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tv   Whatd You Miss  Bloomberg  November 15, 2018 3:30pm-5:00pm EST

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with i'm mark crumpton bloomberg first word news. british prime minister theresa may saying she believes with every fiber of my being that her brexit plan is right. her comments came at a press conference after she addressed parliament about the draft outline of a brexit deal that her cabinet approved this week. define in the face of mounting criticism, may said today she isn't planning to give up and would accept a leadership challenge, saying, am i going to see this through? yes. meantime the leader of a probe brexit faction has filed a letter of no confidence.
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speaking outside parliament, he said he expected enough letters to be sent to the committee that oversees conservative leadership elections to trigger a challenge to may possibly leadership. leadership. >> saying specifically we would leave the customs union. it did not have any small print saying unless we decide to have a backstop and there's a permanent union, it's harder to leave under article 50. mark: he said a leadership contest can take place in weeks. saudi arabia's top prosecutor said today he seeking the death penalty in connection with five men in the murder of journalist jamal khashoggi. also today saudi arabia's foreign minister said the crown prince had absolutely nothing to do with khashoggi's killing. >> this was individuals
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exceeding their authority and going beyond their mandate. these individuals made a tremendous mistake and for this mistake they will pay a price. their cases are now in the court system. mark: saying the kingdom is investigating to make sure it doesn't happen again. took aim atump robert lawler on twitter today. he called the inner workings of the probe into russian elections meddling a total mess. mr. trump accuses prosecutors of screaming at people, horribly threatening them to come up with the answers they want. global news, 24 hours a day, on-air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. crumpton. this is bloomberg.
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scarlet: this is bloomberg markets the close, and i'm scarlet fu. taylor: we are 30 minutes from the indica trading day here in the u.s. scarlet: and were looking for rally in u.s. stocks ending a five-day skid. the s&p tested the 2700 level. the pound in focus with all the brexit drama playing out come it will move slowly, but it moved quickly from one dollar 32 higher. we are keeping and i on oil prices, stabilizing after rebounding yesterday from a 12 day losing streak. taylor: we were talking about the correlation that energy stocks have not fallen with oil. it will be interesting to see which is the leading and which is the lagging indicator. scarlet: i know the vix has been on your mind. taylor: let's take a look at
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that, back in february when markets were bottoming out, that's when the vix hit at 30. we get to see that translate into the vix. we heard a lot from jerome powell yesterday, his comments on the fed. the yield coming in by about two basis points. and the bloomberg dollar index continuing to fall. i wonder if there is a correlation there with higher oil prices. that leads us to the s&p 500 energy index. the energy stock still higher, even though we've seen oil come at 56.ow scarlet: directionally, at least, they are correlated for now. taylor: and our top call, some of our big movers on the back of analyst regulations. let's start with kb home's,
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sinking after company cut its outlook. analyst downgraded the stock to neutral while slashing the price target to $30 from $36. saying ifts, analysts investors pick the right market, the right company come at the right time, outside returns are possible. the price target now set to $166 a share. scarlet: walk and chew gum, no big deal. taylor: and boosting a price theet to $52 a share, analysts citing strength across the portfolio saying the price increases related to tariffs have not yet destroyed demand. those are the top calls. scarlet: cisco one of the big gainers in the s&p 500 along with other techs.
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let's bring in cameron. take has been up all day today but it was a mixed read over all until about 1:00 or 2:00 p.m. when some headlines came out on trade. does tech in effect on trade headlines? >> may be marginally. i'm a little skeptical that trade is the driver of tech. it's just an overall sentiment, i think. it's been an exhausting day and exhausting week. indeed, and exhausting year. take is down about 10% so far this month. some sort of valves on any marginal shift in broader sentiment i think is understandable, without necessarily telling us a whole lot about what the future holds over the next few weeks or months. taylor: just quickly to the financials, goldman sachs seeing .ome of its own issues
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what do you make broadly of the financials here with higher rates? cameron: on the face of it, higher rates are fantastic, but as the curve flattens, it just makes buying conditions a little more difficult for the banks. let's not forget the banks have had it pretty easy, even with lower rates, given that the rates they are paying on customer deposits have been very, very low. we are now seeing some pressure on those to rise. we could see almost a disproportionate squeeze on interest margins even as the banks are starting to have to fork over a little more cash to people who had not really benefited from the rise in short-term interest rates. scarlet: michael key was just on earlier telling us how the fed is going to review the way it does business next year. this goes beyond his holding a news conference ever -- after every fed meeting which they had announced a while ago. this is like a wholesale briefing.
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going to bey're evaluating everything. i think it is fair to say that , thee middle of next year policy outlook over the ensuing year or so will soon reach a point of maximum uncertainty, in the sense we will be at or maybe a little beyond neutral interest and the confidence the fed will have in terms of forward guidance will be close to zero. you could certainly argue that at that juncture, the guidance which jay powell has cast aspersions on anyway could be counterproductive by perhaps misleading the markets are giving the market a false sense of security in terms of the fed policy trajectory. i've been sort of an advocate for a while that they should get
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rid of it and that's one of the reasons why the curve has flattened so much, given the palfrey magnitude of rate rises. the fed is essentially saying the long-term interest rate come the long-term fed run -- fund rate will be at or slightly below 3%. why should bond yields go much beyond that? if they get rid of that, that removes and anchor which is a well-known behavioral finance term, where you could throw a number out there almost regardless of how wild the number is, people will tend to anchor on that. if you get rid of that anchor, perhaps it will allow the long end to rise a little more and the curve to avoid inversion. taylor: we woke up with brexit headlines and its most fork like human were still getting concerns over brexit. cameron: i think it informs brought sentiment. it's one of the risks out there that form the backdrop for
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global investors and obviously u.s. investors as well. you got brexit, which is hard to at this point,ng you got italy in the same boat, and china. these are all headwinds facing financial markets. know what we heard from jay powell last night, basically i don't care. crise having an exhausting day. coming up, or preview of nvidia earnings, reporting after the close, and look at the prospects for chip stocks into 2019. up, up, and away. we will count you down to the latest spacex wants with images live from cape canaveral, next. this is bloomberg. ♪
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is bloomberg markets, the close. you're looking at live photos of
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cape canaveral, florida. scarlet fu and i are standing by, either to bring you a launch live of the falcon nine from spacex. i believe they are going to be reusing this for the second time to see how it goes to reuse it, trying to break the 2017 record for the amount of launches. we will get there in just a few minutes. in the meantime, we're looking at nvidia because they will be reporting third-quarter earnings after the bell. the october selloff hammer the company stock split analyst at rbc and goldman defending it and staying bullish. king, talk to ian us quickly, what can we expect from earnings after the bell. it's been tough for the semiconductors. what do we expect to hear from in via today? -- from nvidia today?
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>> as you mentioned, there's been a huge selloff. they were the poster child for everything different, the chip industry is suddenly a growth industry again and it's wonderful. now all of a sudden, that changed. you mentioned the word inventory, panic, everybody out. today's they need to steady the ship. scarlet: talk about the different business segments nvidia is in, and which one has the most promise right now? ian: the one doing the best is the data center business, selling chips to google, it's a new market for the industry in general. it's been argued they will grow regardless of topline growth. scarlet: ian king, walking through -- walking us through what to expect with nvidia earnings. these are live pictures from
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cape canaveral, florida where the spacex falcon nine rocket is about to launch in a few seconds. phoneasey joins us by from traverse city, michigan. sean, walk us through what is the most important part of his launch. where now minus 3-2-1. there we go. there you have it from cape canaveral, florida. sean casey on the on with us from traverse city, michigan. what's going to happen next, because we are waiting for the first stage to land. that will happen in a couple of minutes. the first stage is important because it is a reusable rocket. second lightis the of one of the block five cap and nine engines. the first minute is the high stress area for these launches.
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after about two minutes and 35 seconds, the first stage cuts all and they ignite the second stage, which is another spacex engine designed for vacuum operations. hearing a successful liftoff. you said that the first minute was the most crucial, so we are entering now what looks like maybe the second minute here. what do we expect during this phase? sean: this first minute of going through the high q, a combination of both the thrust and atmospheric density, putting the most loading on the vehicle. if there was going to be a failure, we would expect to see it during this first stage. after about two and a half minutes, the first stage cuts off and then begins descent back to the drone ship, which is off the coast of florida.
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scarlet: so far, so good. the payload here is a satellite. august through why this is important as well. a satellite me to be used for government and commercial purposes, but there is something of this tangshan, it's the first satellite that will be put into this altitude to link amateur radios from brazil to india. sean: that's correct. the company is associated with satellite operations. the first was lunch a couple of years ago. this satellite was built by the mitsubishi electric corporation. direct broadcast to home for television and also provides internet and has an interesting amateur radio transponder that allows direct communications between south america and india.
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so it has novel technology that has not been flown previously. it's always curious to me, spacex is private company, privately owned. why go this route when spacex has been chosen to the -- to do this, instead of a government entity? is it purely financial? how does that work? sean: my own view is that spacex is providing a competitive price point for launches. one of the last launches we constellation, and that program which was six or seven launches was intended to split between the united states, spacex, and russia. in the end, although satellites went over to spacex. the falcon nine lot five is a
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tremendous cost savings for spacex. vehicle and ise expected to do 100 successful re-fligh its lifetime. every 10 flights it goes in for routine maintenance. savings will translate directly to the bottom line for spacex. in that sense it becomes a cash cow for the company. scarlet: walk us through what happens and what we should be watching for it when we see the first stage landing. just that tend to be problematic, or could it be problematic? sean: i think every one of these launches is always a challenge. been redoing these flights and this is the second flight of this block five engine, but there always can be
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engineering mishaps. hopefully with spacex re-flying these lot five engines, we expect to mitigate those risks with engineering experience and experience of the recovery team, but it's always exciting to watch what actually happens. right now we are looking at both the second stage on its way to its geostationary transfer orbit and we are also looking at theward looking cameras as first stage reenters the earth's atmosphere. it reached apogee, and now it's on its way back. you are seeing the titanium guide pins that are used to steer the vehicle toward the landing pad. you have to feel the love on these operations, but it is really a miracle of aerospace engineering that you can recover these stages.
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>> the first couple of times spacex try to do this, they kind of failed and it did not go as planned. it has done to be much more reliable. when did we move from just doing payloads and get to the point where we are using actual people on these flights, moving astronauts up into the atmosphere? sean: i believe at the beginning of 2019 we will see the first use of the dragon 2 capsule. this will be what is required for a return of u.s. astronauts by u.s. vehicles to the international space station, and it is a competition between both boeing and spacex to build this u.s. capability of launching u.s. astronauts. there have been a lot of questions, for instance, the late stage fueling of the vehicles. he saw that for this launch.
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there are some changes with procedures associated with manned spaceflight that nasa is in the process of accepting, but pretty much in the next year, we expect to see spacex demonstrate the successful capability of launching -- of doing manned spaceflight. scarlet: that will be an exciting moment for all of us. we are still waiting for the , the stationo land is in the atlantic ocean. when you talk about spacex and how it has changed aerospace engineering, who are its competitors at this point? has beenhat jeff bezos dabbling in space exploration and space technology, but they are not really a contender, or they -- are they? makingou origin is steady progress -- blue origin
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is making steady progress. the new shepherd vehicle, they are getting ready for a new vehicle that will be an orbital program. but many other billionaire entrepreneurs are focused on the issue of reusability. virgin orbit under sir richard aanson is deploying from horizontal launch vehicle. they are using a 747 to launch payloads from over there specific and straddle launch from the late paul allen is also focused on horizontal launch capabilities. in addition to be billionaire class, we also have firefly and rocket lab. rocket lab just did another successful flight earlier this week. so we are seeing a lot of players, a lot of entrepreneurial players coming to this space and serving this
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growing launch market. taylor: we are waiting to see the first landing soon. sean: there it is. can we call this a success now because it has landed? it's half a success, because we got the first stage back. haslieve we also see it ejected the -- which we are not planning on recovering during this flight. one, we are not -- it looks like it's going to make it to its transfer orbit. in about 30 minutes after launch, it eventually makes its way to deploying the satellite. this is pretty
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incredible, if we just take a step back. of course this is the 18th mission this year, tying the record for 2017. sean, how many more are we expecting to get this year, and does that continue to increase next year and going forward? launchesdid about 18 last year. this year we are expected to do 22 launches. this was about a factor of three and what spacex did in 2015 2016. we've got some important milestones happening for the rest of this year and next year. later in the week, we will be launching 70 satellites from the falcon nine from vandenberg. startups collection of and early-stage companies that are deploying their satellites in low earth orbit. we also have the test flight of
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the manned dragon capsule and i think what people have not been paying attention to is, return to the moon. -- space il will be launching their lunar lander. not enough people are really paying attention to how many entrepreneurs are focused on lunar activity. and what we've seen play out over the last 10 years of low earth orbit may layout with the same level of enthusiasm over the next 10 years for lunar activity. >> i wonder with all the launches we have had, 18 this year and the projection to go above that next your, arthur the just eagle issues that have to be worked out with regard to the their issuesre at that have to be worked out regarding airspace?
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sean: we only have a few launch locations. there is florida, there is vandenberg, kodiak, alaska. spacex is building a new launch chica in texas. all these companies work actively with the faa to clear the flights for surrounding air traffic. is notht say air-traffic just launch, but for operations in low earth orbit. when you look at all the companies planning on launching satellites, we've gone from launching one or two companies launching 50, 100, 150 satellites. ofmay be position for a bit a congestion problem in low earth orbit and how the faa is going to deal with that in terms awarenessituational
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is under development. nowlet: sean casey, we are preparing for closing dell coverage. what would you be looking for in the coming minutes? we still need to see the second stage engine restart and cut all. what would that look like and what kind of risks are associated with those? sean: the biggest risk is lltting out of this gravity we called earth. now that we are in orbit, assuming all the systems function as they should, and this microgravity environment, it should be pretty much smooth sailing. usually if there is a slip in the schedule, that can mess with the engineering, but as long as everything stays on schedule and is functioning as engineers designed, i would expect it to be smooth sailing. scarlet: thank you so much, sean casey.
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you are looking right now at the closing bell ceremony at the new york stock exchange and at the nasdaq. stocks in rally mode. earlyvercame from stumbles, especially when it comes to brexit and california utilities as well. the best performer of the three major indexes. each index is adding gains of three quarters of 1% at least ending a five-day losing streak. a bit of a relief rally. romaine: look at the semiconductors. they led the way. index is offctor about 3% or more today. the faang compaqs -- complexes rallying up. performance inst the s&p 500, almost all of the top 10 are tech names or communications names. you name it and it is there.
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certainly technology leading higher. relative to 2017 this looks big. relative to 2018 it is not so outside. what was the driver behind the advanced today? was it simply relief after five days of losses and a little bit of rebalancing here. there something like trade or fed headlines that drove us deeper into the green? >> i think it is a little of both. you came into today with markets oversold. it certainly in the last five days but even if you go back to october, that is the month for lows and volatility. typically, you come out of october and the bar has been set lower by companies, expectations are lower for the following year, in market is looking for good news. today the good news was powell last night did not sound any
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more hawkish than he did before. and maybe possible good news on trade from robert lighthizer. markets looking for good news and that seems to be what rallied on, those happen to be the two they latched on to. romaine: is the good news going to last? we see these bounces a little of before when we had some these corrected levels, and when you look at the quality of the recent rally, do you see sustaining power here? doug: that's exactly how i would measure it. you had damage done, no doubt about it. october and september were really bad. the damage has to be repaired. riverfront,, it at to seee to judge the bow if it continues. so far, it has not been high enough quality to say we have an all clear signal. at some point it might.
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generally you want to see a retracement of two thirds of the fullback. we are not yet there. i expected to happen, but we have not seen it happen yet. on the international basis, non-us, they are having a more and a whole to dig themselves out of. we're taking our portfolios and gotten a lot closer to neutral. now's not the time to have the sales fully out and have cargo that will be bouncing around on the decks. we have adjusted the portfolios to navigate through this. we think homer seas -- calm er seas are ahead. >> we are wrapping up third-quarter earnings and let me bring you a new one. this is applied materials bottom line coming in. this coming in and looking at their first quarter net sales going forward. seeing that anywhere from 3.5 6 billion to 3.8 6 billion.
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that is down from estimates of 3.9 6 billion. that's probably why you see shares off coming right in line with bottom line estimates. they are now looking at a first quarter adjusted earnings per share. about 75 to $.83. of $.92.elow estimates another key thing with applied materials from our analysts, we are looking at an roe as high as 40%. in the meantime, the forward guidance coming in a little lower than expectations of why the shares my the following 3%. scarlet: perhaps putting share on -- pressure on tech. technology leading today's gains and they all advance with the s&p snapping a five-day losing streak. dive into a deeper today's action with our reporters and we begin with abigail. abigail: it really is pretty interesting. earlier, the major averages were
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down more than 1%. the s&p 500 and nasdaq finishing above 1%. similar to what doug was talking about, here is proof of stormy seas. finishing lower by two basis point or down to basis points --ling you there is a even though stocks are rallying, bond the rallying to. they are seeking the safety of the dollar and even with dollar strength, they are seeking the yen. it's interesting to see we have these assets rally as stocks rally. it could suggest volatility ahead. there is some reason to think happen.t could if we take a look at a one-year chart of the 10 year yield, over the last year, we had the backup in rates and a sideways rate recently.75% and 3.25% for the top of the range now coming down. if we should go below the yellow line, it may confirm the 10 year yield for move back into what
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the bottom that range suggesting there could be more risk off or volatility ahead. romaine: thanks, abigail. moverss one of the big of today. even with the gains, it is well below where it was when we celebrated the $1 trillion market cap reckitt august. take a look at what analysts are looking at. even with the downgrades and cuts that we have gotten, the average price target we are seeing for this company isn't -- is at1 per share about $231 per share. this is the widest disparity we have seen between analyst price targets and whether stock early trades. -- where the stock currently trades. that data it significant. applen early 2016, forecast a sales decline for the first time in more than a decade . that was following a holiday quarter that came in below analyst expectations. there were concerns about then
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about peak sales, peak iphone growth. it seems we are back to that level again. apple did manage to rally with a lot of the talk around sales prices and services revenue. rather or not we get back to that level, we will have to see. scarlet: while you were speaking, nordstrom coming out the numbers that disappointed -- out with numbers that disappointed. nordstrom done more than 10%. the bottom line in the topline pretty much matched or beat but their estimates sales disappointed. analysts were looking for an increase of 2%. had a huge have selloff in department stores and all of them coming in bad. scarlet: one of the themes is that gross margin is not where investors were hoping it would be. for nordstrom, third-quarter ones margin was
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percentage point below what they were looking for. a big mess for nordstrom and the stock is getting punished. >> let's get more guidance from stammerley back -- doug -- doug. how does this tie into the health of the u.s. consumer? are these one-off scenarios? doug: i think retail you have to take with a grain of salt. the consumer is in great shape and they are buying more, they are just not buying it through the traditional venue. there are lots of reasons for that. i also think there is general pushback against wrongly distributed merchandise. one thing about the millennials is they like the stuff to be local and they do not want to own what their parents own. you see a change in trends and i -- do not think i would look at the re-cure --
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weaker retail numbers as assigned. it would appear there is just as many on high-end merchandise down the fairway for nordstrom. creditors continue to grow. romaine: when you look at the risk in the market or potential risk for the next few months into 2019, can you factor in what is going on in the u.k., italy, europe, china, and elsewhere and how that could affect the markets? doug: brexit specifically, something came out -- there was an update today. there are lots of different lenses to look through it. -- through this. i think you will have a soft brexit which, at the end of the day, is a good thing. that means no big impact to growth. a revoteill maybe have on brexit which is maybe a long-term good thing. is it hast has done
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been a massive deterrent for any country in the eu to say let's go that route. what britain essentially does is transfer their diverse economy into a country that's gratis exporters jobs best greatest - greatestigh exports are jobs. they are putting a shot across everybody's bow like china did. if you are a company and wanted to have a single beachhead in the eu, you do not want to do that anymore. scarlet: talking about that range rain. doug sandler, good stuff. thank you so much. doug had mentioned brexit. up next, we continue the conversation of brexit with theresa may's premiership in peril. we see what it means for market
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and global markets. this is bloomberg. ♪ ♪
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scarlet: live from bloomberg world headquarters. look at how u.s. stocks ended the day. it started off mixed -- mixed and they were things weighing on global sentiment but we overcame that. scarlet: the question is, romaine: -- the question is, "what'd you
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miss?" scarlet: theresa may standing firm after a confidence vote against her. pg&e thinks it is reckoning. the spiraled downward as liability concerns over the deadly wildfires threaten its future. ge, just the tip of the iceberg. cracks in the death market are emerging from ford and campbell soup. we start with brexit. theresa may stands firm as the brexiteers try to plot her ouster by forcing a vote of no-confidence. she said she will see this brexit deal through. >> i will do my job of getting the best deal for britain. i will do my job of getting a deal in the national interest. when the vote comes before the house of commons, many will be doing their job. they will need to consider the vote of the british people to
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leave the european union and our duty to deliver on that vote. scarlet: for more, let's bring atnina who is the director -- from london. we shot -- we thought we got her her job donet yesterday approving the draft of the brexit deal. what happened between yesterday and today to prompt some of her cabinet members to resign? battlething in this always be the most difficult is selling the deal to the cabinet and parliament. the cabinet backed it within 24 hours. the reason for that is because the deal means the u.k. is not in a better position of what it had been before. this is always inevitable from my perspective. the eu and u.k. landed exactly where it would land. hard-core brexiteers believe that is not the case and believe
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have landed here because of theresa may doing a bad job negotiating. they have now resigned and theresa may faces challenges ahead to get it through her parliament. taylor: with all of the resignations, what are the odds of a second referendum? >> i don't biggest second referendum is the thing most likely to happen. the reason why is that if there was a second referendum, this issue would not be resolved. it's not clear what would be on the ballot paper, and the public is split entirely down the middle. if your if the result would be different. winning by a few points would exacerbate tensions that are already so toxic in the country. the referendum tilt as a once-in-a-lifetime referendum has to now be delivered and that is what theresa may is trying to
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do, even though she is fully aware and many of her cabinet aware, and most of parliament is aware that leaving does not put britain in a better position than where it was before. to blame? the brexiteers say theresa may and the more realistic, truth, is that what was promised by the anditeers, the land of milk honey after the u.k. had left the eu, that was an illusion. romaine: we have been going through this now for 2.5 years and more than three years of you count the run-up to this. how much of the current debate is about brexit and the u.k. economy and how much is it about theresa may enter leadership? nina: theresa may enter leadership have become the focal point of the debate, but really this is not about theresa may and her leadership. although the brexiteers say one of them -- had one of them been in charge, the outcome would have been different. the reality is, if you know and understand that eu strategic
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position and understand what the red lines are, and also if you look at what the conservative party's red lines are, there is no other outcome for the u.k. than the deal it has on the table now. romaine: just to be clear, is there anyone else out there saying they would want to step up and fill her shoes? nina: this is the thing, right? all of those might say theresa may is doing a terrible job and do not like her deal, but no one to seems willing to step up try to do what she is trying to do. ultimately, if you do not support theresa may's deal, you either support remaining in the , orcrashing without a deal leaving the eu with the canada style fda. the compromise there is that there would be a hard border in the irish seas. so northern ireland basically goes. none of those are health options. scarlet: yeah, nobody wants to
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take that on. i think you nailed it completely. as you look ahead, what should we be looking for in the coming days? right now theresa may has survived yet another day. what happens next week, next month? if the staggering of events goes as planned, the european council will meet in late november and they will vote for the deal, and the big unknown comes when the deal goes to the british parliament in december. if you look at the numbers, it does not look like the deal will get through parliament, but perhaps as the date edges closer, theresa may might get enough extensions to vote for her and perhaps they will be buoyed on my market reaction if they look like the deal is not going through. realize thatrt to a deal might not pass parliament, parliamentarians will realize what that means. there is no going back to renegotiate.
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that has been clear from day one. taylor: take it or leave it. well said. that was nina schick joining us from london. thank you for staying late. guest features posting their biggest one-day decline in the last 15 years. to giveprompting prices up all of their gains from just a day earlier? this is bloomberg. ♪ loomberg. ♪
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romaine: more breaking news here. nvidia out with earnings and they come in a little light on the third-quarter revenue and eps numbers. one dollar 84 below the 192 average -- $1.84 below the one $1.92 average.
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i don't see a forecast in here, but shares fall, down about 13% or 14%. up 50% before the october selloff and dropped about 30% since then. taylor: and you are seeing amd shares are off as well about 4% after nvidia sales missed estimates. quite a bit of a read through. i'm going to make a hard pivot because you know what else has been quite volatile over the last two been days? taylor: natural gas. i want to bring in a marine here -- bring in nouri al-maliki malik. >> natural gas has been the most volatile commodity and it was dead for months, but this is
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kind of like a throwback to what it used to be like. what happened was we have this dramatic rise and it got a little colder and it set the price up. we kept hearing people were getting squeezed out of the magic -- market. today is a testament of that. we had the biggest one-day drop ever in guess history. 17%. it is a testament to the run-up yesterday wasn't driven entirely by fundamentals, it was driven by people who got squeezed. that kind of went wrong. they get squeezed out. taylor: talking about other squeezes in volatility, i want to bring in jessica summers, our oil reporter. you and i talked a lot about supply and demand dynamics. what is the focus today? jessica: we have seen wti and brent in a bear market and a giant selloff with concerns in the market. we saw a little bit of relief
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and rebound. the u.s. issued sanctions against 17 saudi individuals relating to the killing of jamal khashoggi. is what causes geopolitical risk premiums creep up in the market and make oil more volatile. scarlet: there are so many different factors driving the price of oil. you mentioned weather and people making bets on a mild winter. does the drama we see playing out spillover? naureen: it does. it spilled out in an unexpected way. keep hearing people were long oil. they were talking about $100 oil and they were going short natural gas. the bearish story has been we have this wall of production coming, record production from sale growing at the fastest pace ever. that kind of went wrong this week. oil tank and we saw gas surge.
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that is why he had this accentuated jump and downfall in gas. thisne: what we know about trade where a lot of folks got caught in the middle between oil and natural gas. people that you are speaking with, are they saying oil has reached the bottom? naureen: i'm hearing we are extremely oversold. the fact that we are trading so far below the 200 day moving average is very interesting. until weysts say i reach 60 again, we will see the downtrend continue. taylor: we have heard a lot about wrongly that's. i was reading an article that a lot of people are comparing the specter 2006 when the hedge fund throughout because they had a wrongly bet on natural gas. do we know who are the players getting short squeezed right now? >> we are hearing a lot of talks those getting squeezed are
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the people trading both oil and gas. others are. as plays where they play the same window maker bad. you bet on the end of winter -- .maker bet you bet on the end of winter. scarlet: throwing a lot of people off was the slide we saw in oil prices in 2014 and 2015. is anyone talking about high-yield being concern this time around? jessica: that's an interesting point. there are theories as to why we have the giant selloff earlier in the week. goldman saying that it is partly due to momentum trading strategies. now, we are seeing this rebound because people are starting to price in opec production cuts. that is what is really interesting and we will see whether opec does cut production. scarlet: thank you so much jessica summers and naureen malik.
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coming up, one of california's largest utilities facing an uncertain future. this is bloomberg. ♪ uture. this is bloomberg. ♪
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our $225 offer. that's $150 off the mattress, plus a free pillow - and free shipping too. go to buyleesa.com today. you need mark: i am mark crumpton with bloomberg's first word news. toresa may is promising stand firm as break to supporters plan her removal. mobilizedit army is and a letter of no-confidence of may has been cemented. the prime minister told reporters she will see things through. >> i'm going to do my job of getting the best deal for britain. i will do my job of getting a deal that is in the national interest. when the vote comes before the house of commons, mp's will be doing their job. they will need to look at the deal, consider the vote of the british people to leave the
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european union it our duty to deliver. mark: she added "with ever fiber of my being the course i have set out is the right one for our country and all of our people." in saudi arabia, the prosecution will seek the death penalty for five people confessed to killing jamal khashoggi. of --osecutor is accused the prosecutor is accusing of two people playing key roles. delayed ajudge has ruling on whether the trump administration has to return the white house presidential's -- white house press to dental's -- credentials. bloomberg lp was one of several news organizations that filed a
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friend of the court brief in favor of cnn in their case. crewseather helped fire gain ground against the nation's deadliest wildfire in a century. killed, somee were 300 unaccounted for. one week after the flames swept through. we will have to manage our forests better, build our cities more smartly. we have to build shelters so people can escape when these terrible fires get out of hand, and we will have to deal with climate change. all of that, many elements. we have to get on the side of nature, not fight it. mark: the white house announced president trump will serve a wildfire damage this week.
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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. i am mark crumpton. this is bloomberg. scarlet: we breaking news, intel adding to its stock buyback program and reporting a $16 billion boost to its stock purchase program. the shares were down earlier and repaired some of their losses. taylor, it also indicates intel perhaps is not seeing better use for his cash. taylor: in the short-term is it -- it is a good thing, but in the long-term where they're not better ways to use the dollars? romaine: the shares are down about 16% from the hit back in june. maybe they see a better used to pick up bargaining chips.
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scarlet: they say the stock is undervalued and need to pick some up. we will keep an eye on shares for you. in the meantime, we watch what is happening in california. they are battling the most devastating wildfires of its history. beenast 56 people have killed and towns have been he raced off of the map. liability,dened by one of the largest utilities is facing uncertain future. for more, let's bring in director for policy research and engagement at the morton risk center in washington. the sharek at pg&e, prices are under so much pressure and down for a second day. down six days in a row overall. if you look at chair prices, it seems a investors are factoring in the worst possible case here. -- share prices, it seems investors are facing -- factoring in the worst possible case here. they are under pressure to pay the property damage even if they're paralyzed and not intend to start the fires.
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>> as you said, pgn the has seen the largest are price drop in 16 years. it is because of this potential concern over liability for the property damages for the fires that we are seeing devastate the state. right now, in the state of california, if electric utility equipment is found responsible for starting a fire, due to this unique regime called inverse strictation which is a liability regime, the utility can be held liable for paying for all of the property damages. here we look at billions of dollars, up to $10 billion this year on top of the liability from last year's fires which were also record setting and pg&e played a role in. the trick is that the utility will be forced to pay the damages whether or not they were negligent. in many places, if the utility engages in poor behavior and they are found negligent, they
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will have to pay cost. in california, even if they engaged in the appropriate behavioral and risk reduction behavior, they will have to be forced to pay the damages under this regime. taylor: president trump is planning to california on saturday to assess the damage. where are california legislators? to helpe the governor's potentially protect some of these companies from being liable for these damages that have the possibility to potentially push them into bankruptcy? beolyn: it is getting to quite troubling for pg&e and the utilities are concerned. a few months ago, california passed legislation that the governor signed in response to the wildfires from last year. this did a number of things. types ofphasis on what risk reduction investment should be done ahead of time and allowed pg&e to issue bonds to help cover liability from the 2000 17 fires and let the california public utilities
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commission do a stress test on -- 2000 17 fires and that the california public utilities commission do a stress test on the company. there's a lot of pushback from the consumers and states wanting to do the costs. we are facing unprecedented wildfires presumed to stay fire safetyino more than they see year. a new regime will be needed. romaine: when are we going to start to see that action on the part of legislature in california? when you look at the stock price drop and drop we see in the bonds, investors are not waiting around. carolyn: they're quite concerned. the law passed in september only addressed liability from 2017. it did not do anything to reform the general approach of the state. i think that is causing investor concern now that we are seeing a second year of tragic and high
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levels of property damage that we do not have a system in place to handle every year going forward. scarlet: is edison international , the owner of the southern california edison utility in the southern part of the state, is pg&ein as much trouble as and other liable for the same amount? carolyn: there have not been on any final determinations on any of the fires. i think what triggered decline for pg&e was a statement that one of their transmission lines had started the fire because they were -- was with the line trouble with the line around the same time. a final determination has not been made on any fires yet. i might also say, in thinking about what the state is doing, the law passed in september put in place a commission to look at how thees and look at property damages from wildfires should be distributed among
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people. the commission should be getting started in 2019 and come up with policy options. taylor: i know you don't cover pg&ehe from the street -- from the street on a stock perspective but merrill lynch said a lot of the talk about bankruptcy is overstated. is that true? our bankruptcy or default scenarios overstated for this utility or any utility company? carolyn: it's a little hard to say. final damage numbers are not in yet. they have exhausted $3 billion in credit and their $1.4 billion insurance will likely not be enough to cover the liability. it's hard to say. we know the fire is record-setting in damage. over 10,000 properties have been burned already. record-setting in the tragic loss of life from this fire north of sacramento as well.
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romaine: thank you very much. and is the director of policy research at the wharton risk center. breaking news here. to bethe company these public and when privates, is trying to go public again. carl icahn, one of the biggest roadblocks to the deal, appears to have given up. he is going to withdraw his lawsuit against dell and end his proxy contest saying he believed afar battle deal -- better deal could have been obtained but he is dropping his fight. he's a big stakeholder in the tracking stock the tracks vmware which would have to be bought out if dell returns to the public market. what do general electric, campbell soup, and anheuser-busch have in common? investors are taking notice. this is bloomberg. ♪ this is bloomberg. ♪
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scarlet: let's give you a look at some of the stories trending. we are a multiplatform company. subscribers read that the credit -- credit suisse ceo may ask hundred of dobbs -- axe hundreds of jobs. and a big tax on tax companies -- tax on companies to support the homeless. you can check those stories out. taylor: a blue-chip company has been hit hard this week. losses is geredit signaling to investors things can get worse from here. they are not the only company. to ring in ourt bond reporter, molly smith.
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we've been talking a lot about this. -- bring in our bond reporter, molly smith. we've been talking a lot about this. is this a one-off or broad concern? >> some of the stories that we have looked at and the names i cited in this piece, ge, one of them, another is ford, the issue the companies are facing are a bit unique to the companies. we talked about the struggle for ge power business and fort's operations out of the country not as strong as they used to be. some of these other countries like campbell soup and dr pepper, this is more speaking to the broader theme we have hit at so many times. companies building up these balance sheets over a decade of low interest rates, pursuing large scale m&a and having these massive capital structures, and are facing potential refinancing
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risk as the fed hikes rates. the companiesof you listed, should they have been rated investment great to begin with? when i hear some of the names, and look at the financials, i think wire the investment-grade? molly: you are not the only person to have these questions. the work we have done, especially looking at leverage in some of these companies, granted that's not the only metric factoring into a rating, but certainly a big one and the most easily quantifiable metric. alone, a lot of these companies should not be investment-grade, but when you look at the status of these companies, these are large, multinational firms. when credit raters are coming out with their opinions on these companies, the large opinions are that these companies are companies that have levers at their disposal to modify the balance sheet and get their final show -- financial health in a better situation. scarlet: big-name investors are
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warning about the prospect of downgrades and worsening credit quality. what are the options in terms of expressing your skepticism or concern? you can buy credit default swaps, what else can you do? molly: the cds market has been active in some of these names. ge in particular. the five-year swaps going up above 200 basis points. have not seen that on these contract severed. the ones on ge capital were a lot higher back in the recession. the active contracts now, record highs. we are seeing popular shorts in up,r bonds that have come in the stock is well, there is a lot of ways to express opinions on these. taylor: talk to us about the universe of investment-grade in general. over time, triple q is making up more and more of investment b is making up
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more and more of the investment trade. molly: we talk about the theme a lot that triple b's make up half of the investment-grade universe. we're talking $2.5 trillion worth of debt. if all of that were go to high-yield, we would be having a very serious discussion. that't think that half of will go to high heels. these are large companies that have a lot of levers at their disposal to try to get through these issues. taylor: i could talk about this all day but we will leave it there. smith smith -- molly there. last year'satched total for total lodges. the falcon nine rocket liftoff did from the kennedy space center about an hour ago. the first stage landed on the
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drone ship in the lead to goshen. --s out this hour, activist an activist investor has decided to withdraw a lawsuit against dell. he is permanent in the fight against dell calling the battle on winnable. video shares a slumping after hours. a weak self forecast for the third-quarter showing lingering loss of demand from the cryptocurrency mining. they are the biggest maker for chips for computer graphics cards. that is your bloomberg flash update. scarlet: here's a story that caught my attention. wells fargo has raised its required down payment for ,omebuyers in connecticut fairfield county, to 25% from the standard 20% after the area was categorized as distressed. isting we should mention that fairfield is home to greenwich, connecticut. not a place you associate with distressed. >> absolutely.
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there are a lot of towns along the trend line that employ wall street. scarlet: the surprise people. >> yes i think it surprised people in greenwich like brokers as well who had clients who needed to put 5% down and all of them were scratching their heads. romaine: what is the rationale for raising the requirement? oshrat: wells fargo is not saying. they change the classification recently and they constantly redo -- changed the classification recently, but they are not saying why. the category they gave the classification and greenwich according to mortgage brokers is one that indicates distress. that is leaving everybody guessing is it something relating to the financial situation of the state of connecticut even though no other counties were designated as such? perhaps the housing market but everybody is last -- left
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guessing. taylor: what other pressure now does this put on some of the homes? we are talked about greenwich, especially on the high-end, having trouble unloading these homes. does this exasperated demand problem where people have to come up with even more money? that must be hurting sellers. oshrat: that might even heard outside of greenwich are you have lower-cost homes where another 5% is a meaningful number. the thing with fairfield county is that it fared better in the last quarter than some of the other surrounding counties like westchester. gotten a little jump in sales. sales of been declining like everywhere else in queens and long island so it is not doing any worse. the issue with the mansions has been happening for years, and it is starting to resolve itself because after years of sitting on the market, sellers are
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saying i will be more realistic. it's having more of a reality check in other markets that have not been struggling with that. scarlet: we will see in the weeks ahead how it shakes out, and what it means for home prices in greenwich and fairfield county. thank you so much for joining us today. coming up, deal or no deal? chinese officials are trying to resolve the trade war before the presidents meet at the g20 summit this month. president -- is it on president trump's terms? that is ahead. this is bloomberg. ♪ is is bloomberg. ♪
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romaine: breaking news here. today and after hours it is up about 34%. there doesn't appear to be any news causing the gain in the shares, but i can tell you the volume is pretty heavy for after hours trading. scarlet: i'm looking on twitter
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and no one has any reason why it is surging, but the comment is that it is giving all shorts a big squeeze. romaine: definitely. posted.we will keep you i want to pivot to asia ahead. officials have outlined a potential concession to the trump administration as they continue to resolve a trade war. this is according to people familiar with the discussions. for more let's bring in shery ahn. what are the concessions and are they enough? a second question, to your answer is no. it does not seem to be enough. the concessions we are hearing about is that it is a rehash of previous commitments they have made. be last time there seemed to a deal was last may and that was about china buying more energy and agricultural goods. now we hear something similar. it could be raising equity caps on foreign investment and so comes tot when it
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trading with the trump, it is not about the trade deficit, but they do want to see more structural reforms. romaine: two people in china and asia pay as much attention to the day-to-day of this than we do here? shery: not so much about the day-to-day rhetoric coming from the trump administration because that's really hard to keep track, even for us who are doing the news. about the we heard sources telling us about the list of concessions, secretary ross coming out saying these are u.s. isparatory and the still going to go ahead and put 25% of tariffs in january up from the level right now. the g20 meeting, that will only be about a trade framework and not an agreement necessarily from president xi jinping and president trump meeting. scarlet: in the past, they have held conversations and it has fallen apart. there is no united front when it
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comes to talking to china. in terms of the market reaction and how you can game it out in the markets, japan's topics are doing badly in a bear market. how do you see this expressing itself within equities? shery: it's getting close to the bear market. gtvhave this gtb chart -- chart. what this shows is that the biggest losers are all of those trade related. carmakers, automation providers, they are the big losers despite the fact that violations of dropped to the lowest levels, people are not coming in and buying because of the concerns over trade. scarlet: you will keep us posted on all of the developments on asian trade. don't miss shery ahn on "bloomberg daybreak: asia" that does it for "what'd you miss?" taylor: "bloomberg technology" -- romaine: "bloomberg technology"
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is up next. taylor: have a great evening. this is bloomberg. ♪
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emily: i am emily chang in san francisco. coming up in the next hour, facebook under fire again. could the social network itself be the one threatening to marker see? we will discuss the -- threatening democracy? we will discuss. uber moves one step closer to releasing data on sexual assault. our sit down with the chief legal officer when you're into the job. and, app

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