tv Bloomberg Markets Americas Bloomberg May 2, 2018 1:30pm-2:01pm EDT
shery: live from bloomberg headquarters in new york. mixed ahead of the fed decision as inflation bounces back to its 2% target. how will chairman powell described rice pressures question mark apple amazes , strongest revenue growth since 2015 and returning more money to shareholders from its mountain of cash. amanda: reaching for a nafta agreement this month. from a former u.s. ambassador to canada. let's kick things off with a check of the major averages. we see u.s. stocks mixed. the dow is unchanged. the s&p 500 also keeping its level.
we are seeing pressure for health care and financial stocks. well aftering pretty the strong results from apple. nasdaq is up .2%. amanda: lots of treading water ahead of the 2:00 p.m. fed move. the u.s. dollar is not treading water. that has the canadian dollar following as the u.s. gains ahead of the fed. this is the spread between the two-year and the 10-year u.s. treasury as massive supply floods the market, $70 billion in new treasuries. a historic flattening in this as the fed may try to move at the front end of that. it is the nearest spread in a long time. shery: right. let's get to apple. tim cook saying he has a plan to withstand the slowdown in mobile phone sales.
apple rising today to the highest level since after posting iphone sales in line with analyst estimates. our guest joining us now from san francisco. tom, give us the t -- that key takeaways. we see apple not so susceptible to industry trends when it comes to the smartphone sphere. tom: they have found a way to withstand it. overall, i'm talking about across the market, smartphone-to smartphone-to -- -smartphone boom is lagging. it contracted in the first quarter. some manufacturers faring better than others. apple being one of them. they met expectations for iphone sales. admittedly, those. were scaled back. they were lowered expectations, but they meant to them. they made bullish comments -- but they met the. comments.bullish
they showed strength in areas like services. they made the point that they are a $1.3 billion -- that there are 1.3 billion apple products that bring people in and they have been buying services, stories, music, using apple pay. all of these things are things that contribute to services revenue, which apple is on track to double in the next few years. so lots of things to be bullish about in those results. amanda: of course, that service revenue has higher-margin. buyback and higher dividend. although they are being generous, they are still sitting on a mountain of cash. you can see a declining for the first time in a long time, still about $250 billion. what do investors with the plan to be? tom: apple gave us a strong signal yesterday that more is coming.
a very big boost to their buyback and dividend program. it is a vote of confidence that apple is buying back so much of its stock. it is great for shareholders who want to know that they will have a steady dividend, a company that really believes in itself, that it's such a strong cash position. compared to some of the other big tech companies, they are not investing as much of their money in r&d. when you calculate it as a percentage of sales. some might look at that and say we like to know that apple is investing in innovation at the same pace as some of its other competitors or as aggressively as some of its competitors. for those investors looking for a solid return on their investment, they see that apple is the place to be right now. shery: the high-end pricing
strategy seems to have worked. sales the average iphone surged. yet, they are more -- the more moresive x was the successful product. tom: they talked about how the apple was the most popular each week in the march quarter, the was popular -- sorry, the x the most popular of their phones in the march quarter. we don't know how much better they did than the other devices in the roundup. nicely.up they did not come in at expectations. we don't know exactly what that breakdown was. plan anow that they do new lower-priced iphone in the
coming months, one that will have a lot of the characteristics of the x but at a much lower price point. i think they recognize that they need to accommodate people who are not willing to come out and spend a thousand dollars on an iphone. thank you for pointing out india. tim cook was very bullish on the prospects of india, an area where they have a lot more ground that they can cover in that region. there's a lot of potential for growth there. there are a lot of people who will be upgrading their phones in the coming months and years, going from feature phones to more high-priced phones, and apple wants to be that seller. shery: thank you so much for joining us. let's get the bloomberg first word news. mark: secretary of state mike pompeo received an enthusiastic reception at his ceremonial
swearing-in at the state department. president trump says his welcome -- reception at the agency time. trump told staffers to prepare for the diplomatic work ahead with north korea. president trump: doing things you don't even know about. right now, they are not even a glimmer your i'm. we have a -- a glimmer in your eye. we have a couple going that you don't know about that are very encouraging. mark: secretary pompeo was confirmed last week in the senate. today's ceremonial swearing makes him the 70th u.s. secretary of state. sarah huckabee sanders has confirmed that tight cotton -- t is retiring effectively at the end of this month. president trump may replace them with emmett flood.
the basque militant group is announcing it has completely dissolved all its structures after a 60-year armed independence campaign. the game in a letter to civil society groups. that letter dated april 16 was obtained by the associated press from sources close to the basque regional government after the spanish online newspaper published it today. it says it acknowledges its responsibility in failing to solve the basque "political killed 850 people in their campaign to create an independent basque state in northern spate -- northern spain and southern france. the president of the international red cross is the war in syria has entered the post big battle arab. -- big battle era.
he spoke today in geneva. >> what we see today, at the end of the day, it is a relatively contingent territory control of the syrian government at the present moment, a relatively controlled area by turkey, and another controlled area by opposition groups and western supporters. mark: during the seven years of the syrian conflict, nearly 400,000 people have been killed. half of the country's population has been displaced by the violence. the prime minister of the netherlands says the european -- sayson has proposed the proposed budget is unacceptable. the dutch will have to pay much larger share. the netherlands is one of the wealthier governments that
gives more to the eu than he gets back. the new smaller eu must meet a smaller budget. this is bloomberg. ♪ -- global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. much.: thanks so coming up, the future of nafta. i sat down with bruce heyman. this is bloomberg. ♪
president trump warning about the effects of protectionism. as trump works to negotiate several trade deals, his move on tariffs could be a bargaining tactic. >> there isn't a strategy. manageda grossly miss -- mismanaged trade policy for the u.s. that falls on the shoulders of the ustr, commerce secretary. you need to have a strategy. you need something that is well thought out and clearly articulated. our of our allies or trading partners around the world even understand what the u.s. strategy is at this point. it's all tactics. -- if they have a longer game, nobody fully appreciates what it is. it's all now threats and bullying and harassment and innuendo. that's not an effective way to do trade policy. amanda:? >> the biggest problem with our partners and allies. canada is our best trading
partner in the world. when you do that, you have unintended consequences when you bully her friend of. we are allies -- bully your friend and partner. we are allies. we are allies on so many democratic causes that we work on together. when you aggregate agreements or make threats or hold an anvil over your partner's head, obviously, that is not a good way to treat a forever relationship. amanda: everyone is saying that it was due for an update. >> 25 years coming up in january. amanda: so this is not a terrible thing that? >> the obama administration felt all along that there were a number of things and after that should have been fixed or of rated. is that manyr that industries today that exist today did not even exist 25 years ago. so that makes complete sense. that we were going to accomplish that through tpp.
we were going to publish two things with tpp. was upgradingg and updating our north american trading relationships. but secondly, we have a counterbalance to china. this was a very important initiative for the obama administration. amanda: how important is the damage being done with the chinese relationship right now? >> it is hard to estimate what is actually taking place with china. you make threats, you pull them back, what is the administration trying to accomplish? the china is the issue. the chinese relationship is really not a trading partnership. is transactional, buying and selling. canada-u.s. relationship is very much a partnership, very integrated supply lines, common goals and objectives, shared ideals, shared thoughts and processes to how we do business together. the chinese relationship in these upcoming meetings will be very important. itself, i in and of
think the white house has dropped the ball on this one. amanda: janet pick it up in time? there is a deadline. >> there is always time because we can always work on things. but the problem is now they have kicked the can down the road and mexicanthe next -- the election in the u.s.. midterms that will be problematic now. -- u.s. midterms. that will be problematic now. amanda: the ministers left the table and went home. what does that tell you? fromom everyone body -- everybody i have spoken to, the deal they were talking about was an agreement to agree that a future deal would come together. i have been on wall street are to being u.s. ambassador for 34 years. we would not celebrate an agreement. we would celebrate a deal being closed. that's when he recalled closing deal -- closing dinners. this was premature. it's like mission accomplished premature. amanda: did anything happen in your view to get this done
before mexican elections? that's really soon. surly midterms, is there a chance -- surely midterms come is there a chance? be largereement is to enough that would require congressional vote. or they would be modifications. there are ways to move that ahead. i think what the u.s. has been asking for would rise to congressional approval. amanda: so far, trump has displayed a willingness to take action that may hurt his own economy and businesses in the united states. would we start to see some of the damage done by tariffs? >> i think he is making actions that are harming a lot of things at various ends of the spectrum. we all know that these tariffs announced on steel and aluminum were an impulsive reaction by him. he didn't notify commerce. he didn't notify state. he did not notify our allies around the world that
potentially be threatened by this. and now we are threatening under 232, which is supposed to be a defensive provision within the u.s. trade authority. to canada? canada is our most integrated defensive partner. makes no sense whatsoever. . sophie: they may be tactics -- amanda: they may be tactics and some say that it is right out of "art of the deal." but they may be working is seeing north korea and china. do the tactics work? >> i would sit down and say we have walked away from paris. i don't think anything is working there. we walked away from dhaka. he thought those -- from daca. he thought those tactics would work. he had a travel ban. that has not worked. he walked away from tpp. i think he is a quitter more than anything else. amanda: so many mixed signalsamanda: on this trade
file. the north american deal is not clear to me which one we should listen to. shery: we are hearing from the u.s. trade representative that we could a conclusion in the weeks. within the commerce secretary, wilbur ross, saying this could drag on for months. so conflicting signals, special when this huge delegation is headed to china. and who will they negotiate with? that will be a key issue. amanda: yeah. wilbur ross saying there were four major areas that still need negotiating. when it comes to autos, that is a big deal. the tpp would have modernized nafta. we would have avoided this. it would have avoided -- it would have updated a lot of things in the tpp. shery: all of this coming ahead of the midterm elections in november in the u.s., the july presidential elections in mexico. we are on a timeline and a schedule. coming up next, the federal
shery: we are moments away from the federal reserve interest-rate decision. we will be closely watching the commentary on inflation developments. how are they describing -- how they describe inflation will be tricky. >> that will be the focus of the statement. we have a lull in the first quarter of activity. after eight years that we his the inflation target of the fed, that 2%, the core deflator,
which they also watch, not quite there yet, but we can say we have arrived. that means they will have to update the language in the statement. we know this going into the meeting. so the update of what happened is what is relevant than the language around what they expect to happen going forward with inflation pressures. in the last meeting statement, they described a stabilizing around their objectives. analysts will be watching very closely to hear for any clues as to the degree to which they will tolerate and overshoot of the objective in the short to medium term. amanda: we have the central bank in canada concern about debt levels. is there a similar concern? when you look at the u.s. household debt levels, we see them hit records want to hit -- once again. mortgage is a big part of it. the trend is not great.
the economy? >> certainly increasing debt levels will make the economy more sensitive to those interest-rate increases. i'm glad you asked that question. i brought a couple of charts along with me. if we go to the first chart, that highlights the issue here in the u.s. we can see debt levels, household liabilities above their prerecession peak. however, we should look at debt levels in isolation. as we go to chart number two, we need to look at debt levels relative to income. we can see that personal income is actually above prerecession levels as well. so what we should do instead, let's factor these two trends together and look at debt to income ratios, which is what i brought along in turn number three. i constructed one from the two prior charts. we see the debt to disposable income ratio.
we can see we are well below where leveraged households were or overleveraged households were prior to the great recession. this tells us we shouldn't be as concerned about household leverage issues going forward. a robust economy with healthy wage and salary gains and personal income growth more broadly makes thes debt levels more manageablee. shery: i will toss one quick chart your way. mortgages are still the biggest component of household debt. high.re still hitting take a look at the delinquency rates. they have plummeted, but they are starting to kick up. are we worried about that? >> i don't think we should be too concerned about the optic. i think maybe we are just -- the uptick. i think we are just bottoming on the trend. the delinquency rates are moving with the unemployment rate.
i don't see the and implement rate trending higher in contributing to the loan rates. even as early as this friday, we will see the unemployment rate falls the 4% on friday and maybe even below 4% as we get to midyear. amanda: thanks, carl. shery: we have full coverage of the fed decision in just a few moments. before we get to that decision, let's get a quick check of the major averages. we see u.s. stocks. back some of the earlier declines. fall coverage of the fed decision coming up next. this is bloomberg. ♪ that he: this is a's bestial
report on the fed decision. tom, let's get started. we will not get a rate hike. tom: june 13 and august 1. that is what everybody is doing. i don't like it. i get it. it is a debt meeting, but we will not do that today. wethat will frame us out to get the june 13. scarlet: we are joined by jeffrey rosenberg. what are you focused on? >> the curve reaction. there is not a lot of surprises here. how the market interprets the upgrading is it more on changing the near-term path, or expectations. tom: what is so deportment is the data dependency -- so important is the data dependency. following every trend. are they -- >> they are following. they are clearly following.
jeffrey they want to embrace inflation. tom: they have got to see it. jeffrey that is how the fed is acting. it is very hard to get in front of it. scarlet: we are already at 2% inflation, once we are there, can we stay there or move faster to 2.5%? jeffrey: if you look at shorter-term measures, we are above 2%, but what is the longer run trajectory around that? do we sustain a higher level, come back down around target, they will have the language that expected go back down to 2%. scarlet: there is also cpi and different measures, will the integrate different measures? jeffrey: they look at a lot of different measures when assessing their inflation. tom: we are beginning to see, make america great again, 2.8%, 2.9% -- scarlet: i thought it was 4%. tom: who knows. does thisairman,
matter and can we sustain the good numbers we have seen recently? jeffrey: what matters is sustainability. that is a big debate. you know it well. we do not know where it will settle. we have a settled for 3% in 2018. the debate is the sustainability of that. if it is a sugar high, it could be a problem for the fed. tom: i want to talk about what we will do for the next hour, before we get to the fed decision. what is important is we have guests for conversation about some of these trends out to do 13. i am thrilled that diane swonk is here with us. scarlet: she will be a key guest. we will also hear from scott minerd. he is more bearish. tom: we can break news. maybe they are moving to nashville. scarlet: i'm not sure that is the one that will happen. we will keep an eye on that. data check as we look ahead to the fed decision due out at 2:00 p.m. eastern time. equities all over the place right now. you can see the s&p is a little
bit lower. the nasdaq is higher by 1/10 of 1% when you look at apple results. you see prices moving down, so yields are moving higher. now michael mckee. michael: it is a decision from the fed, the benchmark rate range unchanged at 1.5%-three .25%, and a minor tweak to the language come although it could be an important one. with the pce price index now at 2%, policymakers say "both inflation and inflation for items other than food and energy have moved close to 2%." they drop their pledge to monitor inflation developments on aly and say, "inflation 12 month basis is expected to run near the committee's symmetric 2% objective over the medium-term." the fed is telling you that the inflation is no longer a concern,