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tv   Bloomberg Markets Americas  Bloomberg  August 23, 2018 10:00am-11:00am EDT

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vonnie: plenty coming up including the u.s. and china imposing more tariffs on each other. we are live as fed officials gather for the symposium. breaking economic data on the u.s. housing market. 627,000.s coming in missing estimates by 20,000. sales month over month down 1.1%. the second month they up and down. still a decline down 2.4% as opposed to the 5.3% we have been seeing. a little slowing in the housing market. we got claims coming in below the estimate. we have a lot to adjust in the market including the president tweeting were he to be impeached
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, the market would crash. romaine: who knows if it will crash but it is -- it has done well under him. we know the euphoria that came in in november of 2016 after he was elected and that continued through the inauguration and has gone up well. he might have a case to make sense he is responsible for a lot of this, but certainly investors have embraced him. vonnie: considering the midterms and whether the house flips, is that a good thing for the market which tends to like one brand of government democrat and the other republican or would it be a bad thing in the sense that it might change? how much is wonder euphoria because of him or because of having a republican admin is ration which tends to be more favorable to the market. -- werehing were happen to happen to him or something would change in the midterms coming to did see a change in investor sentiment. you would have a re-calculus in what this means for policy going forward whether it is taxes or regulation. vonnie: we will discuss this
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more with steven englander later on. let's have a check up -- quick check of how markets are shaping up. we are looking very slow moving for the major averages. the second day of mixed trading. the dow is down slightly. the s&p and nasdaq managing to reverse losses. a very small move. investors are in wait and see mode as to what can be next in terms of headlines. trade tensions and the headlines around president trump and his thoughts that perhaps the market would crash if you were impeached. -- if he were impeached. looking at some retailers, take a look at williams-sonoma. elmthree units through west was the strongest, pottery barn is solid. the namesake brand missed estimates but online gross shares being rewarded. children's place had been higher earlier, down 2.4% at this point.
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despite the fact the midpoint earnings, there must be something in there. investors not liking what they are reporting on. brands can't quite get it together. they of lower the earnings view on a fiscal year basis for a second time this year plus the bright spot, the pink chain, the ceo will step down. they will wonder if they will continue to make dividend payments. alibaba, this is a year to date chart. higher on 61% year-over-year revenue grows. take a look at volatility. the point out would like to make despite the fact we have a pop on the strong earnings report, from the peak, alibaba shares losing $80 million. vonnie: thank you, -- romaine: thank you, abigail. the u.s. and china have imposed tariffs as the two sides resume trade talks. the taxes are being levied on
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$16 billion in products. we are joined live in washington. we are seeing a lot of things happening this week between the u.s. and china when it comes to the trade war and tariffs. we have got these low-level talks happening right now in d.c. and you have your member we are not expecting a lot in terms of outcome. you have the vice congress minister from china desk vice commerce minister in -- from china in d.c.. us what theying are expecting out of this is more of a handshake. expecting a letter to come out afterwards saying progress is being made, but not a final solution to the trade war. vonnie: what about the tariffs hitting today? what are they? bring us up to speed with what
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sectors they might impact. >> it is across sectors as we have been seeing for the past few tariffs being imposed and covers a wide swath. they are targeting u.s. medical equipment for example which is being in places like pennsylvania making medical equipment in fact -- manufacturing goods. on the u.s. side imposing tariffs on chinese items like energy and other goods. this is another part of the u.s. china framework and really highlights the divide in the white house itself because leading up to this meeting with chinese officials, we had steve 's treasury secretary officials working diligently to come up with new u.s. demands for the new u.s. playbook and at the same time you have factions within the white house like the trade representative and people who are more hawkish who want to push back on beijing.
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we can expect that to continue for the for seeable future. romaine: so far it seems like most of the retaliatory tariffs out of china have been focused on inputs than other things. things the consumer would be shielded from to a certain extent. a point where we will see tariffs on things that will be directly on consumer goods, things i would see of the grocery store or whatever retail stores? katia: that is a really key point that trump continues to hammer home in all of his public appearances, this is not something that should technically hit consumers, but in some cases people might be seeing it sooner than expected because tariffs are not being put directly on items for example doesn't mean they won't see prices start to go up if the component prices go up. i was talking to ceos in pennsylvania who make plastic parts and they are saying their
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costs are going up because how do you make plastic parts? you usually have metal machinery and because they are being so squeezed by the labor market, jobless claims fell very tight in that tight band, where else will they put the cost? on consumers. romaine: thank you very much. let's check in on first word news. here is kailey leinz. discussing, day two of the latest round of trade talks between the u.s. and china. just hours after -- the u.s. placed duties on chinese made motorcycles, wind turbines and railway cars. china retaliated with cars in cold. the latest -- cars and coal. president trump is making it
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tougher his administration to close the deal on a new north american free trade agreement. the president's threats to fraud -- punish carmakers to make vehicles of the u.s. are a stumble block. the u.s. wants to boost tariffs from cars made in mexico. the central bank of russia will suspend sales of rubles to buy foreign-exchange through the end of september. that helps rollback the currency from a two-year low. worrying about a note deal brexit with raise prices on european goods and make life difficult for retirees. there were 25 tactical notes on how the country should a pair for the possibility collapsing. retirees -- british access to the u.k. bank accounts. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.
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i'm kailey leinz, this is bloomberg. we are on the ground in jackson hole, wyoming next speaking to esther george. this is bloomberg. ♪
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vonnie: the kansas city fed annual symposium kicks off in wyoming. it follows the release of the minutes from the july meeting with shed -- which shed little
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doubt about a rate hike later. it could pose downside risks to the fed path forward. kathleen hays spoke to esther george about that and more. >> wages are very important obviously. wage inflation relative to more general price inflation, i'm not sure you can connect them so tightly as to say we see wages performing runway -- one way, which of the about our project of the core inflation the same way. it's one ofeasons the topics is to understand what structural forces may be affecting that wage performance. do withhave summoned to cyclical factors or are there more structural regions -- reasons we see them not moving at the pace you might expect? is the trade war entering into your view of inflation at this point? our import prices a greater risk in the risk of a tight labor
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market? esther: that would be a good question whether the pressures we see around inflation are temporary or whether they can be more persistent. in my own region we will get anecdotes from people saying i have this price pressure and i'm passing it on. will that be broad-based? will it be a one off and should we look through that or will we begin to see more broad instances of wage pressures -- of price pressures. george: that was esther speaking to bloomberg's kathleen hays. joining us with more is mike mckee. mike, what did you think of that interview? mike: pretty much what esther george always says. she has been one of the more hawkish members of the committee. as idea she sees those
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justified is no surprise given that inflation is around the level the fed targets and the economy is growing at a strong pace. september seems to be locked in. the question is december and whether enough members will decide to go along with that. bet as esther george will data dependent. there's politics and the president to consider and the fed tries not to take that too much into account, boy when you have a president tweeting about how if you were to be impeached and you doesn't think he well, we mustet will crash, be talking about the president's role in the economy here and how that might change going forward and what that would mean. no doubt they talk about on the sidelines but things are not recorded. the minutes show there was no discussion of the president's comments in july about the fed and what they should do.
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he has ramped up the pressure a little bit now. they cannot get into it. on the other hand there isn't much he can do about it. he can't fire jay powell or members of the open market committee. if you were reelected, he could have an impact on jay powell's renomination as the chair, but that term expense that extends past the first german presidency. he can rail about it but there is -- first term in his presidency. much will we see any kind of change in thinking in market structure or any kind of thinking at all and how much is this something to be glossed over? this is a very important topic but it is a longer run topic. what we are talking about is something that will affect the people that will have these jobs somewhere down the road.
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markets have changed a lot, we have automated trading, high-speed trading, a lot of different ways with trade and way things could go wrong and perhaps areas in which new regulation is needed. if they want to understand it, this is the type deficit the type they talk about -- this is the type of thing they talk about. in terms of any affect your comment on current monetary policy, whether we will see that fourth rate increase, it is not the format for that. where you might get information is the media interviews. we will get a full range of their views going forward. romaine: they might be academic, but the market is looking at it from a different perspective. esther george talked about this idea -- i'm curious as to what you think is the line in the sand that we
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get to where the fed may be saying ok, enough is enough. mike: it is hard to define what that neutral rate is. it moves around somewhat. agreement that people on the open market committee talk to is you get to 2.75% or so and you start to think you are getting close. between that and 3% might be the neutral rate at this point. that may be what they are aiming for. you get another rate increase in december, you get to 2.50 and that gives you wiggle room. and then they may be cause and see what is happening at that time. we are a bit of a ways from it but we are getting close enough they will drop the forward guideline about monitored policy. romaine: what is the risk if the fed gets this wrong? -- and theisk is we
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economy starts to slow and has to slam on the brakes and sends is into recession. the general feeling is twofold in the fed at least. they feel their go slow approach is working and the danger is relatively minimal at this point. given the fiscal stimulus the economy is getting they can continue the gradual path without either overheating or falling too far behind. it does give them some breathing room. vonnie: you heard from esther george are ready, but we have interviews with jim bullard, who will you be asking the main questions of? what we look for in these interviews? mike: a couple of things. we want to know what they think the inflation is. that will determine where they go which determines policy. divined so far
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about the president's trade policies and how those might impact the economy. everybody on wall street thinks the trade tariffs are going to at someegative impact point but it doesn't show up in the data. when does that happen? that's the question. vonnie: we are looking forward to those interviews. our special coverage of the federal reserve meeting continues. tomorrow we of interviews with fed president jim bullard, robert kaplan. this is bloomberg. ♪
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vonnie: live from new york, i'm vonnie quinn. the bloomberg for foods. looking at alternatives to your favorite.
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this is the cover of last week's issue of bloomberg businessweek. we spoke to the ceo about changes in the company and how he is conducting his challenges including trade tensions. >> for everybody to understand is the u.s. is so incredibly competitive as it relates to agriculture and when there are issues that are creating uncertainty, that is not good for companies like tyson. we have to focus on getting to certainty. the uncertainty is what creates problems. forof countries looking feeding people and having supply chains in place they want to maintain. any disruption creates turbulence. protein isestic important, but exports are nearly as important in terms of making sure our system is healthy. >> we have a breakdown of your meat.e by meet --
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i know beef did well last quarter. we have seen lower beef prices and so more demand for things like burgers, chicken has been steady through the years. i know you guys have been increasing in that area. really what we are talking about that is most affected by these tariffs is pork, which is the pink bar on this chart. what do you do to offset that? to mitigate some of the effect of tariffs? you end up with a lot of pork on your hands you cannot sell. i will start by talking about the consumer because if we are going to continue to keep products in favor we have to be on the side of innovation. protein is a part of everybody's diet, at least 95% of consumers eat protein and animal protein. getting that in new forms and forms the consumer wants that
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needs them where they are. everybody wants flexible alternatives, different types of protein that are fresh alternatives. we are focused on innovation. what's nice about our model is we move across beef, pork, chicken, prepared foods and into alternative plant-based proteins. we are not just focused on one category. that's what makes our company special. we can move between those. julie: with regards to tariffs and trade, what are you doing to try to adjust as that is unfolding? tom: we are having conversations with elected officials. we are focused on driving the right conversation. we understand the impact for us and it needs to be something that is dealt with quickly. we want agreements to be settled. canada is our fifth largest trading partner, mexico is
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number three in terms of export customers. we want the deals to be settled. we are actively engaging to make sure everybody knows that. we are looking at new markets. it has caused us to put new sales in two countries we haven't been before as we look to make sure we are looking at all the world in terms of where we can export to as countries are creating new relationships, we are too. taking advantage of the entire world in the supply we have. foods: that was the tyson ceo on bloomberg daybreak: americas earlier today. time for bloomberg business flash. a look at the biggest business stories in the news right now. shares of alibaba are rising. they reported -- in more than four years. quarterly revenue soaring. alibaba did fall with the
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expense due to shares to its workers and financial. volkswagen has mapped out its digital makeover. the company wants to transform itself from being just a carmaker to a provider of transportation. the first step, a car sharing service. folks like and will deploy 2000 all electric cars in berlin. that is your business flash. are shruggings off drama involving the president. englander gives us his analysis coming up next. this is bloomberg. ♪
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vonnie: that is some of our reporting. i am vonnie quinn. romaine: this is bloomberg markets. vonnie: a quick look at some other movements around the world. -- is weakening today as political pressure in australia. this, i hate -- i hesitate to call it bizarre, but another tweet from president trump. is amazing how much power he has over currency. vonnie: we have the spread coming in further. it is not as narrow as it was earlier. let's flesh out some of these stories and check in on first word news with kailey leinz. >> the u.s. and china have impose new tariffs on each other's goods as the sides resume trade talks. taxes are being levied on $16 billion in products. the u.s. targeting chinese made motor shy -- motorcycles.
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china retaliated by slapping fees on medical insurance and cars. president trump has waded into south africa's debate over land reform. the president said he asked mike pompeo to step in. ongoing debate about whether south africa should seize the land without paying for it to address inequalities caused by apartheid. the tight job market in the u.s. is easing. by 2000claims decreased to 210,000. in australia, the prime minister is vowing to fight the latest attempt to replace him. he says he will step aside only if his chief rival can prove he has enough support. tomorrow the governing liberal party may hold its second leadership vote.
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australia has switched prime minister's five times in more than a decade. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz, this is bloomberg. vonnie: thank you. let's turn to the markets. joins us.lander added to from president trump any action mentioned the words impeachment and gave a judgment on what it might mean for markets. why are markets ignoring this? i think we are far away from impeachment. the democrats have to win the house and secondly the impeachment process. president clinton was impeached when he was in office, it is very unlikely to result in a guilty verdict in the senate. just being impeached by the house doesn't remove him from office.
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then the question would be whether it was viewed as a political move by the democrats to do that and it could end up helping him politically. reactiont the first but i think ultimately the charges have to be well-founded in order to be justified. vonnie: you mentioned in your note it is not just markets didn't take too much notice of this tweet, but markets seem to be ignoring the midterms, or at least holding their breath. what would you say? steven: that puzzles me more. there is a normal expectation the party in power loses seat in the midterm election so i think the financial markets would be ok if the democrats that the house, very unlikely to take the senate. that would be what we call in midterm seasonal adjustment. it wouldn't have much political significance. the real issue would be if they
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margin that weig would begin to wonder whether they would take the house, the in 2020nd white house and that would give them a chance to reverse a lot of tax moves that have been loosened. riskthat to become a real in investor minds, you will see a lot of profit -- quickly. romaine: it seems a lot of compliments trump has had in the first year and a half has come through executive orders and other unilateral measures yes take in. with the exception of the tax cut bill, that was the only one that went through congress. if you get a more divided congress going into 2019, what -- wouldn't be president have the ability to force through policy initiatives? steven: he would have the ability to force them through but i don't think regulatory reform on the phone or trade policy would give the increase
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we have seen since he took office. i think trade is second order. if you say what is the best trade deal he could do and what impact what it have on the market, i think the answer is plus or minus a bit, it would not be 20% either way. with respect to taxes, having cut corporate taxes enormously and putting incentives in place for investment, that drove the market and if the markets ever begin to worry those would be removed, the same way the republicans started to remove theacare when they take house -- the market would react are medically to this. vonnie: the dollar is sort of reacting to things like federal reserve policy. do you see that changing soon? we get to november before we see
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reaction at least politically? steven: there is the added uncertainty that no one really knows how to read the polls. the generic polls show the democrats ahead. most analysts say in order for the democrats to win the house, they need a majority in the popular vote for the house candidates. some say it's 4% and some as high as 10%. it is not just how much votes the democrats are going to get, nobody really knows what the correct threshold is. this will be a -- vonnie: our thanks to you for those lots. that is steven englander of standard chartered. up toe the s&p 500 index tens of 1%, not a massive move. we have the dollar index up a half percent.
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just above 21 basis point in the 10 year yield coming down at 2.82. this is bloomberg. ♪
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vonnie: live from new york, i'm vonnie quinn. romaine: this is bloomberg markets. -- matched record high after record high. where are the best opportunities? ed hammond standing by with a prominent distressed investor. >> thank you.
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love -- victor koo's victor co. slot -- victor khosla lsa. you, you need to find cracks in that narrative. where are they. victor: in a strong economy it is hard to find a lot of cracks. when we look for opportunity today we are looking at europe. stillropean banks are cleaning out their balance sheets. reallyn there are some interesting industries, predictable businesses like infrastructure or liquidations and bankruptcies, but that is the focus. tragically we saw last week the collapse of the bridge in italy. would atlantia be a company
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being looked at or is it too early? victor: it is too early. the company has 10 plus billion euros of equity market value. it is fallen, but even after that. up, way toodes early to think of it distressed. >> you have made a lot of investments in toll roads. what is this about those particular assets that attract so much attention? victor: we love toll roads. monopoly or a duopoly years onave 45, 50, 60 how long it lasts. there is a predictability about cash flows and a defensiveness about cash flows. when we can find those investments, we find them attractive. >> i remember covering
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infrastructure at the beginning of the recovery. toll roads are supposed to be the darling early cycle investment. they all seem to be owned by distressed guys. what went wrong? victor: that is not quite right. roads,have got 100 toll 5% of them are distressed. a small proportion of them which will go wrong. , the deals we focused on and what we have invested in, there are a few things that made it happen. one is leverage. they are predictable, the banks lend them money and some of them have -- people have bought toll road that 15% equity. the second thing which has gone impossible --
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combustible. hedging fixed to floating. interest rates came down, the swaps have ballooned. you marry the two together, you can't take little bits and bobs in your traffic, you have a little problem, it just gets compounded with what you just created and you will have the collapse. --, in when it relates to think is a european i can ask, what is it about european banks that has them so consistently on the wrong side of these deals? victor: just focusing on toll roads and european banks, a lot of the sponsors who invest in toll road started out in europe. theyig toll road operators
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are european. to bank them, the spanish banks, portuguese banks and some of the english and germans, that is who banks them. even when they got out and bought toll roads in the united banks, it was not u.s. it was banks out of spain and portugal because they were supporting the local. >> let's talk about an area in petrol distressed which is retail. fashion retail. is that something where you are investing or spending time or is it too risky? victor: it is too risky. , it we look at retail today is such a big opportunity. are 30 or 40 distressed
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retailers with multibillion-dollar capital structures. we have looked at it. and ik at it really hard think what we found is all these businesses in distress, they are in secular decline. year they seem to want to shut down 10% of their stores. .e can't figure out we are a midsized fun, we can be really choosy about what we do. we think large-- parts of retail are uninvestable. >> when do you see the opportunities? which sectors aside from infrastructure are you buying into? .ictor: if i could step back one sense of perspective. year to date the first seven months of this year we have
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invested $1.2 billion. buying distressed debt in the u.s. and europe. >> in which sectors? victor: infrastructures, we bought into, some distressed private equity deals in europe. as a sense of balance just where we are today in the markets and opportunity, we are buying a lot , but selling a lot more than we are buying. it is important to keep that in perspective. , we were buying a lot more than we were selling. this is after the oil and gas crash. in 2017 it was just about even. where we are today, there are cracks. the cracks i am describing, the toll road in texas had $1.6
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billion in debt. there is a liquidation in the u.s. we are invested in today. here, thebig cracks opportunity set is more muted than it has been. >> thank you so much for joining us. vonnie: lots to digest there and we will definitely be chatting more about that interview later on. function g tvhe on the bloomberg. this is bloomberg. ♪
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vonnie: live from new york, i'm vonnie quinn. romaine: this is bloomberg markets. time for our futures in focus. the dollar snapping a losing
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, gaining before chairman powell's speech at jackson hole. joining us is the director of strategy at bell curve capital. talk to me about the dollar right now and how much it is playing into the broader market issues. get more emphasis on the dollar right now as far as the energy markets are concerned. we are seeing tremendous strengthen the dollar with new tariffs coming out. seeing pullbacks across the commodity side down on the floor behind me and especially in crude oil, we are seeing trickle down from interim, we had a high and now we are towards the 64 level. romaine: i was talking to someone earlier and he said if you configure a where the dollar is going, you can figure out the rest of the market. do you think that is true? a secret.t is kind of
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a lot of us look at the fx , especially the yen versus the dollar and euro and try to --lar the energy contracts. the focus is on the tariffs. -- verya very low fix low -- he is looking to that dollar strength to see if there is a pullback in any of the commodities. romaine: when we are talking about oil, when you look at the saudi aramco news yesterday, how much did that affect the oil market? i feel like that was priced in and we knew this was coming, it was just confirmation. chris: everybody knew that saudi arabia was going to go public. right now he doesn't need to.
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we are close to $70 a barrel with their commodity and when timing is right in they need to raise that $2 trillion valuation they talked about, i'm sure they well. there is really no news. he said they are going to go public when it is time to go public and you saw there is no volatility in oil market because of that. romaine: wti at 67 and brent over 70, the --, what keeps us at those levels? we stay there. i think you are seeing a consolidation trade. you have seen a trickle-down the interim highs over the last month and a half. 69, now we are at 68 is the high. trade is willreal it hold. i think we trickle-down below $64 in wti before we make a new interim low or high. i think despite what a lot of
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people say, trumps news about the strategic oil reserves -- romaine: we will leave it there. that was chris. vonnie: time now for the stock of the hour looking at williams-sonoma. soaring on a strong second quarter. abigail doolittle has more. abigail: it is their best day since 2012. they are firing on all cylinders. this is the come be that owns pottery barn, williams-sonoma and west elm. pottery barn and west elm both beat estimates. the namebrand came in a bit lighter. the real strength is pottery barn. this stock in 2017 had been down 50% from its 2015 peak due to pottery barn. we see this recovery for pottery
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barn still growing on a year-over-year basis. investors liking it as they remodel stores and the west elm brand is fresh and young. what about --, is that a big piece of the story. now they are making that resurgence again. they had that online presence. you can see this as we hopped back into the bloomberg. you think of brick and mortar an orange having total revenue and then green online. they have more online than in retail stores. the evaluation is a bit stretched. there is a 24% bearish interest. , thee: abigail doolittle stock of the hour, williams-sonoma. the s&p 500 is positive.
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movers.of the top loweroxx 600 in europe is but some stocks moving nicely. lion air is up after an agreement with pilots. you can see some currencies moving. malcolm turnbull under a little bit of pressure in australia. trading after and president trump says he hopes to -- pound, 1.2832. this is bloomberg. ♪ .
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vonnie: 11:00 a.m. in new york and 4:00 p.m. in london. 30 minutes left in the trading day in europe. i am vonnie quinn. romaine: i am romaine bostick and this is the european close on bloomberg markets.
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vonnie: here are the top stories we are covering, stocks are mixed as trade tensions on markets as the u.s. and china hitting each other with fresh tariffs. president trump ways into south africa's racially charged debate about land reform. the south african government calling for a meeting with the u.s. ambassador. tesla exposes challenges facing the sec, how tech titans exploit an understaffed agency. that and lots more. watching u.s.tle and global markets. abigail: mixed markets for major averages with the dow


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