhaps a better way of putting it is enhancing the scrutiny of certain types of transactions coming into the u.s.. so, to the extent -- and there does seem to be the partisan support for that according to people we talked to in washington. that is, kind of, potentially, giving pause to people. aboutalways like to talk -- they seem to be targeting china's deal coming into the u.s.. we put up this chart that shows the fall off coming into the u.s. as buyers. is this something that is being felt across the world? you see european buyers slowdown activity, buyers from asia-pacific, and not just china. is this having a wider effect than intended? larry: it is a good question, and it is a little early to tell. generally people are fairly optimistic about the antitrust dimensions of review in a
republican administration. on the other hand, and there have been some, as i was saying, outbound dimensions to this -- not just the u.s., but china itself put in restrictions on an enhanced level of scrutiny on their side as to outbound investment beyond china. i do think when you look at the two of them together, there is still a desire to do deals in the u.s., but also a prudence about some of the issues. lisa: where? what areas are asian clients targeting the u.s.? larry: generally, we have to differentiate among geographies. for some of the chinese investors, the conglomerate type deals, activities have slowed down. whether it has been some of the more prominent acquirers that have been reported to reconfiguring themselves and slowing down a little bit, you know, that has clearly had a dampening impact for those types of buyers.
for the strategic, cross-border deals in certain industries there is still a desire to do things. julia: where did they see the most opportunity in the u.s.? larry: interesting they come a year to date, the number of deals in asia is flat, but the number of deals in both the u.s. and europe is down a little bit. dollar value is up both in europe and in the u.s., so asian activity within asia is still, i think, very strong. specifics, the industrial spec -- the industrial sector, any industry that has a global dimension to it, is still in play, really. ed: just a last question, 20, will it be a better or worse year for m&a? larry: i think a better year. we might have a pause while the market settles itself, but it feels like there is momentum conference. one of the interesting things about this part of the cycle, if you go back a few years, m&a was just an by a lack of confidence in secular growth. now, traditionally, m&a cycles
always peak when ceo and board conference is at its highest. it feels like it is higher than it was. lisa: we have reached that peak. they do so much to larry grafstein, and of course, our deals to ed hammond, reporter for bloomberg. quick check of the markets right now. there was a bit of softness in stocks. it is accelerating. you see the dow jones now down more than 1%, while the s&p 500 is down more than .5%. actuallyyear yields rising, and the 10-year yield rising as well, though not as much could you see a flattening of the you -- yield curve. julia: wilmont a real weight on the trade today. we will continue to discuss all the issues. from new york, this is bloomberg. ♪
is bloomberg markets. i am julia chatterley. lisa: and i am lisa abramowicz. it is time for the bloomberg business flash, a look at some of the biggest business stories in the news right now. scotchgardttle a lawsuit with minnesota. the case is a culmination of a 2010 lawsuit that alleged natural resource damage from a scotchgard angry and -- ingredient. the jury trial was excepted to run four weeks, but came to an abrupt halt today. an announcement is pending. gap brand's chief executive officer jeff kirwan has stepped down. 2013,taking the helm in he has failed to turn around performance. 's gap's comparable sales have
fallen for 13 of the last 15 quarters. the second vice president will oversee the unit in the interim. notu.s. tax overhaul did turn out to be an automatic overhaul for utilities. duke energy plans to sell stock in regard -- response to the tax cut. it is required to pass savings from lower rates on to its customers. and that is your business flash update. julia: let's get a quick look at the markets and the price action we are seeing. i'm showing you the dow jones of the session. we are weakening as we head toward the close. we really have lost steam. we had session highs around midday. we were focused on what is going on in the rates market. the pressure -- u.s. two-year yields and 10-year yields backing up by three basis points, one basis point respectively. a lot to digest this week in terms of bond issuance.
mention that point, too, of course, but it is walmart losing the most ground they have lost in the session in two years, one of the critical factors here for the dow jones. plenty more discussion of walmart, the rates market, of what is going on for investors and what we should be focusing on coming right up. this is bloomberg. ♪
abigail: it is time for options insight. i am abigail doolittle. joining me, kevin kelly. things were taken the time as always. more volatility. earlier we had stocks early -- higher. the nasdaq up more than .5%, now all the major averages lower. more of the same what we had the last few expected what you think is going on? kevin kelly: i think it's interesting we look at the options market.
it shows you volatility will be here to stay for the next 30 days and that is because the vix is higher than its three-month indicator. market that is a painter's are seen volatility will be low between months from now than it is today. that is an inverted vix curves. you don't normally see that. that rarely happens. a less time we saw that, you have to go back to november, 2016. it takes a while for these things to play out. another thing to play out, you look at v six, the volatility of volatility, it has really spiked out, above its historical average of 121. we have not seen the number 177, even back in 2008-2009 volatility came rolling back during the crisis. vvix number that shows you we will have volatility for a while. abigail: what does it mean for stocks? choppiness? i think the market is trying to gauge risk with a couple of big things happening, if the cost of capital going up on the 10-year treasury
addressing what is happening with cpi. cpi is coming in at a high number. markets are trying to a digest -- trying to digest how they will assess risk. if rates rise, a new low on the s&p 500? kevin: possibly to that is why you want to go into compression stocks. abigail: and turning to your trade --abigail: delta airlines, i am not sure if it qualifies as value. kevin: it does provide value and 11 times pe, eight times next year's. elevated volatility is up at 30%. so thestock here, september 60 doubt -- sell the $60 september call. it is the most conservative options trade you can do in a great way to play it. abigail: great stuff. at some of theok price action we are seeing today. we are trading around the lows of the dow. walmart, as i mentioned, and we'll continue to discuss the
details, a real drag on the dow. we will discuss that in "what'd you miss?" all taken a look at the pullback you have seen. lisa: actually yields are off their highly -- earlier highs on the day. you are seeing people go back a little bit into the longers as a haven play. julia: yes. $180 billion worth of debt taken down. lisa: in an hour. do the u.s. paid up to something, you have the yields on the three-month and six-month t-bills at the highest level since 2008. julia: a lot to digest for investors, whether it is the rates market or the equity market, we will continue to discuss on "what'd you miss?" . this is bloomberg. ♪
they admitted during a court appearance in washington today that he misled investigators about the last time you spoke with rick gates. they wanted the fourth person to plead guilty in the wide-ranging probe so far. a group of students who survived a florida school shooting have begun a 400 mile trip to the state capital. they want to pressure lawmakers to act on a sweeping passage of gun control laws. the students expect to arrive in tallahassee this evening. they plan to hold a rally tomorrow at the state capitol building. tomorrow will mark one week since a gunman killed 17 students and faculty at a parkland area high school. the proposed stimulus pipeline, forcing documents to be turned over because of trump's approval. mr