Skip to main content

tv   Bloomberg Markets Americas  Bloomberg  May 14, 2018 2:00pm-3:30pm EDT

2:00 pm
scarlet: we are live in new york over the next hour. we aree top stories covering from around the world. casino stocks rally as the supreme court strikes down a ban on sports betting. change of heart, president trump throws a lifeline to the te -- eiseman's next to short. the man behind the big short says the junior and -- german lender is this bank. mas gains and -- modest gains and big caps. abigail: a very modest to small gain for the three major averages or the dow, the s&p 500 and the nasdaq, investors taking a breather after last week's big rally for those major averages and the same is true for the
2:01 pm
russell 2000, but in the other direction and that could have to do with the fact that trade tensions seem to be easing just a bit this week between the u.s. and china and the russell 2000 is comprised of small-cap companies that are based more so on domestic basis from revenue perspective, so it is a little bit of weakness, interest into note. for the gaming rally, take a look at many of the gaming stocks sharply higher. these are concealed companies that have casinos outside of las vegas in addition to las vegas for a few of them, including caesars and mgm resorts but what really stands out here is the supreme court reversing or coming down on striking down a decade-long rule law that did single sports events. now it's leading up to the it is likelyalize within a few weeks to conceive is opening up in new jersey, home to atlantic city and procedures and mgm resorts really dominate the atlantic city gaming scene.
2:02 pm
we see a nice rally there. we also see a rally for some of the marijuana related stocks, canopy growth of 8%, this is canada's biggest marijuana company and they've applied to be thecity first cost producer - pot producer to listen the new york stock exchange. they are hoping this will attract institutional investors and they closed a deal with constellation brands with a small rally. where we don't have a rally is calvin. take a look at the small read. pace for the worst day since july 2017 as elliott management has exited its stake the 4.8 percent stake earlier this year and the company elliott management has push for changes including a potential sale but now it seems like not a lot happened. as we take a look at this very interest in terminal, you can see this using the gtb function, this is a fancy way of sayingcos
2:03 pm
push for changes including a potential sale but now it seems like not a lot happened. the yield curve is flattening and up top we have the 10 year yield over the last year of 126 basis points or about 1.3%. the 10 year yield and yellow of 62 basis points. the 30 year of just 12 basis points and the flattening yield peoples a worry for some , a possible recession, it's interesting way to take a look at that move. lisa: thank you. let's get a look on first word news with mark crumpton. mark: deadly fighting took place along the israeli-palestinian border, president trump's top aides and supporters celebrated the opening of the new u.s. embassy in jerusalem. the u.s. ambassador to israel david friedman address the gathering which was held on the 17th anniversary of israel's creation. >> 23 long years have passed since the transfer of the embassy became the law of the land. but today, we keep our promise to the american people and we extend to israel the same right we extend to every other nation.
2:04 pm
the right to designate its capital city. message,ideotaped president trump said the u.s. remains quote fully committed to pursuing a mideast peace deal. the mc move was welcomed by israel by has angered palestinians who claim east jerusalem as their capital. violence clashes continue today on the gaza border at least 52 people were killed in the deadliest day in gaza since 2014. in iraq, a shiite cleric who once fought the u.s. took a surprise lead in early election is alsoin a coalition said to easily win control of baghdad. he's a former militia commander target the political of them was run over corruption and it could take months for a new government to be formed. the u.s. supreme court opened the door to gambling on individual sporting events. justices struck down a federal law that is that unconstitutionally forced states to maintain laws outlawing gambling.
2:05 pm
it will likely lead to a race among states to attract billions of dollars in legal wages. the hungarian prime minister says his country's strong opposition to allowing migrants into europe does not mean that hungarians quote have hearts of stone. his polish counterpart defended ,he refusal to accept refugees a stance that has been in conflict with the european union. both leaders of their nations are helping people in africa and the middle east in or closer to their native lands, insisting this was a better way to adjust -- address migration. global news, 24 hours a day, on-air, online at tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. scarlet: thank you, mark. let's get back to sports betting. the supreme court striking down the federal statute freeing individual states to authorize gambling on sporting events as they see fit.
2:06 pm
we are joined now by ira good way and you have been writing about this. it opens the door for states to allow betting on sporting activities and we know the new be enactedously will immediately because they were the state the challenge the existing law that how quickly will other states come in? ira: you have five states, new ,ersey is in there, nevada delaware already had some provisions that you have five states on top of those that have ordered pass laws that said if what happened today happened, we will get in on it. new york, connecticut, pennsylvania, west virginia, mississippi are all primed to do it and many others who want to bills.and are working on the best guess by 2023, 32 states with $6 billion revenue industry. scarlet: the ruling was a lot less narrow than what people expected. the best guess by 2023, 32 what were people expecting? he could've gone one of two
2:07 pm
ways, the constitutionality of the federal law completely falls in the federal law at the free-for-all for states are you could've had it ruled in a way that said new jersey can go forward when other states what about the stop and reconsider. this is the best possible outcome for the sports betting industry because there's really no no holds barred on a state level is the federal government wants to get in and do something else now. scarlet: i was struck what was reading stories about just a much illegal betting there actually is, some estimates put inat $150 billion the year illegal sports bets. is all this money going to just transfer to the scientific gaming and the mgm of the world? amanda: how profitable is it? not a hugely profitable businesses gaming goes, table games are much better. of thatare right, a lot business is not going to immediately flow into legal operators. lisa: there will still be
2:08 pm
quarter -- like markets. charge taxes or tell your spouse, there's a lot of advantages and they extend credit. scarlet: do you really want to be taking benefit -- credit? ira: the other side of credit is debt. scarlet: and breaking the cap. ira: there are advantages to the black market they will be resilient in the face of this. the larger opportunity from speaking with bookmakers like william hill already operates in nevada with the u.k. book and is getting ready in new jersey, they have been one of the first members on this and they see the larger opportunity not and grabbing people from the black market which they definitely want to do, but in bringing people who are really better us now. casual betting, there will be new ways to reach people who like sports and would consider a wager now and again. you can reach more of them and reach the more directly. they think that where the real money will be and that's where they will be able to bring in that's matching what you
2:09 pm
are saying. scarlet: the nba, and other professional sports league have a question what they call national framework to avoid state-by-state peculiarities. the senate of federal law and if so, what's the appetite for that to happen? ira: the leagues are aligned, they want a federal law and they wanted to make sure they can maintain the integrity to their sports and there are some risks for them with match fixing the come with betting and they want to be able to have a hand in shaping the rules and they also wanted to make sure they get a piece of the pie, they want perhaps to take a fee off the top of every bet on their sports. they also probably want to make the betting operators use official data feeds they can charge for. them's opportunities for to make money on this and they want make sure there's a legal framework that allows them to do that. about -- lisa:nk
2:10 pm
you think about all of you will try to get ahead in this, it's one be messy. scarlet: you have the nhl and nfl soon with 15 in las vegas. ira: the nfl season in the fall is when you will see this happen. note that programming draft king's studio jason robbins will be joining us at 4:40 p.m. with more on how that is a sports could change and it could help his business. carrots and sticks, president trump says he wants to help chinese check giant -- tech giant zte. this is bloomberg. ♪
2:11 pm
2:12 pm
lisa: this is "bloomberg
2:13 pm
markets," on lisa abramowicz. scarlet: i'm scarlet fu. lisa: donald trump offering a line to zte as they send their top economic advisor to washington. caitlin, wherey to begin. let's start with what's going on right now. we heard from wilbur ross, head of the commerce department which is actually the one who implemented the sanctions and the ban on zte. where we from his perspective? caitlin: a few moments ago, it seems like the cover secretary was trying walk back this promise the president gave over the weekend as a stunning promise that the u.s. is going to make sure that zte doesn't go out of business. last month when the commerce department put in place this big sanction and supplier van, they took pains to say this was not
2:14 pm
part of these trade negotiations with the tariffs and other trade issues that are going on between the u.s. and china, trump's message over the weekend was really very different. he is really trying to say everything is on the table here and it's putting ross another trade negotiators in washington this weekend in an awkward and what sort of leverage they have available for talks going forward. lisa: it looks like the left hand is not talk to the right hand. in terms of timing, why now? did this come of as a request from the chinese delegation in trade discussions? is there a quid pro quo here, where china says you help zte and we will approve the purchase of semiconductors? caitlin: it's been reported that chinese government officials and said we are willing to talk on these multiple issues on the trade front, but going after zte
2:15 pm
and huawei is a nonstarter for us. we need to make sure we address that as well. that could be part of the timing and the high-level talk begins here in washington this week. trumpms like potentially is trying to start those off on a more positive note. andntially give investors the business unity something to be optimistic about. apart from that, it was a stunning unusual announcement from the president over the weekend. lisa: there's a big question out there -- what did president trump get for this concession? it does feel like a confession, a walking back of a hard-line. we have any insight into what that could be? caitlin: it's very hard to know. chinese officials are not being as out there in terms of what concessions they are giving up. this is a big piece of leverage and trade negotiators would like to hold on to it.
2:16 pm
there has been some reporting that chinese officials are looking or restarting looking at the merger -- the qualcomm launch with an xt semiconductors. the volume there has been much lower. there has been some reporting around potentially china will to notmore willing impose tariffs are you -- tariffs on exports. the chinese are not being upfront with concessions they are willing to give at this point. scarlet: who is leading the way when it comes to dealing with cta or huawei in terms of not following u.s. laws? is it the executive branch of the white house, i'm not clear? caitlin: i don't think it's clear. on this issue with the iran sanctions out of the commerce department would say they are taking the lead.
2:17 pm
that's a law enforcement and trade enforcement issue. this larger issue with tariffs and certainly that would be robert lighthizer and treasury secretary mnuchin would like their taking the lead. even if trump says we will take care of zte, in this trade deal, that's not going to ease off scrutiny and that company and while way are facing -- while way -- apart from these trade issues, there's a big national security concern. folks fromot of different agencies with hands that play in this. scarlet: imagine if you are on the chinese side and you need to talk to someone, or any other country. caitlin: or imagine wilbur ross and how he is trying to maneuver with this. scarlet: caitlin webber, thank you for joining us.
2:18 pm
still ahead, "curb your enthusiasm." why loriabout calvasina is trimming her equity. this is bloomberg. ♪
2:19 pm
2:20 pm
lisa: this is "bloomberg markets," i'm lisa abramowicz. scarlet: i'm scarlet fu. joining us is lori calvasina, rbc's head of equity strategy. stocks edging slightly higher led by large cap financials. at her price target for the s&p 500, she is turned it from 28 93,000. mr. calvasina: we wanted to tell people we are still constructive on socks -- on stocks the conditions have changed. butre still bullish, looking for an 8% gain instead of a 12% gain. scarlet: we had earnings seasons since then. your read on the first quarter
2:21 pm
has solid etf and sales growth and a solid be great, but not much and we have positive guidance for the rest of the year. mr. calvasina: it was interesting, you didn't see 2018 excitations budget off of the year at a whole. we did get better numbers for the first quarter but people aren't jacking up their estimates for the back half of the year. i think that says something. we dug in pretty deep and we think people are banking on margin expansion in the back half of the year. i understand why people don't want to get more bullish when they have that big ten. lisa: what do you say to people who say listen, we're back in goldilocks. it's fabulous, we had an inflation rate that wasn't that strong, hyperinflation off the table and stocks are in prime position. it's great earnings haven't been amazing with a look forward has been amazing. what you say to those people? mr. calvasina: we are in a year of fed tightening and it was abnormally high tightening have a we normally see contraction on the fed is hiking rates and people forgot about that. -- thatate into
2:22 pm
translates into its not that easy. people have been skittish. scarlet: have we seen the earnings growth -- peak earnings growth? mr. calvasina: it depends on how you crunch the data. we look at the year-over-year quarterly estimates and if you look at the sell side consensus, the sell side thinks we've already seen peak earnings growth. that helps explain why we weren't seeing that growth. lisa: we are about 90% of the earnings season and the big one this week's retailers, we will see retail earnings on thursday and tomorrow we get the u.s. retail data. what's your take on the sector, which has been uniquely punished? mr. calvasina: it's a weird sector, we had on downgrade watch, it's just weird. it's complete with different stuff inside it. you have media companies which analysts will tell you have the evaluations yet we see people rotating back in.
2:23 pm
it's going to move into a whole different sector later this year. then we have brick-and-mortar retail which looks super cheap and is trading at financial crisis lows on the valuation model. but the fundamental story can't get on its own way and then you have internet retailers that look crazily crowded. you can debate whether they look overvalued. it's just this weird match and then you through auto companies in. i do think you have to kind of weight until we get through these retailers before you can make any big declarations about reporting seasons. these are lower margin businesses and they are very hefty weights, they companies are coming -- bigger companies are coming. how concerned are you about higher gas prices eating into the disposable incomes of americans? mr. calvasina: it's a classic rule of thumb that you never want to be overweight energy and consumer discretionary at the same time. what's good for the energy sector is usually bad for the retailers. we will see how internet might , bute those rules of thumb i think that's another pressure point on the horizon.
2:24 pm
nobody saw this energy rally coming in the gas prices moving up as much as they have. it's a whole other headwind and we'll see what they say. scarlet: whether or not you peakve that we've seen earnings, enough people out there do, you can look through history and see what tends to happen in markets where there is this perception that that happens. you've shown it can be pretty turbulent. mr. calvasina: and going to use the word weird again i apologize for doing that. what self-identity telling you that we are seeing this ferocious move up in the great weight session the growth rate from 12. that is something you typically see early on in a recovery, that's not something you see late cycle. keep the rules of the road from the past with that in the back of your mind. it's a little different this time but generally what we have found is that you have that really high level in the moderates stays positive and doesn't get -- doesn't dip. they are up 12 and 24 months later, short-term pressures.
2:25 pm
where you see more onerous market reaction is where you go for strong positives down to negative territory. that's not what we are seeing in the forecast right now and that's really not my base case. i really can't see that happening reasonably anytime soon. that would be declaring the major peak in the whole market thing you would be looking for. lisa: in order to get outperformance later this year it's really sector specific test. where you see the most potential upside right now? mr. calvasina: i still like the energy sector, we like it's a january and we are watching it. so far the case seems to be getting stronger, not weaker. one thing it really has going for it is people have all been scared to death of the sector with growth managers saying it's a tiny weight in my benchmark and value guys are like i tried to buy that thing so many times, i've been burned in a failed another have to look at it and hedge funds have been moving in. we know that we clearly. i think there is still room for that. i think you have to have something other than energy lead. , wenot a big fan of tech
2:26 pm
moved to an underweight there. i'm still intrigued by the financials and they are not making it easy. they still have good valuations, the hedge funds have not moved back in and just about any macro tailwind like identify, rising rates in it's all good for that sector. of rbcori calvasina capital markets. the white house briefing is underway with the principal deputy press secretary rod shop -- rod shop -- you can watch the entire briefing on your terminal using the function live go. for more go to bloomberg.com. ♪
2:27 pm
2:28 pm
2:29 pm
lisa: -- abigail: you are watching "bloomberg markets." we dive into the futures market. we're looking at oil. oil has been bouncing around $70
2:30 pm
per barrel for more than five trading sessions. trading near its highest level since november of 2014, before the big part of the crew to crash. two fundamental factors. one is sanctions on iran. second, oil inventories on the decline. let's go to the bloomberg. we have a great chart. this is using the seasonality function on the doe crude oil inventory data. we're looking at the last five years, plus the five-your average in green. here is 2018. first, we are looking at a much smaller build intimate than what we have seen over the last several years, which means going into what our guest calls the driving month, there's not as much oil. it could be bullish for the price of crude. i would like to bring in michael
2:31 pm
o'rourke of jonestrading. we had talked about oil a couple times, and we have looked at charts and functions that suggest oil might decline. that is not happening. what do you think is happening here? >> what we had is the opec production cuts a couple years ago that have really worked. we have seen inventory levels come down. it is translating over here to the u.s. in contrast, we saw you as production increase, but it has not offset the opec production enough to keep inventory levels high. as they come down, it should be bullish for crude. abigail: speaking of opec, let's function intodous the conversation. >> this tells you everything you need to know about opec and their production. under 32 million in just 32 billion barrels a day. -- under 32 billion barrels a day. you see saudi arabia followed by iraq and iran.
2:32 pm
we talk about iranian sanctions potentially coming into play. that is potentially bullish factor that could push crude higher. this chart of here, you can see the run up in crude production. as production cuts took place, you see that that led to crude inventories being lowered. as long as opec use these production cuts in place, you have also seen the big decline in venezuela production down here, down about 35% over 18 months or so. unless opec starts ramping up production again, that and the iranian sanctions, it creates a bullish dynamic where think crude could move 10% higher. abigail: let's bring this into the futures market and use another great function, the market depth monitor, the front month contract. >> this is simply how crude
2:33 pm
trades. this is the nymex quote. every contract is worth about $70,000. here are the bids. there are the offers or the asks. if you want to buy, pain in the --if you want to sell, you have the bid. if you want to do more, you go threepenny. thursday liquidity here. if you want to trade crude, it is a great contract, very active. abigail: and super quick. $71, 10% higher. looking to take profits around $77, $78. >> i think soap the commodity is acting well, hitting multiyear highs -- i think so. the commodity is acting well, hitting multiyear highs. abigail: great insights, michael o'rourke them on oil. back to you. scarlet: thank you so much, of
2:34 pm
the bill -- abigail. now to first word news with mark crumpton. from the death toll clashes along the israeli-palestinian border now stands at 52. another 1200 palestinians have been wounded by israeli fire. the violence comes as the united states formally opened its new embassy in jerusalem. the u.n. secretary-general expressed concern about the escalating violence in gaza. >> we see a multiplication of new conflicts. newsworried today with the about what is happening in gaza already with the higher number of people killed. audio muslimld majority nations, i-57-member organization, says it strongly 'sndemns the white house
2:35 pm
deplorable action to move the usmc to tel aviv -- and israel tom television -- tel aviv jerusalem. said the u.s. has lost its role as mediator in the middle east peace process. the latest round of nafta talks ended friday without a deal. the unofficial deadline to get any agreement through the u.s. congress is this week. former mexican president vincent a fox tells bloomberg television that if mexico does not get a good deal and an improvement on nafta, mexico will just be happy with withdrawing it we already working on plan b. trump one's toy, please his -- wants to please his audience. he has been stubborn on nafta, stubborn on the wall, and stubborn with a relationship with mexico. mark: time is also running up
2:36 pm
for mexico with presidential elections on july 1. more than 40 people are dead after powerful winds and rainstorms swept across northern india. it destroyed homes and uprooted trees. lesson two weeks ago, similar storms killed more than 130 people and injured more than 400 others -- less than two weeks ago. extreme weather is not unusual in india this year -- this time of year. global news 24 hours a day on air and on tictoc and twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. alisa: thank you so much. coming up, he bridgette did the collapse of subprime mortgages before the financial crisis. stephen eisman tells us what he recommends shorting now. from new york, this is bloomberg. ♪
2:37 pm
2:38 pm
2:39 pm
lisa: this is "bloomberg markets." lisa: i am lisa abromowicz. i am scarlet fu. scarlet: -- scarlet: i am scarlet fu. steve eisman predicted the collapse of subprime mortgages. he spoke at a conference in hong kong. haseutsche bank responsibility issues are they have not spent money on technology in a very long time. they're probably undercapitalized. they will probably raise capital again next week. deutsche bank is a problem bank. >> d.c. more consolidation and some of the european thinks? -- do you see more consolidation in some of the european banks? you look at how much is being
2:40 pm
spent per year on technology in the u.s. versus the regional banks. >> i know you don't look too much into china now, but we talk about excessive leverage -- is that where we are going to see the root of it now, in this time in the cycle? where do you think china is? >> i am not going to comment on china. i do not think it would be appropriate for me to talk about it. >> talk more about the biggest long opportunities right now. you are positive about the banks, and tech is one of your big sectors. what do you think is the biggest opportunity for you in 2018? >> i think the biggest opportunity is -- i think long short is making a comeback. there are more ways to make money on the long side and on the short side. more volatility. the volatility is here to stay. running a hedge portfolio makes
2:41 pm
more sense. >> what do you make of -- i know you say you're not looking in fixed income right now. is it because you see further tightening on how much higher yields can go? >> look, qe is over. rates are going up. i do not see many opportunities in the bond market. call me in two years, and we can talk. >> what about the debt market? there were statistics from the imf saying u.s. gdp could exceed 2023 andtaly's by threats to the global financial system are rising. >> the imf was very bad at predicting stuff going into the crisis. i do not pay particular attention to the imf today. i am not a deficit fetishist. for example, the u.s. debt to gdp today is around 110%. maybe it will be 120% in a few
2:42 pm
years or 130%. japan's is 240%. who has lower rates? people who have been arguing or complaining about deficits, they have been complaining about it for 30 years. the only thing that has happened is that the price of that risk has come down due to interest rates. the owners is on them to show why deficits are problems. >> do you think to eat was effective? >> qe was a failure. paris qe, u.s. growth was 1.5% to 2%. post qe, 1.5% to 2%. it was a noble experiment that did not work. they gave corporations incentives to buy back stocks, and it hurt consumers. qe was a success at all. >> your biggest short play these days, what would it be? >> sort canadian financials --
2:43 pm
short canadian financials. short deutsche bank. short wells fargo. and a few opportunities. disrupteetor versus thing will last a long time. a lot of ways to play both long and short. >> you talk about hedge funds in general and how they are going. talk about the lower fee products right now. how are those performing? >> i have one product with a much lower fee structure. it has daily transparency and daily the quiddity, a flat fee, no carry. it is performing quite well. the correlation to the s&p is quite low. competitionu see when it comes to these funds and strategies right now? does it put pressure on fees? >> i think pressure on fees in
2:44 pm
the hedge fund world will be relentless. lisa: that is steve eisman, the man behind "the big short." time for stock of the hour. shares every noble energy are soaring for a sixth straight day. opensp small-cap 600 tomorrow. dave wilson joins us with more. this is a fascinating story and shows the hour of indexes. walk us through it. dow jones s&p industries, responsible for the us of the 500, and the small-cap 600 decided they would put renewable energy down or told people they were. usually when they make this kind of decision, you get some kind of lead time. that gives index funds time to figure out when they want to do their buying. a stock doesn't an index like
2:45 pm
this, and you have a fund -- if in have a fund like this utrecht the index, you have to own it. this has been around for over 20 years now, public for six years. all of a setting, here they are going into the index and the stock is topping. scarlet: but we are talking about the s&p qualcomm 600, not the s&p 500. i'm kind of impressive the effect. >> you have smaller companies, which means less demand, less trading, and you still have tens of billions of dollars that are tracking the s&p 500. etf,u look at the ishares it has like $40 billion in assets. put that together with the other funds that are tied in in one way or another to the small-cap 600, there is enough buying power for small company but does not have a real effect. lisa: amazing story, another
2:46 pm
example of how much power indexing has. >> absolutely. ,he effect come if anything gets more pronounced with these smaller companies. scarlet: looking at the volumes here with regi. on average, if we take out 563,000 and see -- shares traded. >> the demand in the fund is having an effect on selling today, and the price is going with it. lisa: that is a fascinating story. dave wilson, thank you for bringing it to us. coming up, italy's populist parties are making pricey promises, but can the country afforded? we will speak to a foreign policy fellow from brookings institute. that is next. from new york, this is bloomberg. ♪
2:47 pm
2:48 pm
scarlet: this is "bloomberg markets." i am scarlet fu.
2:49 pm
time for the bloomberg business flash. cbs is suing the redstone firm and national amusement. cbs is trained to gain control of the media company from the redstone family as shari redstone looks to oust certain network directors. potentialng is a merger between cbs and viacom, which are both owned by the redstones. elliott management has sold its position and mall owner taubman centers, and this is according to people familiar with the matter. as of february filing, elliott owned day 4.8% stake and has pushed for changes, including a potential sale of the company. taubman is in a proxy fight with another activist investor, landon buildings investment management. boosting service connecting new work, new jersey, to 17 u.s. cities beginning october 4. it will expand flights to warmer destinations also, such as
2:50 pm
florida and california. it is part of their push to grab more market share at its biggest u.s. hubs as it competes with delta and american. and that is your business flash update. lisa: spending spree on hold, for aasking the president few extra days to complete plans for massive shot of public spending and it boosting the country's struggling economy. joining us is brookings institution fellow alina polyakova, who specializes in european politics and far right populism, which is an incredible hot topic. can you walk us through the latest in italy's mess of a political situation and why markets are not responding at all when it seems like they are about to balloon out? >> great to be here. thanks so much per it we saw shocking results in italy over the weekend. italy has not had a government since march and now all of the sudden has a coalition between the populist party, the five
2:51 pm
star movement, and the league, the far right authoritarian party, and they have formed a government. on their agenda, a few things. cut taxes, lower the pension age, increase spending in social programs. they made a lot of empty promises to the italian people. italy's deficit is out of control. youth unemployment rate has been around 30% to 35%. these are really that indicators . if this government actually does what it says it wants to do, we're going to see a significant crash and the italian economy. that will reverberate to the european union. lisa: i am struggling with the year yieldswo- and italy are still below zero right now/ at one point, a huge deficit used to matter. what is going on? >> if i had to take a guess, i think it is a different story
2:52 pm
for the political parties to rally against the mainstream and have all of this radical rhetoric during elections. it is a very different thing to govern. italy is a test case for the rest of europe. we never have had a coalition of the far right in government. i think the markets are betting they will not be able to get this done because if they try, the eu central bank, various institutions, will slap it down. lisa: so people are betting this government will be completely ineffectual, therefore you can keep betting on italian debt. to the point you mentioned about high unemployment rate among italy's youth, this seems like it is a key factor in the far right's populism that we have been seeing. can you walk us through the link between those on implement rates, far right populism, and where else we seeing that in europe? >> yes and no.
2:53 pm
italy has a troubling youth unemployment rate, but it is not the highest in europe. greece has a higher unappointed rate. -- unemployment rate. see, not just in that but across the eu, is young people who analysts think are more democratic, more left historically, are now shifting their allegiances to the far right. these are the parties really talking about economic outcomes for them and the kind of declines they have been experiencing. it is not such a clear link. in spain, they have a far left party that is using the same rhetoric, but they are not anti-immigrant and not authoritarian what the far right. the agreement at the same but they are channeling in different directions across the eu. lisa: what is interesting is we
2:54 pm
were talking about italy and other nations in the eurozone a couple years ago trying to exit from the region's alliances, from the joint currency. we have seen five star make some discussion about that. how concerned are people about that? if not in italy and with the movement in spain, some of the other extreme is are also saying they want out. >> we saw greece try this at one point. many people remember the grexit debacle in 2015, which was before brexit. previous prime minister actually tried to have a vote on pushing forward austerity politics but was denied by referendum. that is in the government collapsed, and here we are now. all governments are finding out, when they are trying to respond to the populist right saying you are screwing is over and we need to get out, is that they really cannot. these european countries have the come so economically
2:55 pm
integrated that an exit from a big country would be detrimental to the citizens of that country. you look at the budget numbers and see the truth. alisa: what are you watching for in italy -- and make investors wait atice and say, second, maybe this government is more effectual than we thought? >> one thing to watch in italy is whether the league and the five-star coalition government, they do have a majority, so they may be up to push through this radical economic shifts that will send italy's economy into tell spend. we should watch and -- and to telailspin. we should watch what they do with pensions. i think markets will respond to that because it would show the government can do what it says and wants to do. but they may fail, and we will see how the germans respond. germany is a key part in this.
2:56 pm
polyakovak you, alina of brookings institution. you can see her tonight at the intelligence squared debate. she will be arguing whether or not automation is hurting democracy. scarlet: coming up, a rare and exclusive interview. we will ask him what he sees ahead for xerox. as we get closer to the end of trading here, this is what the equity market looks like. modest advances. thin trading. volume in the s&p and dow is 20% below the 20-day average. nasdaq is up .25%. this is bloomberg. ♪ mom, dad, can we talk?
2:57 pm
2:58 pm
sure. what's up, son? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us."
2:59 pm
that's a good one. seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. 3:00 p.m. in new york, 12:00 p.m. in san francisco, 8:00 p.m. in london. i am scarlet fu. lisa: i am lisa abromowicz. welcome to "bloomberg markets."
3:00 pm
are live from bloomberg world headquarters over the next hour. here are the top stories on the bloomberg and from around the world. a deal, we speak with darwin deason on how he helped stop fujifilm's takeover of xerox. hitting the jackpot, live with the ceo of draftkings. and dialing up zte, president trump throws a lifeline to the chinese telecom company. we are an hour away from the close of trading. abigail doolittle has been tracking all the action. the 20-dayown from average. abigail: you are right, small moves. investors consolidating. look at the dow, s&p 500, and the nasdaq, modest gains. we are continuing to see outside gains. philadelphia semiconductor there index at highs.
3:01 pm
is outperforming the majors. here are some of the major semiconductor stocks helping, notably nxp semiconductor up 13%, qualcomm up 3%. trade tensions between the u.s. and china have eased. china is looking at that deal once again, so there is hope maybe it gets done by the july 25 deadline. that is helping the entire space. let's go to the bloomberg and see about these trade tensions with china. ece president trump has probably not liked is the u.s.-china trade balance. you can view this using the gtv function. imports from china into the u.s., more than half a trillion. exports to china, less than 200 billion there for china into the u.s. there is the trade balance moving higher, not the right direction. nonetheless, tensions easing
3:02 pm
right now hoping the chip sector. look at a lot of the outside movers. cbs trading higher. viacom lower. nationalued redstone's amusement in an attempt to block a potential merger between the stoop of companies. cbs higher, viacom lower. sears holding up about 8%. eddie lampert san the company has a plan to potentially sell -- eddie lampert saying the company has a plan to potentially sell some assets. xerox is lower as that $6.1 billion deal with fujifilm is off the table. gaming, a bright spot, stocks. mgm and boyd gaming, caesars trading sharply higher. all of this as the supreme court knocked on a deck is a world that banned gimli for individual sporting events here in the u.s., with the exception of nevada. this now paves the path for
3:03 pm
other states to legalize gambling. of bloomberg intelligence estimates the illegal cabling market in the ould right now c represent $5 billion worth of bookings for these companies. it could beat materials. scarlet: it could be a game changer. thank you. now to first word news with mark crumpton. openss the united states the new is really industry injuries jerusalem, violence raged at the border with gaza. riyadhunited nations, monster, the palestinian permanent observer to the yuan, condemned budget -- riyadh monsoor, the palestinian permanent observer to the you in, condemned this. >> we want those responsible to be brought to justice from the israeli side because this is not allowed under the provisions of international law. we further demand international protection for the civilian
3:04 pm
operation since israel is occupying power and has advocated its responsibility. mark: today is being called the desk to -- deadliest day in gaza since the 2014 cross-border work. botswana's new president wants to rewrite terms with a mining giant. he spoke exclusively today to bloomberg television. >> preparations have begun for negotiations. we expect to get a mutually beneficial agreement, yielding visible results. it is a long-term agreement. we have had a wonderful relationship with de beers. it could be even more cemented. more than anything else, we expect consistency, reliability, dependability, and true allegiance. mark: the president was sworn in last month. the deal and its current form expires in 2020.
3:05 pm
botswana is the world's biggest diamond producer and owns 15% of the diamond mining company. the new leader of malaysia is moving quickly against his predecessor. the par minister -- the prime minister has banned him from leaving the country as there is an investigation into a multibillion-dollar scandal of a state fund he helped set up. he faces allegations that millions ended up in his personal account. a new fissure near the kellaway over kind of summit -- the kilauea volcano sent ashes and lava in the arir. eruptions are likely to continue. the volcano has destroyed nearly 40 structures. 24 hours a day on air and on tictoc and twitter, powered by more than 2700 journalists and analysts in over 120 countries.
3:06 pm
i am mark crumpton. this is bloomberg. scarlet: thank you. shakeup at xerox. the stock is tumbling today after top shareholders carl icahn and darwin deason stopped fujifilm's $6 billion takeover of xerox and removed the ceo. we're joined by julia chatterley and ed hammond. julia, you have been so excited about this. julia: the twists and turns. you have got to love this. it gets even better. i am excited to tell you that we're joined on the phone for a rare and exclusive interview with xerox investor darwin deason. thank you for joining us. congratulations to both you and carl. how does today feel? the biggest question, what is the game plan now? >> it feels really great, of course, that we settled, and thank you for having me on.
3:07 pm
this case has been exciting. it has virtually everything. covering it,'all and it has crowned jewel lockups, conflicts, international intrigue, and on and on, like a big history novel. the big takeaway -- and i'm not used to doing this, but i run companies. julia: it will make a book one day. >> maybe. the big takeaway is this turned out best for the shareholders. the judge made kind of a really landmark decision. he's basically saying if you do not play by the rules, does not matter how self-righteous the board is, how important they are, how important they think they are, they have to play by the rules. this turned out to be really good for the shareholders. we have set kind of a new and our, i think lawyers think, for new york in the country in shareholder rights. we entered this to try to get
3:08 pm
the best deal for our stock. it turns out we have gotten a pretty good decision that is going to help shareholders all over the country. ed: darwin, you have invested in tons of companies over the years, built his messes up. a company runseen as badly as xerox was being run during the negotiations? >> i cannot keep from laughing when you're and sit -- asking the question. no. manye been involved with companies, bought many companies, and i have done over 300 acquisitions in my business career, some really small but some $50 million acquisitions, some quite large, and i have never seen anything like this. just unbelievable. wery rock returned over, started calling them easter eggs. every time, there was another easter egg, another bat email, badher bad text -- another
3:09 pm
email, another bad text. we started with the crown jewel lockup. it was illegal to do, illegal to not inform the shareholders. we just kept finding things, just unbelievable. someet: now that you have kind of resolution, what is the next step? how will you go forward? >> what we have done, as i said earlier, your silly not an activist -- i am not an activist. i have run companies, hired and fired ceo's. we have found a crown jewel, if i may say that, in our ceo. he is already ready to go to work and has been ready for several weeks now. he's one of the best i have ever seen. so what we're going to do immediately, what he is going to do immediately, is start off and we want to run a fair auction for all the shareholders to make
3:10 pm
sure everyone who has an interest in buying this company has the opportunity to look at it and has a fair opportunity to look at it, including fuji. we will not have these lockups that fuji had. we're canceling those. we may have some arguments about it, but i do not think that will go far. what we want to have is a fair go to market or shopping provision, and we're going to do it. we're going to market is khamenei as best we can. julia: are you having conversations with private equity? the new ceo has links to private equity. are you having conversations at this moment? than what hasher come up with john byzantine of apollo, i am not at liberty to disclose. yes, we're having conversations with several private duty -- private equity funds, and we intend to start having conversations with fiji in the near future, once this is
3:11 pm
settled with them. we hope to be able have a different deal with fuji. that might be the very best thing to do, but we will have to see what their attitude is about all this. yes, we have some interest from other competitors that might be interested in going forward. scarlet: you and carl icahn have said that you would be covered over with an all cash bid at $40 a share, roughly a 48% premium to the price. how did you come up with $40? as aboute up with that a 20%, 25% premium for what the price was when they made the offer, which i think was around $32, $31, something like that. of course, the premium goes up as the price goes down. that is kind of how we came up with that, kind of a standard premium. usually about 25% to 30%. we were not trying to be greeting it we thought that we ought to get at least a 25% to
3:12 pm
30% premium -- we were not trying to be greedy. ed: you have background in tech. you have built several businesses. -- does not could need to do a deal to be a successful company. to happen, would it be something carl icahn and you would be aligned in your vision for xerox? >> absolutely. we have talked about it and talked about it with john byzantine. we did not go into this to run xerox. that is not our goal. if we do not get what we think is a fair offer for us and for the shareholders, because that is all we are, shareholders, then we intend to run the company. we have a great guy to run it. i have experience to advise and help john. i do not think he will need help, but he will need advice once in a while. we're very prepared to run this company for a few years.
3:13 pm
and they have a great asset that they have never monetized. the palo alto research center. xerox has invented some of the greatest technological tools in technology, and they have not monetized any of it. they just kind of gave them away really. steven jobs said one time that if xerox had kept them, they would be bigger than microsoft and apple and two or three others combined. multi-trillion dollar companies. that is kind of an exaggeration probably. [laughter] julia: well, you can be hopeful. you still in a joint venture with fujifilm. do you want to see that ultimately dismantled in light of the fact that they cannot come up with the data you were requesting to get something on the table as a result today? are you concerned about the financial health of the joint venture? are you confident that all the irregularities are resolved now
3:14 pm
that you know about them and their dealt with? >> i kind of lost track of the question. julia: are you comfortable with the health of the joint venture now that any irregularities have been cleaned up? or would you like to see that joint venture between you and fujifilm dismantled? comfortableo, i am with it here it they did an audit and had a second audit. i think the now have audited numbers. in going forward, we will just have to see. we may need to cancel it. we are to cancel it on its current terms, sure. we will deal from a position of strength rather than weakness. understand dealing from a position of weakness.
3:15 pm
i do not relate from that, nor does carl icahn. we will try to have a better deal. ownlet: you and karel icon 13%,u and carl icahn own and we are talking about vanguard, blackrock, and state street, other investors. have you reached out to them? >> i do not want to speak of conversations with other shareholders. i suspect there have been significant conversations. scarlet: ok. ed: understandable. in regards to the process, you say you are going to run an immediate option for the company. is there any sense of a timeline how long? >> no, other than these auctions , in my experience, and i have done several of them, they run anywhere from 90 days to 120 days. you set up your data room and you get the companies that are
3:16 pm
interested into the data room, let them do their due diligence, and it takes a little time. i suspect 90 days, maybe a little more. hey, guys, i need to be going. ed: one must question. the crown jewel lockup was a key part of this lawsuit being launched. are you confident that is sending xerox can exit now? very comfortable that we will be able to exit that crown jewel lockup. that is the big thing that started all of this. scarlet: darwin deason, thank you so much for speaking with us. thank you, julia, for coming back, and thank you to ed hammond. from new york, this is bloomberg. ♪
3:17 pm
3:18 pm
3:19 pm
lisa: this is "bloomberg markets." i am lisa abromowicz. scarlet: i am scarlet fu. we have breaking news from the white house, releasing a statement that the first lady this mooring underwent a successful procedure to treat a benign kidney condition. the white house says the procedure was successful and she will likely remain at walter reed national military medical center for the duration of the week. she had a kidney procedure, no competitions. lisa: good to know. and i want to get you up to date to what is going on in venezuela. nicolas maduro says the may 20 election will happen no matter what. this is very controversial because the u.s. government has said it would not recognize a may 20 election since it is all but rigged, if not rigged. political opponents have been pretty much squashed, if not jailed. what we're looking at are bonds,
3:20 pm
in the have climbed up from lowe's of last year -- from lows from last year. amazing when you think how much of a run oil prices have been on. and you have seen a dramatic increase in oil prices, but they have not been able to keep up with that and deliver oil because of the sanctions on the country. will the u.s. start to sanction venezuela even more? we will keep you up-to-date on that. this is bloomberg. ♪
3:21 pm
3:22 pm
lisa: this is "bloomberg markets." i am lisa abromowicz. time for options inside with julie hyman. is jimjoining me strugger from mkm holdings.
3:23 pm
last week, we were talking about an etf that tracks the china a- shares, i believe. we were talking about china-u.s. trade tensions. and today, things have turned around, seemingly. what are you watching now? do you continue to watch fxi as a proxy for what is happening? >> absolutely. one of the reasons we got interested last week, it is not just run zte, but also the north korean-u.s. summit, now set for a few weeks from now in singapore. but fxi options open interest was normal to your lows. you have a series of events coming, yet the option market shows little to no interest. we like to see that. so we put those two facts together last week, showing of site in fxi. and a showing upside in fx -- showing upside in fxi.
3:24 pm
given these events playing out over the next few weeks and really months until trade put to it -- tensions hopefully ease, we think it is a product that comes back into vogue. so we're saying to stay on fxi, remain directionally long. julie: and there are these deals. we learned today that chinese regulators are going to reopen their look at qualcomm. nxp semiconductor. we also have cadmium in a couple potential deals. what kind of options activity are we seeing around those? >> it has increased. with all the biggest trade last week, and puts result for a call spread. there is a lot of option activity around these names. rvl isntioned cadmium, m said to buy them assuming they get approval.
3:25 pm
it brings a lot of optionality back into some of these transactions. there could be spill over to the u.s. there is a little bit less stress and some of these situations that free up capital. twx.cal deals, like buying julie: there is a group that has been outperforming, consumer staples. it has been the laggard this year. of late, it has not been doing well either. what opportunities are you seeing there? >> this cropped up for us last week. yearector down almost 14% to date, the worst performing of the s&p sectors. two things to take out of the options market. open interest at 70%. interest coming in. skew is flat. implied volatility has declined. call volatility has lifted.
3:26 pm
it is a technically oversold sector, and interest is coming back in. we want to play along with it, and a simple way to do that is an xlp. , alsome we like is mdlz september. julie: thank you. appreciate it. lisa: breaking news on cbs and viacom. according to cnbc, cbs and viacom are said to have reached a deal on the ratio of .6135. of theshares haring some losses from earlier, and cbs continuing its gains. from new york, this is bloomberg. ♪
3:27 pm
3:28 pm
3:29 pm
mark: i'm mark crumpton with first word news. as we've been reporting, first lady melania trump underwent a procedure this morning to treat a benign kidney position. the white house said it
3:30 pm
procedure was successful and there were no combinations. this is trump's spokeswoman said she will likely remain at walter reed medical center for the rest of the week. and to the violence along the israeli border with gaza escalated, the new american embassy was opened today in jerusalem. ceremony, thening benjaminister netanyahu praised the move. >> my friends, this is a great day for israel. it's a great day for america where it it's a great day for a fantastic partnership. but i believe it's also a great day for peace. but the palestinian authority president criticized the action, saying he will not accept any peace deal proposed by the trump administration. the u.k. in my five director andrew parker makes his case today why written and european union should continue thei

11 Views

info Stream Only

Uploaded by TV Archive on