tv Whatd You Miss Bloomberg December 13, 2018 4:00pm-5:00pm EST
are back in favor, even among the modest declines. yesterday, nasdaq without performer but today it's the liger -- lagger. materials and financials in the red. .here's more haven plays real estate is doing pretty well. scarlet: on how muted it is, the sm five -- s&p 500's trading days half of the average. compared to the recent past, it is kind of slow. joe: we talk about the square down 1.2%. let's get to our market reporters. it's more inside action. taylor, what were you watching? taylor: i'm taking a look at the oil market.
oil had a 50 handle on it, and now we are climbing. we knew cushing was looking to drop supplied by about 800,000 barrels per day. that came in much lower. arabia,uts from saudi being reduced by about 582,000 barrels per day. that's down about 40% from three-month average -- the three-month average. taking a look it where saudi arabia is, you can see in my terminal, this is their export. they're looking to cut that by about 500,000 barrels per day. if they do mostly in the u.s., the u.s. data as we know is weekly. that's a clear signal to the market that they are holding up their end of the deal with these opec cuts. some of the other markets they export to our monthly or some, not at all. are targeting the u.s. to make sure they send a clear signal that those export cuts and opec cuts remain in place. remain?
kawa mentioned that we serve it out from the american association of individual investors and it showed most of them are getting more bearish. data, take a look at the the share of investors remain bullish on u.s. equities fell to about 21% in the most recent week, down from 30% in the previous week. the share of investors who were bearish rose to 49% from about 30% in the previous week. that's the highest reading we have seen since april 2013. , the lowests down spread since 2015. like to look at this mixed signal we are being sent by the market. whether we look at e.m. or industrials.
these are two segments of the markets that are sensitive to global growth, considered cyclical. right now, they are painting different pictures. in the waistline, we have the sectorsf the industrial . con a bottomeds relative to the s&p 500. have been grinding higher since. newstrial seem to be making and fresh lows every day. as a central bankers are telling us the dimming prospects for global growth going forward, it begs the question, was e.m. priced in too much bearishness and will industrials outperform and take the signal currently being sent by emerging markets? caroline: luke, and the entire markets team, let's bring back mike regan. year, it has, this been a year of divergence with
the u.s. outperforming and some convergence for the u.s. losing its muster. it is time to go abroad once again? >> i think we have looked at emerging markets and the potential to dip back in. often the things people overlook is how big the sector composition is different from developed markets. emerging markets have a high concentration in industries like financials and industry, and commodities. they look cheap on a headline price-to-book basis, but if you do that equal sector adjustment, they don't look nearly as cheap on that basis. you need to really believe that the dollar has peaked. you need to believe that some of the political issues in some of these countries going through structural reforms like argentina, brazil, that those problems have passed. scarlet: how much commission is it comes, mike, when to the attractiveness of emerging markets and overseas markets versus the u.s.? mike: to go back to romaine's
point about the aai survey, that brought negative sentiment is a giant constraining signal that now is the time to buy. it's the worst reading since february 2016. that's right when the market bottomed in vienna. e.m., conviction is going to be low because of all of the things that he just spoke about. the china issue and the trade, there is potential for enormous rally and e.m. once the trade issue is settled. who knows where we will all be when that happens. joe: jason, it feels like the next catalyst on the horizon is next week's fed decision. our colleague had an interesting tweet pointing out basically every analyst out there is calling for the dovish hike. a hike in december, lowering of .he dots, maybe a hint risks
can fed deliver a result with those kind of expectations that will improve market sentiment? jason: i think just the potential lowering in the. -- in the terminal. or. out to the end out to the end of 2019 and where the dots are right now. one 25 had about base rate hike, but there is still a two to 25 cap hike where the 2019 dots are now. i do think a little bit of changing of the dots, rhetoric about the potential to be more data dependent and not be on this path of three or four next year, would deliver what people are hoping for and features are pricing. caroline: amidst the doom and
gloom globally, we are getting in breaking news from individual companies. adobe seems to be fine and it is raising its revenue target for the full year 2019. they reported their fourth quarter adjusted earnings per share which is basically in line with what analysts were expecting. we will dig into these numbers. scarlet, it's interesting. scarlet: absolutely. starbucks also holding its investor day as well. longer term consolidation growth of seven to 9% and adjusted eps growth of at least 10%. actually, the fourth-quarter earnings per share, adobe has beaten its $1.19, the estimate was one dollar 88 -- $1.80. joe: even with the selling, some of these companies are
operating on a high-level. scarlet: earnings are basically over and we will not get results for a while. as ahappens generally catalyst for markets in the days leading up to christmas? we talk about the fed which will be a big one, but after that -- jason: that's an interesting question -- mike: that's an interesting question. you look at the last couple of weeks right now, what kind of d you want to write to your investors? -- a of my 20 say we are lot might want to say that we are holding onto our cash prospect. please don't withdrawal now. joe: jason, we mentioned adobe. what you think about tech? jason: we don't have a superstrong sector view with respect to tech right now. we are one of the sectors where we do have a strong yuan is energy. up, oil being a fair amount it's one of the stronger lps we have.
both energy has a sector relative to equities overall, and commodities as an asset class going into next year as well. caroline: it been a great perspective from you both. thank you jason vaillancourt, and mike regan as well. let's have a quick recap of the breaking news. analysts were expecting a strong fourth quarter from adobe and they have delivered. one dollar 90 from the first quarter -- $1.90 for the first quarter. this is a company that still seems to deliver on fourth-quarter revenue basis. we are up to basically 2.5 billion dollars, slightly above expectations. scarlet? scarlet: starbucks also moving in after hours trading. it has gained for a fourth straight days and is holding. some of the headlines included while it go up to 6000 reaffirming its for your target.
caroline: and a deal with uber as well. a whole new way to get your coffee on the go. joe: i like duncan better. [laughter] scarlet: judge ring cycle, five cups of coffee a day? five by like 10:00 a.m. and romaine for me bostick will be stepping in for "what'd you miss?" we look at the stimulus and the future of theresa may and brexit. this is bloomberg. ♪
here's how you stocks finish the day. half of its recent average daily moves. joe: the question is "what'd you miss?" caroline: the ecb pulls back the euro decline while the central bank cut its growth forecast. bank brutality. trade tensions continuing to weigh on the financials. and the incredible shrinking hedge funds. more bad news for money managers , and it is returning money to investors. the european central bank, led by the president, struck a more dovish tone in its final decision of the address earlier today. >> the lund are lying strength of domestic demand -- underlying strength of domestic demand is gradually rising inflation
pressures. the outlook for inflation has been revised slightly up for 2018, and down for 19. the risks surrounding the euro area growth outlook can still be assessed as broadly balanced. the balance risk is moving to the downside. due to the persistence of liketainties vulnerabilities emerging markets and financial market volatility. joe: for more on the ecb's decision, let's welcome maria brussels. if like he is a knology reality. we see slowing data, italy is one of the biggest economies in the block going into a recession. what else was he going to say? >> you are right.
toe of the analyst i spoke the fact that he thinks it will get better going into 2019, today was just another case -- data has been weaker than expected. the risks for the euro area are to the downside. inflation cut to gdp expectations. we need to keep in mind 2019 will be a difficult year for the euro, but not just geopolitical tensions and trade tensions, but also problems we have going on here. there we'll be a european election. a lot of people see this as the ultimate test between populist forces in europe, but also the fact that the italian budget is a question mark. and brexit. there's a lot of uncertainty around brexit. we don't know how the sense. if they continued confidence with increasing caution. maria, you mentioned the
populace elements, the brexit element. let's dig into the politics. you are in brussels trying to disentangle what you might offer interms of any olive branch theresa may's direction to get the deal through parliament and the u.k.. do you think the eu will offer something? maria: caroline, prime minister may just walked out, and it has been a very busy day for the prime minister. thing, may and leaders told us keep your expectations low. here on the ground that a lot more came out of this meeting. she needs to get an assurance, lead -- legally binding assurance in this treaty, to get the deal done in the u.k. parliament. the irish backstop as it stands, it's a mechanism to avoid a
physical border. if it stays the way to his won't go through u.k. parliament. what we hear now is that european leaders acknowledged that and are willing to give legal assurance that this will not be a mechanism that will stay on in time. it will just be temporary. also, the trade deal that the eu could get -- u.k. could get would be so efficient that there would be nothing to trigger the backstop. romaine: are you getting a sense that if we do come up with an agreement that addresses the backstop in a way the parliament seems to want, that's will be enough to get this thing through parliament and have some sort of an orderly brexit? maria: that's a good question. seen a lot of political commotion over the past 24 hours, but here in brussels, the people i speak to say nothing has changed. she is still in power. we think the u.k. will leave in
march 2019 with a deal. there's a number of reasons. the u.k. and european leaders cannot afford to go no deal. they think there will between made and the u.k. parliament will hopefully recognize that it comes down to a binary choice. you take a deal that you don't fully like, only thing on the table, and you crash out. the base case scenario, despite -- medical drama is that despite the drama is that there will be a deal in 2019. will not get anything concrete today, but we will have to wait until january. joe: there's another possibility of course, although no one says it is likely -- no one is willing to go there yet, a second referendum. is there anything on the part of the eu, if they play their cards right, they might be forced to call a second referendum in the euro area?
maria: i think it's clear that you once the u.k. to stay in the eu. they would deftly take this -- take them back. the u.k. wanted to leave and now they want back. i think they realize that you have to be realistic. prime minister may has made it clear that she wants to deliver on brexit. she said i don't want to look at the next election. her mission is to get this brexit done. day, this is the the base case scenario. if the deal does not get devoted in the u.k. parliament, all bets are off. that's a scary scenario for brussels. power --really stay in can may really stay in power? the question is, what happens to article 50? that means the u.k. would have to leave in march, that it would
are set on curbing production in 2019. airlines are having a hard time standing out rasul and sexual harassment -- racial and sexual harassment. just wanted 20 offenders are removed from planes. there were 350 cases of harassment on flights last year. airlines need passengers to come forward as witnesses to bring charges. countries can lack jurisdiction to prosecute. .e have more on bloomberg.com and tictoc on twitter is reporting the committee to protect journalists is in turkey -- named turkey as the worst fortry in the world reporters. you all all of the stories on your terminal, on bloomberg.com, and on tictoc on twitter. allies maynd its want to curb production, but to they can't control the wave of shale coming from the u.s.. andy hall, and oil investor with 30 years of experience, joined
alex in orb -- and orbital today.s' kevin o'brien earlier our production growth here in the u.s. is exceeding virtually everyone's expectations. euro beer, 2 million barrels per day. resort --e year-over-year, 2 million bels per day. it's a huge resource. unique natural resource. >> do you think that will continue? that ability? [over talk] >> that's what everybody keeps asking. me -- oneriables for of the key variables for me is productivity. these continue to grow and the
question is, how can they continue -- how long can they continue to grow. it's a big resource but not endless. >> let's move to the change in trading. have a report that shows the change to change on a person-to-person basis is automation to automation basis. the blue line is man-to-man and the white line is automated trading services. you can see the real uptick in automation. this is the easy thing to blame when prices get out of bed. how does that change your world? >> it changes it in a big way. there's a lot of money that is now being invested in the market based on out rhythms. a lot of these things tend to be self-fulfilling. a lot of the models use the same underlying equations or ideas. self fulfilling
matrix to these things. that can continue for a long time until reality catches up. ultimately, i remain a fundamentalist. ultimately, oil prices are .etermined by fundamentals in the shorter term, they can detach because of money flows being driven by anything other than fundamentals. i think it was kaine who once said, or someone once said the market could stay irrational longer than you can stay liquid. is one of the problems you have to face these days. >> do ever regret having to shut down the fund? >> no. i didn't want to go to my grave trading oil. >> but you're still doing it. >> it's not the same responsibility or the same pressure doing it for yourself
as doing it when you are investing other people's money. there are other things to do in life than worry about the price of oil. >> there is? i didn't know that. romaine: that was oil investor, andy hall with kevin o'brien and alex on bloomberg commodities edge. let's take another quick look at some of the headlines we got after hours here. we have earnings out of adobe systems. the stock moved slightly higher today. cosco also coming out earnings. their shares are dropping 3.6% despite having revenue beat and eps beat. starbucks also beat on earnings, but their shares are moving lower in after hours. down about 2.7% -- 2.27%. this is bloomberg. ♪
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♪ mark: i'm mark crumpton with bloomberg's first word news. man hasofficials is a been killed in a shootout with police in strasburg, but he has not been confirmed as the suspected gunman who killed three people in a christmas market this week. the associated press said the man opened fire on police and officers today and they fire back, killing him. is accused of killing three people and wounding 13 others on tuesday. police say he had a long criminal record and has been flagged for extremism. french officials said they wanted to catch him dead or alive.
the senate has passed a resolution said saying that's saying the saudi prince is responsible for the slaying of jamal khashoggi. vote calls for the saudi a government -- saudi government -- the vote is a direct challenge to saudi arabia and president trump in the wake of khashoggi's murder. chuck schumer is urging president trump to prosecute huawei technologies for intentionally violating u.s. sanctions with iran and the prospect that the chinese tech innt had a potential role cyber espionage against businesses in the u.s.. senator schumer says he wants while way's ceo -- cfo -- to face bank fraud charges. she was arrested december 1 in
canada at the request of the united states. while way has ties to the chinese government-- h auwei. >> this administration has been tougher on china than previous administrations. they deserve credit for that. this administration has also eagerness to quickly --gain away tougher mark: after three days of hearings, the canadian justice her but required her to wear an ankle bracelet. kevin mccarthy says a government shutdown would be "stupid but might be unavoidable if
democrats refuse to support the president's proposed board while the next eco-." he said today that -- with mexico." he said the plan is likely to fail in the senate. 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. caroline: the incredible shrinking hedge fund. year, hedge funds are not rebounding as much as the numbers would suggest. let's bring in our hedge fund reporter. as a great story out saying what is happening is the darwinian thinning of the herd. do you agree with that statement? >> i would agree. theasset number hides underlying reality, which is fewer and fewer hedge funds are managing that money.
that is like wealth distribution. at thef the capital is biggest hedge funds and not trickling down. you are seeing a lot of consolidation, more hedge funds closing than opening, and it had to happen. there was to dub many of them out there and they are not great. joe: when you say they're not great, for a long time, when hedge funds were underperforming , they say you can't compare us to stocks during a bull market. -- veryng various gang steve engle volatility, penalty seller numbers. katia: you look at the dax and they compare themselves to the s&p, but exactly. they say they can't outperform in a bull market, yet they fail to outperform in a volatile market. what other reasons? they have been setup to fail in a way, because they are all concentrated in the same stocks. those tend to be the most volatile ones. they are also mostly long
because they have been writing this wave. but they generalize, are mostly long. when you have the small bouts of volatility, they have really bad performance. they will say it's not volatile consistently. we need to see more consistent volatility for them to outperform. that is the story we see. as we go to war the end of the year, we see more closures and people getting their reductions number for next year. that we is part of that lost the hedge out of hedge funds? if everyone crowded into the same trade and were overweight to an extent, this makes the short portion of it irrelevant. what were these funds to begin with? katia: precisely. they are mostly long, and why are you paying those fees? those are products you can get something else and maybe perform better, precisely. romaine: that is bloomberg's katia porzecanski talking about
hedge funds. we are going to stay on financials. we have seen a selloff in bank stocks for most of the years. that's s&p 500 financials down about 13% on the year. the worst performer in the s&p 500. to talk more about it, let's bring in data research cofounder, and it. what is -- nick. why was nobody willing to buy into financials this year? this has been a trend. >> we have had a couple of different things, but the predominant issue is, we are at a peak of the cycle. you don't buy financials peak of cycle. they are cheap and affordable. the quality of the loans are good. low growth has been fine. not matter. we are coming into the fourth quarter, final couple days of the year, and we get tax selloffs on top of everything else. it will be a tough sled for a while. caroline: at what point is the
catalyst to get back in if it is not valuation at the moment? do valuations have to fall even further? does it have to be a buy when the fed starts raising , and when we see a change to the way they can make money and deposits? nick: investors view this sensibly, which is valuation math is not investment edge. for isu're looking you're looking for the fed to cut rates and steepen the yield curve. there's a current point where investors say i don't care because am not buying financials, i will buy industrials. you will keep financials under weighted. joe: so it's a gdp proxy, basically with these banks. we see regional banks down over 11% since the beginning of december. ultimately, in your view, it's a rewriting of growth expectation? nick: there's more to it than
that. you have to look at the pullback in european financials. the correlations between u.s. european relations of tighten up. -- and watch a traded today. you had an anomaly today and we did not. it setsorrisome because not just the u.s. worrisome, but the financial system in europe. there is more to it than u.s. gdp. romaine: is there no sense the financial system here is resilient enough to withstand that? we have the stress tests which are supposed to mean something. caroline: we have them in europe too. romaine: are we had a stage where we have to worry about the foundation of our financials? nick: that's just a critical question. thinke right, you would stocks that have a stress test would be worth more than stocks that did not. contracting,e
which says the markets are worried the excess returns for this group have been regulated at a distance because of these stress tests. you can do a 50-20% r.o.e. anymore. you are more like a seven to nine to 12% r.o.e. caroline: does this mean that shadow banks get bigger? shadow banks can get bigger? so it banks feel pressure, will they lend even less? nick: the short answer is yes. in the u.s., the shadow banking is regulated somewhat, but if you think about this on a global scale, it will continue to grow. joe: how pivotal is next week? be hopeful.l we had the fed come out with a revised study, which showed how the market always goes up into a fed meeting. they revised it to say now the market only goes up during fed conference -- press conference meetings. joe: so when there is a decision expected. nick: and when the chair gets to
talk and we get new information. next week is the beginning of the santa claus rally we are all waiting for. caroline: so it should be better that we get jay powell speaking more often next year? nick: that's a wonderful question. the short answer is that is what the fed wants to find out. it ran his data in the middle of the year. it's clear the chair how this data and said let's isolate this event, and make sure we watch it out of the system. the fed does not want the market just a rally. joe: great to have you on, nick colas. coming up, it is the white house against the world when it comes to tariffs. a new report says they are doing exactly what they were meant to do, boosted jobs in the u.s. alumina ministry -- boost jobs in the u.s. aluminum industry. we will talk about that, next. "what'd you miss?" -- next. this is bloomberg. ♪ ♪
joe: if the white house is against the world when it comes to tariff. a new report says the section 232 tariffs are doing exactly what they were meant to do, revive the u.s. aluminum industry. the economic policy institute has a study out on the impact. they join us now. robert scott is their senior economist. robert, everyone seems to hate the tariffs whether it is business leaders, mainstream economists, political opponents of president, but your study says you may dislike the president, whatever, but they are doing what they are supposed to do, reviving jobs in the aluminum industry. what is the evidence for this? was in this industry full-blown collapse before the tariffs were put into effect. 23 down to five
smelters. since the13,000 jobs year 2000. the industry was just about to shut down. the tariffs went into effect and there were only -- they were only 10%. what happened immediately was we had to bring smelters reopened and a third on the verge of collapse has announced they are restarting. .hey are expanding capacity perhaps even more surprisingly, downstream industries are the of primarysumers aluminum. they are investing as well. they have been growing just as fast as the primary producers. romaine: we had a lot of industries, and users, canned food makers, basically saying
this would raise prices and lead to some financial ruin. your data doesn't seem to suggest that is the case. robert: there's no evidence of downstream damage. we look at two indicators. we looked at the production ones that aluminum, would be most directly affected by the increased tariffs. 22 firms announced new investments and will add over $30 jobs, invest over billion in new equipment. claimsthat, there were these tariffs were in the lead to massive job losses, not only in manufacturing, but also throughout the economy. predictions from a group predicted we would lose anywhere from 140,000 to over 400,000
jobs in manufacturing overall and throughout the economy. we look at the data, there is no evidence yet that there is been any downstream damage throughout the economy. sincee at 198,000 jobs february. 1.5 million jobs in the rest of the economy. there's no evidence of the kind of harm predicted here from these tariffs. caroline: no evidence, yet. i'm interested in your perspective. can be taken away as quickly as they were put in place of trade talks do in fact get better. what then of the optimism in the aluminum sector? robert: both aluminum and steel, the core problem is massive excess capacity. it concentrated in china, where the government has for twosidizing firms decades. iny have tenfold increase
production capacity and are weighing down capacity worldwide -- prices worldwide. other countries have joined in like india and the persian gulf companies. do ise really need to find a way to get rid of that excess capacity. usould have preferred to see use the tariffs to circle the wagons. restricting exports from all of those bad apples if you will, and then have open trade amongst countries that employed free-market policies, such as the u.s., canada, and the eu. joe: it's always hard to establish counterfactual's, but how do you disentangle the effect of the tariffs from the fact that the account to me -- the economy is doing well. her has not been much job losses in the downstream consumers of aluminum, but most of them are
probably growing revenues because demand is strong. how do you avoid that issue? robert: we do it by looking precisely at the primary aluminum producers and direct downstream consumers. those are the companies that rollout sheet plates and extrude primary aluminum into bars and other shapes. they have expanded investment. they are the ones you are most likely to see negative effects from on these tariffs. it is hard to claim that if they are not hurting, anyone else is. the auto example, another one screaming bloody murder about the tariffs, has added 8500 jobs. two weeks ago, gm announced they are closing the plant, several plants in north america. i think that does reflect the broader slowdown taking effect
in the economy. of thelook at the impact aluminum and steel tariffs on car costs, it's a few hundred dollars per car, not enough to justify that yet. caroline: it's great to get both sides on the argument. robert scott:, stake -- robert scott, it's great to have you on. a quick check on the business flash headlines. adobe is out with earnings. they are giving a forecast the top estimates. shares are moving lower after hours. also reporting is costco. they slide in after hours trading. that's amid increasing competition. who love pancakes or two for breakfast, you can relax. canada said the maple syrup output fell but there is unlikely there will be a shortage. you have heard of strategic oil reserves, there is something
similar in the government agencies can tap it to make sure government agencies don't run out -- to make sure consumers don't run out. romaine: that's great. i love this. maple syrupt gets down below $10 per bottle. joe: i read stories about the canadian maple stockpile for a long time. romaine: they had the big heist. caroline: i was reading about that. romaine: they had 6 million pounds of the stuff. joe: i think it's a gag. i don't think it exists. caroline: a 96 million pound gag. syrupe: beta maple truther. caroline: a fantastic perspective. joe: president trump it's a win china's xi jinping makes good
romaine: now to asia ahead. china bought about 2 million pounds of soybeans in the most recent 24 hours. a gesture made by the chinese to ease some of the trade issues that have been enveloping between the two bank countries. let's bring in shery ahn to talk a little bit more about this. i should say 2 million metric tons. 2 million metric tons is kind of a drop in the bucket. shery: yeah. if you take a look at the chart you had up, soybean futures, the one-year chart showing the decline a price of 7%. even after this growth, they sell. there.ckpile is out huge in fact as the u.s. agricultural the apartment is double.here set to
joe: so china was buying soybeans, stopped, and now they are buying them again. the deeper issues remain. in terms of the real trade war challenges. are there any real signs there is any progress there? shery: a lot of issues with trade in china seem to be returning to the status quo. when you talk about auto tariffs , theyem in cuts again weren't 40% when this trade dispute started. the deeper issues are still there, intellectual property theft, and a force transfer of forced transfer of technology. the report last month clearly explains china is not doing much on that front. we will see what happens. sources say may be china 2025 could the delayed to 2035. the key question is, will china really do that? i'm fascinated with
the repercussions would be for xi within his own country and how china looks out at the rest of the world. when it comes to what is happening in canada as well, is the story getting more money? do they worry about what china is doing in their repercussions with the relationship with canada now? we had the first canadian detained in china and beijing. that was next diplomat, and the question 10. --still don't know questioned him. we still don't know what happened in that case. person canadian was the that brokered those foreigners trips to north korea, including that of dennis rodman. we still don't have clear details on that one. caroline: dennis rodman, i have not heard his name for nearly a long time when it comes to china and u.s..
emily: i'm emily chang in san francisco and this is "bloomberg technology." next hour, apple doubles down in the lone star state. the company will invest $1 billion to build a new campus in austin as it adds more jobs across the united states. lots, a retail revival? the industry has been struggling, but the ceo of old navy says data connection best collection could be. the key to luring customerba