tv Bloomberg Markets Americas Bloomberg May 24, 2018 2:00pm-3:30pm EDT
scarlet: live in bloomberg world headquarters. the top stories we are covering on the bloomberg around the world. summit canceled. president trump scrubs a meeting with kim jong-un sending markets reeling. accelerates the push to revamp germany's biggest lender. crypto underscore new. the justice department opened a criminal probe into whether traders are manipulating the price of bitcoin and other currencies. u.s. markets closing in two hours. stocks were tumbling. >> the dow was down 1%. ashave seen volatility traders have been watching washington.
now perhaps backing off a little bit. you see one line that is green. the dow jones transportation average. it is getting a lift from oil prices. .e have the airlines rising they move inversely when there are large moves. then we have the trucking and logistics companies on the rise as we see oil prices tumble. they have not come back today. this decline has to do with russia. russia and opec will discuss whether it is appropriate to scale back output. decline here. transports up, energy trading lower. take a look at the bloomberg.
white line here. you can see it flattening on the production cut. while that has been happening oil has started to go up. get backfor russia to into the market. with more fuel numbers. then the report, the shares fell then executive say the merchandise margin rate will feel more pressure and then be relatively -- flat for third quarter and fourth quarter. that appears to be what
in other the gains retailers. foot locker is up. gaffe is serious -- gap is of. mark: american forces remain on a normal stave alert in the aftermath of president trump's decision to cancel planned summit with kim jong-un. the north said it was prepared for a nuclear 10 nuclear showdown if the u.s. did not follow through. the president had this response. terminatedecided to the planned summit. >> many things can happen. a great opportunity lies ahead. i believe this is a setback for north korea and a setback for the world.
>> the harsh rhetoric followed remarks by vice president pence and john bolton that blamed north korea -- link north korea with libya. japan's trading minister says it could lead to the breakdown of the multilateral trade system and angela merkel says her country is committed to fair and free trade reach china responded announcing it will reduce tariffs on a range of the consumer goods. have covereds may up sexual so allegations against larry nassar. organizationed the told people he could not attend events because he was sick or needed to focus on his work. a lawyer agreed to cover the stories. he is serving decades in prison. hundreds have accused him of
sexually assaulting them. the kremlin was behind a phone call from russian pranksters to boris johnson. andcolors responded pretended to the the the premise or of armenia. the russian government was trying to discredit the u.k. following the poison of the russian spy and his daughter. powered by more than 2700 analysts in 100 20 -- 120 countries. scarlet: for more on the north korea announcement we are joined by joel rubin. great to speak with you. you have pointed out this goes back to mid april when a private channel negotiations was made public. league has led to the collapse.
>> it is great to be with you. right now we are witnessing in public view the pressure of this summit was too much for kim jong-un and president trump. these are sensitive talks. for decades they have been looking at each other through a variety of threats and engaging in rhetoric that is damaging. when a private channel was established between director pompeo and the north that was an opportunity to hammer out issues that the leak occurred. the president announced secretary pompeo was needing to improve his standing in the senate when he was going for confirmation and it was contentious. the cost now is we have no private channel. we have seen public pressure
being too much and the collapse of these talks. does diplomacy need to be private at least discrete to work? are there instances where it can be effective as well? init shouldn't be conducted the open until the appropriate time. the united states and north korea have never found the appropriate time. it has been more than a decade we gave effectively with north korea in any manner of getting some engagement and concession. needed a private channel. the private bombast related to fire and fury, and the united nations speech, coming from north korea was too much for any diplomatic process. but secretary on pao they secretary pompeo made that progress.
we never engaged in tit-for-tat publicly where we could get into a position like now with north korea with it all collapse in. -- collapsing. abigail: did this have to do with north korea calling president pence a political dummy? was not a tweet. it is not what we have come to expect. he wrote a full letter. it was stream of consciousness and it looks like it came on the heels of the insult which goes to the point of having this #in private. these do no good. the national security adviser laid a trap for the north koreans two weeks ago when he
said he wanted to use the libya aggressive is language for north koreans. asy don't view libya successful. that is why we solve the debate and discourse. president trump felt like he needed to get leverage in this discussion and reposition it. aggressive and may not get the result he is looking for. abigail: what is the role of china in this? trumpet did indicate prior to that the movement toward the summit was positive that it sounds as if there was a roadblock. >> china's role has been the central question. how to move china and push north
korea to the negotiating table to give up nuclear weapons. china has control and authority in pyongyang. the danger is china will look at this and if kim jong-un takes the high road and says i did not break the diplomacy, president trump called off the summit, he may be able to peel china away from efforts to have china isolate north korea and put sanctions on to north korea that have had an impact in that could be damaging for our ability to arrangement and deal that would stick. president trump has been handed a diplomatic gift for china. what will kim jong-un do? will be in the
hard-pressed position like pressure. >> we introduced you as a former deputy secretary of state. rebuild mike pompeo trust not just with north korea but china? call has got to be to the south korean president. he was just in washington and not given any warning. this has been a feat of south korean diplomacy. i have worked hard. ones with the gun sights in military conflict takes root. repairorea, we need to right now. they are looking abandoned.
to calls to japan after that stay on message. it has been difficult for this administration with the vice president, president trump not all speaking in the same way as secretary pompeo. he has to reassure our allies and get everybody to say the same thing. that is a tall order. >> great insights. ahead. get more reaction this is bloomberg.
lender. >> let me state clearly we are committed to our corporate and investment bank. we are staying international. .e are active in 60 countries that is the way it is going to stay. scarlet: let's bring in our guests -- what is clear is global equity is a big target here. talk about what we know now from him about how deutsche bank will proceed. they are cutting jobs globally. for the last couple of weeks we have been talking about where they are cutting. first it was 10%, then 20%. equities and rates. we are going to see what they are going to be committed to.
shareholders have had mixed responses to the strategies. scarlet: the restructuring charges they would take are up to 800 million euros. put that into context. is that a big number? >> they have had charges across the board. one of the big issues is how much regulatory pain they may be seeing. it is a most a billion dollars. thousands and thousands of people will be let go. more than heaven house and across the world. >> this has deep roots. what does the company have to do to turn the ship around considering the stock is that a low? >> coming out of this fund they are cutting left right and center. what are they going to do the
profitable? of saving, howms is it different? or is it the same with the deeper currents? he was aggressive in cutting costs and streamlining. perhaps he did not get it done by the timeline he promised. >> walking away from this meeting one of the things people like is the precision. equities,ifferent these will be smaller. the banks and now are committing to making these skeletons of what they once were. it was back-and-forth. if you look at the arc of their story, they fell from grace. we were talking about how they were the number one prime broker.
>> disappointed it is not going to happen. not surprised. we had secretary pompeo come yesterday. i got the sense after that hearing president trump and his team were not fully prepared for the june 12 summit. >> you think this is an issue of not being prepared between north korea not wanting to denuclearize. >> part of it is the fact they were not prepared yet. i do not think president trump got mad because somebody else used harsh language so he canceled. i do think over the last few months it is good. secretary pompeo has developed a rapport. i think that is something to build upon. release of the hostages which is positive.
i hope the administration can build on that. they have to be better prepared. they have to clearly define denuclearization and whether they are going to leave a civilian nuclear program in place. there are unanswered questions. >> what would have to take place? specifically with regards regard toguage, with the work, put that into context first. >> the nuclear war part, kim jong-un and his father have always been big talkers. they have always been these exaggerated statements. that is nothing new. is also somebody who talks big.
you have both sides going at each other. , things fell apart. onhink now as the news moves whether it is to russia or some to try and rework the conditions for later on. the gang of eight meeting scheduled for today, with the president is calling spy gate. what do you make of those? you are pressing to have attorneys. >> yes. i think both sides were included in this meeting. attorney.house had an i believe part of the reason
they have push for these briefings where they are exerting maximum pressure on rosenstein and the doj to give them information is because the president is trying to handicap what kind of goods or legal case bob mueller has. that is a signal that is partly what he is doing. talks, this impacts your district. using section 232, what are you hearing from your constituents about the back-and-forth? what are you hearing about the president's potential? >> they are uncomfortable with the uncertainty.
there has been a lot of uncertainty. worried.e cost of autosthe will go up, whether the cost of agriculture will go up because of a trade war with china. this is something that has given texans anxiety. they watch this with the context of nafta. many have been pushing for renegotiation of nafta. whether nafta is renegotiated or not will be a bellwether as to whether the united states is able to do bilateral trade agreements. , republicansds would agree with you and say the president should not be using 232. is there a congressional mechanism?
would those republicans have democratic support? >> we just getting into those conversations. we are going to have to huddle and figure that out. abigail: we appreciate you coming on bloomberg. thank you. scarlet: if we take a quick check at how equities are performing the dow was down. from new york, this is bloomberg. mberg.
necessary to respond to any foolish or reckless act by north korea. the president''s comments came hours after he canceled next month's planned summit with north korean leader kim jong-un. the president said it's possible the summit could still happen and he is waiting for what he has called constructive steps from kim. president trump signed a measure that dismantles dodd-frank. a landmark law that grew out of the 2008 financial crisis. thepresident said regulations were crushing community banks and credit unions. president trump: one-size-fits-all, the rules just don't work and community banks and credit unions should be regulated the same way and you have to really look at this. they should be regulated the safety as in the past.
>> the president said the measure liberates small banks from excessive bureaucracy. snap electiona earlier this month, venezuela's president is moving up his swearing-in ceremony by eight months. the constitution of venezuela takethe ceremony should place in january. he says he will take his oath today even though the term starts next year. many in the country say the elections were neither free nor fair. two students killed in the parkland florida school shootings are suing the gun manufacturer that made the weapon used in a february attack and the store that sold it. the families say american store, brands and the tactical supply, are complicit in the use of an ar fifth in style rifle to kill people at douglas high on february 14. global news 24 hours a day on air and on tick tock on twitter, powered by more than 2700 journalists and analysts in more
than 120 countries. i am mark crumpton. this is bloomberg. abigail: thanks. u.s. stocks are paring their losses after president trump's decision to cancel his summit with kim jong-un. we are joined now. it is terrific to have you here. i cannot think of a better guest to talk about everything happening especially considering earlier today, the major averages had been down about 1% and are now modestly lower. investors seem to be looking once again.dline it seems it could be the noise. how do you make sense of this and tired into the sideways range we are seeing for the us the 500 is here? is it more back and forth up and down? >> thank you for having me. are alwaysl risks there and always present whether we are aware of them or not.
this is a good example of the fact that there are no easy answers to complex problems. this has gone back and forth for a while as has the u.s. china trade. trade developments, and even the iran problem has sort of come back. there are always going to be things to worry about geopolitically and it is a good reminder why investors need a diversified portfolio were part grows in part protects against downside risk. beyond that, markets are driven by other factors as well as well, obviously. fundamentally, the question is always, whatever is happening in whatever the headline is, is it a systemic threat to the fundamentals of the market? fundamentals are that the markets are driven by earnings and interest rates. it's we have an earnings boom in our hands and earnings are accelerating, q1 growth is 21%
and the rest of the world, growth is starting to decelerate. is interesting because for the first time in a couple of years, the cycle that started to fragment a little and de-synchronize with the u.s. on one side with the rest of the world on the other, you see interest-rate differentials between germany and the u.s., at an all-time high pushing the dollar higher and that is having an effect on them -- on the market it we see the whole thing playing out but earnings and interest rates really other than shock coming out of the blue is what is driving the market. in a range between 2600 and 2800 on the s&p for the last four months. my guess is that will persist because the markets are seeing through the very robust earnings growth and are looking at a fed that will tighten policy in all likelihood
. that tends to be an environment or a regime where valuations tend to compress. a rising earnings market. i am not totally surprised the markets have rebounded off the lows because at the end of the day, barring some sort of geopolitical shock, we are left with those pillars driving the markets. abigail: i love the fact that you separated the headline risk from the bottom line. todlines can drive markets make big moves but if the bottom line is not affected, perhaps it is a moment. you were talking about earnings and there has been a lot of chatter about whether or not the earnings growth we saw in the first quarter with peak earnings, what do you think of the possibility and if it did prove to be peak earnings, could that be something to bring that sideways range down to the downside? >> globally, we have peak earnings.
is 22% year-over-year, a good number. it is now down, still high, but that rate of change is clearly starting to slow. we do not see it yet because we have a positive shock to earnings through the tax cuts. , 17% in terms of its growth rate and they have turned out to be 24%. when you look at current estimates, which i actually get off my bloomberg every friday, they are for 22% in the second quarter, 20% in the third quarter, 19%, assuming the estimates are correct. that suggests the rate of change remains very high for u.s. earnings. the caveat is the market tends not to reward earnings growth
that is that strong. it tends to not be sustainable or you look at the relationship between price and earnings and it tends to be much stronger at 10% then at 25. we are maintaining a high level of earnings growth which helps the market valuation without actually knocking it lower. it alike the way you call benign reset. what does the tightening cycle tell us about where we are in the cycle? mid or late stage? >> we have been enjoying the goldilocks stage, mid cycle phase of the economic or market cycle. that is good and interest rates are low and there are no inflation pressures. the fed is on the sidelines in do no harm mode if you will. typically, at least the way i describe it and a lot of people you know,ifferent, ways of looking at it, but the way i very's put -- simplest way to find a way cycle is growth
slows, inflation rises. you have a double lamb me of slowing growth, not negative but slowing, while the fed is tightening policy and interest-rate's are rising. you look at the world through the discounted cash flow model, which is how i look at valuations, you are discounting a stream of future earnings with an interest rate and if the earnings growth number comes and the interest rate goes up, it spells a lower valuation. it is a question of how the juxtaposition of earnings and evaluation fits together. think we are quite in late cycle yet. the growth side in the u.s. is actually tolerating and not decelerating. 9 and 12 months from now, chances are the fed is still raising rates and by then, the earnings growth number should he coming down just from the math of having been up above 20% for the last few quarters at that
point. -- in aind of in the twilight phase. that is why the market was able tothat is why the market was abe to go sideways even though it is coming down and it already has three points since january, a really good result. >> all right. director at fidelity investment, thank you for joining us today. happening now in the east room of the white house, president trump is presenting a medal of honor to a former member of the navy seal team six. you can watch the ceremony by using the terminal function live go on bloomberg. from new york, this is bloomberg. ♪
industrial select sector spider etf. it is up nearly half of 1%. the sector is one of the top sectors for the s&p 500 as the major averages down just modestly. an area of strength, the railroads. .igure look all higher this as we have coverage on the we see aa buy of 1.5%, holdup at 2% and a lot of chatter potential covering the railroad space. let's take a look at today chart because yesterday ge was down sharply thanks to comments turning around certain sectors. of ge we have the shares trading higher as investors consider that half the turnaround is continuing to be in way. dumprday was asked to
around the comments. finally, a lot of strength for the defense sector. the stock of the hour, we will see that shares are popping higher up, 1.2 sent. this of course on the surprise from president trump pulling out of the summit with north korea which has led the defense sector and this is a defense contractor that receives the most amount of revenue of any contractor, it is about 30% and you see the shares rallying in a nice way. talking more about the defense sector overall, i would like to bring in doug of lubricant intelligence and princeton. thank you for taking the time. the news about president trump pulling out of the summit with north korea, is that headline risk bottom line or, what is the influence here?
>> it is important to go beyond the headline. there is a lot of noise, much longer than that related to north korea. you look at the major western that remains in terms of a potential to have some type of peace negotiation over the long-term, big questions there but if you look at the threat environment global in you look at the middle east, it continues a positive backdrop for overseas u.s. defense sales for the u.s. defense contractors. this he being well-positioned, you measure 30% of the revenue to international customers, 40% back log, so obviously a positive sign for growth in terms of revenue and profit growth. a solid and fundamental backdrop from that perspective. it reverberates across the , the toppace as well five u.s. defense contracts, 25% of sales collectively are of ovals -- overseas customers so
it continues to see sales. collectively u.s. defense nextts at least for the couple of years, converging markets with dynamics of military equipment sales. >> it sounds as if you think the rising geopolitical tensions could be a positive effect for the bottom line and other defense contractors and in turn, the earnings number grows, does that suggest the valuation now for the stocks is attractive and --uld be given >> it is a good question or valuations have been in focus for a couple of weeks now. they sold off relatively hard for the market. the have outperformed
overall industrial space for some time now. it back toate revenue and profit growth, continuing to be strong with unrest globally and obviously with higher u.s. it back to revenue and profit growth budgee see very positive driver. >> bloomberg intelligence analyst, thank you for joining us. a great insight. >> the u.s. justice department has an investigation into whether they are manipulating the price of cryptocurrencies. the cofounder spoke to bloomberg earlier today about his reaction to the probe. >> the software company consensus focuses on building the infrastructure and software applications on the decentralized web. another protocol, we don't focus too much on cryptocurrencies. it is valuable to have
space, lookinghe at some complicated practices in much less regulated cryptocurrencies, in my opinion, they should remain unfettered because they are tremendous abuse cases and whether it is howr kinds of assets, and that maps into securities, we are very happy to see the work of regulators in the united states and different parts of the world. >> manipulation? >> so i am not deeply aware of the activities in the cryptocurrencies trading space. we do not do that sort of thing. swings.e price it could be just because the total value of these are small, you know, it is a very young
tech knowledge and a lot of news is coming out the traders are sophisticated and they will do what they can get away with. >> let's talk about what you are having at the moment. what are the questions you're being asked and the key issues and challenges to overcome? >> we're mostly focused on securities law. issue tokenized securities and consumer utility tokens that would be considered. we're focused on getting very and helpingtions regulators around the road understand there are network business models that then if it from membership tokens or tokens that represent scarce resources and as long as the projects are selling tokens to token buyers
that make use of the tokens, and they are not selling in large quantities to speculators hoping to make money by the actions of others, it is a good and clean of a consumer token. it is absolutely what it is. we have done about seven months of homework. it is a crypto feel. world widealized web. bandwidth, you can do trusted transactions, smart software and order to pay for the resources, you need to pay with some of the crypto feel. --. -- fuel. it is a way of offering the shared resources to the world. joseph.was cofounder
i want to point your attention to a function that allows you to check out the theory him. headlines.ncluding not currency according to south africa'central bank and you can click on the story as well. >> climbing 1400% last year is down 50% last year. this is when the average -- rising.ill could be to the downside. right now, it is hard to know where the range will go.
scarlet: now to our jobs report. we are focused on chipmaker and xp. let's handed over to the deals reporter ed. ed: thank you. ed: thank you.m san joining us from san francisco, in the very unusual position of having advised qualcomm and some takeovers. it is exceptional, i should say. thank you for joining us. china and u.s. trade tensions have a huge- we
, $50 billion. can they review something like that before inevitably becomes the local fodder? .> thanks let me say they have been reviewing cases for the last 10 years. so they deftly have experience. for this particular day, i have to say there are a lot of things going on. complicated deal involving complicated technology. it is natural for an agency to take a long time to review the deal. secondly, the smartphone industry is the key industry for again,nese economy and
the government has to be cautious in looking at these issues. the cross-border transactions, we have an idea of is studying with these transactions, is it comparable? >> that is a great question. i would say largely, it is very similar to what the u.s. or the eu would be looking at. the competitive harm of the merger. however i would say there is a difference between the standards that the agency is using, more of a total standard, more than just a welfare standards that the u.s. practitioner is used to. to be more specific, only talk about the total welfare standard, naturally, there is industry and public interest is play and on top of that, there
is welfare as well. explain the independence from the government of aging? will it always be subject to the broader mood in beijing? .> definitely the agency in charge of the merger review is the bureau within, a very independent and in the review, it has -- dependency on the cases. it does regulate information from other regulatory government agencies as well as industry associations. also third parties like upstream and downstream as well. >> a merger of its own is not .nto the agency
how does that affect the process? will that need to extend the window because they have their own complications at work? >> it is a good question. because itt to add has just translated into a new earlier, theld say an two othern agencies in china in charge of non-merger reviews, they combined an two other agencies in into one new antitrt agency and that translation perhaps slowed down some of the review, that is it possible factor as well. deal, you study it and you know what goes on inside qualcomm. do you think this is something that will get done?
it seems a something that has dragged on for so long. >> yes. a merger abnormal for to take that long in china, especially a complicated case like this one. historically, if you look at some other mergers, for example, the merger between them star the parties withdraw as well and that merger got approved and then there was another semiconductor deal that month come a crude -- approved last year. it also went through a refile. of thek at the history approval of merger deals, for the last 10 years, it has reviewed over 2000 mergers and .nly blocked two deals none of those deals have anything to do with nationals here in. -- national security.
>> the other thing with the investment community is what is going on with what is in the headlines, again a more lyrical issue. does that have any ramifications -- are theycome viewed as two completely separate deals? >> again you know, there are a time, ity at the same is hard to separate one from another. there is a complication of the nature of the deal and a smart phone industry, so there might be industry policy at play. there is a translation of the new agency. top of that, of course there is a trade dispute. overall, again, looking at the review, trend of the there are very few occasions
would mock come really block a deal. >> thank you so much for joining us. scarlet, back to you. let's get you the other headlines with first word news with mark crumpton. mark: thank you president trump says the u.s. military is ready respond to any foolish or reckless asked by north korea. the president''s comments came hours after he announced he canceled a planned summit next month with the north korean leader, kim jong-un. the president said it is possible that some it could still happen and it is -- he is waiting for what he called constructive steps from kim. the united nations attorney general reacted to the news saying he is deeply concerned. urge them to continue their dialogue. to take steps to the peaceful denuclearization of the korean peninsula.
work toe all actions to preserve the plan of action. >> the secretary-general told the audience at the university of geneva that the towable denuclearization is a priority for the u.n. the russian central bank leader says president vladimir putin's plan to transform the company into one of the top five isnomies in the world achievable. she spoke today to the bloomberg news editor in chief, john, at the same petersburg international economic forum. >> it requires decisive action but it is possible. there are times when our economy has grown at a rate of 7% per year. for example in the early 2000's. at that time, the growth was largely based on a prolonged time of oil prices. the growth should be short by other factors.
>> the impact of u.s. sanctions on russia has in, in her words, quite limited. hurricane season begins in the u.s. in a week and top jobs at the federal emergency management agency still remain unfilled. critics say they can see is only get harder for the government to respond to the disasters. one of the five deadliest in u.s. history struck with an week -- within weeks of each other causing 265 or and at least 200 deaths. this year's hurricane season is predicted to be worse than average. global news 24 hours a day on air and on tick tock on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. shery ahn: -- scarlet: breaking news, a news conference with the brought --
russian president vladimir putin taking place in st. petersburg. putin has been discussing the cancellation of the north korean summit by president trump p or he says we hope to the meeting will take lace and that kim jong-un of north korea did what he promised for the u.s. summit. he is making some comments on the nuclear deal as well and says the iran deal should be preserved and iran is observing the terms struck tween the five nations. vladimir putin and emmanuel macron holding a news conference with the russian president commenting on the decision by north korean's kim jong-un to cancel the summit, saying he did what he promised for the summit and that they hope the meeting will eventually take place. abigail: out of those headlines, we have the markets now all down again. the nasdaq had been slightly higher but it is now lower with the other two major averages. 1% andsee the dow down the nasdaq just frack surely --
fractionally. they bring the major averages all down about 1%. bottom, oncen the again on the dollar is second day in a row. the best today stretch for the yen since the middle of february when we had a tremendous risk off. nonetheless, we have a recovery for stocks. ouruld like to bring in ed, next guest who is a portfolio manager. you are saying that the bull run is not over, that the increase of geopolitical tensions we have seen today, that it is just a .reeze there -- a breather >> esp are we think there is an interruption in the bull market and it is not the end of the bull market. we had a 10% correction in february and since then, the market has been in a range where he continues to churn and digest a lot of the risk out there. among them, geopolitical risk in the military and trade front. also inflation risks. thiswe finally rate out of
consolidation range, it will be to the upside. it could be a summer of discontent, that the equity markets typically experienced lower than average returns during summer months. it may be a while longer but i beginning of the year target for the s&p 500 is likely to be realized. >> given the price action we have seen in equities, the initial egg drop and the loss in the dow jones industrial average 1%,ng back now one third of it seems like they had already priced in the fact that there would be a cancellation of the summit and that it is likely we will not get anything until next year. >> the markets have to do with the volley of marginally good and marginally bad news on trade
and the north korea issue. i agree with what you said in that given the deterioration we saw in the past week, it is not really that surprising, that the summit was canceled. it is a set back. does it mean we will beep back to the rhetoric on the brink of war, we will see what happens next but if we think about where the ratio is for the s&p 500 at nowbeginning of the year, with earnings continuing to boom, we have a first quarter earnings season where the s&p 500 hearings expanded, and we have the market up marginally for the year, ratios have come down to 16 point five. that is the market building and bigger risk premiums to deal with all of the things we have
talked about. >> if you take a look at the s&p 500 for the year, from a sector composition, you could make a case that it is somewhat there is. returns on the s&p 500 on the year, we will see just four sectors are higher, leading the way in tech and earlier in the selloff, tech had been slightly more. consumer staples down about 13%, we have seen a few other sectors including telecom and real estate, those sectors being hurt. does that weakness for consumer staples were you at all? >> it does not. because as you mentioned, all of , soe are pretty expensive given the fact that we have had major moves in the 10 year, you know, i think that will probably have a rotation where if we could get rates to consolidate here, you will probably see a bounce back in the sectors.
i do not read it as to bearish for the overall market. >> where you want to be when in u.s. equities? kinds ofp or what stocks is not specific sectors? >> there are sectors we like. we aren't gnostic on style. markets.it is more we like financials and we like tech and we like energy. we like the story for each of them. we like small-cap. that is something where you have seen a relative performance of small-cap come into favor. >> it is not overdone? >> i don't think so. the valuations in terms of the relative p/e ratio that typically trays with large-cap is somewhat attractive and if you think about some transitory andors like tax reform trade tensions, small caps are the bigger beneficiaries of the
cuts in corporate tax because they had higher effective tax rates to begin with being more domestically oriented and they are more insulated to -- from the trade tensions as well. >> many talking up cash more recently, have you increased your allocation to cash at all? we started the year with a more aggressive overweight in equities, we pulled back in march as trade tensions can to the forefront and we did buy gold and treasuries and holding to have theash flexibility or optionality to capitalize on the opportunities when they present themselves in these volatile markets. >> a great overview of markets overall. ed, thank you so much for joining us. coming up, the idaho senator james gives his reaction to president trump's decision to cancel the summit with kim jong-un. from new york, this is
scarlet: this is "bloomberg markets." abigail: let's get more reaction to the summit cancellation with kim jong-un. live on capitol hill with kevin. >> thank you. we are here with a republican from idaho. decision toe to the withdraw from the summit with north korean leader chip -- kim jong-un. the complexity of it is absolutely stunning. a lot of people sing coup by and it is over. -- sing coup by off. the complexity ofif you have sg the way, occasionally you will
get a set back. basics haven't changed here. kim jong-un has not walked back his original statement to want him to talk about the new to the rising the grand peninsula. started all this. the whole thing is in kim jong-un's hands. whatever he chooses, we will do what is necessary to respond to that. it is his choice, absolutely. talky be a wise choice to about denuclearization. that was a good thing for him in the korean peninsula and america and the world. of that hasnone changed. the president said the doors open. he is willing to talk. i am cautiously optimistic that we will proceed to talk. >> so you agree with the decision to withdraw. >> yes. i was with the president this morning when he was asked why did this happen.
declined to indicate, which is a good thing. you don't want to have -- if you do have differences, it is not good to litigate them out into the open before you have ever met. so i agree with him. he made the judgment based on the information he had that he would pull back from the talk. >> i find it interesting in the last 24 hours in particular when you have a top diplomat referring to a sitting vice president as a political dummy, and you have the president in gauging in the past several months on>> twitter referring to the north korean kim jong-un leader as "little rocket man". is that rhetoric helpful let's back up.> you will notice the president's rhetoric has been entirely this -- thence closing ceremonies. exactly halfway through. i was sitting in those ceremonies and so is the state department people in all of our
cell phones went off at the same time and the south koreans notified us kim jong-un has said he wanted to talk about the koreanation of peninsula. that was a game changer. it changed things dramatically. now, there are thousands of this. talking about people talk and they say things interpreted not the way they are meant. regard to the president's letter, talking about the u.s. nuclear arsenal, it clearly is a response to north korea doing the same thing but a lot of people might look at that and be concerned. >> i urge you not to focus on a sentence of the letter. it was well drafted and well thought out. would have to take it as a whole.
if i were to pick a sentence out, it would be where the president said look, the door is still open and the ball is in your court. we would like to reach an agreement on that. >> which model should the u.s. follow in terms of which denuclearization model? >> none. the transaction is between the president of the united states and president trump and kim -- and kim jong-un the chairman. it will be there transaction. these are all different. they are unique. you start talking about a model, someone will pick something out that they don't like and didn't work and focus on that. these two parties need to be given the space to get together and way these things and see if they can't come to a decision on how to be handled without reference to anything that happened without reference to any model. >> north korea's economy is dwindling. any out of there would argue that.
more than 90% from korea come for example, what role do the chinese play here? >> of course not. the good news on that is virtually everyone in the world is in the same frame of mind that north korea should not be developing nuclear weapons. given that, it is objective. everyone works in good faith to reach that objective and you get the kind of pressure. things are bad and there is no question and what that does is it causes people to stop and think, what are we doing here? what is causing this and how do we make things better? >> the speculation that the chinese were using the korean , that is notploy what you're hearing? >> pure speculation. if you were in the room this morning, you saw when you walked to the door, he was at somber as i've seen him in a long time.
not gol notice he did off script when talking about this. they had a prepared statement similar to the letter but longer in draft. he stayed right with it. not go off scriptthe tone was the samee message was the same. andakes this very seriously hopes this can get done. i want to take this final what exactly is the administration all in lockstep? when i cover former secretary tillerson, there appear to be differences between president trump but now with the new secretary of state, it appears everyone is very much on the same page, is that correct? i would agree. mike pompeo is close to the
president. on the senate side, we have a tremendous relationship with the president. i was here with the obama administration and the constitution is very clear about the advice of the senate. we were never asked for advice. the uniformly rejected is the vast majority of cases. this president calls for advice regularly. i am up there four times in the last two weeks. >> feel free to tell us what you talked about. thank you for your insight, a to center -- senator talking us about these developments, ongoing, with north korea. vice president mike pence up here on capitol hill reef lawmakers as well. >> thank you. out reminder, you can check all of our programs on the
function tv . it gives you access to our event coverage and i will click on this, abigail, so you can see what we have been airing and there you go. you can see what just happened and you can also seek kevin's conversation with a congressman about an hour ago also on the u.s. and of course, korea. from new york, this is bloomberg. ♪
scarlet: it is time now for options insight with julie hyman. julie: thank you. , interactiveday brokers, we see the markets muddle along here. we have seen that attention seemingly turned more to geopolitical events with the president of his announcement today that he is calling off the that korea summit but then went away. how much are traders and options
traders talking about that? >> i think everyone is talking about it that no one knows how to price it. the market knows how to price more things than political events, especially a combination of volatile people trying to come hammer in agreement that does not affect the stock market and the things that affect the day today stock market. and you knowtical it is there but it is ultimately easy to focus on it. uncertainty to get your hands around in some way if there is an uncertainty, -- >> >> they do not necessarily know how to price uncertainty. >> interesting. let's talk about risk that may finite having to do with financials. we have seen the stock selloff in the past couple of days and you have been watching that here at what is your take away? finite having to do with
financials. >> in some way, the dodd-frank rollback is analogous to the market. it was out there is a positive for so many months. we will get regulatory referral. for the big cap banks, there was not much there but you got it. >> in somereally rallying that o it, there are other problems endemic to the banking sector with the fixed income market. it all comes back to the banks meander a lot and you moved a positive catalyst. the president sort of throughout a line today that he might try to do something for the big banks but realistically, i cannot imagine much going on in that regard through the end of the year. it strikes me as kind of dead money. that would be something to try to think of trades that a cop is that. >> let's look at technicals also . talk about the meandering snapshots. on the bloomberg, looking to the average, which is that what you traders on today.
it is kind of going between its 100 day moving average. if it didn't bump up against the upper bound, it didn't quite make it out. >> it is very much a trading range that we established here. it is a cause-and-effect that it's tricky to figure out sometimes but that think the pattern holds without a lack of catalyst. being -- being toward the higher end of the trading -- >> got you. how do you structure that? >> the trade i focused on today inld be with the etf sort of the higher 27 range. defray theway to cost. you will not to the dollar pullback. 3-1 downget a payoff
in the low end of the trading range, you could spend $.23 and make 77. >> ok. we will see. thank you. we appreciate it. up.let: coming president trump watches and -- people question whether this help help people reach and nafta deal. a reminder as we look at the potential auto tariffs, you want to check out g tv . a lot available including one that dovetails nicely with the story. the market for cars. ♪
diplomacy is harder than the art of the deal. diplomaticrobust efforts to denuclearize the korean peninsula, many of us were deeply concerned that the of preparation necessary before a summit is agreed to was not taking place. south korean president moon jae-in called the cancellation of the summit regrettable. julia skripalys released a statement of her own freewheel. she said yesterday her recovery had been slow and painful.