Skip to main content

tv   Bloomberg Markets Americas  Bloomberg  June 21, 2018 1:30pm-3:30pm EDT

1:30 pm
immigrant detention centers in texas. according to staff, she planned the trip on her own over concerns about how her husband's immigration policies were affecting families. paul ryan today outlined houseplants about to immigration bills that seem likely to fail. the house action comes a day after the president reversed course on that policy. >> daca is broken. the immigration system is broken. the border is not fully secured. these are facts. they need to be solved. at the end of the day, i really believe we will come back around if a bill is a past today we will come around today. >> the president's immigration reform pan -- plan included
1:31 pm
daca. believe we will come back arou's becoming the first in the nation to require a face scan of passengers on all arriving and departing international flights including american citizens. orlando international is alarming some privacy advocates who say there are no formal rules in place for handling data obtained from the screenings. airports in several other cities already use the scans. italy, lawmakers from the coalition partner league have been named to lead key economic parties in parliament. the appointments are likely to add weight to the new government's pledge to challenge the eu in key areas. finance minister has said the country remains committed to the euro single currency.
1:32 pm
global news 24 hours a day on air and on twitter. than 2700 more journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. ♪ life in new york. welcome to bloomberg markets. sabr andined by bloomberg audiences. here are the stories we are following. opec reality check. iran's ease off on its attempt to block an agreement. score for saudi arabia and argentina. fromries got to win big their inclusion in the emerging markets index.
1:33 pm
the supreme court rules that states can collect sales tax on international practices -- purchases. news onbreaking kalanick rep. -- conagra. there is no certainty of a deal being made but in recent weeks conagra and technical have been in discussions. you can see a look at the effect that this news is having on conagra's share price on the day. >> let's now get a broader check of the markets area u.s. stocks falling today. the dow is down 6/10 of 1%. now, falling for an eighth consecutive session. the s&p 500 is being led lower by energy shares. we are less than 24 hours away from the crucial opec meeting. decide the fate of
1:34 pm
crude output. take a look at what is happening across markets. the u.s. may be approaching china to backdoor channels so we are seeing the dollar reversing earlier gains but this is mostly about positioning wearing and trading today. the pound is gaining strength of more than two months after we heard news that three members of the bank of england voted for an increase. they were outvoted. >> ofourse with all eyes on opec, we wanted to show you on the terminal here. the output from opec member nations. it is an interesting reminder that we are well below 2016 production levels.
1:35 pm
for ais definitely room production increase. the debate is what is the sweet spot in terms of keeping the opec, we are in vienna ahead of tomorrow's meeting. keywordism has been the in vienna. what a difference a day makes. when a ron first arrived here they were taking a hard tone saying there would be no agreement. we are hearing now they are more willing to come on board. russian meeting with energy minister and in the next hour the group will meet opening up as a whole. they will discuss the proposals on the table. there is no doubt more oil is
1:36 pm
set to hit the market but how much. can they reach a consensus or will saudi's have to come out here with their own communique. we are hearing maybe one million barrels of oil could be in paper tes. that means not every country has capacity to pump enough oil right now. right now about 600,000 barrels of oil is what we could see. citigroup was saying 500,000 barrels of oil is already priced into the oil price. very interesting to see how the market reacts depending on what number for real barrels of oil they actually agree on tomorrow in vienna. opec, let's bring on the head of natural resources at kpmg. thank you for your time. it seems that we are going to see a raise of output but we are
1:37 pm
not sure how big the increase will be. how crucial is this point? >> it is a very crucial point because the analysts do believe that some increases are arty price in and that is where the bet in. does that cause it to spark back spot whichs a sweet is maybe 70 or lower. it will be a positive outcome for opec if they are able to achieve that. producers hit by that canada forrice in example they learned to adjust. . a number of them have. >> it absolutely has. the entire industry has gotten incredibly competitive during the downturn.
1:38 pm
that wet fascinating are talking about lower for longer. now we are in the 70's talking about the price potentially being too high. we change our minds. the industry is competitive and it can sustain profitable margins even at a 50 or $40 per barrel price threshold. rel about not creating a freefall again. that makes some of the u.s. producers even more aggressive and more competitive. >> even if the -- they agreed to raise production, how feasible is it? is fillingthe issue the gap that has be left by some of the producers that have not been able to maintain. we are all familiar with venezuela, angola, libya.
1:39 pm
cut is 2.8 million barrels per day. pointiginal cuts were one 8 million barrels for today. that's what opec wants to get more supply into the market area the saudi's have the ability to provide a lot more supply a lot more quickly than most of the producers. the ball is in the saudi's hands. >> this cartel used to have a lock on behavior of members. it seems to have a weakened over the last few years. starting to flex their muscles again. opecstion the relevance of over the last 18 to 24 months. the words that they are saying are having an impact on the market. i think they want to play their cards carefully. they definitely are relevant again. we have to make sure they don't get over it -- overly exuberant.
1:40 pm
>> thank you so much. coming up, argentina and saudi arabia both are said to join the markets index in 2019. we are joined by a ceo. just a reminder of breaking news , conagra has approached pinnacle foods about a potential deal. they are said to have contact in recent weeks. deliberations are said to be at a preliminary stage. people close to it said pinnacle shares rose. this is bloomberg. ♪
1:41 pm
1:42 pm
1:43 pm
this is bloomberg markets. it's a major vote of confidence for argentina and saudi arabia. but countries are said to enter the nci index. status foreturns to the first timin nearly a decade. for the saudi's it could be big tickets for foreign investment. we are joined by henry fernandez. thank you for your time. some people were expecting argentina not to be upgraded given the market turmoil. are you concerned with argentina curbing market axes? >> that is a valid concern. we took that into account in our decision. leading up to the announcement yesterday.
1:44 pm
i think including our major clients around the world, major investors, a believe that the country and its administration has had the backbone and the wherewithal to look at the problems that they have and react to them with market friendly intervention rather than change controls or flexibility problem. we will keep monitoring that because we have promoted the to re-included to the emerging markets starting next year. we will be monitoring this event and we for sure will not want to see any kind of controls or accessibility problems going forward. saudi, there was an expectation that this was coming. activity in the event of this but is it frantic call is a maturation of that market?
1:45 pm
>> the changes in the saudi market have been very to such an extent that when we started consulting with our clients less than a year ago a lot of our clients were not aware of the significant reform that was taking place. there was a massive educational process that the saudi authorities did over this. of time leading up to the decision. reforms are very significant , a very large piece and the market is white open and welcoming investors. reforms are very>> will they bn investors if they continue to become more transparent when it comes to these companies? >> i think that clear inclusion is a step in the trajectory not a destination. they fully understand that and they will continue to reform many aspects it is a continuing opening of the market.
1:46 pm
continual development of other parts like futures and shortselling and all of that. thatpoorly the education they need to do with a lot of their companies in terms of investor relations and transparency and governance, they have done a great job but they continue to have to do a lot more. >> there have been a lot of see itover em as people as a riskier place. did that change your thinking? >> we obviously look at that and monitor that but that is something that we do not formally take into account in our decision-making process. a lot of what msci does is create the opportunity set the people can invest in. we don't have an editorial view in terms of evaluation of companies. we believe that when the market
1:47 pm
is open and ready and accessible, that is when we included in the index as opposed to when it is a good time to buy or sell. >> we are now seeing the shanghai composite because of this volatility in the emerging markets. when it comes to argentina houston can they see the benefits of msci inclusion? >> they are are a seeing it today. the market is up six or 7% or higher. on the expectations that they will be active managers and passive managers putting money into the country. this doesn't happen overnight. the index managers don't actually buy the shares until they inclusion takes place which will will not be until may of next year. some of the active managers can decide to go ahead of it. this our present -- present a good opportunity and a time in
1:48 pm
which markets are coming out of favor. if you want to be a contrarian investor these are the times to buy. will also be on your watchlist? announcement that kuwait would be in the review potential review in june of 2019. that is a market that we will start spending a lot of time on. a share market continues to be a focus. there are two directions that could take either more securities including the mid-caps or a higher weight at some point. we don't know when that will be but that is an area of significant focus and attention on our part. >> thank you, henry. big --w for the bloomberg business flash.
1:49 pm
volkswagen and bmw are picking a different lane from daimler. both companies are leaving their earnings unchanged for the end of fiscal year. the confirmation comes after daimler cut its outlook. vw has little u.s. china exposure although they both export suv's to china from the u.s.. a surprised shakeup at the top of the world's largest maker of semiconductors. intel has lived therceaft they learned he previously had a consensual relationship with an employee. that is a violation of intel policies. he was the ceo for five years. internet retail stocks are trending lower today after a 1992 decision was overturned.
1:50 pm
justices decided state and local goves collect sales tax from internet real tellers that don't charge tax to their customers. had protected retailers from collecting taxes if they did not have a physical presence in the state. that is your business flash update. we saw strong reactions. amazon the largest. thishad been preparing for and collecting the sales tax and getting its systems ready to do so. others have been less prepared. they will have to be a process. i am curious to see wha consumers do. will there be a decline once the prices go up next to taxes? >> will we have to pay more? for smaller companies, they will need to spend more trying to deal with thousands of different u.s. tax jurisdictions.
1:51 pm
will this for the supreme court to come out with a enrile standard when it comes to these online retailers? >> coming up, a busy year for leverage lending. will have more on that next. this is bloomberg. ♪ leverage loan issuers are
1:52 pm
1:53 pm
returning in droves with loan add-ons reaching a record high in the u.s. just shy of 41 billion. chief credit officer, great to have you here. it sounds like flashing red a little bit on the quality of loans. are we in aangerous. ? >> certainly the leverage lending is growing. on the other hand, this relatively benign environment where quality is still improving and interest rates are rising that rapidly. >> what would be the dangerous signal?
1:54 pm
reported in your covenant light even covenant free loans out there. >> you would still see some growth in leverage lending because the economy is still doing well and there is a lot of opportunity out there. they are going to continue to look for financing. i think they will continue to see growth. now there will be more incentives out there and it will be martin's -- expensive to borrow. banks will this affect and will it affect bigger banks differently than smaller banks? >> the major play is in the leverage lending in the big banks in terms of breaking the loans. ,he loans they sell to clo's the clo's are dividing it up and selling it off to investors. depending on the size of the
1:55 pm
bank and the loans you are originating. it is primarily big banks but small banks are involved as w as a >> we are seeing changes in the rules. does any of that change the picture here? like there would be you feel deterioration? >> i don't think so. the regulators are still putting pressure on the banks to watch their credit. even if it switches from guidance to controls, they will still be cautious. >> what do you look for here? with thenumbers are up quality stays good. you are not saying we are downgrading banks here. >> know, the banks are mentioning -- managing their credit risk. the risk is going to investors. investors about the being cautious. >> what would change that? is it purely interest rates? >> and economic shock would
1:56 pm
definitely pause problems. that would come back and feet through to the clo's. >> gat to have you with us. of course if you miss out on any of our charts, gtb go is your function. you can save the charts. live from new york in toronto, this is bloomberg. ♪ what's a gig of data?
1:57 pm
1:58 pm
well, it's a whole day's worth of love songs. 300 minutes of baby videos. or, it's a million chat messages. a gig goes a long way. that's why xfinity mobile lets you pay for data one gig at a time.
1:59 pm
and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. >> if you don't do it, you'll be inundated with people.
2:00 pm
i've set it for a long time, you would effectively not have a country. thank you very much. thank you. >> that was president trump speaking. we are obviously working through the playback issues. we will post the -- we will keep you posted when the video is available. and in for julia chatterley. welcome to bloomberg markets. scarlet: we are live in bloomberg world headquarters in new york. are are the top stories we covering. global trade turmoil deacons, china doubling down on its
2:01 pm
promise to hit back if president trump goes through with additional tariffs. the eu withlowing retaliatory levies on foreign goods. earnings bonanza, the season is off and running this week with measures already showing high optimism. and profits at risk. a wild day of trading in new york marks the end of the -- era for deutsche bank. we have u.s. markets closing in about two hours. let's check with julie hyman on the markets. but first, a central bank decision out of mexico. julie: the mexico central bank 7.75%, ad the rate to quarter-point increase here. we have been seeing peso weakness over the long-term, spurring inflation concerns. looks like that flips the increase in rate here. in theh movement yet
2:02 pm
peso, a pretty broadly expected decision. again, we have seen, prior to this movement in the peso climbing in the dollar versus the peso has been dramatic over the past three months. .he dollar down one third of 1% in terms of other breaking news, we've been watching nickel foods 3%pinnacle foods spiked a after bloomberg reports that them for aproached deal to add freezer aisle brands to their roster. remember that janet partners has urged pinnacle to explore -- the inake in the company april. this might be one potential , shares up two point 5%. looking at what is going on in
2:03 pm
the wider market, we have coming pressure notably from the energy complex. energy stocks down today along with oil prices, though that may change with a reversal in oil and industrials week as well. the dow on a losing streak, falling a half percent today. and we haven't seen much movement in terms of magnitude in recent days. looking at the bloomberg, the s&p 500's daily percentage changes, now 11 days that we've seen not even a half percent movement in the s&p 500. in many ways, recent trading actions have hearkened back to the end of last year to this year, where volatility has slumped after seeing record after record of technology, if not the broader market, and the small daily moves in the s&p 500. oil has been seeing volatility, not just today but in recent
2:04 pm
days toward the opec meeting as there is uncertainty about what kind of production changes we could get, and disagreements between members of opec, notably iran and saudi arabia. we have seen a leg up in oil up 4/10 of a% -- percent. first lady melania trump made an unannounced visit to child immigrant detention centers inexas. according to staff, she planned the trip on her own over concerns of how her husband's immigration policies were affecting the detained families crossing the border illegally. the house of representatives has plunged into its long-awaited than 24ion debate less hours after the president reversed course and signed an executive order to end the policy of separating families
2:05 pm
who have crossed the border illegally. came fromlike -- who guatemala as a child, the date is personal. >> i was welcomed here in a loving home. >> we have to have a very tough policy, otherwise we have millions of people pouring into the country. we have to have a strong border, and if we don't, we'll have millions of people. what is happening today -- it would be a terrible thing if we ever did that. we have to be strong on the border. if we don't, you will be inundated with people and you really won't have a country. without borders, you don't have a country. i've said it for a long time. ok, thank you very much.
2:06 pm
scarlet: and that was the president speaking after his working lunch with governors. he made comments about the supreme court decision to tax itine retailers so that evens the playing field between brick and mortars and online retaers. not necessarily encouraging news for the likes of amazon. big question.a amazon shares in of thell on news decision, but there's a question on how much this will actually eat into their profits. it's something we can talk about further. scarlet: we will, later in the afternoon. but let's move on to the markets. lisa: earnings season approaching, optimism is high. companies did well last quarter and the momentum is expected to continue, according to our next guest, who sees better fundamentals as a key driver for
2:07 pm
growth. joining us is patrick palfrey, raising his 2018-2019 earnings per share forecast. it is not as good as it gets yet? not yet. ultimately, we are seeing a strong fundamental backdrop. growth remains spectacular, all sectors delivering revenues. that has been driving ea going forward. scarlet: the first quarter earnings season was stellar. the reaction from investors at the time seems to be that they kind of took it in stride. maybe it is because valuations are fairly rich, a lot of noise to contend with. how much more or less stellar are we going to expect results to be? >> the first quarter came in at around 26%. as we look at the next three quarters, we will average 18% to 22%. absolutely in line
2:08 pm
with that trend. people assume this is a tax phenomenon. it's not. if you take out taxes, we are still growing. this is trends that are unheard of this ten the cye. where we are seeing the outperformance and stock in the tech sector, we see amazon and facebook near their all-time highs. is this where we are seeing the big revenue growth, or the -- trade that is not tied to fundamentals so much? >> it is more than popularity. these are companies that have beaten every single quarter. analysts under appreciate the trends in these businesses. i couldn't think of a better sector to choose then technology to buy. scarlet: why is it that the fundamentals are justified, but people can't get past it? is it because prices are so phenomenal that they think there must be something not
2:09 pm
substantive there? >> what we see is consumers are .hanging how they are shopping it is often times online. a lot of these businesses are catering to those services. that's why trends are so strong for that business. you think the supreme court ruling we were just talking about makes a difference in any way for amazon or other online retailers? >> i don't foresee it making a difference. many states tax at that level. it's not like it is a game changer. consumers are choosing to shop at these stores. it is not a price difference, it is how they want to interact with the stores. scarlet: convenience for some, and i call it laziness. lisa: i think that's the word to laziness, but we like and we reward companies for reporting it. we talk a lot about regulatory pressures and the possibilities
2:10 pm
of disrupting this rally. we stopped talking about that pretty much completely. when do we start talking about it again, and does it matter? >> it don't matter. when i look at volatility, it tells me the market isn't concerned. markets are really taking it in stride. donald trump is debating key issues. we can debate his rhetoric style , and that might be uncomfortable for many, but some of the things he is discussing our legitimate issues. scarlet: we've been talking about the acquisition of fox assets, the merger. speaking with a longtime banker in the media industry, he said disney would unroll what is called a netflix-killer, and they are gaining ammunition for that. is there something that could disrupt one of these tech giants that we are not anticipating? >> it is hard to say what is driving the business decisions
2:11 pm
of these mergers. that recently, the s&p has spun out a lot of these media companies and online companies into their own sector to give individual investors a way to play these fields and themes and take advantage of the marketplace. scarlet: you are referring to the -- in september? it is going to have amazon, netflix -- maybe not amazon, i might be getting that wrong. disney and comcast bill over to what used to be telecom. media and netflix out of discretionary, taking internet service companies like google and twitter out of technology and putting it into communication services. it is really making that basket -- people are able to interact how and where they want. scarlet: you are clearly very bullish. what are the biggest risks to review? toi think the biggest risk view is wages.
2:12 pm
we have a tight labor market. everyone is expecting wages to pick up. we haven't seen it yet. it is something we are watching for. it will happen. people inevitably need to hire. there's not a lot of spare labor. lisa: are people right now too bullish or too bearish? >> i think people are concerned about trade and not with fundamentals. with earnings growth in the 20's, you can't help but wonder, how could i not buy this market with a valuation of 16.5? scarlet: there is a narrative among macro strategists that there's a recession coming in 2020-2021. do you see that is credible? we spend a lot of time looking at recessionary risks. right now, those risks seem quite limited. wages seem in line.
2:13 pm
pmi are in line, still creating jobs. everything is telling me that a recession is not on the horizon. scarlet: thank you very much. we have some headlines. i'm trying to pull them up now. have.s. house republicans delayed until tomorrow on the republican immigration bill put together by leadership as a compromise. so, that is not happening today. it will be put off until tomorrow. ♪
2:14 pm
2:15 pm
lisa: this is bloomberg markets. scarlet: wells fargo ceo tim sloan says the negative headlines have not scared customers away.
2:16 pm
he spoke at the bloomberg breakaway ceo summit and discussed his outlook for the u.s. economy. >> i think overall, the economy continues to improve for a variety of reasons. our outlook is pretty consistent with the consensus in the u.s. that we will probably have gdp growth in the second quarter of about 4%, and the likelihood is we will have growth for a full year for about three. that is a big improvement on what we've seen in the last few years, it is a good thing. certainly there are some clouds on the horizon. >> did you talk about recession at wells fargo? .> all the time we think about the risks -- we are in the business of taking risks. risks,business of taking you need to be all inclusive of the potential of the next downturn. 2006, whenin 2005,
2:17 pm
we were in this environment where people were talking about a new paradigm where we would never have another recession again. ,hat technology had done this that people were talking about taking risks in a different way. business,a cyclical the financial services industry is cyclical. i think we need to be thoughtful of the fact that while the recovery has been relatively , and candidly,. in other parts of the world since the recession, it is long. we are now going to set a new record. i think it is something to be mindful of. we are relatively optimistic for the next couple of years, not because we are worried about year number three. me-- one thing you said to >> one thing you said is you saw
2:18 pm
-- commitment to making more investment in the united states. change in the corporate tax policy in the u.s. allowed us to be more competitive, and it has created an environment who have-us companies been moving, particularly manufacturing operations, here supplyce the risks and chain saying you know what, it probably makes sense to have more operations here because this is such a vibrant market. -- just open their first manufacturing facility in south carolina for exports. the elephant in the room. interesting couple of years for wells fargo. safe to say that many would say it was an epic mismanagement. >> we made our share of mistakes. >> 2 million unauthorized accounts opened by employees.
2:19 pm
$185 million in fines, enforcement actions. workers were incentivized to basically open up those accounts. what have you learned question let me correct a couple of things. we don't know how many accounts were opened, unauthorized. one isd you not say that bad? >> one is too many, that is absolutely correct. regardless, there is no question we had an incentive planned in part of our business, in our retail banking business, that incentivized our team members in retail banking, most of whom did .n incredible job it incentivized them to open an account as opposed to providing good service and advice. >> how does that happen? >> i think it happens over time, when you have a plan that tends
2:20 pm
to work for a variety of reasons. when you look at the customer service scores, they were improving during the same time. we were growing as a company, or earnings growing, all of the other metrics. step back, we had an incentive plan that went off the rails. and it was more than just an incentive plan. i think this is an important learning experience for all of us. it created a management environment where many of our managers at the time were more focused on managing to a plan than being good managers. that made the problem a little more difficult. but we've acknowledged the mistakes we've made, taken responsibility, made fundamental changes in the company, to the extent that any customers were impacted, we are making it right by them, and moving forward. scarlet: that was tim sloan at
2:21 pm
the bloomberg rake away ceo summit. bring you this update. the house has just finished voting on the -- on one of two measures. it does not have the votes to pass and has been rejected. the compromise measure was expected to face a vote at 5:00 p.m. eastern, delayed until tomorrow. -- seeking compromise on the immigration issue, a real battle between hard-liners and those that are more moderate. ♪
2:22 pm
2:23 pm
scarlet: this is bloomberg markets. let's bring you another one of our highlights from the bloomberg breakaway summit. we've been speaking with ursula burns, former chair and ceo of
2:24 pm
xerox. is not anywhere nearly as complicated as it sounds. first, you need somebody who knows more about it than you do. often times, i thought we needed to transform or think of some new service. but th wasn't where we started or should have started. digitizing the core of your business, digital can be used to generate new revenue, add new value to clients. but the first place we looked was inside our operations, to streamline and lower costs. that --us some to do some cap-ex to do that. we approach that as a pretty .traightforward proposition
2:25 pm
a lot of companies, even if they were talking about this earlier, if you are a taylor or a garbage collector, a flower person, etc.. literally, the amount of people-based transactions or interactions that could be automated, digitized, that could use a view of using data to be more efficient and effective. ursula burns, former xerox chairman and chief executive officer. scarlet: it is now time for the bloomberg business flash, a snapshot of some of the biggest business stories. the largest radio broadcaster has turned down an offer -- i heart media rejected the bid for a 40% stake. they say other talks are continuing.
2:26 pm
chanel has opened its books for the first time to dispel rumors that the french luxury brand could be taken over. -- revenue of almost $10 billion. sales are up 11%, driven by demand in asia. that is the business flash update. lisa: when we come back, a look at deutsche bank's while day of trading in new york. more next. ♪
2:27 pm
2:28 pm
2:29 pm
lisa: from bloomberg world headquarters in new york, this is bloomberg markets. mark: the house of representatives has rejected a republican immigration bill that
2:30 pm
would have given temporary protection to dreamers while abilitiesmmigrants' to sponsor family members to come to the united states. the measure would have also eliminated the diversity visa lottery. a house gop aide tells bloomberg news that republicans have delayed until tomorrow a vote on another republican bill put together by leadership as a compromise measure. the you when is urging the u.s. to reconsider its decision to pull out of the world's top human rights body. you when secretary-general antonio guterres spoke of the council's merits. >> i believe the human rights to promotee is a -- and protect human rights around the world. russian foreign minister sergei lavrov expressed a sink -- a similar view.
2:31 pm
the u.s. withdrew from the council earlier this week, accusing the body of being biased against israel and allowing countries with poor human rights records to become members. -- report what washington has described as national security concerns, cutting ties with allies from -- straining ties with allies. wilbur ross said "the g over." >> we are going to fix the problem of protectionism around the world by making it more painful for those countries to do bad practices banned to do the right thing, which is to lower the trade barriers. secretary ross added the trading partners took advantage of the free american markets, and called them " spoiled." the new zealand prime minister has given birth to her first
2:32 pm
child, a daughter. the mother and baby are doing well. she becomes the second leader to have a child while in power, as the former pakistani minister who had a baby on her own birthday. global news, 24 hours a day on air and on tictoc on twitter. powered by more than 2700 journalists and analysts in more than 120 countries. lisa: the fed releases the first stage of its results from the 2018 bank stress tests today. the first of two stages, quantitative impact on hypothetical scenarios. bloomberg has learned of a wild day of trading at deutsche bank, raising concerns about their risk management. let's start with stress tests.
2:33 pm
this is being viewed as a formality for the government to go through. banks are flush with cash, waiting for the green light to throw it back to shareholders. is that an accurate assessment? >> we have big foreign banks being tested for the first time for real this year, like deutsche bank. that is an unknown part of the puzzle. but the numbers we will get today will show everybody, including foreign banks, very good capital levels, even after stress. nobody is going to look scary with numbers. that next week, when we hear the qualitative results, we will hear about whether portugal failed. -- up to par, as u.s. banks have managed to bring them up in the last 8-9 years. scarlet: i want to point out
2:34 pm
that large u.s. banks are returning more capital to investors than they are generating for the first time since 2008. a question, are they depleting their coffers to a degree that might threaten the system? >> there are critics who say that, but let's not forget the background. they held on to their capital for many years. , in thet several years first stress test in 2009, they were asked to raise a hundred billion dollars in more capital, and they did. for several years, the fed did redistribute anything, and they started with tiny dividends. year, they'vethis been allowed to give more because their levels have reached beyond the required minimums. that is why they are able to give more. about wells to ask
2:35 pm
fargo. obviously have a lot of issues, including risk management issues. is this a bank that is may be at risk of not passing stage one or stage two? >> stage 2. their capital level is probably higher than anyone else. i don't think they'll give up a lot of money act to their shareholders, but stage 2, the qualitative part is a black box. last year, aev thought th were going to fail the qualitative part because of all of the scandals. they didn't, and they passed. this year, will they fail? will they not? if they fail, they may distribute a lot of money or they may not. ofa: another troubled child the banking world is deutsche bank. we have a scoop about a wild a of trading that raises questions about risk management in the bank.
2:36 pm
is there serious concern that they will fail the qualitative part of the stress test, and if they do, what is the consequence? >> similar issues. withare a consumer bank consumer scandals, and deutsche bank is an investment bank with investment issues. that raises the same kind of concerns to regulators and the fed. the whole u.s. operation was not of the stress test, but their custodian unit was, and they failed in the previous two years. their capital level was at 20%, much higher, as you know, but they failed qualitatively because the fed was not happy about how they know about their risks and take care of them. it's very possible that the of u.s. operations not being tested will fail.
2:37 pm
a couple of weeks ago, we found out the fed had downgraded their ratings, the way they look at banks, because of these risk control issues. already, there are issues going on. it would be pretty surprising if they passed this one. we thought one would definitely fail, but they passed. that is the black box part. and the numbers out of deutsche bank are areas of concern. german lenders are repng one-day loss at 12 times the risk of -- of things the kind that worries the fed. they look at this number and ask the banks, well, how did this happen? the explanation is meanwhile, we have another trade in europe matching that. they say, we don't see that. can they really handle their risk? that worries regulators. scarlet: we will get a sense of that later today.
2:38 pm
onaran, our senior reporter on all coverage of lenders. -- leaves after violating policy. what this means for the company and its strategy. ♪ ♪
2:39 pm
2:40 pm
2:41 pm
2:42 pm
scarlet: this is bloomberg markets. it is time for the sector spider report. >> today, we are taking a look etf up for the third day in a row. , down 10%,the year but this month, up 3%, the best month of the year. we have had volatile actions, so it is worth noting. relative to some of the individual members in the sector, this is the m.r.r. function on the s&p 500 consumer staples space. kroger up 9.4%. the best day since 1993. the company put up a better quarter than expected. despite pressure from amazon. take a look at philip morris,
2:43 pm
the worst day since april. kimberly-clark down 1.6% as morgan stanley has initiated coverage on kimberly-clark with underweight, claiming the weaker long-term growth prospects are not great due to composition -- due to competition, especially in the diaper space. now let's look at pinnacle foods and conagra. conagra was higher earlier as well, and may have approached pinnacle foods for a potential deal. these consumer staple companies really looking for growth. that could be one impetus for wanting to have a deal. lots of retail names in the consumer staples space. let's switch to a different retail space. is our stock of the hour. 9%.he lowest, down
2:44 pm
behind this, the supreme court taxsion to allow states to online sales, overturning a 1992 the agesaying that in of e-commerce -- it makes no sense. this comes as a surprise to some. i spoke to one analyst who said that this has sort of been on the back of the roster, that the supreme court was not paying attention to it. but there's so many different nuances. if we keep it simple, who are the e-commerce players that lose? who could potentially win? and third, department stores. in terms of losers, the e-commerce space,, ebay, etsy, shopify. the reason they haven't been collecting taxes on a state basis. one company that is relatively protected is down, amazon. they've been preparing for this for years. at the end of last year, they
2:45 pm
started to collect taxes on their own retail and goods. the third-party channels, they aren't collecting. a bit of weakness, but they look like overall the most protected. scarlet: i've spoken to a couple of analysts and they said it really won't affect the giants as much. abigail: within ebay, there's tons of little merchants within ebay. so there's nuance of course. for department stores, it is interesting to see whether they benefit. the ticket size for amazon is less than $40, but for or wayfarer, it might deter sale. thank you very much. the world's second-largest chipmaker is facing its biggest leadership crisis in years. they ousted their ceo after learning he had a consensual
2:46 pm
relationship with an employee, violating company policy. this raises a question. would intel have forced him out in another era? are we seeing a change in corporate actions toward relationships at work? and every other silicon valley company, given the backdrop, behavior and reaction of people toward this kind of issue, they are having to stand by those rules and do something about it, and it proves nobody is above them anymore. scarlet: it comes at a pivotal time for the company. krzanich had been trying to shift toward another direction. he's trying to turn intel into more of a general provider of chips. where are they in that process? without an immediate successor, it raises a lot of questions. >> you are absolutely right.
2:47 pm
, things couldn't be better. numbers are fantastic. record revenue, record income levels. so, what is everyone worried about? intel flipside, that is making money out of what it has always been good at. new challenges, whether in the data center, ai, so driving cars. these are the avenues of growth that intel has to get on as the market changes. krzanich put some things in place, to take advantage of those opportunities. by,: one thing i'm struck intel shares are down 2.2% so far today. chipmakers are in a uniquely difficult position when it comes to trade. i wonder how important it is who
2:48 pm
they pick for navigating through some of the trade tensions that are bound to affect chipmakers and their imports and exports. ini think at least investors intel and the chip industry are concerned more with the direction that the company is to go in. thishave always had regular path, this established leadership role. you've always known who is coming next, and if that person wasn't going to get it, you knew the next person. it has always been clearly telegraphed and organized. byanich has broken with that getting thrown out of the company, but by also putting in people from outside. a case of uncertainty being created. what is the identity of intel going forward? a thin bench, as you wrote, when it comes to looking for successors. outside, and he
2:49 pm
also pushed out insiders, veterans who would be in a prime position to take over. stacy smith,ike renee james, competitors for the -- for the topbe job. but they aren't there anymore. and a number of people below that level, like dan bryant. people really doing well for the company. they would also be the natural successors or standins. kinget: bloombergs ian joining us from san francisco. coming up, our exclusive interview with martha stewart. why she decides not to take sides. ♪ sides. ♪
2:50 pm
2:51 pm
leaders meet in scenes that would have been unimaginable months ago. trump says the meeting was fantastic, a historic document at the time.
2:52 pm
lisa: this is bloomberg markets. scarlet: martha stewart is one of america's most high profile business women with a significant comeback story. she sat for an exclusive fireside chat at the bloomberg takeaway summit where e discussed her political stance in today's climate. i think, you have to be a political. it is hard to take sides publicly, especially in the media business. i can't do anything overtly, and i feel bad. i get requests every single day that i should be over in my feelings, and i can't, because 50% of your readership is on this side and on the side. i have a magazine and an obligation to my employees to pay attention. so it is very hard to be
2:53 pm
political. entrepreneurial , theys, like elon musk take sides and get into trouble. you can't. if you are running a big corporation, it is better to pay attention to the everyday workings of your company, of your employees, and focus on that. >> you get pressured by employees? >> often. they know how i feel, but i can't tell other people how i feel, personally. again, that is why you write a book. [laughter] >> later run. would marthae stewart today give to the one starting out? smany pieces of advice.
2:54 pm
your employees wisely. get the very best like-minded people you can, and some that are even smarter than you are. don't ever be afraid of that. i think having smart people business, itn my has to be both smart and creative. those are the people you really want to have around you. thrive.row, as you it is very impor. you have to do a lot of research into people's backgrounds. somebody they -- if comes in and is a little older, know what they really did at what they can do. it is hard. for me, that is the hardest part. choosing wisely enough who is working with me. one last question.
2:55 pm
do you wish you were starting over again? >> do i wish --? in a way, of course. beause in that way, i would 40 years old and on my way again. absolutely. >> is there anyone else other than snoop, an interesting person you want to work with? >> lots of people. that was our exclusive interview with martha stewart. it is time for the bloomberg business flash, a snapshot of some of the biggest business stories in the news today. at&t is not resting on its laurels after locking down its acquisition of time warner. they agreed to sell data center operations to brookfield infrastructures for more than $1 billion and are setting their sights on internet advertisement exchange company -- to better compete against google and facebook. they have also launchean online tv service at $15 per
2:56 pm
month. lex going group is ramping up guggenheimne -- life and annuity. looking to offload risk, and blackstone are buyers of their relatively predictable books of business. scarlet: coming up, president trump's says he has done his part on immigration. now it is up to congress. we will talk to two lawmakers in a mome. ♪ two, down, back up!
2:57 pm
2:58 pm
our phones are more than just phones. they're pocket-sized personal trainers. last minute gift finders. [phone voice] destination ahead. and discoverers of new places. it's the internet in your hand. that's why xfinity mobile can be included with xfinity internet
2:59 pm
which could save you $400 or more a year. it's a new kind of network designed to save you money. click, call, or visit a store today. in new york. welcome to bloomberg markets.
3:00 pm
>> we are live in new york. here are the top stories we are covering. the immigration bill favored by conservatives has just been rejected in the house of representatives. the jimmy lee -- gop compromise bill will be delayed until tomorrow. deal.en fruit conagra is approaching medical. the supreme court rules that states can collect sales tax on internet purchases. -- one hour away from the close of the markets. >> stocks heading back towards the lows which is notable as we had to the last hour of trading here. there has been a gap in recent days between the performance of the dow and the nasdaq there for theoving closely
3:01 pm
magnitude of the decline. within the s&p 500 are reflective of the broader market. you will see that it looks like a rotation into defensive groups away from sin -- cyclical groups. a driving force behind this could be that we see bond yields slide. financials are little changed. energy remains the worst forming group. industrials have also been suffering. take joined them today. that is not something we have seen as of late. i want to focus on energy for a moment. that is still the worst performer even know oil prices are looking a little better. we have oil climbing from the lows, now is back to unchanged. it is than bouncing all over the place as the opec meeting in vienna unfolds. iran doesn't think it can sign on to any oil production
3:02 pm
increase agreement. that may have been responsible for the highs of the day. it looks like the negotiations perhaps are ongoing. i have also been looking at the correlation or how they move together if you're looking at energy stocks versus oil. we have the ratio of the xle versus the st why. we have not seen that type of a correlation. we have oil stocks hasrperforming and as oil pulled back then gone sideways, the stocks of kept on going lower. it has been an interesting phenomenon. also a lot of food related news. we have this report from bloomberg saying that conagra ha approached pinnacle foods about a potential deal. kroger out with earnings they
3:03 pm
came out ahead of estimates. darden restaurants, all of garden apparently going well. >> thank you. let's get the first world news with mark crumpton. >> a day after president trump signed an executive order ending new family separations of the border, first lady melania trump. a firsthand look at some of the inner -- immigrant children being kept in holding facilities by the u.s. government. mr. omega's present visit to the texas facilities today. she said she wanted to letters or to the children and she asked staff to reunite them with their families as quickly as possible. citiese mayors of u.s. met in texas. they say trump has failed to address a humanitarian crisis of his own making.
3:04 pm
they call for the reunification of children with their families. >> this is more than politics. is is a ral crisis. a the mayors asked to tour holding facility to witness conditions inside. they were denied immediate access by the department of health and human services area collects the u.s. is warning u.s. in syria's president for violations of an unraveling cease-fire in southwest syria. troubledremains deeply by reports of what she calls increasing syrian regime operations within the boundaries of the troops. forces have violated the cease-fire with airstrikes, rocket attacks, and artillery.
3:05 pm
the wife of benjamin netanyahu has been charged a fraud. the case involves the alleged cateng servi00,000 in fun she denies any wrongdoing. the prime minister says the family is the victim of a political witchhunt. global news 24 hours a day on air and at tictoc on twitter. powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton, this is bloomberg. .> thank you republicans rejected a broad immigration bill that was bigger by conservatives. it would have provided funds for e border wall, narrow -- gration, the house is scheduled to take up a second measure tomorrow. let's bring in ryan costello of pennsylvania. fellow, as aals
3:06 pm
whose party is offering these bills, give us insight into the compromise .easure i understand it was scheduled to be voted on today but now is delayed until tomorrow. what at this point, it wld halp it otherwise not going to pass both. the more conservative will that we just voted on was closer than we had anticipated. the big difference is on the compromise bill is a six year daca solution with a green card. it is 25 billion for border security with that money being released provided that the doctor green cards are available. the intention was to get them on board that has not happened. this will likely be republicans having to carry the bill on our own. we do not have the votes right now. the president's we today was not
3:07 pm
helpful. there have been a lot of? 's going into today's meeting and what the public tomorrow. >> are you saying that president trumpan obstahese negotiatio? >> i think his tweaks -- tweets today were not helpful. yes. i'm wondering whether inanceats are willing to thwall the president trump would like to build an order to get some concessions on daca. been and certainly that was proposed by senator schumer some months ago. this is not a compromise between democrats and republicans. ais legislation really is compromise within the republican caucus itself.
3:08 pm
it's not yet a compromise with the caucus. the they have been involved in discussions about what a good bill would look like that would garner democratic support. clearly we want this -- to solve the daca problem. we want that pure border wise.ty to be building a wall not solve the problem. there are other options that are far more efficient and effective. the st of the story is that there are other things that have to be done. one of those is to reunite the children with their parents. >> it is not clear what will happen to more than the 2300 children that and separated by the parents. we know officials say they are working as hard as they can to read that venison is possible but there are no details are clear solutions. legislation whether
3:09 pm
it's authored by republicans or involve democrats address those people? >> i think the answeo. not because it shouldn't be addressed but rather because we do not have an audit on how many children need to be reunited, where they are, what kind of which is six and paperwork was done from a tracking perspective at the time that they were separated. i think the intention and objective is to make sure they get unified but without knowing what needs to be done, it is difficult to put something in the bill will we don't what the solution is. add, you are certainly correct about the fact that there doesn't appear to be information about where the kids are. or who they are connected with. that is part of the strategy. foro know there is a need
3:10 pm
greater number of men and women in the adjudication system. lawyere calling up a from the department of defense to back fill some of the openings that are there. that is money and personnel. >> part of the reason why people is independent facilities because it takes so long to get a hearing. i totally agree with that point. i am wondering heading into the midterms, do you think that immigration as an issue is going to be helpful or purple to revolt against to the republicans? it would be hurtful in those districts where republicans need to hold in order to maintain a majority. ins stuff might be helpful
3:11 pm
terms of prioritizing border security at all costs with a but-tolerance policy separating families as the case congress thiswas fall when deciding it wasn't and they could do it on their own, this inconsistent message and not handling this and a way that is humane and appropriate is not the kind of thing in a district like mine which is very purple, we are handling it properly. mention congressman costello is not running for election. americans say they are concerned about immigration. what extent do you think democrats in washington in the house or in the senate understand that concern? >> the democrats are very aware of it. you can't go to any election in america without addressing the
3:12 pm
immigration issue. safe oryou are in a unsafe seat. democrat or republican. this is a national issue. it has been for about 20 years. it is a tough complex issue. it is one that has been used as a political football for both sides over the course of the years. there was an opportunity six years ago to move on this. the senate had a bipartisan comprehensive immigration reform bill that moved out of the senate. it was not taken up in the house. reasons that are obscure in my mind. we missed that opportunity. and we be able to come back deal with this in a comprehensive way where you have border security, you deal with complexities,the
3:13 pm
we must do it. >> thank you very much congressman. this is bloomberg.
3:14 pm
3:15 pm
this is bloomberg markets, i'm scarlet fu. today in our deals are for, to funds valued at more than $17 an analystm like pool of capital generated for deals. conagra says to have approached pinnacle. joining us now is jason kelly. executive editor for global tv. a lot of food, we will talk all about it.
3:16 pm
>> it seems unappetizing. >> for investors is advertising. back.s is activism coming it never went away. activism is very active right now. viagra is looking at pinnacle. .hey are driven hereby that knows am little something about conagra. they have been pushing them along as well and we are in an where food is being smudged together. it is investing into a fascinating trend here which is frozen food of all things. it is back. millennials love frozen food.
3:17 pm
>> it is not easy to get organic. do you guys use frozen food? >> we do. >> frozen dumplings. even millennials have to succumb. >> there is a lot going on in the food world. us to the next story about private equity money. one of the funds that is apparently getting some money is jad. not a fun a lot of people have heard of. they have the ryman family behind them. what is more apparent to people s an era --panera. they are in the coffee and food business themselves. billion froming $5
3:18 pm
a whole host of investors. >> they are not alone. you are also looking at premier a. raising $10 million. >> this is a nice sized fund. we covered the boom in the bust in private equity and leverage finance and credit at all that good stuff. , it is comingnd back. so much money going to private equity right now. trying to understand whether this is going to be a liability. especially in the private world where you have so much cash. can they deploy it? >> it is hard to say. the map tens to point towards no.
3:19 pm
we are at that point in the cycle which could be good or could be bad. if they have to put the work -- money to work quickly, valuation is going to be very tough. ,f this is longer-term capital we want to circle up some money because at some point the music will stop. deaths of 2008, 2000 nine, there will be some bargains to be had and that is what we come back in. >> how quickly do they have to deploy the money for this fund? can they hold onto it? >> it is usually a matter of years. what usually happens is it is a tenure fund. they will typically put out money over three to five years. they do have some time. that is some argument that they make. they are not a hedge fund. they are in it for the long haul and for the long game.
3:20 pm
that did prove to be somewhat prescient. there are a lot of success stories that came out of that room we lived through in 06 and 07. >> thank you. find the charts that we highlight here on bloomberg on gtb. this is a ratio of the flv. you are looking energy stocks relative to the s&p 500. course you can go back to gogtv ♪. ♪ this is bloomberg markets.
3:21 pm
3:22 pm
it's time for options insight.
3:23 pm
>> hello. lot that wesaying a seem to be returning to at least the sentiment where we were late last year early this year. you have been looking at the vix curve. what does that tell you about where we are? has been in ave very tight range for the last month or so. the green curve being a month ago, the orange curve being yesterday. we are sort of in the middle because of the rise of the vix because of an actual selloff. you can see it is been a steep slope predicting some more action to come in the fall but a quiet summer and not much to say. , they havegetting been complacent yes again.
3:24 pm
i think there is the feeling riskthere is a real tolerance in the equity markets right now. people are starting to invest around the themes rather than be adverse to the negative themes. that's why you see small crop -- small-cap russell, domestically focused and smaller exporting based. capsyou start to see small as a potential haven that tells you that the risk tolerance is very high. risk high riskl tire tolerance and that leads to complacency. change, gelk about a coming out in what is obviously the changing of the guard in a big way. walgreens going in. announced,already how do you capitalize on the move? >> i'm thinbout it you
3:25 pm
have had a nice rally in walgreens. since the announcement was made earlier in the week and what you want to do in a situation like that is intentionally aided the rally. it can be a bit dangerous when you have a stock going into the s&p because so much money is indexed to the s&p 500. the dow is not a heavily indexed a, arcane more of relic of our financial system. give an example, there is probably $21 billion and diamonds as opposed to $270 billion in spiders. i think you had your move. you may have a slight move based on mechanics but i am saying what you want to do is, volatility has risen stock has .ritten cause of a potential strategy would be to sell the call and by the calls
3:26 pm
further. >> i feel strange coming on here and saying that could blow up. is a wayg the 71 calls of saying let's cap are loss at a reasonable number. you >> i want to bring you breaking news. new talksnsidering with china. this is bloomberg. ♪ i'm mark crumpton.
3:27 pm
3:28 pm
3:29 pm
the house of representatives has rejected a republican immigration bill that would have given temporary protection to dreamers.
3:30 pm
the measure also would have eliminated -- republicans have delayed until tomorrow a vote on another republican bill that was put together by leadership as a compromise measure. for some lawmakers the immigration debate is personal. came to theemocrat u.s. as a child from guatemala. >> i was welcomed here. in a loving home. i was not put in a freezing cell . house speaker paul ryan said we are advancing the cause even if something doesn't pass. think this is the seed that is going to be planted for an ultimate solution.


info Stream Only

Uploaded by TV Archive on