tv Bloomberg Markets Americas Bloomberg November 21, 2018 1:30pm-3:30pm EST
asylum policy as "an obama judge." an ever instance of criticism against the president, roberts says the u.s. doesn't have obama judges, trump judges, bush judges, or clinton judges, and that independence is something we should be thankful for. president trump is thinking saudi arabia for keeping oil prices down. he says it is like a big tax cut for the world and urge the kingdom to put prices even lower. that comes after he said he would stand by the saudi's regardless of whether crown prince mohammad bin salman ordered the death of a u.s. based journalist jamal khashoggi. theresa may is meeting with european commission president jean-claude juncker in brussels today. it is a bid to finalize a brexit agreement. the u.k. and european union have agreed on a document ceiling the terms of britain's departure but are still working to nail down an agreement on future relations. officials will meet on sunday to rubberstamp the deal but
sticking points remain. filing for on a plumbing benefits rose last week to a four-month high. that reflects holiday related volatility in what otherwise has been a strong labor market. jobless claims rose by 3000. 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. i'm kailey leinz. this is bloomberg. live from bloomberg world headquarters in new york, i'm shery ahn. >> live in toronto, i'm jon erlichman. we are now joined by our bloomberg and be in a bloomberg audiences. >> here are our top stories from around the world. the permian basin in texas is
about to pump a lot more. we have the maps you must see. banking on ge. morgan stanley ceo james gorman says the market over worries about the embattled industrial giants debt load. an apple struggles to catch a break. year,n facing a tough planning did cost cuts. we have seen an internal memo now with foxconn sitting they want to cut around 2.9 billion dollars from expenses in 2019 and they are worried about a difficult and competitive year. of course, this is not just about foxconn but we are talking about all of these asian suppliers getting hit by that bleak outlook on iphone demand. absolutely. foxconn tried to clarify they do these annual reviews and what their needs will be but you are right, lots of bearish sentiment around apple, and the company told us they will do away with providing specifics on how many
iphones sold. you see that sentiment hurting the stock. shery: not surprising apple falling more than 20%. rebounding a little bit today. one of the gainers on the nasdaq, take a look at the broader markets. the nasdaq is gaining 1.5%. faang stocks leaving the move up. the s&p 500 also led higher by consumer discretionary stocks while the dow is now gaining .7%. worth mentioning the volatility is coming down with the vix now around that 20 level. of course, trading is muted today, lighter than normal ahead of the thanksgiving holidays in the u.s. we are seeing volumes about 15% lower than average. i'm taking a look at what is happening with oil, bounce back for crude today. shery he was talking about volatility in the stock market.
we have seen plenty of volatility in the oil market, highlighting that crude oil volatility measure through an index at the highest in two years. talking about the uncertainty their just, demand today, goldman sachs says they expect to see more volatility in the weeks ahead for the price of oil. with the u.s. oil industry is seeing, a lot of volatility. producers and canada are in the midst of a full-blown crisis. prices have been plummeting by over 60% as an onslaught of new production from the oilsands overwhelms the nations pipelines. joining us on what happens next is kevin orland. that number is pretty dramatic, 60% slide. give us a sense of what is going on. as you mentioned, the situation started with a couple hundred thousand barrels of new oilsands production coming on from a couple large projects
that have been in the works for quite a few years. was that new production ran into a situation where there were no new pipelines. there have been some pipelines in the works, commonly the most famous is keystone xl, but as a lot of people know, those have been held up, and they were not there when the new production came online. , in theatters worse late summer, early fall, the u.s. refineries that normally would have taken that heavy canadian crude went down for maintenance. we had a lot of crude that had a hard time getting to the u.s. in the first place, and what went there to not have a refinery to go to. shery: this is putting a lot of pressure on those governments. are we hearing any steps the administration could take? the oil industry has come up with a couple ideas. some of those are centered here in alberta. one of the top ones being
debated is whether to have the government mandate output cuts across the industry. that would take some of the supply out of the market and ease the glut of oil that is backed up in storage right now. that sets up an issue of a lot of controversy. even though all produces cannot agree on it. officials have asked the trudeau government to invest in some new rail shipping capacity, but that's something that will take a while to come online. hard to see how that will help this acute pain that the industry is feeling now. you are talking about often come up in the conversations around with the opec members are doing but we are seeing big production south of the border in the u.s. how does that impact the opec story, all of that production in the united states? opec is meeting next month in vienna and they have a tough decision to make. possibly 2oking at
million new barrels a day of production coming out in the permian next year. tryhey cut production and to boost prices, that will only fuel that shale behemoth that has been producing so much oil in the u.s. for lower prices, that hurts the saudi arabia government, the economy, which are heavily dependent on oil. shery: thank you so much, kevin orland. the latest on energy markets. u.s. stocks climbing today, trimming sharp losses from yesterday's session. here with insight on how investors are positioning themselves ahead of volatile trading is david joy. he is with us from boston. welcome. we have seen some speculation the fed could soften its stance on rate hikes, helping the rebound in equities. at the same time, we have those trade concerns, a trade war
looming in the background. what is important for markets right now, the fed or trade? of a tossup,kind i'm not sure you can have one without the other, frankly. if we don't get some kind of ,ease-fire on the trade front then that is going to have real implications for slowing down the u.s. economy and global economy. that will influence what the fed thinks it needs to do. beneficially, some of the fed commentary recently has been a little more dovish, suggesting at least they're open-minded about the possibility of pausing. for al not know that while. i think we will see a rate increase in december and then we will see what the data tells us. past the g20gotten meeting, a better sense of if there's any movement on the trade front. then the fat can take it from there. i think these two are very critical for the future path of
equity prices. jon: david, i like how you labeled what the market is up to as searching for progress, whether it is treated, central bank plans, or something else. is that a narrative that will continue for some time? i think what has happened in the last month or so, the market has repriced to a new sense to incorporate the that the fed is raising rates. if you go back to the beginning of october, they said we are a long way from neutral. the market have to take that into consideration. we are looking at roughly 15 times earnings for 2019. that is about the right level even what we know. but what we don't know is what is important. if we don't get progress on the the fed showsnd no signs of slowing down, then the market will have to adjust lower again. i like the fact the market found
some support yesterday at the october low. that says to me the market is open-minded about the possibility that the news could get better. if it does on these two questions, i think we can bounce off of the levels and may be sustained a little bit of a nice rally over the next couple months. but we need to see progress on both of those issues. shery: what about the housing sector? we seem to be getting conflicting reports this week. a chart on the bloomberg showing how homebuilders have risen in the last four sessions of trading but really taking a beating. when it comes to valuations we have not seen at this low since 2007, compared to the s&p 500. on a pe basis, our valuations in the homebuilding sector attractive enough to leave investors, or will rising mortgage rates make this sector a lot more calm? thed: i'm not excited about
housing sector, i think it has some real issues. if you look at the any hb number with the drop down to a 60 level on that index, there was a lot of weakness across the board. on a regional basis, it was particularly week in the northeast. that has issues in addition to higher mortgage rates. we also have inventory issues, space issues. at the same time, inside of that index number, traffic was sluggish, expectations for six months out was very sluggish. i'm not so sure we will see any real bounce in the housing sector are. it's been a weak spot for a while. i'm not sure we can look to it as a source of strength in the economy. the consumer is doing well, rates are not real high, but i just don't see a catalyst to suggest housing will turnaround
anytime soon. as you point out, rates are continuing to rise, until we hear otherwise from the fed. shery: thank you so much, david. jon, david mentioned consumers being strong, wanting to spend. what a better chance than this upcoming black friday after thanksgiving. we are now hearing from adobe analytics that we could see spending at $124 billion online during the final two months of the year. i have to say, i contributed a little bit to this. jon: doing your part, good for you. one of the things we heard this week, companies like target trying to boost their game against amazon, to get a piece of the digital pie. but we thank you for your spending. more next. this is bloomberg. ♪
jon: this is i'm jon elrichman. i'm jon elrichman. shery: i'm shery ahn. when it comes to u.s. banks, lending risk, it doesn't get much bigger than ge. the five biggest wall street firms have each committed to lending at least 3.5 billion dollars to the industrial giant facing growing debt concerns. morgan stanley ceo james gorman is not concerned. the markets over were raped. ge is a fantastic institution, they have tremendous ability to restructure the assets there appeared a off the business. i'm not concerned about ge's credit at all. it is a world-class company. they are going through a tough time and they have a leader doing something about it. >> even if they end up drying
trend on the credit facility, they are still good. >> absolutely. this is ge, one of the great institutions in the world. shery: let's bring in lisa abramowicz. this would be a crucial backstop. we saw when andrew danone it's in credit line. general electric has a $41 billion credit line with the number of different banks. we don't know all of them but the fear expressed in the story today is what happens in general electric demands all of that money back, take it all out because they have commitment from these wall street banks to withdraw it. what happens to those banks? especially if general electric is doing so under duress. as the morgan stanley chief executive was talking about, it's important to recognize general electric is still rated investment-grade, but certainly a lot of concerns recently. we have seen this in the price of its stocks and bonds. this is a good time for
case studies, for example, as bloomberg pointed out today. pg&e in california is an example of a company tapping into its available credit, on what happens when you really need to pull the trigger on something like that. lisa: pg&e is a special story, the biggest utility in california. there was suspicion the government would backstop it if it came under duress. even though it also has the lowest credit ratings amongst investment-grade tier, it had his backstop. normally when a company draws down on its credit line, especially under duress, this is a warning sign to investors. sometimes investors will flee simply in response to a company drawn down the credit line because it screams desperation. pg&e is a little different because it has a governmental backstop. general electric, if it were to so, you would have to think
the credit investors -- ge has more than $100 billion of debt -- so, you would have to think those holders would get somewhat concerned given the fact that they are reaching into this last backstop, not to mention shareholder seeing their valued got to the lowest since 2009. shery: california came out backing those holders would get somewhat pgd and i think they have some state bonds thanks to some new legislation. you mention the market reaction on ge. we have already seen it on cbs. the amount of people demand to insure against losses from the credit worthiness of this company have climbed. today, i will say, you are seeing a little bit of a rebound electricnds of general and decline in the perceive the risk of credit default swaps. part of the speculation is general electric has $26 billion do coming in the next two years.
it is the liquidity crunch potential, not as great as some were talking about. yen-yanghe sort of that is creating a market for general electric assets. this a reminder, given those comments from james gorman, on the importance of the corporate lending side of morgan stanley's business? the fear. is sort of it highlights the potential systemic risk of massively indebted industrial companies. general electric is the sixth most indebted nonfinancial company in the world. if it were to default, have a idiosyncratic, onto itself, what is the fallout to all of these financial firms that have other tentacles that reach elsewhere? questionhe existential
and why people are so concerned about the credit line and bake exposure. jon: fascinating numbers. thank you, lisa abramovitz. coming up in question and why people are so concerned about the credit line and bake exposure. jon: the show, carlos chairman is up in the air. board members are divided. why directors say they don't have enough information to make the call. that is next. this is bloomberg. ♪ ♪
shery: welcome back. nissan will vote on a motion to dismiss carlos ghosn as chairman tomorrow. board members are divided over his fate. one director says not enough details of his financial deeds an investigation had been provided for them to make a decision. our auto reporter is here with us. craig, this is a nine-member board. do we know any more details about the financial misconduct allegations? >> there are reports coming out of japanese media and we have been able to substantiate a lot
of information about where mr. ghosn lived, what parts of the and of the same time, a lot of things we don't know at this point. we don't have a great glimpse of what is going on with the prosecutors in tokyo, where mr. ghosn is actually. that is not necessarily unusual. we have seen this in the past with executives caught up in legal troubles in japan, that there is not a whole lot of transparency, and is not a process that we might be used to here in the u.s. where you have charging documents, lawsuits, and are able to see what evidence has been obtained against an executive and why they have been put in jail. does the debate within the sun complicate the future of the alliance of these automakers attached to the story? craig: absolutely.
with the nissan board, you would have assumed there was going to be this sort of trouble when you think about how long carlos ghosn has been with the company, you would assume there would be factions within the board that are there because of him. he has been the face of the company for decades. clearly, there will be loyalists on the board to the ceo who was critical of mr. ghosn during a press conference on monday. that is where these divisions perhaps come into play where you have two power players at this company, one being the chairman, one is the ceo. it is complicated because you have a situation where not only the nissan board is calling for more information but also the renault board where they did not oust him as ceo, sort of elevated the coo on an interim basis to play that role right now. shery: how are they doing
business lies? here in north america, mitsubishi has had some challenges. some of that was maybe springing from unrealistic targets. ghosn was talking about how he wanted to get to 10% market share here, wanted to pass honda. that proved to be an elusive goal for them, they struggle to get to, and resorted to some questionable tactics. they are facing the same problems with trade, raw material cost, that a lot of the industry is. and china and europe slowing down as well. jon: fascinating story, craig trudell joining us with the latest on carlos ghosn. another story on my radar, a
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prices are like a big tax cut for america and the rest of the world. let thehe would not investigation of jamal khashoggi jeopardize relations between the u.s. and saudi arabia. arerning the budget plans in breach and rules underpinning the euro single currency, and it's as countries should save section spirit the eu executive arms as italy could face fines of a does not bring its plan into compliance. the italian government has vowed to continue with it spending plan. 85,000 yemeni children under the age of five may have died of theer and disease as outbreak of the war in 2015. save the children says more than 1.3 million children have suffered from malnutrition, this as a saudi led coalition went to war with yemen houthi rebels. more than 8 million people in human are at risk of starvation.
headed for southern california, and that could mean more trouble for the fire stricken region. mudslides and rock slides will be possible, especially areas burned by the fires. flash flooding is also a risk. this could come kit efforts to find more victims. at least 81 people are confirmed dead. 870 are still missing. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. caroline: 2:00 p.m. in new york, 7:00 p.m. in london. scarlet: this is "bloomberg markets: the close."
stabilize, u.s. equities edging higher but the dollar drops on reports the fed may force a cycle early next year. there is concern over a slight -- supply chain hitting apple's market value. and theresa may aims to fine-tune her brexit plan ahead of a summit on sunday as the eu escalates its clash with italy's populists who are not backing down. all that and more coming up. scarlet: first, a check on the markets on thanksgiving day eve. not as much trading activity is there would be normally. volume off by 20% in the 20-day average. you have to take this rebound with a grain of salt. especially the energy recovery on the back of higher oil prices. caroline: 2.3%. it was pulled back slightly on the back of the iaea numbers
once again showing there is plenty of oil in the united states. thatll, there is a hope maybe we got stabilization in the price point. scarlet: only one of the energy companies is down. we are watching foot locker, rising as much as 19%. forecorded a beat and race the third quarter. suppliers nike and adidas also getting a boost. the dollar is falling, but one exception is the dollar gaining versus the yen, which is consistent with the higher risk appetite. caroline: does seem to be a little bit of cautious optimism as we head towards the holiday. scarlet: a deeper dive into the action with our markets reporters. emma: i am looking at the homebuilders rallying today, the home's, d.r.ar, kb horton, and taylor morrison all and little higher, this as his existing home sales come in a little bit stronger than anticipated.
contra closings from the prior months rose from an annual way of 5.20 2 million. risingian sales price three point 8%. inventory expanded, welcome this for the homebuilders. they have been suffering as we have seen mortgage rates increase. i have a chart that shows you this rise and is a seeing home sales is extra the first and some seven months, suggesting demand may be stabilizing at a availablel as properties become less scarce. you can see the rise, the first rise in seven months, at the end of the chart. but sales are still down 5.1% from a year ago. software stocks rising on the back of a report this morning that shows a little bit of strength among corporate spending, corporate buyers, i should say, in the software and services space. adobeoft, salesforce, and
gaining. the s&p index that tracks software and services is the third best performer year to date. fourth quarter forecasts being raised from autodesk. microsoft seeing substantial standing. analysts we talked to pointed out there is a rotation here out of some of the consumer-oriented tech names and into some of the enterprise type names. a transition from hardware into software is what we're starting to see. looking at the comparison between what we have seen with the hardware technology stocks which had outperform software for most of the year, that is sort of been erased. all 18 stocks on the hardware side of the s&p 500 are done on some deepr, including losses by apple, f5, and hp. on the software side, a lot of strength in semantic and verisign. and you also had an acquisition underpinning some outperforming
in the software side of the business. gartner says next year a .3% gains will be seen on enterprise software spending, compared to about a 2.4% gain in device spending and only about a 1.6% other types of sort. of data center hardware type businesses that might its point some of the move. lisa: as people had to thanksgiving weekend, a lot of people will be talking about this stock market declines of late, today not included. i want to address why. this chart shows the relative value proposition for equities has gotten to the point where it really was not worth it for a lot of people relative to two- year treasury yields, the earning yield on the s&p 500 yields.-year treasury it reached the lowest level since 2007, so the earnings yield investors were earning on
a basket of stocks was the least versus two-year treasury yields as the end of september. this goes to this idea of cash is king and people are earning something on their money. if you look at the three-month treasury bill yield, again, we see a new post crisis-, reaching 2.4%. the concept of there is no alternative, there is now an alternative, and even though a lot of people are debating what exactly is the reason behind the stock market decline, the fact that cash pace something is a big one. scarlet: markets team, thank you so much. great points. we are going to build on that conversation with christina cooper, invesco's chief global market strategist. when you hear from our reporters and you look at the turbulence in the u.s. equity market, there is the backdrop of a relatively strong economy and a labor market that is tight in consumers that are confident. are stoxx picking up on changes
stocksthey -- are picking up on changes before they get the data? week, the fedst seemed on pace to continue through 2019. also, you have fears about trade, which is still a big unknown. by the day, it looks increasingly worse. there is certainly a motion wrapped up in here, but there are also some signs of there are cracks in this strong economy. i cannot stress enough, even the most robust economies are quite vulnerable. at the start of 19 29th, the u.s. had 3% unemployment and 6% gdp growth. it quickly unraveled. caroline: the durable goods number, the disappointment and showing investment has not taken off in the u.s. as anticipated, is that one of the key concerns? >> absolutely. the durable goods number
suggests companies are getting worried yet we certainly heard that anecdotally. jay powell this summer talked about it in testimony, that they were hearing from business context that work curtailing capital spending plans or ending capital spending plans because there was so much economic policy uncertainty around trade issues. certainly this is emblematic of that, and we are finally starting to see tangible data that suggests that. on the positive side, that could give reason for the fed to take its foot off the accelerator. scarlet: we will see the -- how that plays out in the december meeting. what is interesting this time is stocks seemed to be picking up on signs of nervousness before leads and usually credit the way. why is credit taking a cue from equities this time? seenthink because we have a huge run-up in equities so they have become the more sensitive asset class at this juncture.
valuations are stretched. i would argue that we have had an unbelievable run-up that has not priced in some of the negatives. there are a lot of positives, but it has not priced in the negatives to it i think that has made u.s. stocks more sensitive than credit. caroline: when you see this today, do you think the federal reserve will win out compared to trade concerns, for example? if we do get more of the view coming from fed meetings, they will take their foot off the accelerator come 2019? >> i think so. what we could see from the fed is the potential for helping to support stocks, and i think that is part of what we have seen today, the hope of the fed taking its foot off the accelerator in 2019. lastt encouraging comments week from richard clarida, who not only stated that the fed is
still data dependent, which had been a question since janet yellen left the helm, and he also said it is close to neutral, which contradict did what chair powell said just a month ago. we heard other fomc participants that suggested that they are willing to take a step back and take their foot off the accelerator. that could be a countervailing force to the concerns of the trade. scarlet: what does this mean for the traditional santa claus rally? you cannot take a lot from the gains today because it is on pretty thin volume. we will get a better read next week and in december. stocks tend to do well at the end of the year, especially an election year. i think the fomc meeting in december is going to be absolutely critical to where stocks in end this year. till in key points to consider. a, thank you. coming up, crude surging the
the investigation taking place in malaysia. stifel downgrading lows to a hold with a $92 price target -- downgrading lowe's. analysts citing poor quarterly results. finally, wedbush upgrading best buy to neutral of a $65 price target. the analyst lifting its estimate following impressive quarterly results. those are some of your top calls. caroline: meanwhile, british prime minister theresa may has been meeting with the european commission president in brussels. so far, they say the have failed to finalize a deal. earlier today, the european commissioner for economics and financial affairs expressed the importance of reaching a deal. because wer, by far, believe it is the highest interest of the u.k. and europe that there is a deal, and we also believe that the deal which
is on the table is the best possible. on, is what we're working and we're dedicating our strengths and forces to that. caroline: with us is the invesco chief global market strategist, and you have been focusing on some of the global threats to growth, italy being one of them, brexit being another. any optimism about the eu and u.k. reaching a mutually beneficial deal? >> certainly today gives me a little more optimism than i had a few days ago. it seems that the eu has finally taken some cues from the struggle and the u.k. and is suggesting this is a great deal and we may not want to give it to the u.k. i think it is similar to a children's story where a rabbit says do not put me in the prayer bush, and i think the eu is starting to catch on that that they have to sell this, as well, by saying that they do not want to it and it is not necessarily a good deal for them.
certainly, the odds of the deal have gone up today. scarlet: the odds have gone up, but it is a political process. it will go through a lot of back-and-forth's before it is resolved. what does that mean in terms of investments? how are you positions? a long enough time horizon, and we are very long-term investors, this could offer buying opportunities. i happened to be in london last week and got to watch firsthand sterling go up on the announcement that prime minister may had a deal. the sterling fell. of course, a lot of other assets sell off in the wake of departures like the resignation of an mp. there certainly opportunities to pick up oversold assets in the u.k. do i think much will be impacted outside the u.k.? no. certainly the european union has some challenges, soak european stocks -- so european stocks may
have some challenges, but they supported by monetary policy, and the u.s. is so far ahead of where europe is. that could change come october 2019 with the departure of mario draghi. but for now, that supplies a supportive climate for risk assets in europe. day,ine: it was an up green across the screen, with equity markets. looking at italian bonds, as well, managing to pull back and rallying in italy on the hope that maybe italy will negotiate with the eu, will in some way make some appeasement's when it comes to the 2.4% deficit target. what do you think of italy as qe cominging towards off the table when it comes to the ecb? >> sure. well, italy has more immediate concerns, and it needs some level of fiscal stimulus. it also needs to be willing to compromise. ultimately, thing italy recognizes that.
it needs the eu more than the eu needs italy, although the eu needs italy, as well. the u.k. helps in terms of being a poster child for what you do not want to do. you do not want to leave the european union. i think ultimately a deal will be worked out. certainly italy will have its fingers wrapped for doing this, italythink ultimately will come to an agreement with the european union. less fiscalallow prudence this year, probably on the agreement that italy gets more prudent in future years. scarlet: will anything tradable come out of the trump meeting later? >> i highly doubt it. the speech suggested he was panicked that globalists had taken over and had changed president trump's stance and therefore the stance of the u.s. in negotiations. but it seems like that is
actually not the case and that what we are looking forward to is more of the same, talk but no positive outcomes and perhaps more negative rhetoric. scarlet: plenty everett are to come, one way or the other. thank you so much. , coming up, oil trading near its lowest level in the year, maybe higher today, but there is consensus a supply glut, and it could grow as production rises in the permian basis. it might be opec's worst nightmare. this is bloomberg. ♪
lateste: a check of the is this a flash headlines. the board of nissan is divided over whether to fire chairman carlos ghosn. bloomberg third some directors say they have been given too little detail on his alleged financial crimes. the board is due to vote on his fate tomorrow afternoon japan time. ghosn was arrested monday after
stepping off a plane in tokyo. ramping upnsumers the online spending before black friday. shopper spent $32 billion online in the first 20 days in november, up 17% from a year ago. hebrews comes as traditional retailers battle online customers may be offering holiday promotions and delivery deals weeks ago. and existing homes as the u.s. was for the first time in seven months, suggesting demand is stabilizing at the lower level. contract closings increased to average rate of 5.2 million homes. median sales price rose 3.8% from a year ago. that is your business flash update. scarlet: it has been a fairly tumultuous week for oil. crude is rallying today, but it has lost a lot of ground of late, still off by 3% over the last two days. our team leader for oil is joining us. there was a stockpile report
today that was bearish -- i cannot quite figure it out. david: there is a much expectation of bad news that the mediocre report does not hurt anymore. caroline: all eyes turn attention to opec and how they continue to navigate, whether they start to curtail supplies as soon as december in vienna. what is the jury on that at the moment? david: hard for them not to cut supply. there has been so much traditional supply coming out -- so much additional supply coming out of the u.s., and once there were some waivers granted to the buyers of iranian crude, the market really took a hit. so there is not much question that there will be some kind of how much a question of it scarlet: you talk about how there is a lot of supply. there is a lot of supply in the pipeline, as well. there is a great story in the blooper today about how opec's worst nightmare is the permian
basin is about to pump a lot more. the oil pipelines set to open here in 2019 are highlighted, and you move on to 2020 and it increases. talk us through how the sectors into it opec is deciding on now. david: sure. you cannot just look at you as production now. they have to realize, ok, there were are over 11 million now come a so what would be a year from now, two years from now? with all these pipelines coming, you will have these constraints that may have slowed down some of the completion of wells. that is going to go away. so there is really nothing stopping u.s. producers from continuing to pump and finishing new wells and bringing more online. caroline: that means opec is between a rock and a hard place, particularly when it comes to shale producers. if they do not pull the coproduction, maybe stealing market share. >> sure. right now, the choices are you keep production up and try to
keep market share, and then you have a repeat of 2015 and 2016 when prices are down a $25 or you cut production and risk market share but you support prices and you keep rice is where you are making more money for your oil. caroline: the battle for production versus the price point. thank you, david. a great piece on the permian bases you should read. up withe, s&p 500 energy companies leading us higher, as well as tech turning around. the dollar weakens. the durable goods number up. anticipation of a fed pullback. bitcoin is on the up, too. this is bloomberg. ♪
obama judge. robert said the u.s. does not have obama judges or trump judges, bush judges or clinton judges, and that an independent judiciary is something we should all be thankful for. permission from the white house to use military chiefs to protect customs and border protection personnel at the southwest border, that is what press secretary -- that is what jim mattis says. it could mean troops will temporarily detained migrants to prevent violence against border patrol agents. troops could also use lethal force if necessary to protect border patrol. a dozen gop senators are urging president trump to send congress a copy of the u.s.-canada-mexico trade agreement as soon as possible. they want it to be passed before democrats take control of the house next year or the senators say they are concerned waiting until next year will make passage of the bill significant when since democrats want the agreement to be revised. havee's billet predators
approved a request by officials to scrap pension cuts planned to 2019 after the country delivered a strong budget performance. the commission says the previously agreed cuts are no longer necessary. according to the draft budget, the debt will decline from 180.4% of annual output this year to 150 7.8% next year. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. pot this is "bloomberg markets: the close." -- caroline: this is "bloomberg markets: the close." scarlet: 90 minutes to the end of the u.s. trading day.
the s&p 500 is still down about 9% from its high on september 20 . however, that is nothing in comparison to the plummet we have seen in oil. for more on how these corrections are playing up in the futures market, let's bring in our macro strategist. you have some charts here. walk us through the charts of the sop versus oil futures. vince: we have seen a steep drop in crude, and the correlation between crude and s&p has been rising. nowhere near margin levels but making a sharp rise from basically the end of october. the s&p and crude moving in tandem in this fall some of the year, crude is outpacing, but the s&p is starting to catch up. should this correlation continue to increase, crude staying under pressure, we could expect another steep drop in equities here it scarlet: that is the direction. in terms of the size of the move, we know crude is in a bear market, the s&p 500 in
correction mode. vince: we have seen something like a 30% drop in crude prices. closing in on 10% moving s&p. the last time it happened was the summer of 2015. we did lift the equity market and all was right again. but if in this case some does not break, for instance the trump negotiations and next week, crude continues under pressure, equity markets are likely to stall and drop further. scarlet: let's look at another chart in your trade. vince: 30% drop in the crude prices and just about a 10% drop in the s&p. we saw this back in the summer, ande based in a québec up raised equity market risks. question is, going forward, will risk assets rise again? a little bit of a break today but not a real strong bounce.
, confirmation for the us a peek, whether or not you should be buying the dip are staying away until things settle down. scarlet: and we have some events to watch for, as well. trump. vince: we will see financial moves. scarlet: vince, bloomberg's macro strategist, thank you. caroline: a couple of asset classes. lisa abramowicz has a couple charts showing how bad things have gotten for the credit market. lisa: we have been talking about how u.s. high-yield bonds have been selling off. european high-yield bonds have been having a harder time of it this year. 8%. have lost almost here we are this month and hardly any of the new bonds sold in europe this month have tightened. it is sort of the pop you normally get when a new bond is sold another investors buy it.
we have not seen that, indicating less demand. deals being pulled from the market as a result of the lack of demand. meanwhile, if you look at the contingent capital bonds, this market is headed for its first annual lost since its inception. honestly, this is risky. take a look at the next chart, the cocoa bonds, showing the negative return so far this year. these bonds stand to lose or get potentially wiped out if the capital ratios of banks fall below a certain key threshold. you have seen an increasing amount of concern around a number of different banks, for example, deutsche bank, as easy concerns about having to raise more equity, as well as risks. it shows we're focused on the u.s., but in europe, it is a lot weaker and you are starting to
see signs that it will get even more pervasive. scarlet: we will watch that one. to what. -- thank you.. now to our stock of the hour, best buy. it got a boost yesterday from a strong earnings report. emma chandra is who to make sense of it. retail stocksost fall yesterday heard best buy did better, and it is falling today. other retailers doing well. the issue could be a renewed focus on margins over this life after a note from morgan stanley where they said hardline retailers, this bike, target, lowe's, are likely to come in to thee margin pain due amazon effect, sing traditional retailers really need to of their game when it comes to e-commerce. they acknowledged that best buy
is further along than others when it comes to that. they are talking about when you're shifting to e-commerce, a lot more costs come with that like delivery, and that could cause a lot more pain for best buy. this is despite a pretty good earnings report. talk about the solid set of burning spirit it was a bit of a standout. lisa: they beat estimates. i have a chart here showing the positive same-store sales, the seventh consecutive quarter of same-store sales. in the positive. and they scored a couple upgrades off the back of this strong earnings post yesterday, both raymond james and wedbush upgrading the stock. wedbush sing best buy appears to have settled in the right formula for long-term growth and will continue to deliver on its promises and ability to compete with amazon. divergent seeing
thoughts on how well best buy is doing when it comes to taking on amazon. scarlet: a lot of conviction for both sides of the argument. have atly it we may not real idea until january after the holidays. scarlet: we stick with retail. it is the ultimate should up between cliques versus brexit clicksack friday -- versus bricks this black friday. more next. this is bloomberg. ♪
week on black friday, and the race is tight between consumers buying online and in brick-and-mortar stores. here with more on the state of a memberl industry is of washington prime, which owns over 100 malls nationwide. luke, great to speak with you. but is the distinction of this holiday season versus last year? the economy is doing well and the consumers more confident, but there are jitters thanks to the stock market and what we hear politically. >> hey, guys. first, happy thanksgiving. i think we will see a continuation of just continued, you know, strength with respect holiday shopping. i was just looking at some statistics earlier today, and we have seen that a fair amount of holiday purchases may not be they areurchases, ie,
that happenlar buys to be occurring during the holiday season. i am a big fan of this, because we need more smoothing and kind of rounding things up for the entire year than this kind of peak and valley, the peaks and the troughs that we see. so that is what we are seeing so far. caroline: does it worry you, lou, that it seems like black friday starts earlier each year? we have heard of discounts and deals for the past couple of weeks. does that help smooth the situation or does it ring deals just bringor does it deals forward and everyone starts spending? >> good question. move back,nues to that is the ultimate smoother.
it is also the reality that this kind of retail has become such a presence in our space, and as a result, discounting is just way of the world. scarlet: we mentioned you own and operate, the firm, owns over 100 miles nationwide, heavy representation in florida, illinois, ohio, and texas. you aim to attract customers across the socioeconomic continuum. talk about your process in higher in malls versus areas that do not do as well. what does it look like on the ground? >> we have some higher socioeconomic assets, in those assets, i actually think -- let me take a step back -- i do not think we should differentiate in terms of what someone gets. obviously. but what offerings we provide for where you sit in the
socio-economic continuum. by that, i mean we continued as a result, the johnson city, tennessee, coral springs, whether it is from hawaii to south florida, we are seeing every time we diversify tennessee, activate common area, we see an increase in our guests and then more sales per square foot. caroline: do you see much difference depending on where the malls are based as to how they are reacting to political situations? the rust belt, for example, a manufacturing area, which had confidence at the beginning of perhaps trump's presidency, but now there are concerns with geopolitical issues.
do you see a difference? did -- it is still on our website, defensive secondary market places, and the cost of prettyadjustment so robust spending in kind of having a marginal unit of capital to spend throughout, whether it be typical rust belt locations -- i do not like illing it rust belt, but really cannot discern that much of a difference. scarlet: quickly, you have a malibu property it we have been following the wildfires and telephonic closely. any since on how that will affect traffic and prospects for that location? beyeah, i am going to flippant and am sure some
shareholders will give me a kick in the behind, but i do not care. what we care about is that the our guests and employees, everybody is safe. we have been pretty proactive with respect to our relief fund as it relates to not only the will see fire but also the paradise fire. of course it will have a detrimental impact, but that is really secondary to just making sure that everybody is safe and sound. citizenscan we do as of these respective communities to make this transition and make the rebuild as easy as possible? scarlet: important points. lou, thank you for joining us from chicago. we are getting knee-deep into holiday season, and according to
aaa and a more than 54 million americans will travel at least 50 miles from home this thanksgiving day week. in keeping with the theme, here's what you need to know about the biggest u.s. transportation focused etf. that could benefit from a surge in america's traveling over the holidays, the transportation average etf, iyt. the fund has roughly $700 million in assets. it tracks 20 u.s. airline, railroad, and trucking companies in the dow jones transportation average. like the dow jones industrial weighted,yt's price so names with the highest price per share have the biggest ratings. fedex, union pacific come ups, jb hunt. sincesince launching 15 years a, the fund has taken off, returning more than 300%, easily
outperforming the s&p 500. still, comes with a relatively high expense ratio. iyt gets a green light in the bloomberg intelligence trust system with the notice for is price weighted portfolio. a reminder to catch "etf iq" every wednesday at 1:00 p.m. caroline: a brexit update. john kline juncker is meeting with the prime minister of the u.k. in brussels -- jean-claude juncker is meeting with the prime minister of the u.k. in brussels. theresa may will return to brussels on saturday. may will meet with jean-claude juncker again on saturday, and the key eu summit is on sunday. -- from new york and london, this is bloomberg. ♪
scarlet: black friday is more than just shopping in college football. for golf fans, it will be a meeting of the titans. tiger woods and phil mickelson tee off in las vegas in the first of its kind pay-per-view event. vonnie quinn spoke with both golfers. >> i think it is an interval part of the game. gambling has always been part of our game, whether we like it or not. we have always embraced it in how we have taken chances on a golf course, whether it is a weekend round with buddies or a practice round on tour. we are always trying to have a little bit of an edge and have a little bit of fun. the side challenges will be fun, yes, but their pressure packed. this is for a lot of money. and it is a lot of fun, and it is right at that moment.
wagering is part of what we do in the game of golf. make yout enough to uncomfortable or make you think about that one particular shot or the next shot. that will be the fun part for everyone viewing. they will realize it is a lot like what they do with their own clubs. because it totant just how to perform our best under pressure. the tournaments or biggest competitions are major championships or in a match like this, those type of elements bring out the best in you and train you to play your best under the most pressure. vonnie: you guys have done a pretty good job at trash talking each other. i wonder what you have heard from other guys on the tour about this event and whether they have been trash talking? had a lot ofve texts from guys out on tour wanting odss on -- wanting odds
on whether i should beat phil. i have a lot of side that's already, and it will be a lot of fun. >> i think a lot of federal and a fellow players have great insight and of who they want to put their money on. vonnie: you sound confident, phil. tiger, you are two wins away from a record. when does it happen that you pass that record? >> first of all, i need to get their first. -- i need to get there first. 80 is a significant number. i feel like it is attainable aw, now that i have had season where i have come back and played and computed and have won an event. looking forward to next year. >> i am only 39 away from sam's record. i want to ask if
you are going to be having thanksgiving dinner with tiger, perhaps a last supper before the ultimate showdown? >> he is going to be with his family. i will go to utah for a few hours and see my wife amy's grandma, who it is her birthday. i will be spending my thanksgiving with them. vonnie: some professional fighting talk. caroline: the latest business flash headlines. deutsche bank tried to minimize risk at its u.s. equities business but lost $60 million. traders i new yorkn pulled positions into one portfolio an attempt to to effort losses. it did not work. one of the traders moved to another role. game shop is getting out of the business. it was once viewed as a key source of future growth. -- thereless stores
spring mobile unit has a most 1300 stores. at&t changed the conversation last year, putting a crêpe on spring.'s mobile earnings apple's biggest similar of iphones plans to cut to $.9 billion in extensive in 2019. foxconng to a memo, says it faces a difficult and competitive year. 10% of non-technical stuff will be he eliminated. more on this next hour. that is your business flash update. a quick check on the markets. nasdaq currently in the green. technology has been on fighting talk today, at 1.4%. amazon making a comeback. apple less positive on the back of continuing concerns about its suppliers. amazon leading the charge. we have yields unchanged for the
10-year, even though we're hearing words that maybe the fed could take it's foot off the hiking pedal in 2019. scarlet: the speculation is keeping treasuries in this holding pattern. we have seen it the last couple of days, treasuries holding firm even as stocks rise. not seen treasuries go anywhere. an up day in the u.s. and across the world. emerging markets getting a boost as the dollar weakens. caroline, you have been watching the dollar. $4408, meant to be diversification on related trade -- not working. ♪
brian higgins said he pronounced the low see after signing onto a letter opposing her head. she would back a lucy after considering running for the position herself. lucy needs to secure 18 votes to win the pose. -- this isler is until the u.s. appeals court. mueller says papadopoulos has not expect -- accepted responsibility for his crime. he said he regrets his guilty plea. thanks to saudi arabia from president trump for keeping oil prices down. the president said lower prices are like a big tax cut for america and the world and he urged the kingdom to force prices lower after he said he would stand by studies regardless whether mohammad bin salman on ordered the death of
jamal khashoggi. unemployment,s. rising to a four month high. that reflects holiday related volatility and what has been a strong labor market jobless 225,000.sing global news on air and on tictoc on twitter. this is bloomberg. caroline: 3:00 in new york. 8:00 in london. scarlet: this is bloomberg markets "the close." caroline: equities edging higher. theyollar drops on reports
may close the hiking cycle next year. concerns over the supply chain means apple is only slightly higher after its recent tumble. says negotiators will work through the night to finalize the deal with europe. the eu is escalating its clashes. all that and more coming up. scarlet: we have just under an hour to go before the close. we are looking at the rebound after tuesday's broad selloff. software and services company doing the best in the tech sector overall. microsoft one of the beneficiaries. aboutne mentioned speculation the federal reserve may ease up on its rate hike. you are seeing treasuries stall out. off evenbeen selling now.
it is still trying to find a bottom. >> it is $54. helping get a bid to the energy stocks. again onocusing once high-yield, whether it comes to the etf. >> the etf that tracks high-yield. j and k is moving in a similar direction. credit recovering after a nine day decline. let's take a deeper dive. we will get started. today best performer shares rising, 19% earlier around 14%. the best 3rd street earnings. they had positive sales but more important, looking at a chart showing margins. retail investors have been extremely interested in margins
this earnings season. the third quarter margins, you can see third quarter margins. inventory appears clean. they also drew a flurry of positive notes from analysts as though they we watching how they perform, with consumers prime to spend big. >> thank you. i'm taking a look at the tractor mailer. across farms, they are walking a fine line, trying to grow the business when the trade war is crimping gains at the farmers who buy equipment.
the fiscal fourth-quarter estimates for both sales and revenue. for-profit coming in low estimates. we get a little bit of sense why. over the past couple of years, prices have plunged amid the trade war with china. maintain anng to epcot -- a upbeat forecast. they are going to need new tractors and supplies. that should help the company grow sales and profit as we move into 2019. take a look. this is tracked by the usda. that is a bit of a concern. it go beyond soybeans. they do spillover into the other crops. they fear it is going to have to start raising prices with
regards to higher steel and tariffs that we could seal -- c. scarlet: we haven't talked about stocks leading credit. they have to measure investment grade credit. you can see the stock index declined much sooner than the bond index. the bond index has been following in the past few days. usually it is the other way around. is leading credit. take a look at the credit default swaps on high-yield bonds. the amount investors demand on high-yield debt, they had a steep climb up, increasing riskiness.
it does appear to be declining in tandem with the risk on we are seeing in south carolina. great market perspective for us. caroline: the european union has taken the step towards imposing fines. speaking bloomberg earlier today, he has received no answers from rome. >> they one capable of reducing debt is too high. have this meters, we received no answer. that is why we are persisting ad we see that there is serious deviation to the rules is bad for italy as well. it has to be corrected one way or the other. >> we are joined by italy's prime minister, a former
director of the imf fiscal affairs. that he has heard nothing from rome. the market expects something from rome. >> they, if they had wanted to move, they would have done it already. they moved a bit. , theyffered something decided to move ahead. i don't think there'll be a major change. something is going to happen in a matter of days. ae process for opening
procedure is quite a long one. we are talking the beginning of january. the penalty will come later. in between the european elections. the government hopes it will be a new commission. >> the process is going to be slow. the -- kick the can down the road. to? should we look the meeting between the premier of italy and jean-claude juncker ? a they will have to start procedure. that could be at the beginning of january. before that, yes.
>> they want to stick to their goals. in terms of budget deficit, 2.4%. this goal spending they want to exert. maybe this is the right way to go. what do you think of that? >> -- short-term input. the higher deficit and no additional growth. the government believes what it needs is a fiscal expansion. this will start the investment process again.
happens, the second quarter. because of the approval and benefits, which makes it very likely that the growth rate is at one and a half percent for the government targets. we are talking about something they can't ignore. >> what would you like to see -- to stabilize the economy? spending,reasing increasing the deficit is causing concern in the financial market. above 300.till a level that hurts the economy. that will makeng it a better place to invest. there are three things investors
would like to see happening in italy. process, and taxation. that requires spending on the saving side. italyse things occur, will be in a stronger position. i'm not pessimistic in the sense that i don't believe the crisis is imminent but italy remains .ragile to an external shock it could cause a recession in italy. that will be difficult to handle. will desperate will start rising above the current level. >> how much do you think italy and the bond yields canned -- can't sustain pulling back on quantitive easing? >> there a lot of concern. increasing the level of interest
rate, it is not going to be good for italy. the problem will occur in the context of stronger economic deck to the d in europe and high inflation. absorb the higher interest rates. thething of concern is economic activity. we have already seen ,hird-quarter gdp quite low particularly in germany. if this continues italy could be in trouble. >> we know the eu in this region is good at kicking cans down the road. do we think -- what will happen in the next year or so? the government has the mandate from its people to drive forward the changes it wants to bring. from your perspective, does the market force their hand at some point? >> does the market force their
hand? >> will it be bond yields that force italy's hand or new government the new leadership? >> i don't think the government is going to stick with the pressure unless it was a full-blown crisis. for that to happen, the beginning of a recession for italy, if this occurred and the say 100 or 600to the situation will be difficult for any of her -- any of the government.
would be. it could be general elections or could introduce a capital movement. mandatory requirement to purchase italian bonds by banks. stuff like this. we are not there yet. >> some well needed perspective. nothing imminent about to occur in any direction. scarlet: coming out, dated drop. amazon admits it accidentally shared details with undisclosed parties. will it face a backlash? scarlet: and the apple supplier plans to slash expenses. we get the view on the world's most valuable tech companies are may key analyst. we are live in san francisco, next.
the plant medication for $700 million. the video game retailer once use these stores is a key source of future profit growth. is amazon reporting a sad -- nav through as the holiday season wraps up. this has since been fixed. of 1%.up three quarters another sign of falling demand for iphones. ,t bill's biggest assembler foxconn plans to cut expenses. says it faces a competitive year. those are your social climbers. for more on apple, suppliers and broader technology, let's bring in bob o'donnell.
he comes to us from san francisco. great to speak with you. i wanted to get your thoughts on apple and the supply chain issues. the supply side has been a story we are familiar with after the relaunch of new iphones yet it feels different especially since apple itself slows it will not release unit sales numbers. >> you are right. over and has been told over with regard to trying to decipher from the supply chain what has happened with apple. i agree with you. you brought up the key reason why. that is the fact apple says we are not going to report numbers anymore. that was the big red flag that said we know the growth is over. we have moved to asp increases increase revenue. we need to change the story about the metrics. frankly, look. anybody who was followed apple
knows the writing has been on the wall on this. if you look at the smartphone market it is piqued. it managed to last a little bit longer? member about apple. scarlet: go ahead. how much does it hit? the power is the average selling price, to dine out on the service part of the equation. >> i agree. is there to remember is a mini conglomerate or they have several different businesses with different types of profit models. they have different levels they can hold. a while now, they have been shifting the focus away from the
iphone story toward services. this is part of that strategy they have had in play. it is unfortunately a lot of folks looking short-term. they have been getting worried about these unit numbers going down. they have a strong business model in these different pieces of their business. scarlet: you make a good point. there are almost these many conglomerates. if you are amazon or alphabetical what about if you are amazon? faang,book of the facebook is arguably the least having that conglomerate capability. the course of 10 years ago we have seen the comings and goings of different social media brands.
aws, the web services as well, advertising for them for apple. you have the streaming content business getting in to their own movies as well as other services they have an offering. a faang perspective, facebook faces the toughest challenges. not to mention they are the most likely ones to get hit by regulatory concerns in the near term. scarlet: in terms of what has -- caroline: in terms of what has been shaking faang, trade committee the u.s. and china, how much is that all-consuming? >> it is a big concern. a number of them are frankly more focused on the u.s. then markets outside. most notably alphabet doesn't even play in china.
that andompanies like facebook have not had much of an influence. apple clearly has but has been good in china on a lot of high-profile trips. the products are made there. frankly a number of the phones are sold there. apple is the one you have to read the most about. >> one to watch with that. meeting, thankll you. great to have you on the show. this is bloomberg.
scarlet: let's get the first word. theresa may says some sticking points remain, even though she has made progress in brexit negotiations. she will return to brussels for more talks including with the commission president. sanctions for italy's recommendation for the european commission. italy's budget plans are in serious breach of rules under the single currency. the eu executive arm says they could face fines if they do not bring the plan into compliance. thattalian government resist