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tv   Bloomberg Markets Americas  Bloomberg  November 8, 2018 1:30pm-2:01pm EST

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era program. the ruling upholds one of four laurel court rulings that bars the government from ending the deferred action for childhood , or daca, which allows about 700,000 people to legally live, eddie, and work in the u.s. and protects them from deportation. california, a 28-year-old former marine who may have had posttraumatic stress disorder has been identified as the gunman who killed 12 people in a bar last night. authorities is the footed attacker walked into the crowded country music nightclub during a night for college students, and opened fire. he later apparently killed himself. the sheriff's department says it was called to his home in april and found him angry and acting irrationally. the shooting took place in thousand oaks, about 40 miles from downtown los angeles. european commission president jean-claude juncker traveled to helsinki to attend a gathering of europe's center-right
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political parties. the subject of brexit was on theed as juncker met sidelines of the sonnet -- the summit. he said based on his discussion with the eu leaders, major progress in brexit type -- brexit talks was likely, in his words, within a week. optimistic, if cautious tone. >> we have been discussing for months now the different issues. i think as far as brexit is concerned that we need a deal. [inaudible] -- to be done. juncker said that british prime minister theresa may is, as we are, deciding to have a deal, and we will have a deal. charges have been filed against the captain of the missouri tourist boat that sank and killed 17 people in july. the boat sank near branson after
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a sudden and severe storm rolled into southwest missouri. the indictment alleges captain kent mckee did not properly assess the weather. 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. ♪ >> live from bloomberg world headquarters in new york, i'm shery ahn. amanda: and i'm amanda lang. welcome to bloomberg markets. here are the top stories we are following from around the world. decision day for the fed. we are 30 minutes away from the november fomc statement. we will discuss the key statement -- the key issues to
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watch with economist dana peterson. a stall in the rally. a emerging market funds turn tactical as em equities struggle to break past their 50 day moving average. bloombergnner is -- businessweek releases its 30th annual ranking of the best business schools in the u.s.. which made the top three this half hour. let's get started with a quick check of the major averages. u.s. stocks are under pressure, the dow giving up most of its earlier gains after hovering near the one-month high. the s&p 500 and the nasdaq also losing ground. energy leading the declines on the s&p 500 as we see oil losing ground for a nice consecutive session. we also have a tech underperformance, and disappointments from square and roku. 10 year yields are down. we had a big event this week, the midterms. now we are headed to the fed policy decision in about half an hour. and as we head for the policy decision, we have seen those raised sensitive stocks, -- the
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rate sensitive stocks reacting to that. but it's we's is pointing this -- credit suisse is pointing to this ratio between utilities, falling the most since the march 10 year high. that, of course, as the 10 year yield tops 2.3%. all eyes right now. what is going to happen at the fed? no big changes expected in terms of interest rates, but what it could mean for tightening in 2019 is key here. shery: always -- shery: always a path as we are looking for the language. experts are they stand pat on the race themselves. the question is, will they offer of any other insight about what they are thinking about bond buybacks, for instance? they are lightening up their balance sheet. there are growing complaints and criticism, and fears of what that could look like right now. amanda: that could be key -- shery: that could be key. because of the timing here in the u.s., we are seeing other
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parts of the world take a big beating. amanda: ahead of the fed rate decision, which we will cover with a special at 2:00 p.m., take a look at the u.s. dollar. we are seeing strengthening today, as you might expect. not because a move is expected today, but because we are expecting to see the federal reserve continue to tighten based on its balance sheet. i think we have a look at the dollar on the day. that is, of course, a continuation of what we have seen. dollar strength is the name of the game. this has been relevant. look at the fed funds versus aser big local central banks they all moved to normalization. it is worth from entering the fed that it is worth for membrane the fed is in front, the white line on top. you are also looking at the ecb and the uk's central bank, and canada lagging the federal reserve. it is tightening at a faster pace than some other central banks. shery: let's discuss all of this and today's market moves. .e welcome now sarah ponczek
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we are seeing some effect from the midterm elections, and as we head to the fed policy decision, movements with financials right now. sarah: financials are leading the way higher. if you look at the industry groups, banks are the best-performing industry group today so far. you might extrapolate from this, if you look at the one day, heading into the fed meeting, investors truly don't believe there is going to be some that -- some fed put upon anytime soon. inpoke over with an analyst california, and he said there had been talk and october. some people questioning if the fed would acknowledge this volatility. he said they don't believe it will play into it. in fact, they believe the fed will be full speed ahead with the rate hikes. not today, but starting in december. also seen aave rally in health care stocks postelection. do we expect that to continue? how does that jive with their thoughts on a fed moving towards normalization? investors aref
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expecting this to continue. they were hired today, although they have faded a bit. yesterday, health care stocks were the second-best performing sector. if you look at the dow today, two of the best-performing stocks are united health and 3m on the industrials died. with health care, analysts on bloomberg tv, and i have also spoken to a number who said they expect health care stocks to now outperform, especially the managed-care names. with gridlock in congress, there is the idea that not much more can be done to detract from these health care names. there also shouldn't be as much headline risk there. so investors are looking to the health care names in the aftermath of the midterms, but we will see what happens going forward. as you note, industrials are also doing well. if gridlock is the outcome here, which seems to be one potential scenario as we look down the next couple of years, what does that mean for health care, industrials, things are doing well in the short-term.
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sarah: industrials believe that a president trump and bit republicans are going to take the high route, they want to come together and work something out. a large potential for that is infrastructure. if you have infrastructure moving forward, we might some industrial names outperforming potentially, maybe some of the material stocks as well. so some investors, as they are looking to health care, are saying this could be a good midterm play in the aftermath. industrials might be as well. in the next couple of weeks, if it seems like the two sides will come together to get something done on the infrastructure front. shery: sarah ponczek, thank you so much, with the breakdown of the markets and the different sectors we should be watching. let's turn tactical, because some fund managers are growing can earned that the recent emerging markets rally will not last. risks to global growth are weighing on sentiment, and some are abandoning the longer-term place for more. then barto is here with the story. there is -- then barto is here
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for the story. investors seem to be losing confidence here. of: there is a lot uncertainty in the next few months. we have a few months before the new senators and representatives take office. as you mentioned, in the next three weeks, we have a big summit between trump and xi. there is a lot of uncertainty among emerging-market investors as to whether that meeting will produce a productive out, and an easing of trade tensions, or whether the trump administration will go full force with their biggest tariffs to date. can say weppose we are seeing a turn to the tactical, because we have seen some big funds moving in and out, capitalizing on recent gains in em. at what point do we say, that is a tactical move but they are staying put. do you expect volatility to stay with e.m.? ben: absolutely.
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volatility should be on the rise in the next two months. there is so much uncertainty. the trump administration and donald trump himself has said he would like to get a deal, but his administration is also preparing for the biggest blow yet to china. that is weighing a lot on investors. another thing that might be more on the optimistic side is as we have seen the dollar strength this year, it is about nine months in the dollar strength and historically speaking, that does not last too much longer than nine months. so that might be a positive factor in emerging markets' favor as well as positive valuations. valuations seem pretty cheap if you take a look at asian markets. most markets are down 10% or in bear market still. the msci index, it is still in the bear market from january, and there is an expectation this can only last so long. there are a lot of other stocks that have historically done quite well that are temporarily lagging. amanda: how important is it when
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we talk about the in moving day averages, how important is it to see the markets hold at these levels? ben: it is certainly an important indicator for traders. a lot of the folks we speak to our thinking more long-term, thinking about the broader implications of a democratic -- of a divided washington, a democratically controlled house and a republican senate, and how that will influence trump's primary policy measures going forward, when that comes to stimulus measures potentially impeding another round of tax cuts to the wealthy, and the impact that would have on the fed, as we might see in a few minutes. amanda: thank you, ben. up next, election night saw pauses and momentum for pot, but will the canada's craze farewell for packaged food companies and soft drink makers? we have more after this. this is bloomberg. ♪
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shery: this is bloomberg markets. i'm shery ahn in new york. amanda: and i'm amanda lang in toronto. pot and packaged foods. is it a perfect combo? sarah held that joins us from washington. let's start right there. we have seen many different the allrage companies, tobacco, kind of poking around in cannabis. it is a new space and exciting. what are the challenges facing packaged foods that should make them pause? we see thiss getting traction are not in their core competency. in the u.s. market, in places where recreational marijuana is legal, smoking and vaping are holding it down. edibles is a small portion of
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the market. yourself, thek supply chain lends itself more to that. if that will not be a huge corner of this market, why bother? especially when they have an existential challenge on their hands of adapting to consumers' new preferences for healthy eating. i think that should be there priority in shoring up their core business. shery: you are seeing packaged foods companies lose ground and underperform the broader market. if this is the case, what do they have to lose? i think this is money they could be spending on other things. a lot of these companies, they are cash-strapped right now because they have done a lot of themselves.nd save they have spun off certain businesses or bolted on certain businesses to try to better position themselves for the future. so they either have a lot of debt or they do not have a lot of cash on hand. if you are going to invest in something, it should be in fixing your core business,
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instead of -- the promise of marijuana is probably very exciting for them, but it seems to be a medium or long term, not a short-term payoff. aery: but we are seeing majority of americans ok with pot. we have a chart on the support for pot, which is building across the country, as you can see right there. if this is the case, what about not packaged foods, but big tobacco or big alcohol? >> i think big tobacco and big alcohol should be looking at this space. here is why. public sentiment does seem to be shifting in the direction also, ifavoring it, but think they are really threatened by this idea of substitution, that as marijuana becomes it isin more places, but not something people pair with tobacco or alcohol, but use instead of. they need to hedge against that. amanda: and fully legal across canada now, sarah.
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does it make a difference here? that it is clear of your and legal nationally? >> i think they will be watching very closely, because they expect canadian consumers will be very similar to what we see if this would ultimately become legal nationwide in the u.s.. one thing in particular they will be watching is what kinds of products in canada get traction now that the business is able to come out of the shadows? some products are infused with thc, the type of cannabis and the ingredient that gets you high. cbd, ae made with compound that does not get you high but has a more medicinal, anti-inflammatory quality. they will look and see what is getting traction with canadian consumers and how does that shape where they will be looking in the future? shery: it is early days in terms of the lot of possible outcomes. what about the potential blowback on a branch to being associated with this product before we know a lot about it? what we are seeing so far is
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there does not appear to be a lot of reputational risk here. a survey i looked at of u.s. and canadian consumers asked them, if a brand were to become associated with cannabis, how does this affect your perception of that brand? that was asked for a variety of different categories -- cosmetics, personal care, food, etc.? the majority of consumers said this would not affect their perception of the brand or improve their perception of the brand. if companies are worried about getting the payload of being associated with a vice products, that should not be a particular concern or driving the decision-making. shery: sarah hall back, thank you so much. more storyhave one on our radar, our annuals or day of the best business schools out there. bloomberg business week surveyed more than 26,000 mba students, alumni, and recruiters, and the top three turned out to be stanford, pennsylvania, and harvard. when it comes to a wide range of
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compensation,e learning, networking, entrepreneurship. amanda: and no surprise, those are very familiar names when it comes to business schools. one question i would ask, how much does this matter? do you think young americans who can frankly afford or will qualify for a scholarship will look at this and pick it that way? or are there a bunch of other criteria they are looking at? shery: the compensation would be the biggest one. if you are going to business school, how much are you expected to earn? if i have to put so much money in there, i want to know how much i am going to get in reward after this. amanda: well, you can go as come to canada, where we subsidize education. shery: really? [laughter] the newestck out edition of bloomberg businessweek, on newsstands now. coming up, the fed decides. the fomc is widely expected to keep rates unchanged when the decision is announced at 2:00 p.m. new york time. we will speak with citi's data
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peterson next. this is bloomberg. ♪ ♪
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a federalead of reserve decision, we are keeping an eye on another piece of this puzzle. that is that some banks are now complaining of tightness in the overnight markets. i want to show you something here, the upper band of what the fed would consider its curve. the effective rate is now bumping up against the upper band. this is something that has not happened since 2009. the concern is that if the fed does bond repurchases or does not purchase new bonds, it is creating tightness in the overnight market. that is a concern that banks are saying might affect lending, sherry. shery: let's discuss this with dana peterson. are you predicting another tweak to the interest rate on excess
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reserves this time around, or in the next meeting? we are anticipating a change in the december meeting. shery: why would that be? i think the fed will probably discuss this in the minutes of today's meeting in terms of where they would like to see the i/o we are -- the and ithe quarter system, think they would really like to have more time for this. they have already sent out surveys to primary dealers to get a sense of this. if you look back in the springtime, we saw the surveys were sent out and there was at least some morning in the minutes that the fed was going to make a change at the next meeting. we are figuring the same thing will happen this time around and there will be a change in december. so along with tightening on the fed funds rate, the fed will be reducing the size of its balance sheet. is this a legitimate concern by some banks, that the tightening
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is affecting the market? our view, it is most likely trading in the t bell range which is affecting things. we think the fed will continue with its program of running up the balance sheet. it will probably complete the program in late 2019. when you look at the differences between whether or not you have a quarter system or the current floor system, with the floor system you can have a much higher -- well, you can have more reserves on your balance sheet, where as with the other system you need fewer reserves. that would mean a longer run off for the balance sheet. the fed right now, we are not hearing any signals they are willing to change the course. currently, they are running off the billion dollars per month, which would place us with ending the full process sometime next year. shery: no changes in interest rates expected this time around. so what you would be watching out for in this moment, when we are seeing economic growth in the u.s. is seemingly slowing
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down or moderating, at least. how you depends on define moderation. in the second quarter we had 4.2% growth, which some of that was payback from a very weak first quarter. if you averaged that out, it was around 3%, right? for the first half. in the first quarter, we saw growth of 3.5% with quite a bit of a strong impulse from the federal government, also consumption. we also did see some interesting things with respect to inventories and exports, that could more or less balance each other out. areas we did not see were in residential investment and also in nonresidential investment. residential investment we know has been coming up a little bit from a combination of lack of supply that is driving the as highern, as well interest rates. on the nonresidential investment side, some of that might have been concerns about percolating straight dispute between the u.s. and the rest of the world.
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nonetheless, 3.5% growth is very strong. for 2.5%, 3%g growth in the fourth quarter. dana peterson, thank you so much. stay tuned for the fed decision, coming up in just minutes. shery: let's get a check of the markets right now. a little bit of pressure from a major averages, the dow giving up most of its earlier gains, and then s&p 500 and the nasdaq also lower. yields also under pressure. we will have that fed decision in just a couple of minutes. this is bloomberg. ♪ shery: -- scarlet: this is the fed decides
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2018. officials are widely expected to keep rates unchanged, and with no news conference scheduled or forecast to be released today, investors will only have the statement to read for any signs of a change to the outlook. tom, you joked about how this is a dead meeting. tom: it is a dead meeting. scarlet: but it is not. it is never at that meeting. we have great guests for conversations across asset classes and monetary theory. as michael mckee assured me this morning, it is not a dead meeting because you are looking forward to december an economic and looking on the path of inflation. scarlet: absolutely. joining us in washington is julia coronado, a former fed economist as well. do you agree with assessment that this is a dead meeting, where the fed does not want any drama? absolutely, they do not want any drama. it is dead to us in terms of market participants. but they are discussing things
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like the interest on excess reserves and what is happening with the fed funds rate, what to do with the balance sheet on a more permanent basis, what equilibrium looks like there. again, the state of the economy and the risks from abroad and the market corrections. there is lots of work going on at the fed. but they are not going to tell us much. they want it to be ho-hum. a few tweaks here and there, low drama. tom: the clear consensus we see from every guest is 4% gdp, 3% gdp. the julia coronado gdp. is it going to talk about the vector of real gdp? julia: in the statement are at the meeting? tom: in the statement. julia: in the statement they will continue to characterize the economy us strong. the latest data has been strong, the latest data has been strong. the only tweaked to their characterization of the economy as they need to moderate their tone on business investment.
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your prior guest just mentioned, business investment can unexpectedly -- came unexpectedly screeching to a halt in 2-3. they previously described it as growing strongly, so they will need to tell that down. it will be a characterization of the data rather than a reduction in optimism. scarlet: they will tweak their language on that, but what does the slowdown in business investment tell us about the effect of the tax cut? beia: it tells us that may the boost from the tax cut is fading earlier than we had business certainly investment has been a strong spot in the economy over the last year. and it did slow unexpectedly. it could reflect rising concerns about trade wars. we will have to watch and see. julia coronado, sit tight. we are moments away from the fomc decision. let's get a data checks, the s&p 500 falling for the first time this week, only falling twice in
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the past eight russians. treasuries are rising, pushing yields lower, the aero, and 3.23%. yen at a five-week low. let's go now to michael mckee at the fed. >> i'll keep it short. we expected nothing and we got it. no change in interest rates. very little change to the statement. no forward guidance on what happens next. either in december or 2019. no move to adjust interest on excess reserves and no mention of the balance sheet. in their statement, the fed officials' description of the labor market is unchanged from september. quote, it has continued to strengthen. the same for their description of the economy. quote, activity has been rising at a strong rate. couple of tweeks to the statement. unemployment, which stayed low in september, has declined this month. household spending has continued to grow strongly, while business investment in the biggest tweak, quote, has moderated from its

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